On the surface, investors may view this as a good thing; but if you are still holding the stock, you now have a liability in the form of the debt on the balance sheet where previously you had an asset with free cash only and no liability. This liability exceeds cash assets three to one. In short, what is missing from the current recovery is all the money that corporate America has bled off on financial game playing.
That money could have been used to invest in equipment and products and put extra money in the pockets of consumers and that would have provided tax money to governments which then could have invested in basic infrastructure, research and the education of the next generation of workers.
US markets are still basically flat this year despite the gyrations. The yield curve is still flattening with a 180 basis point difference in the 5 yr. to 30 yr.- at the beginning of the year that difference was 270 basis points.
DISCLOSURE: Opinions and estimates offered constitute the judgment of MCS and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.
This article was written by Metropolitan Capital Strategies CEO Sharon Snow and Chief Investment Officer David Schombert.