Back in 2012 we accurately predicted [4]that in the Brave New Normal World, where zero cost debt-issuance is used to immediately fund stock buybacks instead of being reinvested in growth and expansion, in the process boosting management pay through equity-performance linked option payout structures, that with every passing year CapEx spending would decline first in relative then in absolute terms, even as free cash flow use of funds is spent on other "here-and-now" shareholder-friendly activities such as buybacks and dividends would grow exponentially (which also explains the unprecedented emergence of shareholder "activists" who demand that in an Ex-CapEx world they get paid right here, right now).
That much has been proven and now, year after year, strategists keep telling us that the long overdue CapEx spending boom is just around the corner (as is the so-called recovery), because as of this moment in the all important industrial and construction segments, CapEx is running a whopping 30% below trend...
[5]
... and yet, the "boom" never comes.
And here is why it never will, because while waiting for CapEx is reminiscent of waiting for the proverbial Godot, nowhere is it more evident that CapEx is not coming back, in any terms, than in the following chart from Goldman showing both historical and forecast CapEx, created on a bottoms-up basis and showing that global CapEx will decline sequentially both next year and the year after that.
[6]
And yet companies which have no choice but to continue their existence, even if they are forced to pay out all incremental cash to their loud-mouthed shareholders simply because there really is no global economic growth which can soak up the incremental growth spending, they still spend money on (mostly) maintenance and (to a tiny extent) growth capital spending.
So for those curious where this spending ends up (because everyone knows where dividends and buybacks go), here is a global heatmap of all capex spending broken down by region and segment:
[7]
