Investors considering when is a good time to jump in the market have generally been served well by investing in all sorts of environments. While we may indeed be in the latter stages of a bull market which has (by some accounts) raged on for too long, the reality remains that some deals are present out there and investors ought to seek them out.
That being said, finding companies with pristine balance sheets, excellent earnings, and little to no debt is becoming more and more difficult, particularly in Canada. Recent reports that Canadian companies have, on averaged, levered up to around 60% of revenue compared to 35% of revenue in the U.S. market has some investors focused less on current earnings, but more on a company’s debt load, as indicative of how a company will perform long-term.
As with companies, governments around the world have been loading up on debt at unprecedented levels. The government of Ontario, for example, has been cited as being one of the most indebted regional governments in the world, and has begun planning additional deficits.
Canadian consumers on the whole are taking on more debt as well, with the average Canadian owing approximately 171% of disposable income in the form of debt, with HELOC balances shooting up in recent years as Canadians continue to use real estate as a piggy bank.
My take is that by paying off debt personally, investing in companies with pristine balance sheets, and de-leveraging, investors will be able to weather whatever storm is to come: buying companies with massive debt loads on margin, however, appears to be more of the norm these days.
Invest wisely, my friends.
