Conservative Economics

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Subject: Asset-lite Movement

A term used in Capital Flow Analysis to indicate a trend in corporate finance in which company holdings of fixed assets were reduced, while borrowing increased. The practice became popular in the 1990s.

The Asset-Lite Movement

Corporations lighten up on tangible assets

Corporations hold less tangible assets

Federal Reserve national flow of funds accounts for the years 1995-2004 show that corporate tangible assets, as a percent of total corporate assets, dropped from 56.7% in 1995 to 49.7% in 2004. Tangible corporate assets would have had to been $1.4 trillion greater in 2004 to represent the same percentage of total assets as in 1995.

This is an indication of the success of the asset-lite movement and the pervasive flight from “asset-heavy endeavors”.

US Equity Market

Are profits as good as claimed?

Corporate profits depend upon your point of view

On January 28, 2006, an Associated Press dispatch proclaimed: “Corporate Earnings Good Despite Headlines”, stating that “corporate profits remain very healthy overall, and the majority of corporations are beating expectations.” Are these assertions true and does this mean that the outlook is rosy for the average investor in US equities? This article argues that the answer depends on who you are.

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Stock buybacks

Stock buybacks, refusing to die, live on

In Q1 2009, stock buybacks came back, driving up equity prices and sparking a rally by dominating a thin market. These equity repurchases were financed from depreciation and bond issues. More ...

Securities Analysis

Is big bank complexity irreversible?

The root problem with big banks today is organizational and product line complexity. Excessive complexity in banks can be traced to the reorganization of Citibank in 1956, under Walter Wriston, following the advice of McKinsey and Company.
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US Politics

Why Congress won't kill ACORN

Closely connected with President Obama, the ACORN group of "community organizers" has drawn censure from the Democrat-controlled Congress as a result of investigative reporting by James O'Keefe and Hannah Giles. More ...

US equities

Sarbanes-Oxley and the shortage of equities

The Sarbanes-Oxley Act of 2002, by discouraging companies to go public, will exacerbate the shortage of equities, with a negative effect on the US stock market, although this was not the intent of its authors. Poorly drafted, ill-conceived, and unfair this law does little to protect investors.
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US Bonds

Bond demand exceeds supply for a decade

Over the decade, 1995-2004, the demand for US bonds of all types has surpassed new bond issues in eight of the last ten years. This is the reason that bond prices have held firm, even in 2003, when net new issues reached almost $1.8 trillion. More ...

World Economy

What Is ‘International Liquidity’?

It used to be that the term 'international liquidity' meant the relative amount of resources available to a nation's monetary authorities that could be used to settle a balance of payments deficit. In the days of the gold standard, this would mean access to gold that could be used to redeem a nation's currency held by foreigners. More ...

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2011-01-07 16:03