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To JPM, This Is The Alarming Chart Suggesting The Next Recession "Is Just Around The Corner"
By now it is clear to even the most tenured economists that the half of the US economy, the one that deals with manufacturing and industrial production, is sliding into, if not already, in recession with today's contractionary Chicago PMI and subzero Dallas Fed data confirming this deterioration.
But while the NBER is notoriously behind the curve when it comes to determining the onset of recessions, the market may have already spoken, and nowhere louder than in the collapse of corporate cash flow generation. This collapse in EBITDA is also what we cautioned three weeks ago is the biggest risk facing the economy.
This drop in cash flow is also one of the key catalysts listed by JPM in its report (noted earlier) which said it is time to lower allocation to US equity exposures as "the long period of indiscriminately buying any dip might be coming to an end."
Specifically, JPM looks at the corporate financing gap, the difference between organic cash flow and the outflow on dividends and buybacks, and is very concerned with what it sees.
The current deterioration in the credit market is particularly worrying at a time when corporates are becoming more and more dependent on external sources of liquidity. The US corporate financing gap – the difference between cash flow generation and spending on capex and dividends – has turned strongly negative. In the past, when the financing gap went strongly negative, the next downturn was just around the corner.
And here is the chart which JPM believes suggests the next downturn may be "just around the corner."
Will it be different this time? Here JPM is pessimistic again, for the simple reason that any attempts to extrapolate profit margins, the lifeblood of corporate cash flows, suggests that much more pain is ahead: "If we were to perform a simple modelling of NIPA margins, using as inputs the unemployment rate, wages and nominal GDP growth, we get as a result a clear deceleration in profit margins next year."
One wonders, and can only hope, that these observations are part of the Fed's deliberations as Yellen and company sit down in two weeks to discuss whether the US economy is finally "strong enough" to weather the first tightening cycle in nearly a decade.
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Haha...just don't matter. Buy the dip. Period. Fed and ECB have your back. Easy money. A potential recession will only unleash more QE and higher stock prices. It is what it is. BUY THE DIP!!
Fuck the "coming recession". What about the depression we are currently in. Consumption based on debt is not "growth" and never was or ever will be.
I'm alarmed. Just say'n.
What is coming is not a recession but a systemic collapse. The Rothschild cabal of parasitic private bankers and the ponzi scheme they have put in place to steal the wealth of the middle classes in the west has reached the point where it simply cannot continue even in a best case scenario. It is good to be worried about where this is headed because noone has a clue as to who is going to win and what is going to happen.
Can we dispense with this recession bullshit? We are in a global depression and to go into a recession would be a step in the right direction. But the whole fucking FUBAR is in a death spiral and if you don't believe that then ZH has had no impact on your thinking. We all know the end is coming so let's not fool ourselves and prepare for it as best you can…May the force have mercy on your continued existence…
What ever I just said I'm not responsible as I observed the confederate flag on a laptop and I need therapy and maybe a fucking education of what the flag really represents,,,MORONS AMHERST COLLAGE.
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EBIT and EBITDA are crap indicators, meaning nothing.
Earnings BEFORE Interest, Taxation, Depreciation and Amortisation?! Right, so a company doesn't have to pay or allow for any of those?!
DavidC
Very true
All non-GAAP numbers are spray paint to cover up the ugly reality. Too bad that you can't spray paint a collapse......
Pass a law requiring the us govt to us GAAP
Did you mean CRAAP?
Never happen, the government would destroy itself in a massive bullshit implosion......
Nobody wants to see that number. Better off with the ostrich numbers TPTB hold up as reality, until the real reality is unable to be held just below the surface.
EBITDA is a proxy for cash flow, I don't think it's a crap indicator. It gives some insight into the operating cash flow of the business.
That being said, it shouldn't be the ONLY indicator you use to evaluate the health of a business.
remember to exclude the one-time, non-recurring charges that occur every year, too.
