I was early in recognizing that the current bull market was driven by corporate share repurchases. During the first two to three years of the bull market, bearish strategists contended that stocks were on a “sugar high.” They couldn’t fathom why stock prices were rising when there were no obvious buyers among retail, institutional, and foreign buyers. They obviously missed corporate buyers.

Share repurchases by the S&P 500 corporations totaled a staggering $2.1 trillion from Q1-2009 through the latest available data, for Q3-2014. Over the same period through Q4-2014, these companies paid dividends of $1.6 trillion. Many investors tend to reinvest dividends in the stock market. The S&P 500 has been highly correlated with the sum of these two cash flows.

S&P 500 corporations have had an incentive to buy back their shares ever since 2004, when corporate bond yields consistently fell below the forward earnings yield of the composite. Today, Moody’s Seasoned Aaa corporate bond yield is down to an historical low of 3.8%, while the forward earnings yield is at 5.8%. In other words, the Fed’s Stock Valuation Model has been more relevant to corporate finance behavior than investor behavior in the equity market.

My friend Lazlo Birinyi reports that buyback authorizations for February 2015--of $118.32 billion--were the strongest for any February on record as well as for any month ever, in dollar terms. While analysts expect H1-2015 earnings growth to be negative y/y for the S&P 500, I think buybacks could help to turn S&P 500 earnings growth positive.

Today's Morning Briefing: Bull Market in Buybacks. (1) Early bulls. (2) Lots of buybacks and dividends. (3) Fed’s Stock Valuation Model really a model for corporate finance rather than asset allocation. (4) Interest margins and profits. (5) Gross vs. net corporate bond issuance. (6) Birinyi’s numbers. (7) Other inflows. (8) QE myth and fact. (9) The scary correlation. (10) Buybacks-led melt-up? (11) What will stop buybacks? (12) Focus on market-weight-rated S&P 500 auto-related industries. (More for subscribers.)