11/02/09 Stockholm, Sweden – If you’re looking for insight into how you should be responding to the “recovery” in the US economy, there’s actually a glimmer of sanity coming leading US companies. Right now major American companies are storing up more cash than at any other time within the past 40 years.
According to media reports, Citigroup and JPMorgan Chase among others are saving “as if another financial crisis were on the way.” Even the vice president of equity research at Rochdale Securities Dick Bove said, in reference to Citigroup, “In my 44 years in the business, I have never seen a company with remotely as much cash as this.”
Outside of the abovementioned banks, other firms saving up for a rainy day include Bank of America, Wells Fargo, and about 500 of the largest nonfinancial US firms. They are all in the process of increasing assets and short-term investments. So, if you’re wondering whether it’s better to be a spender or a saver right now, at least these firms seem to have made up their minds.
More details are available in The Huffington Post’s coverage of Citigroup, Bank of America, and other companies hoarding cash.
Sign Up for The Daily Reckoning e-letter and receive a copy of Bill Bonner's The Trade of The Decade report… at NO CHARGE.
We Value Your Privacy.
I can tell you that a major insurance company that i seel for has just announced that they are selling surplus notes to raise $400,000,000 in cash. This is very unusual for this company and i suspect that it is being done for reasons similar to the banks you mention. another major life insurance company announced earlier this year that they bought gold for the first time in the companies 150 year history.
Isn’t this hoarding just an aspect of Bernanke’s plan? The ratio of reserves going up is a deleveraging that is equivalent to money destruction. If that is carefully balanced with money creation (newly printed money that does not go into circulation, but into making bank reserves look “bigger” and more “solid”) it should not trigger inflation. The tricky part, of course, is the balance. Print too little and get depression, too much and get inflation. It also requires stopping the printing presses at the right time and keeping the banks from re-leveraging. Personally I don’t have much faith in their succeeding on getting those balances right but, from a theoretical point of view, isn’t that what they’re trying?
Rocky, you lose serious style points for mentioning those loons at Huffington as a source for a story.
to badschooter – truth is wherever truth is….the genetic fallacy is not an intellectually astute form of “thinking.”
I’ll take my truth without the hard left spin, thank you very much. I think it is pretty easy to figure out without relying on Ariana Huffington’s demagoguery. And I’m not sure what you’re quoting with that crack about “genetic fallacy”. Wha?