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US corporations are sitting on more cash than at any point since World War 2.
That's without including banks. I'm only talking about nonfinancial corporations – the ones that sell goods and services and make the economy go.
Those businesses hold $1.4 trillion. In absolute terms, that's the most ever. In relative terms, it's the most since World War II.
As investors, we can infer quite a bit from corporations' inability (or unwillingness) to deploy their cash.
For one, it indicates that business have assumed a very defensive stance.
Cash, of course, is a buffer against uncertainty - the uncertainty that business slows for any reason. Management wants a healthy cash reserve with which to pay the bills and remain liquid should anything unexpected happen. I think we can all agree that this is prudent, and a good business practice.
But $1.4 trillion? That tells me that businesses are not just a little jittery about the future. They're prepared for an apocalypse.
Think about this, it’s important;
If these businesses could conjure up even the most marginal of projects to earn a meager 1% return, they would generate $14 billion profit. Instead, they're sitting on the cash and earning near zero for a guaranteed after-inflation loss.
It's a bad omen that corporate management would forego a collective $14b per year. Clearly, by their judgment, the risk of investing in new projects outweighs the reward – the exact opposite of the conditions needed to produce healthy economic growth.
Originally posted by havok
I've read somewhere that the business model for large corporations was secretly changed in the early 1980's. Companies were expected to make as much profit as possible and bank it for themselves. Only fix what needs fixed without splurging income costs and absolutely produce as much gain as possible.
All risks set aside and fines paid because the profits alone could cover the costs of negative impacts.
That would make sense today, because if you look around...that is the business model.
Profits first, everything else last.
Whereas before the 80's it was more of quality first or customer first.
Maybe those high ranking CEO's were told of things to come in all those Bilderberg meetings.
So they can make as much profit as possible to usher in a new type of economy.
A new world economy?
Just my $0.002
Originally posted by IrVulture
I think somethings up....Things have gotten really weird the last 6 months....
Can't quite put my finger on it, But without revealing what industry I work in, I can see trouble brewing....
We are being told we have supplier problems, But literally EVERY SUPPLIER?
January seems to be the goal for some reason......
So many options too!
2012 madness?
World War?
The American elections?
The coming of Heysous?
Yup! Sumpin's up
Originally posted by bg_socalif
Originally posted by IrVulture
I think somethings up....Things have gotten really weird the last 6 months....
Can't quite put my finger on it, But without revealing what industry I work in, I can see trouble brewing....
We are being told we have supplier problems, But literally EVERY SUPPLIER?
January seems to be the goal for some reason......
So many options too!
2012 madness?
World War?
The American elections?
The coming of Heysous?
Yup! Sumpin's up
And why can't you reveal what industry you work in?