Don Thurston Blog

Hoarding cash by another name is what?

One definition is harboring resources for a time when the investing climate improves.

Much is being made about corporations squirreling away capital to a point where substantial economic damage is postulated. Funds are staying under the mattress. Canadian stats suggest levels of $ 525 billion in various treasuries, up from $ 150 billion ten years ago. United States based companies hold some $ 5.1 trillion, the UK $ 1.2 trillion. These are very large numbers.  Research and development, capital expenditures and increasing  dividends all suffer.

So now we witness collective cries to have this cash liberated to help get the economic ball rolling again. Corporations are not preserving resources to look good at the country club and to flaunt their bank account in the financial press.  In part these balance sheet decisions are made as protective measures, anticipating a more favorable investment climate and cheaper deals. All legitimate business objectives. A very important corporate responsibility is the return on the capital employed and deployed at management’s discretion. External intervention will likely erode this most important result.

The behavior of some corporations, governments and economic alliances provides a lot of ammunition to the contrary. The litany of malfeasance, extravagances and regulatory weaknesses leave all of us punch drunk.  A mistake would be made in correcting the problems by tarring  well and ethically run companies with the same punitive brush.

Many fine companies that have acted responsibility, and maintained great performance credentials for a very long time. The availability of discretionary assets is one of them.  We should keep them that way.

Thanks for reading!

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