One of the memes of the Wall Street touts is the strength of US company balance sheets. “They have never been stronger” is the line heard over and over again by those wanting you to believe that the economy is recovering and the stock market is undervalued. Not surprising, most of this talk is all hype.
John Hussman explodes the myth with facts and concludes:
The bottom line is that at an aggregate level, corporate balance sheets look reasonable, but are certainly not “stronger than they have ever been in history.” Cash levels are elevated, but this is at best a second-order factor (with excess cash representing only a few percent of total assets), while debt remains near record levels relative to total assets and net worth. In any event, balance sheet risks should be evaluated on a business-by-business level, rather than accepting the blanket notion that cash levels are so high that nobody needs to worry about corporate credit risk.
