Stocks hit record high on sagging performance, higher debt.
Stocks hit record high on sagging performance, higher debt. by Simon Black – Sovereign Man
There’s something completely ridiculous happening around the world right now.
We can start in the United Kingdom, where the FTSE-100 stock market index hit an all-time high yesterday of 7454.
Simultaneously the British government released statistics yesterday showing that debt judgments and bankruptcy filings across the UK soared 35% in the first quarter of 2017 to the highest level in a decade.
British consumers are on a debt binge, borrowing (and now defaulting) at record levels.
This all sounds pretty sustainable.
Across the pond in the Land of the Free, the US stock market also hit a record high yesterday.
Simultaneously, consumer credit (i.e. DEBT) in the US is also at an all-time high of $3.8 trillion.
Even more specifically, margin debt, which is the amount of money that investors borrow to buy stocks, is at an all-time high.
Think about that: investors are borrowing record amounts of money to buy stocks at all-time highs.
This sounds like a fantastic trend!
If you look deeper, the numbers become even more bizarre; let’s go back in time a few years and I’ll show you.
In 2012, Coca Cola reported $48 billion in revenue for the year, and $9 billion in profit. That was a pretty good year for Coca Cola shareholders.
For 2016, however, Coca Cola reported revenue of $41.8 billion, and $6.5 billion in profit.
So when you compare 2016 to 2012, revenue declined 13%, and profit declined 28%.
Given those dismal figures you’d think that Coke’s stock price would be a LOT lower today than it was back then.
After Coca Cola reported its 2012 earnings on February 12, 2013, its stock price was around $37.50.
When Coca Cola reported its 2016 earnings earlier this year, its stock price was $41.25. And today it’s even higher at $43.50.
Even more curious is that Coke’s 2012 report shows long-term debt of $14.7 billion. By 2016, long-term debt had more than doubled to $29.6 billion.