Over the past decade, companies have taken advantage of low rates both to grow their businesses and reward shareholders.
Total corporate debt has swelled from nearly $4.9 trillion in 2007 as the Great Recession was just starting to break out to nearly $9.1 trillion halfway through 2018, quietly surging 86 percent, according to Securities Industry and Financial Markets Association data. Other than a few hiccups and some fairly substantial turbulence in the energy sector in late-2015 and 2016, the market has performed well.
"Reward shareholders" is code for stock buybacks - the practice of a company using ultra-low interest financing to buy its own stock on margin. It's an unsustainable way to manipulate the price/earnings ratio, and thereby make a company look like a better buy than it is.
Buybacks in turn have been a major source of funding for the stock market's unprecedented run:
I suspect those looking for a soft landing here haven't considered the reversible nature of this debt-fueled stock market rally. Nor have they considered the amplifying effect of debt on the upside and downside.
Total corporate debt has swelled from nearly $4.9 trillion in 2007 as the Great Recession was just starting to break out to nearly $9.1 trillion halfway through 2018, quietly surging 86 percent, according to Securities Industry and Financial Markets Association data. Other than a few hiccups and some fairly substantial turbulence in the energy sector in late-2015 and 2016, the market has performed well.
"Reward shareholders" is code for stock buybacks - the practice of a company using ultra-low interest financing to buy its own stock on margin. It's an unsustainable way to manipulate the price/earnings ratio, and thereby make a company look like a better buy than it is.
Buybacks in turn have been a major source of funding for the stock market's unprecedented run:
https://seekingalpha.com/article/4156578-buyback-bubble-will...
I suspect those looking for a soft landing here haven't considered the reversible nature of this debt-fueled stock market rally. Nor have they considered the amplifying effect of debt on the upside and downside.