What The Income Statement Of The Entire Market Looks Like

Tyler Durden's picture

In the New Normal, where fundamentals ceased to matter some time around March 2009 when Bernanke decided to nationalize first the bond, then the stock market, and soon, every other "market", stuff like "data" is largely meaningless. However, for those who are still curious how the cash flow in the biggest corporate market - that of America - looks like, instead of merely chasing the latest trend or looking for a heatmap break out, here it is.

Using Factset data for the 1500 largest stocks (ex fins), Morgan Stanley has broken down the world's biggest Income Statement by line item (and by sector). The results are as follows.

Some observations:

  • Of the $12 trillion in total revenue, nearly $6 trillion each year is the cost of goods sold for consumer companies (discretionary plus staples), energy, and industrials.
  • Gross profit (net of COGS and D&A) is just 27% of revenue, or a little over $3 trillion.
  • Consolidated income tax is a tiny 2.5% of revenue. Of all sectors, Energy companies paid the most taxes in FY 2012: $89 billion.
  • Interest expense was a tiny $215 billion. It is here that the bulk of EPS "generation" has taken place in the past two years now that companies have fired the bulk of the "fat", courtesy of constant refinancing into an ever cheaper cost of debt. A historical analysis of the interest expense line item shows a constant decline. At some point, this number will start rising again, especially if indeed the Fed wishes to see rates rise. At that point, there will be only downside for the market's Net Income, despite what paid financial-humor pundits say to the contrary on TV.

The same chart as above broken down by industry:

Source: Morgan Stanely

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Sudden Debt's picture

and what's the income on their R&D Because that's also revenue right?

AmCockerSpaniel's picture

So; Why not include the financials?

Kirk2NCC1701's picture

This would be a good time for all those Ueber-intelligent bloggers to show their analytical skills.

Will they? What do you think?

Orwell was right's picture

Quite interesting analysis....(I have to look at it a bit deeper...but very interesting).

Smegley Wanxalot's picture

So what's the market's P/E ratio - about 40 or so?

Going by Amazon the market has a lot of room to go up!

sasebo's picture

Why this ex-Fin data put out by a TBTF Fin when all our problems are Fin? They consume but don't produce.

Tombstone's picture

...only downside...there is no end to the accounting gimmicks that will be used to support non-exsistent earnings.  The power hungry money grabbers will sell their usual bill of goods to the public; hook, line and sinker.

philipat's picture

And the only reason that Energy Companies pay higher taxes is because they declare Royalties paid to Host Governments (Ib excahnge for an operating permit) as taxes. What a complete joke it has become.

Ban KKiller's picture

Two plus two is five. I love big brother. Big brother tells me what numbers mean...if I even bother to ask.

MythicalFish's picture

So if borrowing costs double and the Shiller PE ratio returns to its median level, SPX should be in the 700 neighborhood (assuming no change in revenues). Bubble, what bubble?