runway of the entire U.S. economy. Using traditional accounting metrics, this wouldn’t be possible. The problems with how different companies treat metrics – like leases, interest expense, capex, and other line items – make as-reported accounting totally incomparable and trend analysis impossible. Any big-picture macro analysis of U.S. corporates in aggregate would be “garbage in, garbage out.” FORGET THE SPIN CYCLE, LOOK AT THE CREDIT CYCLE By using Uniform Accounting, a more reliable way of looking at companies than the U.S. generally accepted accounting principles (“GAAP”), we can see a better, macro picture of companies’ ability to service their debt obligations. The following chart highlights the aggregated “Credit Cash Flow Prime” chart for the S&P
To understand if we’re headed for a recession and a bear market, we pay attention to one key question... Are we headed toward a debt crisis? The best, most comprehensive signals say that the answer is a resounding “no.” Not yet anyway. For U.S. corporations, there are no near-term signs of an impending debt crisis. Companies have two options to service their debt as it comes due. 1. They can pay off the debt with their cash balance and cash flows. 2. Or, they can refinance their debt with more debt due at a later date. Debt crises normally begin when companies are unable to refinance their debt. They are still on the hook to pay. But they don’t have the cash to do so. And banks aren’t willing to lend to them. By looking at all U.S. corporations’ debt, cash flows, and cash on hand, we create a signal that accurately gauges the overall health and
Aggregate CCFP for the Entire S&P 1000 With Outstanding Debt (excluding financials)
400K
Obligation & Debt Maturity Schedule
Cash Available for Outlays Gross Cash Earnings Other Uses of Cash Maintenance Capex R&D Maintenance Dividends Rental Maintenance Interest Expense Debt Maturities
300K
200K
100K
Source: Captial IQ, Valens Research Analysis
0K
2019E
2020E
2021E
2022E
2023E
American Consequences
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