Great Graphic: Behavior of US Capital

This Great Graphic comes from the Economist's Buttonwood blog, which in turn, it got from Andrew Lapthorne, a Societe Generale economist.  Together they tell an interesting story about the behavior of Corporate America that is consistent with the sketch we provided in our skeptical response to arguments of financial repression. 

Beginning with the bottom chart first, we see that corporate profits appeared to have been bolstered by the aggressive monetary policy that that driven down interest rates and spurred the ire of the financial repression camp.  Net income rose faster than earnings before taxes and interest payments. 

The chart second and third from the bottom shows that the short, sharp de-leveraging by corporations initially during the crisis, has been followed by a re-leveraging process, which means the taking on of more debt.  Leveraged loans, high yield bonds and investment grade bond issuance have soared.  The chart also shows one important thing publicly traded companies did withe the funds raised and internally generated:  bought back their own shares.  

The top chart shows that capital spending fell sharply early in the crisis and quickly rebounded to pre-crisis levels, perhaps encouraged by expedited depreciation allowance.  However, more recently as gross operating cash flow has weakened so has capital investment. Indeed, the gap between the two warns of further downside risk to capital expenditures in the coming quarters.