Joe Cooper
2014-04-17 05:23:31 UTC
Theres a damning number regarding our economy that Obama doesnt want to
talk about. Its a number, but for him, would be lower. And, lower, in
this case would be a good thing for the economy.
Although estimates vary, says Joel Kurtzman, a senior fellow at the
Milliken Institute, American companies have between $4 and $5 trillion
in liquid assets, a sum greater than the size of the German economy.
How is it that companies can now have more cash than anytime in history,
while unemployment remains so high, inflation in many goods so low, and
national income grows so anemically?
Oh, yeah. Democrats at work. Shhhh.
If all that was needed to bring us a juggernaut economy was more money,
wed be in boom times boys.
But alas, while more money is the Democrat recipe for success in
everything-- and generally good in the corporate sense-- in this case
its a telltale sign that something is wrong with policies coming out of
Washington.
Because those high cash balance sheets are telling us a few things.
They are telling us that hiring isnt an investment that companies want
to make right now: Too much risk and too little reward they fear to bring
people on the payrolls.
They are saying that companies would rather keep cash on the balance
sheet than make investments in new plants and equipment and even sales.
Again, this is a matter of balancing against risk and reward.
Many corporate types are more concerned that they have enough cash for
the next downturn, versus concern with putting liquid assets to use to
generate return on investment the old fashioned way, by growing their
base business.
Instead companies have been doing things like buying back their own stock
and passing out dividends to shareholders, which the site ZeroHedge calls
balance sheet arbitrage.
ZeroHedge observed last year: Curious why there is a sense that [there]
is no real corporate growth in the US? Because companies are simply not
investing in growth, and are instead all engaging in cheap balance sheet
arbitrage, which makes corporate equities appear richer. The problem is
that the debt remains, and once rates finally do go up...
But this year, thing wont be so easy says ZH.
The site says that in 2013 stock buybacks in the S&P 500 equaled about
half the money that the Fed injected via quantitative easing. But now
that easing is tapering, companies wont be able to manipulate earnings
upward by taking stock off the street.
Fewer shares means higher earnings per share. It looks good at earnings
season, but its not the best way to use capital.
A better way would be for companies to buy other companies.
The cash accumulation among five giant tech stock, says YCharts, Apple
(AAPL), Google (GOOG), Microsoft (MSFT), Oracle (ORCL) and Cisco (CSCO)
continues, with their combined positions now totaling about $400
billion.
But despite Wall Street continuing to pitch tech giants about the
advisability of putting that cash to use in merger and acquisition
activity, mergers are sluggish.
By number of deals, year-to-date M&A is down 8% compared to 2012
levels, says Thompson Reutersnof 2013, and is the slowest year-to-date
period for deal making, by number of deals, since 2005.
In 2014 so far there have been some high profile deals: Comcast has
proposed a merger with Time Warner, which faces significant regulatory
hurdles; Facebook has purchased WhatsApp for $19 billion by over paying
for a company that has 450 million subscribers, yet only $20 million in
revenue for 2013.
Both deals cry desperation in looking for ways to put capital to work.
But even M&A activity is not the best way to put capital to work.
Or at least M&A activity is not a sign of robust economic health.
The anticipated M&A boom could begin, writes Bob Doll, chief equity
strategist at Nuveen Asset Management. Favorable signals include
recession-like nominal GDP, vast cash reserves on corporate balance
sheets and a growing activist investor base.
Agitated investors, overblown cash balances and sluggish GDP growth are
not signs that a recovery is under way.
In fact, they are each signs that perhaps the best of the so-called
recovery is over.
The best way to put capital to work is by hiring, we can all agree.
But until the politics changes in Washington, D.C. thats not going to
happen.
And we won't get another recovery until 2017.
Source: http://bit.ly/1nda2Li
Remember in November
--
Stop Mozilla Firefox's Discrimination Against Christians & Conservatives
- Sign the Petition & Uninstall FireFox: http://t.co/KjFkLRaRJa
"The Democratic Party has been contaminated by the madness of the left
through its alliance with the left. Its one night stand has developed
into a syphilitic infection and it's slowly going insane. You can see the
derangement in Nancy Pelosi, staggering through aimless rhetoric, or
Harry Reid, burning with inchoate anger, telling increasingly implausible
lies, doing anything to hang on to power." (Daniel Greenfield)
I wouldnt be surprised if President Obama learned Osama bin Laden had
been killed when he saw himself announce it on television. Jon Stewart
talk about. Its a number, but for him, would be lower. And, lower, in
this case would be a good thing for the economy.
