I woke up this morning, picked up the paper(*) as I walked out the door, and found this: Triple-A credit rating takes corporate pounding, at the top of the Business section. Summary: Corporate America’s credit-worthiness is at an all time low… far worse than in 1980.
I think the author, by focusing on the near disappearance of AAA rated firms, misses the bigger story (a huge shift in the overall quality of corporate creditworthiness, and the number of firms with “junk” or near-“junk” grade credit). I’m also annoyed by the “spin” that this is merely a re-balancing of corporate priorities between bondholders and equityholders. Nevertheless, the article makes it absolutely clear that Corporate America is as debt-ensnared as any other sector of our society. I’m not surprised, but at the same time, I haven’t seen this laid out so starkly anywhere before.
This completes the triumvirate… every sector of our society (public, individual, and corporate) is massively overextended.
Want more information… horrifying stuff? The Grandfather Economic Report, put together by Michael Hodges, has a ton of it.
Did you know that America’s total debt exceeds $40 trillion dollars (not counting unfunded liabilities of various sorts)? That’s ~$136,500 for every man, woman and child in the country… and counting. Did you know that household debt as a percentage of national income has been soaring like a rocket, and that the ratio now exceeds 100%? Or that the percentage of equity Americans hold in their homes has dropped to 55%? (scroll down)
Setting aside the author’s political leanings (libertarian/limited-government), the overall picture he paints (very carefully documented and sourced) is pretty damned horrifying. Why isn’t this the number one item on our elected representatives’ agenda?
The author also links to an article on the housing bubble — the source is suspect (a Lyndon LaRouche associated newsletter), but the information in it is troubling, to say the very least… how deeply leveraged is the entire housing market? Is it vulnerable to a Long Term Capital Management style financial market meltdown (with far greater consequences)? If I had more time, I’d try and find more information from a less suspect source. Anyone care to do that, and post a link in a comment below?
* Yes, I do subscribe… although only because I got a super-deal from the SF Chronicle last year at San Francisco Pride… $82 net for a full year’s subscription after receiving a $50 Safeway Gift Card. I sincerely believe that part and parcel of being an informed citizen is subscribing to a daily newspaper… and yes, the Chronicle is a sorry ass rag, compared to the Los Angeles Times of my youth, but – it still keeps me somewhat in touch with the flow of the culture; not to mention putting the occassional very informative piece of information in front of me, and/or provoking me to dig deeper on a subject.