As is typical in any #LateCycle economy, U.S. companies are resorting to all manner of corporate chickanery to mask financial deterioration. In response to a Wall Street Journal article about companies inflating their financial results by obscuring generally-accepted accounting principles (GAAP), Hedgeye Senior Macro analyst Darius Dale wrote, "The U.S. #CreditCycle continues to deteriorate and no amount of non-GAAP accounting will stop it."
A key callout for our Macro team has been the rollover in the credit cycle. Essentially, the natural progression of any economy in the final stages of expansion is for a protracted breakout in corporate credit spreads. (Hence our short Junk Bonds call.)
As proof of deteriorating fundamentals in the credit cycle, Dale offered the following charts with key takeaways for investors: