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Halftime: Buybacks Not as Good for Stocks as You Think

You may think a buyback signals strength in a company, but think again.

S&P 500 companies spent $94 billion on buy backs in the second quarter, which is triple the amount spent during the second quarter of last year, according to figures from Dealogic. So far this quarter, $59 billion has been spent on buybacks.

But are these buybacks good for the market long-term?

Source: CNBC

Not necessarily, said Guy Adami of Drakon Capital. While these buybacks have given the markets a boost in the short-term, Adami thinks it's just that these companies have "nothing better to spend their money on" and that's bearish long-term.

Spending money on buybacks is better than doing nothing with their money, said Steve Grasso of Stuart Frankel, but most investors would rather see them do more attractive deals. On the other hand, he said many investors are attracted to companies that are buying back shares.

Buybacks does often cause the earnings per share to rise, however, said Adami and so companies need to be careful. But because it doesn't affect revenues, which is what people care about, he sees no harm in it.

Watch the video to see the full conversation on buybacks.

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TICK BY TICK: PETROLEO BRASILERIO

Shares of Petroleo Brasilerio pushed higher Thursday on speculation demand for a $79 billion share sale will surpass the amount on offer.

Tim Seymour, founder of EmergingMoney.com, said a lot of people are shorting the deal. Others are buying shares at current levels. He expects a deal soon, which will satisfy the investor base.

The tough part is valuing the company because it's valuation is tough to call. As Brazil's state-controlled oil company, the government sets the value. Seymour thinks the company is not expensive relative to itself because it could have massive reserves.

In the end, Seymour is a buyer of this offer and thinks it could trade higher.

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NIKE TO REPORT EARNINGS AFTER THE BELL THURSDAY

Nike is scheduled to report quarterly earnings after the closing bell Thursday.

Investors are eager to hear the company's progress towards achieving hefty growth goals. Earlier this year, the world's largest shoe maker said it plans to increase revenue to $27 billion by 2015.

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CALL TO THE FLOOR: POLYCOM

Shares of video conferencing company Polycom have been pressured in recent months, as it's stuck between Cisco on the high end and Apple on the low end, said CNBC's Melissa Lee.

Andrew M. Miller, the company's new CEO, hopes to turn things around. To talk about his plans, he spoke with the "Fast Money" desk. Watch the video to see how it went.

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CALL THE CLOSE

Jon Najarian, co-founder of optionMONSTER.com, likes the way the market is going.

Steve Grasso of Stuart Frankel also thinks the market could push higher.

"Where there's smoke, there's fire," said Veracruz founder Steve Cortes. "There's a lot of smoke in Europe right now."

Guy Adami, managing partner of Drakon Capital, also worries about Europe and thinks the markets could go down.

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Trader disclosure: On Sept. 23, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Jon Najarian; Jon Najarian owns (AA); Cortes is short the Australian Dollar; Cortes is short the Euro; Cortes is short (XLF); Cortes is short (BAC); Cortes is long U.S. Treasuries; Grasso owns (ASTM), (BA), (BAC), (C), (CSCO), (JPM), (LPX), (MO), (MOT), (NDAQ), (PFE), (PRST)

For Steve Grasso:
Stuart Frankel & Co and it’s partners own (BAX)
Stuart Frankel & Co and it’s partners own (COG)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HPQ)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (TLM)
Stuart Frankel & Co and it’s partners own (TRV)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners are short (QQQQ)

For James Swanson
***No Disclosures***

CNBC.com with wires.

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