"Record corporate cash"..."Record corporate cash"... "Record corporate cash"

That pretty much covers most of the conversation on prime time financial media and TV stations when discussing corporate balance sheets.

There is, however, one big problem with that mantra. As Zero Hedge first showed in January with "Corporations Have Record Cash: They Also Have Record-er Debt, As Net Leverage Soars 15% Above Its 2008 Peak" companies indeed have tons of cash. What isn't discussed is where that cash came from. The answer: debt. Because while companies have record cash, they have recorder-er debt.

Today, we are happy that more are starting to notice this simple math problem. Here is Deutsche Bank's Torsten Slok who is the latest to be struck by this "revelation".

If you look at cash levels relative to debt levels you find that corporate cash holdings are at the lowest level in 15 years, see also the chart below. In other words, a very important reason why corporates have more cash is because they have taken on more debt via IG and HY issuance. Expect capex to accelerate going forward but keep in mind that debt levels for corporate America are at the highest level ever and there is a risk going forward that higher rates through debt-servicing costs and higher defaults could have a negative impact on the recovery and hence the terminal rate for both short and long rates.



Of course, as long as rates are low and keep declining, this record debt hoard is not a big issue.

Once rates start going up, however, nobody would possibly have been able to foresee the absolute massacre that will take place at corporations, levered with publicly tradable debt to never before seen levels.