The Big Picture

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• Negative GDP. Discuss
• 10 Mid Week PM Reads
• Fisher Says Fed Constantly Reassessing Stimulus
• Why Are Corporations Holding So Much Cash?
• BBC: Tomorrow’s World
• Time Wasting Productivity Tools
• US Q4 GDP -0.1% Lower – a Rogue Number
• 10 Mid Week AM Reads
• “One, two, three, four, I declare a currency war!”
• Forgetting History: Value Creation & Tax Burdens
• Krugman on U.S. Fiscal Policy, Economy
• Which News Moves Stock Prices? A Textual Analysis

Negative GDP. Discuss Posted: 30 Jan 2013 05:50 PM PST Not much reaction to the negative GDP -0.1%. Was this a one off, special circumstances, or the start of something more significant. Discuss . . .

10 Mid Week PM Reads Posted: 30 Jan 2013 02:30 PM PST My afternoon train reading: • Fund manager betting on a bear market in government (Philly.com) • naked capitalism: Bank of America Foreclosure Reviews: Why the Cover-Up Happened (Part IIIA) (Part IIIB) • A Warning to Wall St. About Misleading Clients (DealBook) • Home Prices Surge More Than 5%, the Most Since 2006 (NYT) but see When Good News for Real Estate Is Bad (WSJ) • Libor Lies Revealed in Rigging of $300 Trillion Benchmark (BusinessWeek) • Disney’s Bob Iger Talks Deal-Making With Steve Jobs, Importance of Risk (The Wrap) see also Disney CEO went to Steve Jobs to find out if Disney films "sucked" (arstechnica) • Your employer may share your salary, and Equifax might sell that data (The Redtape Chronicles) • This iWatch Concept Features Seamless Linking To iPhone, Is Perfect In Every Way (Redmond Pie) see also BlackBerry 10 Critical to Research in Motion (NYT) • Gasparino, Wall Street Watchdog, Stogie Lover (cigar aficionado) • Duke Ellington: Soundtrack to the Century (Dublin Review of Books) What are you reading?   Fed’s Long-Running Show Goes On and On Source: WSJ

Fisher Says Fed Constantly Reassessing Stimulus Posted: 30 Jan 2013 11:48 AM PST Federal Reserve Bank of Dallas President Richard Fisher talks about monetary policy and the impact of the Dodd-Frank financial-regulatory overhaul on the banking industry. He speaks with Michael McKee on Bloomberg Television’s “Bottom Line.” Source: Bloomberg, Jan. 17 2012

Why Are Corporations Holding So Much Cash? Posted: 30 Jan 2013 10:30 AM PST Why Are Corporations Holding So Much Cash? By Juan M. Sánchez and Emircan Yurdagul January 2013       U.S. corporations are holding record-high amounts of cash. Understanding this phenomenon, many argue, may help us tease out the reasons for the slow recovery from the Great Recession. A close look at the balance sheets of publicly traded U.S. firms shows that their cash holdings have increased dramatically since the mid-1990s except for a slowdown around the financial crisis. The two explanations most frequently given for the growth in cash pertain to fiscal policy and structural factors. Fiscal policy affects cash holdings in two ways, both of which involve taxes. First, public firms are seeing their profits rise elsewhere in the world; if these firms were to bring these profits from overseas operations back to the U.S., the profits would be relatively heavily taxed. Second, uncertainty about future taxes is on the rise. Other explanations point to gradual changes in the nature of the operations of a firm. The leading hypothesis in this group relates the rise in cash holdings of U.S. corporations to the increasing predominance of research and development (R&D). Since R&D is an activity intrinsically connected with uncertainty, the association of R&D and cash holdings is a natural one. The rising importance of R&D in the overall economy is a long-term phenomenon that is due to the rapid growth of information technology firms. Aggregate Trends All the results on cash holdings presented here are obtained using Compustat, a data set that contains balance-sheet information on publicly traded firms. The variable of interest for the purposes of this article is “cash and short-term investments,” which include all securities transferable to cash. Figure 1 displays the sum of cash holdings of all firms. In 2011, cash holdings amounted to nearly $5 trillion, more than for any other year in the series, which starts in 1980. The increases in cash holdings grew steeper from 1995 to 2010, with an annual rate of growth of 10 percent (from $1.22 trillion to $4.97 trillion) compared with the corresponding growth of 7 percent from 1980 to 1995 (from $453 billion to $1.22 trillion). This suggests that at least some of the reasons for the record-high cash holdings must have started some 20 years ago—before the upturn in 1995. Figure 1 Aggregate Cash and Equivalents of U.S. Firms Click to enlarge SOURCE: Compustat. NOTE: Sample includes all U.S. firms in the data set. Figure 2 Aggregate Cash and Equivalents of Non-Financial Non-Utility U.S. Firms Click to enlarge SOURCE: Compustat. NOTE: Sample includes all U.S. firms in the data set except financial and utility companies. Figure 3 Ratio of Cash to Net Assets Click to enlarge SOURCE: Compustat. NOTE: Sample includes all U.S. firms in the data set except financial and utility companies. Cash-to-net assets ratio is found by dividing aggregate cash and equivalent assets by aggregate total assets minus cash and equivalent assets. Recent studies of this trend have found it useful to split firms into financial and non-financial corporations because these two types of firms likely hold cash for different reasons. Thus, to keep the analysis comparable with the studies discussed below, in the rest of this article the focus will be on publicly traded non-financial non-utility corporations. {9} AdBrite FOOTER {8} Nice Blogs (Adgetize)