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S&P 500 Full Year Sources And Uses Of Cash
M&A and Underwriting bankers are all too familiar with a Sources and Uses of Cash analysis (and yes, for our NYT readers, this is far more popular, practical and worthwhile than a DCF). Yet we had never seen an Sources and Uses conducted for the entire market prior to this table created by Goldan Sachs, which demonstrates succinctly and to the point precisely how roughly $2.25 trillion of cash was raised in 2009 by the S&P 500 (ex Fins and CNBC parent General Propaganda), and what this cash was used for. It is not surprising that nearly 50% of cash was generated from operating cash flow ($1 trillion) while $600 billion came from new debt issuance (the rest from asset disposition). Yet despite consistent claims that companies have massive deleveraged, just $635 billion of debt was repaid, meaning only $35 billion of debt was actually retired! What the flow was used for, however, was to extend maturities, and to shift debt across different sections of the S&P500's balance sheet, lowering the debt cost of capital. And while $400 billion in new cash was used for CapEx (far less than the recent historical average), only $189 billion was put to use in the form of dividends: a fact that shareholders are certainly not too happy about. In a comparable operation, while just $63 billion of new equity was issue, double that amount was bought back, thus boosting EPS by reducing the denominator. Yet total shareholder friendly cash in 2009 (dividends and buybacks) amount to just over $300 billion: a small fraction of the total $2.25 trillion used by companies for various purposes.
Incidentally, Zero Hedge is awaiting the end of the Q2 reporting period to repeat the same type of CapEx analysis we conduct every quarter in an analysis to see whether companies are finally spending more monay for organic growth (typically a precursor to hiring), or merely stockpiling ever more cash.
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After seeing the headline, "Obama blames GOP...", I did this search...
http://www.google.com/search?hl=en&source=hp&q=obama+blames&aq=f&aqi=g10...
When does he blame himself?
those waskaly wepublicans!
We should not blame the party that took us from record prosperity to the second great depression. Their policies of tax cuts for the rich and building schools in Iraq were awesome for the economy.
We need to start blaming the guy who was elected more than a year after the crash happened.
Oh, and we need more tax cuts for the rich, since so many jobs were created after the last tax cuts for the rich... (so many = less than 0)
While Obama has clearly inherited this condition -- he has just sustained it. Pandering to vested interest cuts across all party lines -- I guess, that is democracy in action...
We were just naive to think he will risk taking radical action to break the grip of the lobbies and other vested interests -- I guess he knows the risks are very high. Other than a small minority, the majority of Americans do not want to be told to tighten their belt. Very entitled population has no appetite for bitter medicine. Can only bitcha and continue to suck up from the government teat.
Indeed, he did more than just sustain, but he also exacerbated the situation at hand.
+$1.2T
http://www.brillig.com/debt_clock/ first time I've been there in years.
of course those waskly wepublicans are to blame, especially since they failed to help "progress".
- Ned
If Barry was to use some his 300 million dollars remaining from the last election to create a few jobs he would get a pass. But he only makes money for himself and those who paid campaign donations(bribes). Barracky only cares about money. Keep the change hopey man.
Bill Clinton and the DNC were in power while the 1st attack on the World Trade Center occurred. Bill Clinton and the DNC did such a good job that it happened again. The planning of this attack and 12 of the 19 months the terrorist were actively training occured while Bill Clinton and the DNC were in power.
Bill Clinton and the DNC allowed 9/11 to happen.
Blame goes both ways.
Its so easy to judge a priori.. your sarcasm is noted, even though you fail to see how the current admin has done absolutely zero to get out of this 'second great depression' as you write.
Partisan hack. Both parties have been waltzing us toward the edge of the abyss for a century. Suck Democratic dick all you like, but your are still going to lose everything.
Still putting plywood on the windows and filling bags with sand during the summer of recovery.
Companies need to borrow more money in order to keep executive payscale growth. Fuck shareholders. Fuck dividends. Fuck profitability.
Corporations exist to serve executives
Share buybacks are friendly only to the shareholders who want to be former shareholders and sell to the company whose stock they no longer want to own.
A better system is what Loew's does: give shareholders the choice of cash dividends or grant of new stock.
The idea that stock buybacks are shareholder-friendly to long-time shareholders, when their main purpose is to increase the value of the stock options held by insiders by increasing inherent share price volatility, is one of the pernicious ideas foisted upon investors by TPTB.
Agreed....Could there be a bigger poster child than Microsoft? They've already proven they can't innovate beyond windows and Office, yet no regular dividend!...Only when the screaming becomes deafening do they relent and toss out a sizeable special dividend. It's pretty clear to me that many of these so called growth tech stocks, like Intel, are really not growing at all and should pay monster dividends.
i would say that from my experience of the crisis in 1997 in my home country of thailand that the only way this corporate debt can be repaid is by a devaluation of the dollar. Or default. the big question is when. I have been listening to people like howard ruff saying the end is near since I was living in the us as a teenager. the end never seems to come.
The US is a special case due to reserve currency -- trading partners are not willing to let the USD devalue as they do not want to reduce exports to the US, thereby increasing unemployment.
Then our trading partners can fall right along side us. Once again, the Fed shows they are brilliant by basically holding the US economy for ransom. The ransom continues to be us being able to export inflation, at will.
Corporations have consumed so much there is only other Corporations left to consume in the names of Profit and Greed.This will be the Corporate endgame,the executives will live on private islands with private armies keeping the people they,ve shafted at arms length.Until society demands stability and a reasonable standard of living and quality of life the extremes will get worse.Politicians just sit on the payroll watching the status quo.The time for true Patriots is nigh ............................................... ask not what your country can do for you but what you can do for your country (heed that Obama ).
Please, both the Democrats and Republicans are catching, what the upper 1% of the US is pitching.
In fact i would argue, that both parties bend over at an equal rate for that 1%.
The interesting issue, is why the other 99% bend over for both the 1% and their poltical slaves?
Corpo land has been cannibalizing itself for at least two decades now, first with M&As gobbling up all worthy competition (none left to gobble now) and now they borrow to maintain dividends on declining revenues and keep stock options high. No, wait, last I heard execs on balance have been selling their stock. See: http://aucontrarian.blogspot.com/2010/07/corporate-ceos-wont-invest-in-a...
Good article. Thanks for posting the link. Of course, what is missing is comments from the financial sector CEOs. Washington saved their freakin' bacon. Those jobs are tough to export except for data processing to India. The financial sector has become the gorilla in the room and he's tearing the furniture up. Saw Greenspan on Meet the Press this morning. I just caught an earful when he said something to the effect that keeping the stock market alive and thriving is the only thing that will save the U. S. economy. I'm looking for the exact quote. That is a scary thought!
Found the transcript... here are a few snippets:
All those corporations accumulating FRNs, waiting for someone to jump into the abyss first -- while the Govt sets out Punji sticks at the bottom. Once cash flow hits zero, the bloodbath begins.