The Real Us Under The Debt Crisis: Poor Government + Rich Enterprises

stay

The real us under the debt crisis is a combination of "poor government and rich enterprises".

Apple Corp is a typical representative.

Apple's 2011 quarter fiscal year third quarter earnings showed that its total revenue amounted to $28 billion 571 million, net profit of $7 billion 308 million.

In 2010, Apple Corp's sales revenue amounted to US $65 billion 225 million, and its net profit amounted to US $14 billion 13 million.

Apple currently has total cash holdings of $76 billion 200 million, while the US Treasury's operating cash balance as of July 27th was only $73 billion 800 million.

Since the outbreak of the financial crisis, although the economic indicators of the United States are still weak, GDP growth is slow, and the unemployment rate is at a high level of 9%. But the US enterprises seem to have stepped out of the recession before their macro economy, and began to rebound strongly and return to normal operation track.

We measured the sales revenue, net profit, sales net interest rate, ROE, EPS and net cash flow in the US as a whole.

American enterprises in the first quarter of 2011

Strong return on sales

The S & P 500 in the US stock market is a microcosm of American enterprises. Its sales revenue has rebounded from the trough of 2009.

As of the first quarter of 2011, the sale revenue per share of the S & P 500 enterprises (excluding the financial and utilities sectors) was about $870, which was directly against the historical peak of $880 in the third quarter of 2008.

In the current big rebound of sales revenue, the contribution of energy, information technology, manufacturing and consumer industries to sales revenue is particularly prominent, accounting for 80% of sales revenue growth.

As a source of corporate profits, a substantial increase in sales revenue provides a guarantee for corporate earnings to return to the pre crisis peak.

There are also big increases with sales revenue.

According to the US economic analysis Bureau (BEA), the total annual net profit of us enterprises was US $1 trillion and 450 billion in the first quarter of 2011, making it the most profitable quarterly in history.

In 2010, net profit increased from 34.29% to $1 trillion and 410 billion in 2008 from a historical low of 1 trillion and 50 billion.

From 1947 to now, the proportion of net profit of us enterprises in GDP has increased from 0.88% to 8.17%, especially since 2009, the growth rate of net profit of enterprises has greatly exceeded the growth rate of GDP.

Although corporate profits shrank to $396 billion 800 million during the financial crisis, companies slashed costs after massive layoffs, and rebounded strongly under the government's low tax burden, low interest rates and other stimulus packages. Net profits peaked in the first quarter of 2011.

The return of net profit can be so strong that the increase in net interest rate is a must.

The net interest rate of American enterprises has been rising since 1979. Although it was affected by the financial crisis, it hit a low of 5.9% in 2009, but after that, the net interest rate rose rapidly. In the third quarter of 2010, it returned to the peak of 8.3% in 2007, and reached a record high in the fourth quarter of 2010, reaching 8.5%. In the second quarter of 2011, the annualized net interest rate was 8.9%.

In addition, as an important measure of shareholder returns.

As another indicator of shareholder returns, earnings per share (EPS) of US companies has been increasing.

From 1975 to 2011, the EPS of us enterprises from less than 20 US dollars to close to US $100.

Although the financial crisis in 2008 brought EPS down to US $40, the strong profitability of the company quickly restored its vitality.

As of the first quarter of 2011, the US enterprises' annual EPS reached US $96, and showed a rising trend, which is expected to exceed US $100 in 2012.

The continuous growth of sales revenue, net profit, net sales interest rate, R0E and EPS, and the ability to recover quickly after the outbreak of the financial crisis can prove the strong economic strength of American enterprises and the hidden skills, innovation and management skills. The vitality and energy of American enterprises are very strong.

The overall cash flow of enterprises is abundant.

Compared with the current difficulties of the US Treasury, American companies are experiencing the most abundant cash flow.

As the blood of enterprises, the annual net cash flow of us enterprises reached US $1 trillion and 730 billion in the first quarter of 2011.

Net cash flow in 2010 was $1 trillion and 700 billion, an increase of 37.01% over the historical low of $1 trillion and 240 billion in 2007.

From the perspective of the situation, the net cash flow of American enterprises is very rich, and has been on a steady upward trend. Sufficient cash has laid the foundation for enterprises to continue to expand investment, indicating that the short-term solvency and resilience of enterprises are very strong.

In addition, the net cash flow of us enterprises is almost always higher than net profit, which means that the ability of enterprises to turn profits into cash is very strong, the rate of bad debt loss is low, and the profit quality is very high.

In the face of adequate profits and cash flow, American enterprises have also invested.

Capital expenditure is the prerequisite for enterprises to remain the leading position and achieve sustainable operation.

From 2003 to 2007, although the US government expenditure and personal consumption expenditure have been sluggish, the investment in intangible assets such as fixed assets and high-tech technology has not been stingy, but has been increasing year by year. The ample cash flow of enterprises is a strong backing for its continuous increase in capital expenditure.

