Tuesday, March 19, 2013


The huge stockpiles of cash being hoarded by profitable corporations have been discussed for the past few years.  Critics liken these large cash holdings to dead inventory.  Activist stockholder groups have called for increased dividend payments.   In light of the fact that these hoards keep growing it is appropriate to look at what they may mean.  

Are theses hoardes of cash the result of poor management? Probably not.  They are, I believe a symptom of the fact that Business Leaders lack confidence in the future and have no vision or direction. In the end it is proof that society lacks leadership...and this vacuum goes to the very top of the political power pyramid. 

It is not just corporations that are sitting on cash. Government Sovereign funds are sitting on vast pools of assets...  meanwhile consumers are cutting consumption.  While liquidity is piling up on the sidelines Central Banks are continuing to print more money to keep the system going.

(It may be that these hoards of cash are the natural result of the long term festish of Central Banks with keeping inflation under 3% - when one might argue that with the advent of Globalisation a 4% or 5% rate might have been appropriate to finance 3rd world growth.)

Now I don't pretend to know what those who control these liquid assets are planning (if anything)...but it could be they are hoping to buy REAL assets after the next crash.  Or we could have a real recovery that might be followed by rampant inflation.  

Meanwhile I expect we will meander thru months of stagflation until the next geopolitical crisis or natural disaster unfolds.


Reliapundit said...

most arent buying back stock which tell you they dont think the stock prices will stick.

northern seer said...

thats true...

and the solid companies banks want to lend to have no need for money...while the companies that need money banks won't lend...