Debt as a strategy

The following article highlights how US Companies have been using larger and larger debt sales to goose their bottom lines:

• Bloomberg –  Supersized Corporate Bond Sales Are Taking a Bigger Bite Out of an $8 Trillion Market

The amazing thing about this article – is how it is presented as normal?  To quote:

“The corporate sector’s embrace of leverage as a key driver of earnings, and ultimately, stock price performance, along with the eventual need to refinance these deals, makes it likely that the volume of jumbo bond issuance will continue to increase in coming years.”

Did we not learn anything during the last meltdown about debt and leverage?  This is why all my stock screens weed out companies with poor balance sheets – no exceptions.

So, as the job market has improved – are individuals being more fiscally responsible than corporations?  Ah, not so much:

• Bloomberg –  Make Six Figures? There’s a Decent Chance You’ve Got Almost Nothing in the Bank
• USA Today – Americans’ debt problems have evolved

And if you think we are being irresponsible in this country – look at the rest of the world:

• The Telegraph – China facing full-blown banking crisis, world’s top financial watchdog warns
• ZeroHedge – Italy’s PM Unloads On Deutsche Bank’s Unfixable Problem: “Hundreds And Hundreds Of Billions Of Derivatives”

From the ZeroHedge article – this chart alone should keep you up at night:

How can one German Bank have derivative exposure 14 times larger than German GDP?

Repeat after me – “debt is not a strategy – leverage kills!”