Average Is Over

Re:Average Is Over by invalidOrTaken on Wednesday January 25, 2012 @05:11AM (#3509167)

One question I've had for...a while now.

  a) corporate profits are up                         

  b) hiring isn't happening, or is seeing a skills mismatch

then where exactly are all these profits going? If they're going to capital goods for the company, that just moves the question on down the line. If they're going to shareholders, then what are those shareholders buying? And if it's just sitting in the bank, where is the bank lending it out?

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Re:Average Is Over by yummyfajitas on Wednesday January 25, 2012 @05:35AM (#3509229)

Many of the profits were earned overseas, and are being left there. If they bring the profits home to the US, they will be taxed. Essentially, the US is levying a tax on (certain) foreign investment, specifically investment by Google Ireland in Google USA.

Additionally, most of the private sector is deleveraging and building up cash reserves to use in lieu of debt financing.

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Re:Average Is Over by marvin on Wednesday January 25, 2012 @08:12AM (#3509576)

Do you have numbers or references on the deleveraging point? I know that Google, Apple and Microsoft are sitting on vast cash reserves...but is this what is happening in the economy in general? If this is the case, then this is as far as I can tell good news. Debt serves a purpose, but if it causes systemic problems like we've seen in recent years then it should be kept low.

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Re:Average Is Over by justincormack on Wednesday January 25, 2012 @10:27AM (#3510004)

I recommend this paper for some numbers on the US, UK and Spain, and the different sectors.

http://www.mckinsey.com/Insights/MGI/Research/Financial_Mark...

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Re:Average Is Over by invalidOrTaken on Wednesday January 25, 2012 @05:53AM (#3509271)

I don't know why you got downvoted (and your reply was certainly within the guidelines), but your answer left me with some questions: would profits left overseas mean that (well duh, but more so than otherwise) foreign consumer markets will pick up noticeably (and we therefore should be paying close attention)? And is there some specific reason the private sector is deleveraging? Have CFO's just gotten more spooked than before?

Thanks.

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Re:Average Is Over by yummyfajitas on Wednesday January 25, 2012 @06:17AM (#3509318)

...would profits left overseas mean that (well duh, but more so than otherwise) foreign consumer markets will pick up noticeably...

No guarantee, but it's likely. If the overseas profits are invested, then yes. If it sits in the bank and is not invested, then maybe not.

From what I've read and seen, it seems that overseas consumer markets are increasing. Here in Pune, it's definitely the case. There are a ridiculous number shiny new apartment complexes advertised by pretty white ladies doing yoga, Centaurs, and claims that everyone will envy your opulence.

And is there some specific reason the private sector is deleveraging? Have CFO's just gotten more spooked than before?

The credit crunch is a very recent memory. If another one occurs, then any company that uses credit for cash flow could be destroyed. So yeah, hoarding cash is basically an insurance policy.

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Re:Average Is Over by aangjie on Wednesday January 25, 2012 @07:49AM (#3509529)

I can vouch for a similar increase in consumer markets in Bangalore.. Been in chennai a few months and am suspecting the same here too....

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Re:Average Is Over by sskates on Wednesday January 25, 2012 @05:29AM (#3509212)

A lot of companies are just sitting on the cash (most likely in a bank account). Interest rates are very low right now, so there's not much incentive to lend the money out.

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Re:Average Is Over by justincormack on Wednesday January 25, 2012 @10:24AM (#3509997)

Often in treasury bills, as banks are too risky. Which is why treasury bill rates are so low, and the money does not get relent. Since Lehman's banks are not seen as safe and there is no deposit insurance for these large amounts.

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Re:Average Is Over by robryan on Wednesday January 25, 2012 @05:42AM (#3509244)

The bank would be lending it out though.

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Re:Average Is Over by dgit on Wednesday January 25, 2012 @08:27AM (#3509616)

What makes you think so? Interest offered by borrowers is generally low these days and risks are high. So lending isn't happening.

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Re:Average Is Over by Nick_C on Thursday January 26, 2012 @02:13AM (#3513202)

If that was the case, we would see M2 and M3 go up, and we aren't. Depending on how you want to measure it, you could even argue they are contracting slightly.

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Re:Average Is Over by dgit on Thursday January 26, 2012 @06:01AM (#3513620)

Looks like 'up' to me for M2: http://www.federalreserve.gov/releases/h6/current/ M3 not being tracked.

That said, I'm not entirely sure about the definition of M2 and how that's related to 'money sitting in the bank'. M2 includes 'savings and time deposits' according to Wikipedia, but it doesn't seem to differentiate whether banks in turn lend out that deposited money or it just sits there.

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Re:Average Is Over by dgit on Wednesday January 25, 2012 @08:25AM (#3509611)

" ... if it's just sitting in the bank ..." it's just sitting there, they (banks) are not lending it out. That's precisely what's happening now.

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