Friday, 17 January 2014

Refuting The Biggest "Recovery" Lies In Four Simple Charts


"US profits are growing, companies have underinvested and have no choice but to spend more on CapEx, and corporations have much less debt than they did during the crisis thanks to a massive cash build up."

These are the generic go to explanations by soundbite, talking heads for why the US recovery is gaining traction with US corporations, if not so much Joe Sixpack, and why companies are still cheap. There is one problem: they are all wrong.

As SocGen's Andrew Lapthorne shows conclusively, "US profits are not growing, companies are over not underinvesting (they may in fact have overinvested), and corporates are carrying more (not less) net debt than they were in 2009. It would appear that many believe the opposite to be true, yet corporate report and accounts data seems to say otherwise." But hey- stocks are at record highs, right, and the market is never wrong (except when it is), so who cares. Indeed "Thank goodness equities went up in 2013, otherwise it might have been a rather depressing year."

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