Delinquencies of commercial and industrial loans at all banks, after hitting a low point in Q4 2014 of $11.7 billion, have begun to balloon (they’re delinquent when they’re 30 days or more past due). Initially, this was due to the oil & gas fiasco, but increasingly it’s due to trouble in many other sectors, including retail.
Between Q4 2014 and Q1 2016, delinquencies spiked 137% to $27.8 billion. They’re halfway toward to the all-time peak during the Financial Crisis in Q3 2009 of $53.7 billion. And they’re higher than they’d been in Q3 2008, just as Lehman Brothers had its moment....
Business loan delinquencies are a leading indicator of big economic trouble. They begin to rise at the end of the credit cycle, on loans that were made in good times by over-eager loan officers with the encouragement of the Fed. But suddenly, the weight of this debt poses a major problem for borrowers whose sales, instead of soaring as projected during good times, may be shrinking, and whose expenses may be rising, and there’s no money left to service the loan.
he seems unable to grasp that we are close to the end of the 35 year neoliberal paradigm, which substituted asset price booms and increased consumer access to borrowing for policies that focused on increasing average worker wages. In the topsy-turvy world of the new orthodoxy, worker prosperity was bad because…gasp…it might create inflation! And economists and policymakers have done such a splendid job of fighting the last war long after the inflation threat was vanquished that they are now on the verge of creating deflation, which is far more destructive than inflation, particularly in debt-burened economies.
And this analysis plays into an issue that we’ve raised as far as the fall elections are concerned. The economy is more vulnerable than the overwhelming majority of pundits seem to recognize. Rocky markets or further decay in the economy that the 99% live in will help outsiders at the expense of incumbents. Sanders’ big rise in the polls started in January, when market upheavals reminded voters that Wall Street still poses a risk to the economy and the last time they blew it up, they walked away with cash and prizes rather than orange jumpsuits
Record $1.68 trillion on hand versus $1.8 trillion owed
There’s more cash sitting on company balance sheets than ever before. For the first time since 2012, that’s not enough.
Combining all of the corporate cash in the U.S. wouldn’t cover the $1.8 trillion of corporate debt that’s coming due in the next five years, according to a report by Moody’s Investors Service on Friday. That’s because U.S. companies have been borrowing more quickly than they’ve built up the record $1.68 trillion of cash on their balance sheets. And more of that debt comes due sooner
"You’re seeing more and more borrowing," Richard Lane, a senior vice president at Moody’s, said by phone. "The increase in leverage has been notable."
Cash coverage of near-term maturities hasn’t fallen below 100 percent since 2012, and hasn’t been as low as its current 93 percent since the year before that, according to Moody’s.
One reason may be that companies are making less money from running their businesses. Cash flow from operations declined 0.2 percent to $1.54 trillion in the 12 months ended in December 2015, the first time the metric declined in Moody’s data going back to 2007.
To cope with sluggish global growth, companies went to the bond market to raise cash at rock-bottom rates. They issued a record $1.4 trillion of bonds last year, according to data compiled by Bloomberg. That helped lead to a 17 percent increase in the amount of company debt outstanding that matures in the next five years....
Apple Inc. kept its crown as cash king -- a superlative it earned in 2009 -- and has $216 billion on its balance sheet. That’s more than the amount held by energy, automotive and manufacturing companies combined.
Microsoft Corp., which is one of only two non-financial U.S. companies that still have the highest corporate credit rating from S&P Global Ratings, had $103 billion of cash on its balance sheet at the end of 2015. Google Inc. came in third, with $73 billion of cash.
A lot of that cash was stashed overseas, presumably to avoid having to pay taxes to repatriate it into U.S. dollars, according to Moody’s. In 2015, $1.2 trillion, or 72 percent of total cash holdings, was held overseas.
Rather than repatriate money, many U.S. companies borrowed in the domestic bond market to fund mergers and acquisitions, or to return money to shareholders through dividends and share buybacks
The rampant borrowing has caused corporate leverage to spike among even the highest quality companies. Debt at investment-grade companies rose to 2.35 times earnings before interest, taxes, depreciation and amortization last year, the highest since before the financial crisis, compared with a level of 1.57 in 2007, the report shows