Thursday, July 23, 2015

7/23/15 Corporations deleveraged?

From the peak of leverage before the great recession Q3’07, non-financial corporations liabilities grew 37.4% through Q1’15.  For the same period their equity grew 29.4%.

Liabilities to GDP:
Q3'07     1.12
Q1'15     1.27

I am just dismayed that anyone thinks there is less risk due to deleveraging.

Well, who am I to question the ROI on corporate decisions?  Profits have been stellar so I guess corporations can grow out of their debt.

The place that deleveraging actually took place is with the banks and non-bank financial companies.  And this was a financial crazy products crisis.  So who am I to question what liability levels non-financial corporations should have?

Note that the economy as a whole continues to plow money into R&D.  And this chart is adjusted for inflation.

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