Corporate Leverage Increases

According to Goldman Sachs, the level of debt on corporate balance sheets has risen to a level not seen since before 2008. With record low interest rates, companies have increasingly borrowed to fund buybacks and acquisitions. During 2014, about 10 percent of debt issues were used to fund buybacks. And, so far during 2015, about 8 percent of debt issues have been used for buybacks. Meanwhile, goodwill, which is created from mergers and acquisitions, has risen 32 percent since 2010 and more than $1 trillion in goodwill has been added to corporate balance sheets since 2008. While goodwill can represent real value, such as a brand name, it could also indicate that companies have made negative NPV acquisitions.