Courtesey of the federal reserve's attempts to push the market around, treasury yields across the entire curve are well below their mean [2]. This is leading to a gross misallocation of capital, which as usual is largely ignored by the mainstream media.
How are companies taking advantage of these low rates? They certainly aren't borrowing in order to invest in the future. Not with the level of CapEx we're seeing [3]. What they are doing is focusing on is short term gratification as ZH has pointed out many times in the past.
One glaring example of this short sighted vision is dividend recaps. Corporations borrow funds, then turn around and pay shareholders in the form of dividends. This should be a red flag to anyone paying attention, as it is a clear indication that companies apparently can't identify any projects worth investing in that will create future shareholder value.
So how are companies creating shareholder value if they aren't investing in CapEx (and thus a steady stream of future cash flows)? Why, they're adding debt of course. And lots of it -- just to turn around and give a one time cash benefit to shareholders.
To summarize, companies can't figure out how to cover an ever decreasing cost of capital by way of CapEx, so they're borrowing on the cheap and giving a one-time benefit to the shareholder (Einhorn picked the wrong company). This may paint a gloomy picture if you understand what's going on here, but the humor can be found in listening to the pundits wonder why nobody is buying the "market is cheap" argument.