As of the first quarter of 2011, American enterprises' investment in fixed assets such as machinery and equipment, as well as R & D expenditure on high-tech industries such as semiconductors and computers rebounded rapidly and surpassed the highest level before the crisis.

{page_break}

Profits of overseas enterprises are increasing.

By 2008, the number of branches of American enterprises in the world reached 26548, more than half of them distributed in Europe.

According to the US Bureau of economic analysis, by the end of 2007, the total assets of us overseas enterprises reached US $14 trillion, and the total assets of us overseas enterprises accounted for the proportion of GDP in the United States, and it has increased from 49% in 1999 to nearly 100%.

The core of the enterprise is profit, and the overseas enterprises in the US have brought considerable benefits to them.

From the perspective of the trend of earnings change, profits are increasing rapidly, the average annual growth rate is 18% between 1999 and 2008, and in 2008, the annual profit is 956 billion 300 million dollars, which is 5 times more than 181 billion 900 million dollars in 1999.

Compared with the earnings of domestic firms in the United States, the share of American overseas companies is rising.

In 2007, overseas enterprises made a profit of 884 billion US dollars, domestic enterprises made a profit of 714 billion dollars, and overseas enterprises made more profits than domestic enterprises. But by 2008, US overseas enterprises made a profit of 956 billion dollars, and domestic enterprises made 532 billion dollars, and overseas enterprises' profits were 1.8 times the profits of domestic enterprises.

According to the US Bureau of economic analysis, in 2004, the US foreign direct investment yield was 11.2%, while foreign direct investment rate to the US was only 4.4%, and the yield difference was as high as 6.8 percentage points.

Apple with zero liabilities

As the leader of American Technology Corp, Apple Corp is a typical representative of American enterprises.

Apple's 2011 quarter fiscal year third quarter financial report shows that its total revenue amounted to $28 billion 571 million, net profit of 7 billion 308 million dollars, compared with the second quarter, the growth rate of 15.8% and 22.1%, only iPhone mobile phone sales reached 20 million 400 thousand.

In 2006, Apple Corp's sales revenue was only 115 million US dollars, and its net profit was only 20 million dollars. By 2010, its sales revenue had reached 65 billion 225 million US dollars, an increase of 567 times, and its net profit was up to 14 billion 13 million US dollars, a 700 fold increase.

As sales revenue increases, Apple's liquidity is also increasing.

By the end of 2010, Apple's cash and cash equivalents and short-term investments amounted to $25 billion 620 million.

In addition, Apple has been running almost zero debt for many years, and its long-term liabilities have always been 0 since 2003.

The expansion of overseas markets is also one of the sources of Apple's high growth.

In terms of net sales, operating income or assets, the proportion of Apple Corp in the US market in the past three years has been declining, accounting for 38%, 33% and 31% respectively in 2010.

In 2008, Apple Corp's net sales in the US domestic market amounted to US $20 billion 900 million, accounting for 56%. After three years, the net sales in the US market were 28 billion 600 million US dollars, down to 44%, while overseas net sales amounted to 36 billion 600 million US dollars, accounting for 56%.

In the three years, the average growth rate of Apple Corp's net sales in the US market, the European market, the Japanese market and the Asia Pacific market was 14%, 26%, 32% and 45% respectively.

Among them, the growth rate of the US market is the slowness. The main growth of Apple Corp comes from the foreign market. The most prominent one is the Asia Pacific market, with net sales from 2 billion 680 million dollars in 2008 to 8 billion 250 million US dollars in 2010.

The dollar system may be more stable than imagined.

A comprehensive assessment of the state's financial position in the United States is a combination of "poor government and rich enterprises", that is, although the government has a heavy debt burden, the enterprise has amazing wealth.

We believe that when we evaluate the United States, we should not be blinded by the "poor government" and do not see the "rich enterprises" with high profits. We should not unilaterally equate the poverty of the government with the end of the US economic status and draw the conclusion of the end of US dollar currency status.

Under the combination of "poor government and rich enterprises" in the United States, the dollar exchange rate system may be more stable than the conclusion that the market is purely from the perspective of the "poor government" of the United States.

The assessment of the economic strength of the United States also needs to be put under the framework of "poor government + rich enterprises".

A typical case is that after the collapse of Lehman in September 2008, the US dollar index rose from 70 to 89, and the US dollar appreciated sharply.

Part of the reason behind this is that a large amount of capital flows back from the global market in the US business sector, creating demand for the dollar and pushing up the US dollar exchange rate.

The capital repatriation scale is larger than the withdrawal of us overseas creditors from US funds.

That is to say, the structure of "rich enterprises" in the US will help stabilize the US dollar exchange rate in times of crisis.

For example, when the Bank of America was in crisis, the Bank of America could sell shares held by China Construction Bank, buy US dollars and return to the US market, which created us dollar demand in the market, and was conducive to the stability of the US dollar exchange rate.