One reason the financial market averages keep rising

Posted By on March 8, 2013

In talking with a long suffering customer the other day he asked me, “why are the stock market averages rising to all time highs, but business seems slower than ever?” I thought about that a bit since business wise I’ve felt pretty much the same way … as do most Americans with depleted savings, depressed home values, higher taxes, targethigher health insurance premiums and stagnant or depressed paychecks … that is IF they have been fortunate enough to keep their jobs. Frankly, the policies from Washington DC haven’t encouraged additional hiring or expanding business. Companies with decent balance sheets and profitable operations have targets on their backs that say “tax me” so they have just been keeping the cash on their balance sheets or returning it to their shareholders.

It hit me this morning after reading an article in the WSJ … strong companies impacted by the recession hoarded cash, reduced investment in capital and personnel and weathered the slow economy by streamlining their operations; the “do more with less” management style.

“We are starting to get out of hunker-down mode, so what you have now is a bunch of cash-hoarders who have decided to take that cash out of their balance sheets,” said David Ikenberry, dean of the University of Colorado’s business school. “Is that a good thing? It probably is. They’re liberating capital and putting it back out into the capital markets, and letting that multiplier effect kick in.”

EDIT: Thanks for the email Lee, although the “nasty” comments were not necessary — just disagree politely please.

Yes … I know corporations have accountants and tax attorneys to reduce their tax burden through but deductions and credits (“loopholes” as you called them), but U.S. companies, particularly small to midsized domestic only companies, are still at a disadvantage to overseas corporations who also receive incentives AND therefore still pay the highest effective tax rate. See video explanation below.

Comments

Desultory - des-uhl-tawr-ee, -tohr-ee

  1. lacking in consistency, constancy, or visible order, disconnected; fitful: desultory conversation.
  2. digressing from or unconnected with the main subject; random: a desultory remark.
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