Hello Ilir,

Excellent news regarding you joining the comments stream - nice to know we have another learned, intelligent contributor out there.

I think you read my post correctly, but your interpretation and narrative of the facts differs from mine. My interpretation/narrative is that risks in the overall ecosystem have not actually lowered by much, but have been artificially kept low. In this environment, the prudent thing to do would be to continue to demand higher, absolute rates of return as compared with WACC. If firms still demanded 10-15% returns, but could fund at 3.5%, the spreads would be very high. Instead, firms have lowered their hurdle rates, since they are market based. Consequently, they are approving many dozens of projects and capital choices that would never normally pass muster. So I am saying that this is a risk to the system.

Also, I need to address my 'gutless' characterization because several comments have mentioned it. I did not say that corporate finance people were gutless, I said I fear that a generation of corporate managers is being hatched that will be gutless. I was trying to suggest that the future for corporate earnings looks bleak once costs of capital normalize because of the mentality I feel is developing. Right now what is missing is an appreciation for a once-in-a-lifetime opportunity to earn outsized returns on capital projects since funding costs are held artificially low. But instead, corporate finance pros are using relative spreads to evaluate projects. Ouch!

An analogy may help: The behaviors I witness are similar to the child that has been handed everything by a doting parent and had to work for nothing. When the subsidy of the child is rolled back the child does not know how to survive in the world because he doesn't know how to take risks, or to think very large about her life, or how to solve life's big problems.

I hope this helps to reveal my intent : )

Yours, in service,

Jason