2017-05-16 —

... let's look at ExxonMobil, whose 2010 annual report showed $383 billion in revenue, $30 billion in profit, and $12 billion in debt. The company's most recent annual report from 2016 posted $226 billion in revenue (42% decline), $7.7 billion in profit (74% decline), and $28 billion in debt (133% increase)! Once again a rational person would think that the price of ExxonMobil's stock (XOM) would be dramatically lower. Wrong again. XOM is up from $78 to $83 over that period.


Then there's Apple, a company so hallowed and consecrated that it's almost sacrilegious to question the business. But if you compare Apple to its own performance just two years ago, both revenue and profit are lower. A few weeks ago Apple reported $39.6 billion in operating cash flow for the first three months of this year. That's a full 25% LOWER than the $52.8 billion the company reported for the same quarter in 2015. Over the same period, Apple's DEBT more than DOUBLED from $40 billion to $84.5 billion. Again, it seems obvious that Apple stock should be LOWER in 2017 than it was in 2015. But it's not. Apple stock has climbed 19% in the last two years from $130 to $155, and its price is also now at an all-time high.

Something in these markets is obviously broken... I'm not suggesting that stocks are going to crash tomorrow or that this is the top of the market... But it seems pretty obvious that investors who buy these asset are taking on significant risks relative to prospective returns.

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