A week or so ago I wrote a blog called “Which Way is Up“. Like most of my writing, it also was of a rambling nature, but also like most of my writing, there was a minimally cohesive theme.
I moaned about the fact that with the available investment instruments, sometimes it’s difficult to remember what it is exactly that you want. Buy or selling a stock is simplistic, but then you get into all of the derivative variations, the vast majority that I will never go near.
I’m a pretty bright guy, but still can never remember the difference between “strangles” and “straddles” and the other Kama Sutra positions. Actually, I think the “strangle and straddle” was a Brazilian Snuff Film from the 70’s.
Sometimes the message is pretty simple. There’s not much mistaking the “I Want You” message from a few generations ago. The aim was clear, as was the objective. The only downside to answering the call was death, but even that was pretty clear.
Today, the messages aren’t necessarily as clear, even though sometimes the end result can be financial death.
But do you remember the time, not to long ago when there was a broadly agreed upon moan from leading economists and government officials that we, as Americans werent saving enough?
Remember when all of those posters were trotted out comparing our savings rate compared to the rest of the economically civilized world?
I’m sure that retailers didn’t mind that we had a negative savings rate, because after all, if we weren’t saving, we were buying.
Not only were we buying, but we were buying in a way that was anything other than zero sum. During boom times, when both money and credit are readily available, not only do we buy, but we buy inefficiently. We aren’t price sensitive, we don’t wait until the end of an item’s useful life has come and we buy in a frivolous manner.
These days, when you buy an iPad, that means that while Apple prospers, some other company, such as Hewlett Packard suffers, because there are no discretionary spending dollars. Whatever is left over is going toward paying down debt or waiting for a heavily discounted sale.
Now, wouldn’t those economist and government officials like to see the newly adopted frugality and savings behavior just quietly go away?
And since the Supreme Court has decided that corporations are people, it should come as no surprise that corporate behavior mirrors societal behavior. Over the last couple of days there’s been so much talk about how much cash certain corporations are sitting upon. Of course Apple is way up there. With the speculation that Apple might buy Hulu for $2.5 Billion, someone reported that was Apples cash flow in less than 3 weeks.
Throw General Electric into the mix and we’re talking some real money.
Last July, USA Today, a newspaper not owned by The Murdochs, reported that U.S. companies were sitting on $837 Billion. In February 2011, President Obama put the figure at $2 Trillion, which is James Altucher’s projected market capitalization of Apple.
Who are you going to believe, an all color newspaper or the President of the United States?
Or a Harry Potter look-alike venture capitalist blogger from the Bronx?
I don’t know whether either of tthe above figures include cash being held overseas due to tax liabilities if transferred back to the US. No matter, you can get lots of stylish haircuts and cute glasses with that kind of money.
Understanding why the government hasn’t come up with a tax based incentive and performance monitored plan for companies to repatriate foreign held profits in order to benefit the USD economy is the topic for a different rant.
Byt why is the stock market continuing its rise despite the somnolent economy? Because corporate profits are great. But the reason they’re great is that they are just not spending money where it’s needed the most.
Companies are just not hiring. Simply balance sheet stuff. Increased productivity, fewer workers, even with lower revenues you can have improving margins.
See. Saving money is bad. That’s why I sleep on a concrete slab.
Although I know that it’s a good idea to keep investing cash around to take advantage of unexpected opportunities, I am typically 100% invested. I have a really hard time keeping cash uninvested. Of course, the problem with that is also that not every purchase is a bargain. Investing for the sake of investing, as I wrote in Feeding the Beast, can be deadly.
But that’s why these weekly options are so nice.
Now, I typically have a stream of new cash sitting in the account every Monday morning, instead of just on the Monday following the third Friday of the month.
This past Friday, that meant losing shares of JP Morgan, ProShares Mid-Cap, QQQ and SPY.
JP Morgan was a holding that I had successfully sold weekly options on 11 weeks in a row. Although it was sometimes assigned, I always bought it back within a day at an even lower price.
So, I’m already salivating. hat money is as good as spent with an eye already on Praxair, which was assigned from me just last week, but suffered a 2% loss today, bringing it right back into my neighborhood.
It’s like riding a sine wave, not to be geeky. As soon as your flush wiuth cash on the top, I just projectile vomit it out and suck it all in again.
And that’s what corporations should be doing.
The financial industry let us down. Despite the TARP rescue, they did little to infuse cash into the system and lend at what would be bargain rates and bargain prices for land and labor. That lending would now have resulted in tangible jobs.
Jobs means salaries and salaries mean spending.
We don’t need no stinking savings. We need the Apples and GE’s pf the world to step it up and invest in jobs. Let them have the confidence trhat they have products that the consumers or industry desire and put people to work making them.
Once they’re back to work and flush with cash, what kind of behavior do you think Americans are going to revert to?
That’s what we should want.