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Strategies & Market Trends : A.I.M Users Group Bulletin Board

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To: Jack Jagernauth who wrote (13879)	12/9/2000 8:48:25 AM
From: OldAIMGuy	of 18929

Hi Jack, One of the things about debt that I find interesting when studying a stock is how well the company uses it. Being debt free and restricting the company's growth has as little merit as being loaded with debt and only growing the business by 4%. Both speak of management problems. Mr. Phelps mentions in his book that we should watch out for companies that build fancy new offices at the same time they carry lots of debt. The "office" part of their company isn't usually what creates wealth in Brick and Mortar type businesses. He calls this "Ego-nomics." However, if a company can approach the debt market in a rational way during times of low interest rates and use that capital to turn +15% or +20% bottom line growth, then it is probably a smart move. The only concern is whether a recession would stop that growth or reduce the company's cash flow to where satisfying the debt is a problem. Winter's come early to S.E. Wisconsin, too. However we've only had about 3" of snow locally. Best regards, Tom

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