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Strategies & Market Trends : Heinz Blasnik- Views You Can Use -- Ignore unavailable to you. Want to Upgrade?

To: EL KABONG!!! who wrote (546)	5/1/2003 3:10:07 AM
From: LLCF	Read Replies (4) \| Respond to of 4912

<In my opinion, the day is rapidly approaching where the US consumer will no longer be able to support the global economy, at least not to the extent s/he does so now.> It's interesting that while the US consumer has been proping up profits around the world, US corperate profits have been real crap. And while those that 'pooh pooh' the 'debt worrywarts' hold up debt service [due to low rates] as reasonable [most likely so they won't have to look at those aggregate debt numbers] in fact the guys that pay the wages [US corperations] saw annual interest charges move from $108B to $193B during the '96-2002 period while profits were flat. According to Bernstein at Merrill debt/equity ratio's have gone from about 35% to 53% over that time period. Further states Bernstein "those that believe balance sheets are being repaired based on income statement measures such as free cash flow better look at balance sheet data which argues otherwise. In fact the data we present argue that the build up in free cash flo may be more attributable to balance sheet deterioration than to balance sheet repair." He notes interest coverage has not even improved in the last 12 months with the supposed recovery AND lower rates., and all the liquidity ratio's have been deteriorating for years and continue to do so. Meanwhile even Merrill thinks profit forcasts continue to weaken. The consumer has also added debt faster than his income increases... at best this boost to the economy won't last, and at worst it could strangle this driver of the economy. Debt is a two edged sword, those that think net income of X for an unleveraged company or family = income of X for the leveraged company or family may be in for a rude shock if things continue to deteriorate, especially on the jobs front. Further more, if the noose on neck does get tight, there is a VAST difference between the family with X debt and a family with X * 5 debt even if their 'debt burden' is the same. <<When that day of reckoning arrives, there will be Hell to pay, financially speaking, because there's not a single trading country anywhere that's prepared for that happening.>> Lot's of bag holders out there. Wonder what they'll do? DAK