U.S. conserves money

USA: the question of money

In brief: After consulting with analysts, Chief Financial Officer Ray Arthur has decided to transmit the cash capital investment. I just did not expect that by the end of each quarter we will have to 80-90 million U.S. dollars cash capital, - he said.

U.S. companies increasingly prefer to keep money in banks. This once again underlines the concerns about the state of financial markets and the sustainability of economic recovery. On Thursday, Fed reported that at the end of March, not financial companies put under the mattress is 1.84 trillion dollars in cash and other liquid assets. This indicator increased by 26% compared to last year and a record since 1952 in the aggregate assets of all companies, including production and investment sector, the cache accounts for 7%. It is the highest figure since 1963…

The resumption of confidence in the bonds of the corporate sector has allowed large companies to attract an unprecedented amount of funds, but many are still hesitating whether to increase spending on the expansion of the state or business against the background of uncertainty about the stability of economic growth. They would also like to have on hand tools, in case the credit crisis in Europe again freeze the market. “Money is still in the price”, – said Jeff Hand, chief managing director, Ross Controls, manufacturer of pneumatic valves and other products. The company is increasing its available capital, trying to recover from the slump that hit her in the past year. “Our things went better, but uncertainty remains,” – he adds. The deepest financial crisis in decades, characterized by increasing available capital in the corporate sector, and this trend promises to be preserved for a long time. In the worst days in 2008, even large companies were confident that they can make small loans for current expenditure on wages and purchasing equipment. “We have just experienced a financial crisis, which forced us to feel the price of cash” – the economist says business-school Duke Fuqua School of Business John Graham.

Even now bayki reluctant to lend. As the representative of the Federal Reserve on Thursday, net loans in the financial sector, including banks, credit unions and other lenders, according to the results in March decreased by 5.4% over the same period last year. But the calm that ensure the availability of capital, take them over a high price that companies do not want to pay for too long. Cash capital is not profitable, and hence companies will be harder to pay dividends to shareholders. Ultimately it will force them to reduce the amount of available capital.

“Shareholders are not interested if the company will sit on the bags of money” – says economist Paul Kasriel Northern Trust, – “the company put them to use. Or expanded state, or spend on investments or payments to shareholders in the form of dividends or repurchase shares.

Earlier this week retailer Target Corp. increased the amount of dividends from 17 to 25 cents per share, citing the fact that “the company has capital, which is more than enough for optimal reinvestment in core business.

On Monday, the Philadelphia company to sell spare parts for cars Pep Boys – Manny, Moe & Jack reported back for the fiscal quarter ended May 1. Its cash capital amounted to 87.8 million dollars last year, this figure was 21.3 million dollars. A recent study by Mr. Graham in conjunction with the magazine CFO Magazine, found that in the next year the company plan to increase capital expenditure by 9%. When a similar study was conducted in December last year, the company cited the figure 1.5%. According to their estimates, the expansion of the state should increase by 0,7%. Six months ago, figured forecast a reduction of 1.4%.

Manufacturer of upholstered furniture Hooker Furniture Corp. in Martinsville, Va., also accumulating cash assets. The company recorded a growth in demand for its products in the U.S., which usually exceeds the demand for similar goods from China. Nevertheless, it is careful. On Monday, she released her report for the fiscal quarter ended May 2. Cash capital and other liquid assets amounted to 38.7 million dollars And last year the figure was 26.2 million dollars. “We are a little conservative, believe that the costs keep our powder,” – said Chief Financial Officer Larry Ryder. According to Mr. Ryder, available capital for it – is a kind of guarantee that he will always be able to buy material and equipment necessary to operate the business. Since last year the company reduced its inventory from 47.1 million to 38.5 million dollars. I do not want us to have had no liquidity for the purchase of necessary materials and equipment “, – he said. The desire of companies to use existing capital can play a decisive role in fostering economic growth, as consumers want jobs, as many of them still could not make ends meet will be deposed. According to the Federal Reserve rate debt in the private sector fell slightly. In the first quarter, when credit conditions were harsh, and many of the debtors defaulted on their mortgage loans, the rate of its decline in annual terms amounted to 2,5%. Net equity of households, which includes the cost of housing, stocks and other investments net of debt, increasing the fourth consecutive quarter as the improvement in the market. Now it is 54.6 trillion, which is 11.3 trillion dollars below the maximum level in 2007 when it reached 65.9 trillion dollars.

Ukrainian Globalist
2010-06-12 13:19, Economics.

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