Although estimates vary, says Joel Kurtzman, a senior fellow at the
Milliken Institute, American companies have between $4 and $5 trillion
in liquid assets, a sum greater than the size of the German economy.
How is it that companies can now have more cash than anytime in history,
while unemployment remains so high, inflation in many goods so low, and
national income grows so anemically?
Oh, yeah. Democrats at work. Shhhh.
If all that was needed to bring us a juggernaut economy was more money,
wed be in boom times boys.
But alas, while more money is the Democrat recipe for success in
everything-- and generally good in the corporate sense-- in this case
its a telltale sign that something is wrong with policies coming out of
Washington.
Because those high cash balance sheets are telling us a few things.
They are telling us that hiring isnt an investment that companies want
to make right now: Too much risk and too little reward they fear to bring
people on the payrolls.
They are saying that companies would rather keep cash on the balance
sheet than make investments in new plants and equipment and even sales.
Again, this is a matter of balancing against risk and reward.
Many corporate types are more concerned that they have enough cash for
the next downturn, versus concern with putting liquid assets to use to
generate return on investment the old fashioned way, by growing their
base business.
Instead companies have been doing things like buying back their own stock
and passing out dividends to shareholders, which the site ZeroHedge calls
balance sheet arbitrage.
ZeroHedge observed last year: Curious why there is a sense that [there]
is no real corporate growth in the US? Because companies are simply not
investing in growth, and are instead all engaging in cheap balance sheet
arbitrage, which makes corporate equities appear richer. The problem is
that the debt remains, and once rates finally do go up...
But this year, thing wont be so easy says ZH.
The site says that in 2013 stock buybacks in the S&P 500 equaled about
half the money that the Fed injected via quantitative easing. But now
that easing is tapering, companies wont be able to manipulate earnings
upward by taking stock off the street.
Fewer shares means higher earnings per share. It looks good at earnings
season, but its not the best way to use capital.
A better way would be for companies to buy other companies.
The cash accumulation among five giant tech stock, says YCharts, Apple
(AAPL), Google (GOOG), Microsoft (MSFT), Oracle (ORCL) and Cisco (CSCO)
continues, with their combined positions now totaling about $400
billion.
But despite Wall Street continuing to pitch tech giants about the
advisability of putting that cash to use in merger and acquisition
activity, mergers are sluggish.
By number of deals, year-to-date M&A is down 8% compared to 2012
levels, says Thompson Reutersnof 2013, and is the slowest year-to-date
period for deal making, by number of deals, since 2005.
In 2014 so far there have been some high profile deals: Comcast has
proposed a merger with Time Warner, which faces significant regulatory
hurdles; Facebook has purchased WhatsApp for $19 billion by over paying
for a company that has 450 million subscribers, yet only $20 million in
revenue for 2013.
Both deals cry desperation in looking for ways to put capital to work.
But even M&A activity is not the best way to put capital to work.
Or at least M&A activity is not a sign of robust economic health.
The anticipated M&A boom could begin, writes Bob Doll, chief equity
strategist at Nuveen Asset Management. Favorable signals include
recession-like nominal GDP, vast cash reserves on corporate balance
sheets and a growing activist investor base.
Agitated investors, overblown cash balances and sluggish GDP growth are
not signs that a recovery is under way.
In fact, they are each signs that perhaps the best of the so-called
recovery is over.
The best way to put capital to work is by hiring, we can all agree.
But until the politics changes in Washington, D.C. thats not going to
happen.
And we won't get another recovery until 2017.
Source: http://bit.ly/1nda2Li
Remember in November
--
Stop Mozilla Firefox's Discrimination Against Christians & Conservatives
- Sign the Petition & Uninstall FireFox: http://t.co/KjFkLRaRJa
"The Democratic Party has been contaminated by the madness of the left
through its alliance with the left. Its one night stand has developed
into a syphilitic infection and it's slowly going insane. You can see the
derangement in Nancy Pelosi, staggering through aimless rhetoric, or
Harry Reid, burning with inchoate anger, telling increasingly implausible
lies, doing anything to hang on to power." (Daniel Greenfield)
I wouldnt be surprised if President Obama learned Osama bin Laden had
been killed when he saw himself announce it on television. Jon Stewart