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"Record Corporate Cash And Profitability" Are Lies: Here Is The Truth

Tyler Durden's picture




 

One of the best and easiest rules of thumb in recent years to determine just how clueless any one financial pundit is, was to ask them if US corporations have record cash. If they blindly recited the conventional wisdom, which is dead wrong, and said yes, US corporations are loaded to the gill with cash (even though we have repeatedly shown that this is simply incorrect in "Corporations Have Record Cash: They Also Have Record-er Debt" and "Here's A Chart You Won't See On CNBC") one could henceforth ignore their hot air.

It was truly a great filter for so much of the financial noise out there.

However, since the number of people who still believe this lie has soared in recent months, it is our duty to conduct a public service announcement to show the truth.

Here it is, from Credit Suisse:

  • Cash levels have slipped relative to assets, while free cash flow yields are nearly back to 2007 lows.
  • Corporate cash levels in the US are still high relative to history, but have been worked down in recent years.

Keep in mind this chart shows gross cash. What it doesn't show is that the bulk of the cash on the asset side is the direct result of incrementa debt, as we showed before:

 

... not due to organic cash flow. In fact, as the next chart shows, corporate cash flow yield across the entire US market is now at the lowest level in the 21st century.

Credit Suisse' conclusion:

  • Overall, there appears to be less firepower to do M&A, buybacks, and increase

Which, among many other, is one further reason why the Fed simply can not hike rates: for an increasing number of companies the only source of cash is new, incremental debt. Because in a world in which there is little motivation to create cash flows organically when one can simply lever up (until one no longer can: see IBM and its stock buybacks), there are no cash flows, period.

 

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Fri, 03/20/2015 - 18:43 | 5911526 dimwitted economist
dimwitted economist's picture

the stock market is so undervalued right now.. Buy Stock Bitches!!!! 

Sat, 03/21/2015 - 04:39 | 5912419 TripsTrading
TripsTrading's picture

I do think we'll see 2150 end of March, see here: www.tripstrading.com 

Fri, 03/20/2015 - 18:44 | 5911527 davidalan1
davidalan1's picture

Lies? cmon....who be lying? who lies?  Back in the day of the Rockefellers and Carnegies and my Father...shit was done with a handshake...go figure... my, my how far we have come. And there in lies (pardon the pun) the challenge. No one trusts anyone. NO ONE is honorable

I was in small biz finance over the past decade. The amount of charlatans, crooks, con-men, UP FRONT FEES...ie. send me 1k and we can begin on your loan...omg...corzine, drink wine, feel fine, be mine...its a disaster...time for a building 7 take down

 

Please refute

Fri, 03/20/2015 - 19:02 | 5911562 lasvegaspersona
lasvegaspersona's picture

So you dealt musicians too?

Fri, 03/20/2015 - 19:47 | 5911688 davidalan1
davidalan1's picture

YES, so many viable businesses looking for capital that just got scammed for the "up front fee" only to get NOTHING..

Fri, 03/20/2015 - 19:15 | 5911599 honestann
honestann's picture

No refute here, but I would not say that NO ONE is honorable any more.  What I would say is, those FEW who are honorable have understood how few others are, and are now very hesitant to deal with anyone because the odds they are dealing with a scam artist are now much too high.

This is just one of several reasons the number of new small businesses has been FALLING.  Nobody in their right mind would risk starting a new business when virtually everyone else is a flaming dishonest predator or parasite.

Fri, 03/20/2015 - 19:45 | 5911680 davidalan1
davidalan1's picture

Been there and agree. The implication are staggering

Fri, 03/20/2015 - 18:46 | 5911530 Westcoastliberal
Westcoastliberal's picture

This comes as Earth-shattering news!

Fri, 03/20/2015 - 18:57 | 5911543 Chuck Knoblauch
Chuck Knoblauch's picture

The investor class cannot carry an economy alone.

Your squeezing the balls of everyone else.

There's no sperm or piss left.

Commieville, here we come.

The investor class is turning the US into a commie state.

And they don't see it?

LOL..................

Fri, 03/20/2015 - 23:51 | 5912207 TheReplacement
TheReplacement's picture

Useful idiots selling the communists the rope by which they will hang the capitalists.

Sincerely,

The Redundant Department of Redundancy

Sat, 03/21/2015 - 05:22 | 5912440 KashNCarry
KashNCarry's picture
'Inverted Totalitarianism: A New Way of Understanding How the U.S. Is Controlled' http://bit.ly/1FiW4B0
Fri, 03/20/2015 - 19:14 | 5911548 Whoa Dammit
Whoa Dammit's picture

Corporations can no longer create organic cash flows because most people no longer have money to buy their products. When all of a country's  workers  wages are spent on taxes, food, shelter, health care and transportation, there is no, and never will be any, organic grow in product sales. So any increases shown in corporate cash flow are the financial equivalent of a dog eating its own shit and declaring that itself well fed.

Fri, 03/20/2015 - 18:55 | 5911553 clade7
clade7's picture

Well piss in my hat!  There goes the Christmas bonus!

Fri, 03/20/2015 - 19:05 | 5911573 kchrisc
kchrisc's picture

What ever the corps may or may not have, it is actually owned by the Zionist banksters that hold the fiat mortgage over it.

"Sure, we'll loan you a few $billion more to buy back more of your stock, and/or Enron your earnings report. No problem. Just sign here. I'll just need to prick your finger for the ink."

The banksters need to repay us.

Fri, 03/20/2015 - 19:37 | 5911660 Yen Cross
Yen Cross's picture

 Dead cat bounce? BDIY Chart - Baltic Dry Index - Bloomberg

 The USDX needs to move 2-3% lower IMHO.

Fri, 03/20/2015 - 21:04 | 5911858 Winston Churchill
Winston Churchill's picture

More like the putrefaction gases bloating the cat, than a bounce.

Fri, 03/20/2015 - 22:25 | 5912046 jdtexas
Sat, 03/21/2015 - 07:08 | 5912496 VisionQuest
VisionQuest's picture

FEDGOV Pentagon operations will be adding to the cash-flow of certain U.S. domestic constabularies with Operation Jade Helm, using U.S. towns for training purposes. Matt Drudge displayed this link on March 20 2015. https://www.scribd.com/fullscreen/258605525?access_key=key-dS1ZhJJ4ZgCH6...

Sat, 03/21/2015 - 02:28 | 5912358 Jack Daniels Esq
Jack Daniels Esq's picture

Mugabe/Zuma/Obama - Dumb/Black/Economy/Destroyers

Sat, 03/21/2015 - 10:05 | 5912707 11b40
11b40's picture

I did not know George Bush was black.

Sat, 03/21/2015 - 06:12 | 5912462 Bobbyrib
Bobbyrib's picture

Imagine a Quantative Easing specifically based on buying corporate debt if enough deflation hits that these corporations can't service their debt. I wonder if that would be enough of a wake up call for the public. The Fed debasing their currency to save our coporate masters..people would probably find a way to blame the public like they did for TARP.

Sat, 03/21/2015 - 11:08 | 5912818 Ban KKiller
Ban KKiller's picture

"Creative bookkeeping", aka former "big eight" accounting firms. IT ALL STARTS WITH PHONEY ACCOUNTING. 

2+2 DOES = whatever number you need to keep the investor fooled. 

Can't beat them so join them in white collar crime, says every company! Not a crime unti they get caught and by then...too late sucker! 

I feel like nailguns are  the real answer.           The Onion makes no sense in todays news. 

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