Market Confirmation

In my previous blog I advocated small businesses and even individuals using debt to fund investments or even build a cash reserve for the potential double dip recession on the premise that money is extremely cheap and since its being subsidized by YOU; be sure to get your slice. Seems other folks agree with this view. According to Dealogic, for the first 9 months of 2009, of all debt issued by non financial companies, only 9 of the 100 largest bond deals globally and only 6 of the 100 biggest US deals, were for expansion, capital expenditures, investments or project finance, while 65 of the top 100 US deals were for refinancing or working capital. When companies issue debt, they tell investors why they're doing it in the prospectus they file. Most of these companies explanations suggest they are hoarding cash or repairing finances. Many also listed "acquisitions" as a use. When companies borrow debt without an immediate opportunity for a return on investment that exceeds the cost of capital, it is a good sign they either fear things could get worse (and capital will dry up) or they believe debt is so cheap that it is better to get your hands on it while it last and figure out what to do with it later.