David Kirkpatrick

October 28, 2010

Want to know where some of those missing jobs are?

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 6:56 pm

A great place to start looking is corporate balance sheets.

From the link:

US companies are hoarding almost $1 trillion in cash but are unlikely to spend on expanding their business and hiring new employees due to continuing uncertainty about the strength of the economy, Moody’s Investors Service said on Tuesday.

As the economy stabilizes companies are also more likely to spend on share repurchases and mergers and acquisitions, Moody’s (MCO: 26.60 ,-0.54 ,-1.99%) added.

Companies cut costs, reduced investment in plants and equipment and downsized operations in order to boost cash holdings during the recession.

As the corporate bond market reopened many companies also boosted cash levels by selling debt and refinancing near-term debt maturities.

Nonfinancial U.S. companies are sitting on $943 billion of cash and short-term investments, as of mid-year 2010, compared with $775 billion at the end of 2008, Moody’s said.

This would be enough to cover a year’s worth of capital spending and dividends and still have $121 billion left over, it said.

However, “we believe companies are looking for greater certainty about the economy and signs of a permanent increase in sales before they let go of their cash hoards, which they suffered so much to build,” Moody’s said in a report.

“Given low demand and capacity utilization within certain industries, companies are wary of investing their cash in new capacity and adding workers, thereby doing little to abbreviate the jobless recovery,” it added.



August 18, 2009

Credit crunch continues

The headline for this linked article is, “Fewer banks tightened credit standards, Fed reports.” Very misleading in terms of the reality on the ground.

Here’s the real news from the subhead:

But credit availability probably won’t return to normal before mid-2010, report says. Also, the Fed and Treasury extend the TALF emergency financing program aimed at boosting lending.

November 19, 2008

States are feeling the financial crisis

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 2:41 pm

States aren’t recession-proof, but tend to fare better than most other entities — commercial or governmental. Even so things are a little tougher around the fifty right now. Moody’s singles out six states for particular trouble at the moment after being placed on its “negative outlook” — Florida, Kentucky, Nevada, Ohio, Rhode Island, and Wisconsin.

From the link

April marked the first time since December 2001 that Moody’s revised its outlook for the U.S. state-government sector to negative, and last month the ratings agency put out a new report predicting states will face harder times as the effects of the credit crisis and economic downturn continue to set in.

Already states are facing larger-than-normal budget shortfalls, which could mean, among other things, a reduction in services for residents and a greater risk of a credit rating downgrade. New York is looking at a whopping $47 billion deficit over the next four years. California is $3 billion in the hole this year. The National Conference of State Legislatures has even begun appealing for states to get their share of bailout money. (Even cash-strapped cities like Philadelphia and Phoenix are hoping for a piece of the pie.)

Yet, as bad as it looks, Moody’s predicts most states will get through this period without a serious deterioration in their credit quality.

“States are stronger in and of themselves,” said Edith Behr, vice president and senior credit officer at Moody’s. “It has everything to do with being able to reduce expenditures and increase revenues.”

These tools, like raising taxes or cutting spending, are why states generally have higher ratings than corporations. No states’ General Obligation Bonds rank below A1, which is investment grade and only four notches below the triple-A “gilt edged” ranking.

The fact that states can’t declare bankruptcy also supports their relatively strong ratings. That’s one key reason why states have a higher median rating than cities, which can file for bankruptcy protection (as Vallejo, Calif., voted to do in May). What’s good for states when it comes to easing their financial woes can also end up meaning more hardship for their cities as states push expenditures down to the local level.