Brett Arrends at MarketWatch.com has an interesting article on the health of United States companies; in essence, they’re just like the rest of the nation, swimming in debt. I guess that figures, the state governments are bankrupt, the federal government is closing in on bankruptcy and a huge numbers of individuals are up to their eyeballs in debt, why would American companies be any different? As he reports:
“American companies are not in robust financial shape. Federal Reserve data show that their debts have been rising, not falling. By some measures, they are now more leveraged than at any time since the Great Depression.”
This is ignored by some, such as The Washington Post, who have been reporting on the “surprising strength” of corporate balance sheets. But as Arrends notes:
“A look at the facts shows that companies only have “record amounts of cash” in the way that Subprime Suzy was flush with cash after that big refi back in 2005. So long as you don’t look at the liabilities, the picture looks great. Hey, why not buy a Jacuzzi?
According to the Federal Reserve, nonfinancial firms borrowed another $289 billion in the first quarter, taking their total domestic debts to $7.2 trillion, the highest level ever. That’s up by $1.1 trillion since the first quarter of 2007; it’s twice the level seen in the late 1990s.”
While this isn’t that surprising, it is troubling. If the financial markets tumble again, where is the government going to come up for the next round of bailouts they shouldn’t do but will try to do anyways?
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