Sell Prudential before Earnings Received Jaded

PRU has me thinking about the danger of debt verses cash flow. How stable is a company's cash flow? What could cut it off? How constricting are debt payments as a portion of cash flow?

For instance Time Warner with reoccurring Network revenue supplying 60% of earnings has its debt paid by 50% of earnings. There is no way they can miss a payment. Or so it would seem. TimeWarner has 30 billion in debt and its market capital is also 30 billion. Prudential holds 30 billion in debt but its market capital isn't even half that, at 14 billion. With that much debt it's a worthy question, what is Prudential's cash flow? Prudential holds only 30% of its assets in mortgages or bonds, generating 8.5 billion in cash and premiums that are paid monthly or yearly totally 11 billion in 2008. Premium income can fall by scared investors taking early withdrawals, as it did in 2004 falling by almost 10%. Earnings in 2008 was 1.4 billion, and 14 billion of prudential earnings are due in 5 years. Of course in 2007, Prudentials earnings record was 3 billion and everyone believed they could pay 14 billion of debt off in five years. Of course this 14 billion will have to be refinanced, but by whom, and at what cost?

Prudential's cash flow is opaque, more than 50% of it in "other assets", more worrisome, still, is that executives could wait so long to disclose their earnings for Other Class assets. Most of these are the worrisome Asset Backed Securities. So likely management does not understand the risks in these assets, either. What is the cash flow they currently deliver? Maybe little to none?

At the end of 2008, TimeWarner made about 3 billion. In five years it has 3 billion in debt due.

Prudential will pay down that debt for which they will need new debt at higher interest. This will constrict future earnings growth by larger and large factors over the next few years, even while mortgages continue to deteriorate, and no one will buy their still undeclared ABS's.

Prudential may well "profit" the most from mark-to-market shenanegans because of their large paper holdings. But will the People still be buying?