Greed is good said Gekko. Debt generates economic growth and amplifies returns says this. Well, Modigliani–Miller also said something and got the Nobel.
Debt can only be good when there is capacity (earning power: cash profits) to repay it with coupons. This happens when one is certain that return on debt capital is much higher than cost of debt.
It is easy to say this than see it, which is why we are witnessing the global financial crisis and the European sovereign-debt crisis; weaker US; slowing down China, and slowed down India; and the obvious consequence - the recession in the global economy.
And when someone says debt is good, it is just an extreme publicity!
Debt can only be good when there is capacity (earning power: cash profits) to repay it with coupons. This happens when one is certain that return on debt capital is much higher than cost of debt.
It is easy to say this than see it, which is why we are witnessing the global financial crisis and the European sovereign-debt crisis; weaker US; slowing down China, and slowed down India; and the obvious consequence - the recession in the global economy.
And when someone says debt is good, it is just an extreme publicity!
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