Any lament that U.S. executives are sitting on a record $1.73 trillion at their companies instead of investing in plants and equipment may be about to get louder.
The buildup of cash and marketable securities accelerated in the first quarter on a year-over-year basis after slowing in early 2012. At the same time, capital spending in the most recent quarter rose by the least since March 2010, when the U.S. was still emerging from a financial crisis.
Note that a CEO's job is to grow their company in absolute size and/or profitability, preferrably both. There are only a few ways to do this:
That's pretty-much it.
There is no such thing as "excess cash." Firms "hoard" cash when they do not see economic opportunity to do one of the above. That's the beginning and end of it.
There is no duty for any firm to invest in money-losing things. If the firm cannot make more hiring additional employees than it costs to hire them, it will not do so. If the firm cannot make more money by expanding operations, it will not do so. If the firm cannot determine a place to innovate through R&D or capital investment, it will not do so.
If the firm's management determines that the so-called "great market" is a distorted mess created out of lies and scams, generated by central banks and governments desperate to prop up asset prices and thus what they can acquire, whether it be land, equipment or other companies are bid up to an unattractive price compared against their perception of actual value then they have no reason to spend on what they perceive to be money losing options.
There is nothing to lament. There is only the fact that today, this is what CEOs and other business managers see. They see rapidly rising costs well beyond value, imposition of BS from governments (such as Obamacare) that make employing new people uneconomic and a bid-up marketplace for property, plant and equipment that makes investment unattractive.
"Cheap money" doesn't make investment more attractive because "cheap money" reduces the discount against value that a holder of cash can obtain .vs. someone using credit.
It thus destroys the benefit of economic success -- that is, a larger surplus than one's competitors -- that would otherwise be available to and exploited by said better firms.
Bernanke and the Federal Government are fools if they think current policies will engender economic progress. They not only have not they will not for the simple reason that those firms who are better at generating economic surplus (that is, profit) have seen the advantage of their operating efficiency intentionally and systematically destroyed.
There's a reason that on Tickerforum I am quite-rigorous about insisting that all the conspiracy theory nonsense go in the "Tinfoil" area of the forum. This should serve as a sufficient example:
ORLANDO, Fla. – A Chechen immigrant shot to death in central Florida early Wednesday after an altercation with an FBI agent shares a similar background to that of one of the Boston Marathon bombing suspects who authorities were questioning him about at the time.
Ibragim Todashev's Chechen roots and mixed martial arts background mirror that of Tamerlan Tsarnaev, the Boston bombing suspected killed in a shootout with police last month. The two also had lived in the Boston area.
When this story broke the usual nuts were out claiming that the FBI had executed this guy and that there was no reasonable explanation for shooting him.
Did they read the second paragraph? Mixed martial arts background eh? So if some guy goes MMA on your head, and you're armed, you're not going to shoot him? Like hell.
Might I remind everyone that a soccer ref was punched by a player (once!) and died as a consequence? Fists are not deadly eh? Tell that to his family.
But that's not the rub here. No, you might remember that there was an unsolved triple-murder near Boston that was believed to be related to at least one of the Boston Bombers.
It appears that the guy who "went nuts" implicated himself in those triple murders, which, it appears, was over something rather simple: drugs.
Those who say that there was "no reason" for the FBI guy to shoot this suspect have a bit of a problem here. If the person being interrogated realized that he had just implicated himself in three Murder 1 charges it is entirely plausible that he might have made a "best effort" attempt to escape and/or kill the FBI agents involved.
Folks, I don't care if you like cops or not, if you trust the government or not, or if you believe the official stories or not.
Self-defense is always justified no matter who you are.
Until or unless further information is developed this particular incident looks, at a distance, like perfectly-legitimate self-defense by a law enforcement officer who was assaulted by someone who, at that point, appears to have been involved in and implicated himself in committing three murders.
In the week ending May 18, the advance figure for seasonally adjusted initial claims was 340,000, a decrease of 23,000 from the previous week's revised figure of 363,000. The 4-week moving average was 339,500, a decrease of 500 from the previous week's revised average of 340,000.
This is "better than expected", which of course makes it "bad news" in our odd world.
What's the big table tell us?
This is interesting; there is a real fall-off in "regular state" claims and EUC continues to wind down.
The open issue is where are those who are coming off the rolls going? Are they giving up and and running out of benefits, or are they finding jobs?
We'll see here soon, as in another couple of weeks we'll get the new NFP report in two weeks.
My "best guess" at this point is that we will not see the usual big spike in jobs that comes with the summer months; it will instead be rather muted and, while present, will not impress in terms of actual economic output.
But it likely will be enough to "justify" The Fed "tapering" -- their excuse for that which they are now being backed into a corner and must find a reason to do, whether they like it or not.
.... of normalization of the Fed's balance sheet.
Did you catch that? No?
Gee, what does that mean?
It means The Fed is intentionally creating a bubble in asset prices.
Just like GreedScam did.
Just like Bernanke and Greenspan did in housing.
You just heard that, in plain English, on CNBC -- if you were listening.
What sort of arrogance do you think is required to believe that The Fed is actually in charge?
I simply look to history.
The Fed didn't prevent the .COM crash.
The Fed said that there was no housing bubble.
Bernanke, specifically, said subprime was contained.
Bernanke, specifically, said The Fed did not believe there would be a recession, say much less a market crash.
How wise are you to put "faith" in an institution that has been wrong in virtually every case -- a record so bad that one is forced to wonder if their "wrong-ness" has been intentional and used to screw you as the common person as a means for their "buddies" to steal all your wealth.
"Raise toner cartridges!"
"ChairSatan, they've blasted the laser printers and the toner cartridge is destroyed!"
"Use the keyboard -- the KEYBOARD!"
"ChairSatan, the margin is too great and the clerk is on line 1 with terms for your surrender...."
Last night Japan imploded, down over 1,100 points.
Helping accelerate the decline was the China PMI which was under 50 (negative, that is), throwing cold water on the China will save the world crowd. In point of fact, China has been losing their battle with credit games for over two years -- but these sorts of shifts take time to come to fruition.
Let us remember that margin debt has risen to outrageously ridiculous levels. This means that the clerk is going to be making some calls, if they haven't already started being received.
As I have said over the last couple of months this has the nasty feel of still air just before a big tornado comes ripping through -- or like 2007, or like early 2000.
Not only is margin debt ridiculously high, much of which is likely out to hedge funds (speaking of which, how many piled into that Japanese trade, turning the crank on their leverage as "profits" expanded) and now are looking at losses that are likely in the 5-7% range over one night? I'll bet the list contains a few names and well-known ones.
CNBC is pumping just like they were last time... and the time before that. "The declines are not nearly as bad."
Who remembers that in 2007 the same pattern initiated, with the Asian markets leading.
Then the losses were "magically" recovered and the market roared higher, finally posting its apex in the fall.
Today the market moves much faster. I would not be even slightly surprised if the instabilities that central banks have intentionally put into the system go "prompt critical" this year.
I'm sure there will be many who will dismiss this as "Oh that Denninger, he's just a perma-bear."
My riposte is simple: While the extraordinary madness of crowds can take manias much further than anyone could ever believe, the math is never wrong.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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