Show Me The Lack Of Money: Global Corporate Cash Flow Slides To 2009 Levels

Tyler Durden's picture

The last time we looked at global corporate cash flow and capex as a percentage of G4 (US, UK, Europe and Japan) things were bad. Two quarters later, things have gotten much worse, with that purest proxy of true growth, or lack thereof, corporate cash flow (and not fudged, adjusted, normalized, pro forma earnings), sliding yet again tracking the ongoing collapse in capex, and now down to levels last seen during 2009, and what's worse going further back, all the way back to 2003 levels. In other words, even when taking into account the tens of trillions of liquidity injections by global central banks to prop up capital markets, the flow through to actual corporate cash flow has been non-existent, and the entire past decade is now a scratch despite the global asset price bubble rising to unprecedented new heights.

As for global CapEx which may (or may not) have bottomed at a % of GDP level not seen since 2002-2004, who needs organic growth when you have stock buybacks and dividends?

And just like last time, as we explained in early 2012, it is still the Fed's fault.

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screw face's picture

((((( FUKUNOMICS 101 )))))

Headbanger's picture

I think what's of more importance  on the above chart perhaps,  is corp cash flow is now back to pre-crash levels but with more leverage and lower rates than then. So any uptick in rates will be much more punishing than the 2008 mess!

And expect dividends to be sharply cut soon.  That may well be the final straw to break the "market"

spine001's picture

This kind of drop and trajectory in corporate cash flow can only mean 1 of two things:
1) Large inefficiencies are building into the productive system (i.e. Wall Street and miss-allocation of capital)
2) Increase in GDP is not real, but fiat paper only increase of which corporate cash flows are able to reflect only a glowingly smaller portion, thus making the dividend disproportionally larger.

The worst possible scenario is that it is a combination of the two.

Any alternative explanation?

spine001's picture

ZH published an article a week or two ago describing three papers presented at Jackson Hole demonstrating beyond any doubts that QE is not working and that it is achieving the opposite effect to the desired one.

My analogy are forest fires, the economy like the fores, now and then needs fires to get rid of what is not useful and to restart fresh with what it is. After the many years of CBs easy money inflation prone policies the economy like the forest needed a good fire and by preventing it, we prevented its healing.
Environmental scientists took years to figure this out about forests and from then on, they allowed controlled fires to take place. When they don't we end up with uncontrolled fires, like the ones that took place recently, which unequivocally end up happening and end up being huge disasters, a lot worse that those we tried to prevent.
The leadership of the FOMC, should have to take mandatory courses on HOMEOSTASIS and natural equilibrium.

SDShack's picture

In a macro sense, all true, but the analogy is incorrect in a micro sense. As you point out multiple papers prove the Fed Forest Fire analogy doing major macro damage to the economy. But in the micro sense, you can only look at this from the bankers point of view. In that micro sense, the correct analogy is not the Forest Fire, but the Scorpion and the Frog. The bankers as scorpion will only continue to do QE "because it is their nature." True sociopaths. 

B2u's picture

Can't Bernanke just increase QE from $85 billion to $850 billion and the problem will be solved?

spine001's picture

Yes, he can increase QE, but NOT corporate cash flows, for that you need to increase consumption, thus the ability to pay for the increase in the consumption of these products and services. Just inflation won't do it, since most people depend on fixed income salaries which won't follow inflation, unless you mandate that by law, like they did in Argentina in the 1980's.
If you do that, you end up with growth ahead of inflation, but the catch is that you also end up with hyperinflation, since you'd be creating a positive feedback loop in the system.

analyzer_66's picture

But QE is the cash flow for banks selling phony bonds to the govt.
Could we go ask Verizon what they did with the 85 billion they got for selling bonds to the fed or was that money just dumped into their bonus accrual to be paid out to upper management next march?

iLiquid's picture

We were looking at non-financials in that diagram.

As for Verizon...

1) Sell bonds at 0% interest rate,

2) Pay dividend,

3) ???

4) Profit!!!

Rusty Shorts's picture

There is enough currency to last a 1000 years!!!

TheGardener's picture

What ever happened to G7 without beheading a few heads of state, we are talking G4 now?

UK and Japan still counted despite being little more
than spent fuel rods ? Pure window dressing?

The pending free trade agreement with Europe will fix mercantilism and TBTF mega corporations claim on TBTF
political entities.

G1 here we come.

spine001's picture

He included the EU as a whole in the G7 they count some as individual countries and ignore the others

DoChenRollingBearing's picture

"Non illegitimi carborundum"

(Don't let the bastards get you down)  

Check out the two pretty little cousins in Peru:


So while things look very bad, there is always hope for the future.

Skateboarder's picture

They is cute as buttons, bless their little souls.

q99x2's picture

Is this what getting old means?

No because it has to be compared with what is new and becoming.

Atomizer's picture

Just roll out 2,000 minted 1 Trillion dollar coins valued at Rare Earth Metals market price. See how easy it is to take over the petrodollar currency based system with another Mickey Mouse faith based currency?

Under the collective Central Planners discussions for new monetary implementation,  MoU (Memorandum of Understanding) & REE (Rare Earth Elements) are being considered as an asset backed leverage to the new upcoming  monetary system. Just be aware..


DoChenRollingBearing's picture

Not very hygenic of that fellow, we do not know where that finger has been...

smartstrike's picture

Do you remember 2004-2006? We were told how strong banking earnings were! I think that financials accounted for some 40% of S&P500. For the past several years, we've been told over and over again how strong corporate earnings are and how much idle cash they have?

Watch out! I've been waiting for corporate collapse notwithstanding Martin Armstrong's theory that we alternate between Private and Public confidence cycles and confidence in the Public sector is waning. What he means by that is, that capital will flow to the Private sector creating a boon in the stock market and gold as it flees governments debt.

disabledvet's picture

what is the Fed's fault? That interest rates remain pegged "at or near zero"? Or that businesses that took those low interest rate loans and plowed into into mid western energy plays are now called "billionaires"? we're exporting 2 million barrels of diesel fuel a day from the the USA. "that's a lot of class flow" at 4 bucks it 40 gallons that equals a barrel? what's that...160 bucks a barrel at 2 million a day is like 3.2 billion a day or something. sure...we're still a huge importer of "cheap oil"...but then we refine it and send it out as "cheap diesel" for (obviously) huge profits. since most Americans now are taking public transportation or are now buying all electric vehicles which rely on grid power...or if we go with Solar City "a solar panel on your roof"'s really hard for me to see gasoline prices remaining high here. the USA produces billions of gallons of ethanol now to boot. coffee has rolled over. sugar has rolled over. gold and silver miners have been annihilated (meaning more product that than ever will have to be produced to get out from under the "hole" so to speak)...i really see at least a mild deflation coming...but we'll see.

Disenchanted's picture

Paper Money - Montrose



I play the game of a rich boy
I buy everything I can
My bankroll is a foot thick
I'm a wealthy man

A million dollar reserve note is right there in my hand
And I can't stand to think, well, it's all that I got

Take away all my silver
Take away all my gold, yeah
And hand me a stack of paper
Paper money, paper money don't hold

Paper money don't hold

venturen's picture

Why do you need CAPEX or non financials when you can just the dollars for corrupt banks and governments?

dunce's picture

The ratio of total market cap to cash flow must be well outside normal variations.