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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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Sun, 06/02/2013 - 15:36 | 3618595 disabledvet
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.) http://www.youtube.com/watch?v=8kpHK4YIwY4 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 http://www.youtube.com/watch?v=oM4bCiKIJuA&feature=player_detailpage what if Gandalf really did take the ring for himself? hmmmmmmm......

Sun, 06/02/2013 - 15:36 | 3618598 Ban KKiller
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.

Sun, 06/02/2013 - 15:54 | 3618621 Crash Overide
Crash Overide's picture

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

Sun, 06/02/2013 - 15:55 | 3618622 machineh
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.

Sun, 06/02/2013 - 16:45 | 3618716 HeliBen
HeliBen's picture

Think you might have your screen turned upside down.

Sun, 06/02/2013 - 17:59 | 3618824 Bohm Squad
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.

Mon, 06/03/2013 - 13:01 | 3620630 dunce
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.

Mon, 06/03/2013 - 17:32 | 3621541 Broken
Broken's picture

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

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