Corporate Business Lightens Up on Tangible Assets

Federal Reserve national flow of funds accounts for the years 1995-2004 show that corporate tangible assets, as a percent of total corporate assets, dropped from 56.7% in 1995 to 49.7% in 2004.

Tangible corporate assets would have had to been $1.4 trillion greater in 2004 to represent the same percentage of total assets as in 1995.

This is just an indication of the success of the asset-lite movement and the pervasive flight from “asset-heavy endeavors”, mentioned in Joseph Albaugh’s speech at the Global Air and Space Conference on May 11, 2020. (See: The Boeing Buyback)

The graph shows this trend:

Corporations Shun Tangible Assets
Corporations Shun Tangible Assets

Unfortunately, the Federal Reserve seems to have dropped the data series on tangible assets from the national flow of funds accounts, as of 2005.

This lightening of tangible assets is, of course, a reflection of the move towards a service economy, as well as outsourcing of production to offshore enterprises.

The trend also indicates that an increasing percentage of the enormous cash flows being generated by depreciation of older tangible assets is being freed for purposes more to the liking of Wall Street, such as stock buybacks.

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