Regarding Investments of Bankers and Corporations

Are bankers and corporations really doing so badly? The US banks (as well as European) are lending at close to a 0% interest rate. They are bringing the money back to the FRS deposits and not to the economy, skimming the cream off the monetary policy. Today the banks’ margin as a percentage from their earnings beats the record while banks’ interest expenses have dropped to a historic minimum to almost zero rates.

American companies have accumulated record amounts of cash but do not rush into investing it. Today the relation of absolute salary rate in the US private sector to the earnings of corporations is at its lowest level. However, we do not observe massive hiring. Corporations prefer to invest into re-purchasing their own stock. The dynamics of this process is shown in the graph below. Record margin of banks, record cash level: is it really so bad?

 

 

Disclaimer: This article contains the opinions of the author. The opinion of the author is subject to change without notice. All materials presented are compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. This article is distributed for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service. Performance data shown represents past performance. Past performance is no guarantee of future results. No part of this article may be copied, distributed, transmitted or published without the prior written consent of the author.

 

 

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