New York, NY (PRWEB) July 31, 2012
According to Michael Lombardi, lead contributor to Profit Confidential, corporate balance sheets are not as healthy as they might first appear, with corporate debt and pension deficits being big problems. Lombardi cites a Federal Reserve report that shows that non-financial corporations held $1.7 trillion in cash at the end of March, down from $2.0 trillion last year.
In the article “Cash at Corporate America Now Declining,” Lombardi says much has been made about the record amounts of cash being held by S&P 500 companies and corporations in general, but few are talking about the record corporate debt.
“According to the Federal Reserve, as of March 2012, U.S. non-financial corporations held a record $8.1 trillion in corporate debt,” reports Lombardi.
Lombardi argues that S&P 500 companies have bought back shares and increased dividends, instead of investing in capital projects, because they are uncertain about consumer spending due to weak demand.
“If S&P 500 corporations don’t create the jobs, consumers can’t buy products, and it’s the same old vicious circle,” notes Lombardi.
The Profit Confidential lead contributor also notes that corporations have record corporate debt and other problems for which they need the money.
“A study from S&P Dow Jones Indices highlighted that, within the S&P 500, pension liabilities were under-funded by a record $354.7 billion at the end of 2011,” says Lombardi.
Lombardi highlights that because interest rates are so low, the S&P 500 companies can’t earn enough return to compensate for the payouts promised to pensioners, so their pension liabilities compound higher.
“S&P 500 companies have no confidence in the economy to generate a sufficient return on their money,” states Lombardi. “The question is: why do investors still have confidence in the stock market when S&P 500 companies don’t?”
Profit Confidential, which has been published for over a decade now, has been widely recognized as predicting five major economic events over the past 10 years. In 2002, Profit Confidential started advising its readers to buy gold-related investments when gold traded under $300 an ounce. In 2006, it “begged” its readers to get out of the housing market... before it plunged.
Profit Confidential was among the first (back in late 2006) to predict that the U.S. economy would be in a recession by late 2007. The daily e-letter correctly predicted the crash in the stock market of 2008 and early 2009. And Profit Confidential turned bullish on stocks in March of 2009 and rode the bear market rally from a Dow Jones Industrial Average of 6,440 on March 9, 2009, to 12,876 on May 2, 2011, a gain of 99%.
To see the full article and to learn more about Profit Confidential, visit http://www.profitconfidential.com.
Profit Confidential is Lombardi Publishing Corporation’s free daily investment e-letter. Written by financial gurus with over 100 years of combined investing experience, Profit Confidential analyzes and comments on the actions of the stock market, precious metals, interest rates, real estate, and the economy. Lombardi Publishing Corporation, founded in 1986, now with over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more on Lombardi, and to get the popular Profit Confidential e-letter sent to you daily, visit http://www.profitconfidential.com.
Michael Lombardi, MBA, the lead Profit Confidential editorial contributor, has just released his most recent update of Critical Warning Number Six, a breakthrough video with Lombardi’s current predictions for the U.S. economy, stock market, U.S. dollar, euro, interest rates and inflation. To see the video, visit http://www.profitconfidential.com/critical-warning-number-six.