To: Road Walker who wrote (146767 ) 11/5/2014 1:18:20 PM From: RetiredNow Read Replies (1) | Respond to Fed easing has resulted in record corporate borrowing at very very low rates. I've seen it with tech companies that won't repatriate their dollars. Instead, they borrow to do buybacks and pay dividends. Corporate debt, including junk debt, is at record levels. The bid under the market comes in part from corporate borrowing used to drive record buybacks. Leveraging up at low rates, as you know, is how corporations are able to drive increased earnings. On top of that massive company layoffs like that at Cisco, HP, Microsoft, and elsewhere, have been replaced with lower paid contractors. That also increases corporate bottom lines. But what has suffered is capital investment. Increasing leverage beyond a certain point does not result in sustainable growth. You cannot cut your way to prosperity. You have to invest in the future. The moral hazard the Fed has enabled has created a perverse incentive for corporations and banks to think VERY short term, at the huge cost of future growth.
