Mish's Global Economic Trend Analysis |
- Cash Cow: "Who has the Cash?" Followup
- California Pension Promises Exceed 550% of State Tax Revenue by 2012; A Look at Solutions
- Cash Cow: Who has the Cash, Who has the Debt, by Sector and Company
Cash Cow: "Who has the Cash?" Followup Posted: 22 Oct 2010 12:16 PM PDT In response to Cash Cow: Who has the Cash, Who has the Debt, by Sector and Company I received the following email from Erico who says the cash situation is even worse than I presented it. Erico Writes ... Mish – I believe you overstated the amount of cash in your analysis. A lot of that cash for the banks is collateralized. Plus GS is certainly NOT a cash cow. I would invite you analyzing their cash flow statements over the last 10 years, so you can really see how much of a ponzi finance Wall Street has become. In the latest 10Q available, they "only" generated $2bn from operations.In case you missed that top link, please give it a look. It contains an nice interactive graphic about cash levels, using Tableau software. Corporate "Cash" - Cheering the Asset and Ignoring the Liability Erico is correct but actually I was aware of it. Here is an analysis from Hussman that I meant to include last night but did not. This is one of the things that happen when you finish a post at 5:30AM. Please consider Corporate "Cash" - Cheering the Asset and Ignoring the Liability Four years ago, in There's No Such Thing as Idle Cash on the Sidelines, I observed:Raising Cash While They Can I have previously address some of these issues myself. For example please consider my August 12, 2010 article Are Corporations Sitting on Piles of Cash? The Wall Street Journal claims U.S. Firms Build Up Record Cash Piles Note that I even referenced that Hussman post way back on August 12.U.S. companies are holding more cash in the bank than at any point on record, underscoring persistent worries about financial markets and about the sustainability of the economic recovery.Sideline Cash = Corporate and Government Debt So as you can see, I am very aware of these issues. I concluded the above piece with my own thoughts .... So, in spite of what most are saying, corporations are not really holding tons of cash, ready at any moment to go on an investment or hiring spree.The closer one scrutinizes corporate cash, the less there is of it to see. In short, except for a handful of companies, there is almost no cash that can be used for purposes mainstream media says. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
California Pension Promises Exceed 550% of State Tax Revenue by 2012; A Look at Solutions Posted: 22 Oct 2010 11:20 AM PDT To put a little perspective on the pension crisis, please consider the Bloomberg article California Pension Promises May Top Taxes Fivefold To keep their promises to retirees, the California Public Employees Retirement System, the biggest plan, the California State Teachers Retirement System, the second-largest, and the University of California Retirement System may have combined liabilities of more than 5.5 times the state's annual tax revenue by fiscal 2012, according to the study released today by the Milken Institute. Levies are forecast to reach about $89 billion in the year that began July 1.Addressing California's Pension Shortfalls The study the above article referred to is Addressing California's Pension Shortfalls: The Role of Demographics in Designing Solutions from the Milken Institute. Concurrently raising the retirement age and increasing employee contributions is only the first step in addressing California's looming public pension liabilities, according to a new report, Addressing California's Pension Shortfalls: The Role of Demographics in Designing Solutions from the Milken Institute. The situation will eventually call for even bolder action, such as shifting to hybrid plans with only a partial defined-benefit component.Milken's Proposed Solutions The Milken report recommends raising the retirement age and increasing employee contributions. It also wants as shift from defined benefit plans to a hybrid plan with partial guarantees and a partial 401K type coverage. I agree with the first set of proposals on retirement age and employee contributions. However, I strongly disagree with any guarantees. The private sector has no guarantees. Pray tell why should taxpayers guarantee any benefit levels for public bureaucrats, most of whom are grossly overpaid in the first place. Moreover, we need to get rid of public unions, privatizing every needed service, and killing all of the unneeded ones. The study fails to mention that as part of the solution. Finally, I believe states should explore the legality of taxing all public sector pension benefits above some set amount, say $75K annual, at a very high penalty rate, say 90%. If legal, that would take care of the mess in one easy step. Here is the Milken Slide Show on Addressing California's Pension Shortfalls. It's worth a look to understand the magnitude of the crisis even if the proposed solutions are lacking. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Cash Cow: Who has the Cash, Who has the Debt, by Sector and Company Posted: 22 Oct 2010 03:33 AM PDT There are a lot of claims by mainstream media regarding cash on the sidelines and corporate cash levels. Except for a handful of isolated companies, predominantly technology, claims are far-fetched. This interactive script showing the top 50 companies in the US by market cap is proof. Please give the script time to load. It may take 10 seconds or more. Thanks to Ellie Fields and Ross Perez at Tableau Software for help with the display! As you can see, the total cash (in green) for the top 50 companies is $3.71 trillion, which sure sounds like a hell of a lot of cash, and it would be were it not for the debt (in red) totaling $4.45 trillion. The data for this sheet is from Yahoo!Finance. Scroll over any of the bars (not the company name) to see more details. For example ... Bank of America Goldman Sachs Apple Goldman Sachs (GS), Apple (AAPL), Google (GOOG), Microsoft (MSFT), Intel (INTC) and Qualcom (QCOM) are genuine cash cows, but JPMorgan (JPM), and Bank of America (BAC) are charlatans. As for Citigroup, how much of that cash is needed for losses? Relatively speaking, the tech sector has quite a few cash cows but it also has some real turkeys like AT&T (T), Comcast (CMCSA), Verizon (VZ), and IBM. Google and Apple have the distinction of holding buckets of cash and no debt. An award of sorts goes to General Electric (GE) with a monstrous net cash level of negative $415.9 billion. It's fair to point out that a handful of tech companies could go on a buying spree, but in aggregate, if one factors in debt, a negative $749.6 billion is sitting on the sidelines. That's a far cry from the purported $trillions of sideline cash ready to come pouring into the stock market at a moment's notice. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
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