The $1.2 Trillion Secret

As mentioned in my last post, I think the most interesting news going on in business is getting burried in the press.  Burried on page 73 of Business Week in an article titled $1.6 Trillion. Now We’re Talking Stimulus, to be precise.
Here are some select quotes:

  • “But before you get stoked over just $150 billion in tax aid, forget not the huddled, cuff-linked masses, those with millions of fiduciary mouths to feed but who are too scared to spend. American CEOs, with hundreds of billions at their disposal, could make more of a stimulative difference than all of our shopping sprees combined.”
  • “According to Moody’s Investors Service, a record $1.6 trillion in cash sits on the books of nonfinancial U.S. companies, $600 billion more than was there five years ago.”
  • “”Management is admitting that they just see no opportunities,” says Ivan Feinseth, chief investment officer of AlphaWorks, a Manhattan hedge fund that screens investments for how efficiently they use capital.”
  • “Prediction: This passivity will not stand. In a hyperglobalized, weak-dollar economy, U.S. balance sheets have never been so prone to international scrutiny. Cash is fungible and speaks all languages. It appeals to every constituency, from employees and shareholders to lawmakers and creditors, from Wall Street analysts to labor unions. Leave too much of it out there, and you will be told what to do with it.”

What does this mean in the short term?  I consider it a huge insurance policy against a crash in the market.  Companies who see their stocks dips are very likely to buy back their own stock at discounted prices.
What does it mean in a historical sense though?  This is the real question that interests me.  It’s alarming to hear this surplus has grown 60% in 5 years.  I wish I could dive deaper into the Moody’s report, but their website doesn’t list much stuff that you can get for free.  That aside, the numbers in the BW article tell me that companies don’t have great ideas on where to put their new found profits.
I will go out on a limb and guess they also don’t have the staff to charter new endeavors.  And if that’s right it means we have billions of dollars of opportunity cost queued up behind finding a class of workers that can seize working capital and launch into new businesses, even create whole new industries.  It’s ironic that at this very time Republicans are hell bent on selecting a presidential candidate that will close down our borders and want to spend billions upwards of $80 billion on fencing and law enforcement.  What if we spent just $100 million in ads around the world attracting college graduates to come to the U.S. to work?
I think this is also an indicment on MBA programs.  While Gross National Income is certainly one measure of their success, this $1.6 trillion is a measure of opportunities management and leadership could not harness.
It’s a great time to be a manager and leader, because there are more than a billion people from Brazil, Russia, India and China coming into the world marketplace.  This has been well reported by Thomas Friedman.  And now we find their is hundreds of billions of dollars waiting to be spent sitting in the pockets of corporate America.

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