Tom Keane’s interview of Alan Greenspan yesterday on Bloomberg really surprised me, when Greenspan stated that companies ratio of cash to debt is currently higher than at any time since statistics have been kept in the 20th century. In my last post I optimistically speculated that this cash-pregnant position is putting firms in a significant position for future investment, not unlike grey clouds pregnant with rain. Mr. Greenspan emphasized how their tendency to hold cash, not invest it, is symptomatic of fear. When firms are uncertain of the direction of the general economy, they tend to disengage, to paraphrase him — which is exactly what they are doing, holding onto record amounts of cash.
I had expected some action to break in the economy since that last post, but the good news is this: the government knows it’s in a position to do something about the state of affairs, and it’s taking its time to figure out what to do. As of now, not even the Fed knows what they will do — the QE regime may or may not continue. With the early exit of Congress, I expect that the sitting majority is not willing to step into the fray and end their term with decisive legislation.
However, if the November 2 elections bring a republican landslide, we have some good things to look forward to:
1) a presidency willing to return to Clintonian tax policies (not the speculative drivel we’ve become accustomed to, which everyone fears)
2) a balanced federal legislature, alongside a survivalist presidency, with remnant political capital
These forces came together to create a productive climate in the 90’s — which is where firms like mine wish to go. I want to see regulated markets, driving investor confidence, interbank lending with confidence, and consumer protection to continue in financial products. It’s very hard to get banks to loan anything to anybody, and having healthy financial markets is the cornerstone of our country. Obama’s desire to put social agendas ahead of economic agendas have been the wrong ideas at the wrong time.
I remain bullish on the US; I foresee the current state-level elections powered by a popular trend in pulling back public-employee entitlements. If Meg Whitman-esque regimes become more popular, there will be political will to reduce government budgets where it hurts the most: personnel. People are and will be the critical capital expense to make government work.
I am preparing for the growing body of college enrollees to train harder, more earnestly, and with greater employer focus. Gone will be the prima-donna Y generation; they will learn that obeisance to the employer is essential, and being valued is the crux of being employed. I see this behavior already in classrooms, where students are revolting against obsolescent curricula, and driving faculty to teach more current skills. I also see students flocking to proprietary colleges that respect this ethos, leaving traditional community colleges and four year institutions to more career-focused, occupational programs. (These technical, skills-oriented curricula are producing highly employable graduates)
I do believe we’ll see a mass pattern of capital investiture next year. I do not believe any special increase in recruitment will take place until the human buffer of the democratic supermajority is broken; this group has failed to respond productively to the needs of the nation. And I do believe that swing voters, enamored with an ethos of change, will devalue the current administration.
When students come to me and ask, what should I study? What industries are growing, what should I prepare to do? I want to be able to give an answer.