Saturday, August 13, 2011

"Sitting on Cash" is not a strategy of firms

The "sitting on cash" tag line/talking point used by much of the media and many pundits is a notional statement attempting to blame the current economic malaise upon firms with cash on hand.

For a myriad of self-interest reasons, pundits and the media love to talk about firms "sitting on cash". However, sitting on cash is not a strategy. However, having cash on hand, at what ever level, is merely an indicator of an underlying strategy.

What we are likely not to hear from the same group of pundits and media is that the indicator of strategy aka cash on hand, appears to be the correct position given the U.S. credit downgrade and the Europian Union debt meltdown.

It is very likely that absolutely none of the media and none of the pundits that consistently lament over firms somehow "sitting on cash" will report on the positive aspect of being long cash and cash equivalents from a firms perspective given the current financial environment.Why? Because economic malaise always comes with the bogie man [blame the external/exogenous for the internal malaise]. It is the standard snake oil of charlatans.

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