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With interest rates so high in the 70s, corporations issued plenty of equity - $0.04 for every...

Tuesday, June 12, 2012, 12:12 PM ET
With interest rates so high in the 70s, corporations issued plenty of equity - $0.04 for every $1 of debt - likely a factor in single-digit PE multiples by 1982, writes Conor Sen. With rates low over the last 10 years, companies have done just the opposite, buying back $0.97 of stock for every $1 of debt issued. Those waiting for stocks to return to 82-like PE levels are going to be disappointed.

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This news story has 3 comments:

John Early Comments (177)

If earnings growth slows enough in the next recession the record amount of cash on corporate books may not be a big enough cushion to service the record amount of debt on corporate books. The expansion of debt has contributed to the last 10 years having a greater volatility in earnings than in any period going back to the 1880s. Leveraging earnings with debt cuts both ways. Sure the PE based on last 12 months earnings will not come close to 1982 levels. The PE10 that Robert Shiller uses may go below 1982 levels.

12 Jun 2012, 03:08 PM Reply Like

remurraymd Comments (2306)

Feds giving out 0% interest taxpayer money to buy back stock all good CEOs will take that deal. Quality dividenders will get stonger
over time anyway (AAPL) a good example forward PE of 8 backing out cash.

12 Jun 2012, 04:09 PM Reply Like

bbro Comments (7826)

Any earnings valuation model (i.e.. Shillers) that includes when Custer was alive is seriously stuck in an Ivory Tower....

13 Jun 2012, 05:14 AM Reply Like

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