The thieves at JPM are just reporting the truth, that the low hanging fruit is gone, that the thieves have to get creative. The ultimate thief is the U.S. government. Which explains the push by the United States Justice Department to use the Foreign Corrupt Practices Act as a worldwide money hoovering scheme while Justice turns a blind eye to Obama's continuing to allow the CIA and corrupt elements in the Pentagon to ship in tons of drugs into the USA from Columbia and Afghanistan. You now have criminals in the White House fining foreign corporations hundreds of millions of dollars for being blackmailed by the corrupt leaders of countries like Uzbekistan (see story below), while ignoring corruption at home, such as the $250 million Senator Feinstein made for her family's construction business by approving billions in Iraq construction projects when she was the Senate MilCon subcommittee chair. The media knows better to report stories such as Feinstein's, thanks to seeing what happened to reporter Michael Hastings, whose Mercedes blew up after the FBI placed an IED in it. Naturally, the LAPD covered up the murder and the M.E. there went along, cremating Hasting's body so it could not be checked for torture and the bullet hole in the head.
http://www.msn.com/en-us/money/markets/the-dictators-daughter-and-a-doll...
Suurree..., because we have left the second great depression in the first place.
It's only a depression after the fact. Honesty is for the little people......
It's only a depression for the private sector middle class. For the upper 1% and lower FSA it's never been better.
I agree the economy is in the shitter, but it's funny that all the usual suspects are out talking gloom and doom, because they're scared shitless the Fed. is going to lift rates and dry up their casino bux.
Just around the corner....sort of like being in a round room and looking for a corner to take a shit. Always around the corner. GMAFB
chart below compares global industrial output post 1929 to post 2008
http://assets.bwbx.io/images/iCaTVZhQxzpM/v1/-1x-1.png
http://www.voxeu.org/
Transitory
Here are some signs of a coming recession.
1. Factory orders continue to drop
http://www.zerohedge.com/news/2015-10-02/us-factory-orders-flash-recession-warning-drop-yoy-10th-month-row
2. Default risk spikes
http://www.zerohedge.com/news/2015-10-02/us-financials-default-risk-spikes-2-year-high
3. M&A set record
http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record/
4. Fed sees 2 bubbles
http://michaelekelley.com/2015/02/20/fed-warns-of-two-bubbles/
o Commercial Property higher than pre-2007 level.
http://nreionline.com/finance-investment/cre-prices-are-now-officially-above-pre-recession-peak
o Global Corporate Debt Market hits $5 trillion.
http://fn.dealogic.com/fn/DCMRank.htm
5. Iron ore prices tumble
http://www.marketwatch.com/story/iron-ore-prices-keep-crashing-adding-to-global-growth-fears-2015-11-30
6. Baltic dry shipping index tumbles
http://www.marketwatch.com/story/shipping-index-falls-to-all-time-low-stoking-fears-about-global-growth-2015-11-19
Here is how to prepare.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Here is how to get your mind off this stuff.
http://michaelekelley.com/category/humor/
Good luck!
Nah, no crash yet......Al Gore and his climate ilk don't have their open borders climate scam government fully in place yet.
It almost doesn't matter what tweaks the federal reserve tries now. They've utterly destroyed the real economy. Game over.
The only question now is how the scam shreds itself apart at the seams.
The Fed will never tighten. Just ask Greg Hunter.
Oh, wait, don't....Greg, get some rest brah, you're letting it get to you. Back away from the doom porn, take some time off, and lay off the cigs. You look terrible!
Eventually there will be a recession and the ZH doom and gloomers will proclaim they predicted it. There is nothing wrong with deconstructing the spin of the asset gatherers but at some point your credibility is just as suspect if you are constantly screaming the world is going to end. The truth is we are in a low growth environment because as a mature economy with a stagnant population that is all the economy can naturally produce. Is what it is, but what it is not is the end of the world. Insults to follow I am sure.
take away the printing press and its a no growth environment. no QE, normalization of rates, and it's a negative growth environment. fake, fake, fake.