Minyan Mailbag: Corporate Cash Points
...both sides of the balance sheet are bloated.
Question for you relating to the recent corporate cash points on the Buzz:
Can you clarify/reconcile the bullish "corporates-have-lots-of-cash-and-stronger-balance-sheets" argument with the bearish "corporate-pension-deficits-are-an-accident-waiting-to-happen" view?
To my mind, they both go to defining a macro view of U.S. corporate health, but I never hear these two issues addressed in the context of the same analysis. Would appreciate any light you can shed on this...
The debt is unbelievably overwhelming compared to those few companies with all the cash. Just look at a chart of total credit market debt/GDP, consumer debt/GDT, installment debt/GDP, mortgage debt/GDP, etc., forgetting for a moment the under-funded pensions. (Can you BELIEVE GM is still using a 10% assumption for their pension plan returns?)
Intel (INTC) announced a huge buyback lately and look what the stock has done. It can buy all it wants 3 points lower after the pop. I think it is a sham to issue stock options, buy stock for anti-dilution and then sell your own stock in the public market (insider sales are and have been for 2 years staggeringly large).
The real problem is this: Yes the consumer has a 'record net worth' of $42 trillion. Only problem is that both sides of the balance sheet are bloated. So the asset side needs to keep growing--God forbid it should fall--MARGIN CALL. The debt side doesn't go away. Hope that answers it.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter