Wednesday, January 9, 2013

Nonfinancial Business Debt

Maria Bartiromo of CNBC assures us yet again that American businesses are flush with cash. This is great news!

The following chart shows nonfinancial corporate business debt (in red) and nonfarm nonfinancial nonfarm noncorporate business debt (in blue) as a combined percentage of GDP (stacked chart).


Click to enlarge.

If businesses are truly flush with cash, then that must mean that they can afford to pay off a small portion of their $12+ trillion debt! As seen in blue, note that the noncorporate businesses are certainly trying. The corporate world can't get enough debt though. No amount is too much! To infinity and beyond!

Put another way, it would seem that companies are generally flush with borrowed cash. That might explain why less than 1% of the companies in the S&P 500 currently have an AAA credit rating. Go figure.

More and more, in fact, companies have found that a AAA credit rating is not something worth aspiring to if a more conservative approach means lower profits.

Please note that this doesn't even include the financial industry. We all know how rock solid that is though. Nothing to fear there. No sir!

Too much sarcasm? It seems excessive this time. Oh, what the hell. In for a penny, in for a pound.



See Also:
Sarcasm Disclaimer

Source Data:
St. Louis Fed: Custom Chart

8 comments:

Stagflationary Mark said...

Guess what? I got a fever and the only prescription is more clown horn.

Luke Smith said...

Businesses can't take that trade recievable and attach it to their commercial paper like they used to.

I would not expect the return to 'prosperity' to be lead by businesses or households.

Stagflationary Mark said...

Luke Smith,

I would not expect the return to 'prosperity' to be lead by businesses or households.

Other than Mayor Bloomberg's theory that our problems stem from the creation of super-sized sodas, I would not expect government to lead the way back.

Once you eliminate the impossible, whatever remains, no matter how improbable, must be the truth. - Arthur Conan Doyle

I guess that just leaves us with hurricanes! It is common ivory tower knowledge that more destruction creates more growth!

Cue the clown horn, lol. Sigh.

dd said...

Then think of the interest rate swaps and credit default swaps free-riding all those corporate bond "assets" sitting in pensions, retirement accounts, etc. One can pretty much guess in the next "crisis" the "surprise" will be that corporate bonds are not "safe." Can't wait.

Stagflationary Mark said...

dd,

Can't wait.

Don't it feel like heaven right now? Don't it feel like something from a dream?

dd said...

Off to a workshop on colleralization of OTC derivative trades. Can't wait; just attend to try and figure out if there is anywhere left to hide.
I've always referred to the retirement thing as "retirement heaven:" looks a whole lot like the religious heavens where there's a lot of hype and no hard data.

dd said...

Guess my mindset is: Highway to hell.

Stagflationary Mark said...

dd,

Off to a workshop on colleralization of OTC derivative trades. Can't wait; just attend to try and figure out if there is anywhere left to hide.

It's a trap! Get out of there!

Gallows humor. ;)