Home » Posts tagged 'indebtedness'
Tag Archives: indebtedness
US Companies Are More Indebted, More Leveraged, Less Profitable, And More Richly Valued Than Ever
US Companies Are More Indebted, More Leveraged, Less Profitable, And More Richly Valued Than Ever
Once again I start with a warning: A recession is eventually coming and a financial crisis with it. There is a real potential for it to come soon, although serious tax reform could delay it.
But sooner or later, the pressures of too much government debt and too many government promises, plus growth that is continually grinding slower, will break out into a recession.
There is always another recession.
You can’t run your life and business as if you expect one to happen tomorrow, but you can make contingency plans. With each passing day, recession gets closer, but that’s no reason to be fearful if you’re prepared.
Troublesome Facts
Most have helpful source links, too. Here’s a short recap:
- The S&P 500 cyclically adjusted price-to-earnings (CAPE) valuation has only been higher on one occasion, in the late 1990s. It is currently on par with levels preceding the Great Depression.
- Total domestic corporate profits (w/o IVA/CCAdj) have grown at an annualized rate of just .097% over the last five years. Prior to this period and since 2000, five-year annualized profit growth was 7.95%. (Note: Period included two recessions.)
- Over the last 10 years, S&P 500 corporations have returned more money to shareholders via share buybacks and dividends than they have earned.
- At $8.6 trillion, corporate debt levels are 30% higher today than at their prior peak in September 2008.
- At 45.3%, the ratio of corporate debt to GDP is at historical highs, having recently surpassed levels preceding the last two recessions.
…click on the above link to read the rest of the article…
Canadian Families’ Debt Jumped By 64 Per Cent In Just Over A Decade
Canadian Families’ Debt Jumped By 64 Per Cent In Just Over A Decade
The amount owed by indebted Canadians grew by 64 per cent to $60,100 in just over a decade, according to a new Statistics Canada study.
The StatsCan report released Wednesdayfound that between 1999 and 2012, the median debt held by indebted families increased by $23,000. The number of households with debt — including mortgages, car loans, lines of credit, personal loans and student debt — also rose, from 67 per cent in 1999 to 71 per cent in 2012. The median figure is the middle number separating the top half of families with the most debt from the bottom half.
However, the government agency also points out that the value of assets held by Canadians families grew over the same period by an even greater 80 per cent, or $179,800, to $405,200. The value includes both financial assets like investments and pensions, and non- financial assets such as real estate.
Both phenomena can partially be attributed to rising real estate price tags, especially in the past few years. As homes become more expensive, many Canadians must take out bigger mortgages to afford them. But as they pay down those carrying costs, the value of their biggest asset, their home, also rises.
Economists and government officials have been warning Canadians for years about the perils of sky high debt loads, which rose to 110 per cent of median incomes in 2012 from 78 per cent in 1999. More than one-third of families had a debt load of 200 per cent of after-tax income.
But the situation for families when comparing debt to assets is much more stable as debt loads rose alongside the value of assets such as real estate. The median Canadian family had debt loads about one-quarter the size of their assets in both years.
For some groups of Canadians, debt loads rose much more significantly than assets.
Those groups include non-homeowners, single people and families whose major income earner was between 15 and 34 years old.
Household Debt Soars in Canada, “Stability” at Risk
Household Debt Soars in Canada, “Stability” at Risk
Debt by Canadian households is a special phenomenon. Statistics Canada reported today that in the fourth quarter, household debt set another breath-taking record.
Earlier this month, even Equifax Canada, which is in the business of facilitating and increasing this indebtedness, had warned about it. The total indebtedness of Canadian households, according to its own measure, had jumped 7.7% from prior year, which had already been at record levels. The biggest culprits were installment and auto loans. Households are powering consumer spending, and thus the overall economy, with ever larger amounts of ultimately unsustainable debt.
A “a cautionary tale,” the report called it.
The rapid decline in oil prices caught many by surprise. And, that’s the point – consumers and business owners need to be more vigilant. When economic change happens, it can happen very quickly and can challenge previously observed stability of key economic and credit indicators.
In other words, as the price of oil collapsed, as housing stumbled, and as layoffs began – the “economic change” that “can happen very quickly” – the “stability” of different aspects of the economy, including household debt, is suddenly at risk. It’s a warning that consumers might buckle under that mountain of debt.
Now Statistics Canada weighed in. In Q4, household borrowing, on a seasonally adjusted basis, jumped by C$22.6 billion from the third quarter. Credit cards and auto loans accounted “for the majority of the overall increase.” Total household debt (consumer credit, mortgage, and non-mortgage loans) rose 1.1% from the prior quarter to C$1.825 trillion, with consumer credit hitting $519 billion and mortgage debt C$1.184 trillion.
…click on the above link to read the rest of the article…
