Show Me The Money Flow: Global Free Cash Flow And Capital Spending Contract To 2010 Levels

Tyler Durden's picture

In a world in which glaringly misreporting factual news no longer generates much more than a shrug, the latest lie reported so often by the mainstream media and various 'expert' pundits it has almost become "the truth", is that that the key missing link to a global recovery - free cash flow, and its derivative, capital expenditures - are now once more rising. After all, corporations can not grow revenue (as confirmed by the most recent reported quarterly earnings) without investing in themselves, and they can't spend for maintenance or growth unless they generate Free Cash Flow: this is simple finance 101. So in order to put this pervasive lie to rest, we present the following chart showing free cash flow and Capex in the developed "G-4" region as a % of world GDP, which have now round-tripped back to 2010 levels, and ask a simple question: what growth?

PS. Yes, it is the Fed's fault.

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disabledvet's picture

fine...phuck you Bernanke. from "the Great Recession" to "the Great Default" in one simple...albeit huge and oft repeated... Federal Program (QEverlasting.) still...the attraction to the Dark Side was as alluring then as it is now. You know..."the what if's of sci fi" like what if Gandalf really did take the ring for himself? hmmmmmmm......

Ban KKiller's picture

Facts are for sissies. Fed follows only one rule...grab everything in sight by any means possible. Especially natural resources and homes.

Crash Overide's picture

Humans are the only species that pay to live on this planet. :(

machineh's picture

What this chart shows is that high capex levels in 2000 and 2007 reflected excessive optimism. 

Recessions ensued.

Today's levels of capex and cash flow resemble 2003, which marked the start of a four-year expansion.

HeliBen's picture

Think you might have your screen turned upside down.

Bohm Squad's picture

...which marked the start of a four-year expansion in the misallocation of capital driven by inexpensive debt.

Fixed it for you.

dunce's picture

You are comparing capex to capex at different times and ignoring the whole purpose of the chart which is to compare capex and cash flow against the same standard, % of GDP. What is most disturbing to me is the drastic change from above to below the other. The charts time frame does not go back very far, but i wonder how long it has been since the last inversion and what were the subsequent effects though that may be irrelevant because of the perpetual QE condition taking us into "uncharted" waters.

Broken's picture

i would be interested to see the inventory chart overlaid here...