The Wall Street Journal recently published an article bemoaning the fact that corporations were sitting on a record $1.84 trillion of cash and liquid assets at the end of the first quarter, up 26 percent from a year ago and the largest amount since the Federal Reserve began tracking it in 1952. Cash accounted for 7 percent of total assets, the largest share since 1963. The article noted that companies remain hesitant to spend on hiring and expansion due to lingering doubts about the strength of the recovery. (Click here to read the full article.)
My colleague Pete Bolton who leads the new Phoenix office of Grubb & Ellis has a more bullish interpretation, In a recent note to his clients, Pete says, “The most important part of this article is buried in the text. Any of you who were around during the recession of 2001 and the jobless recovery of 2002/03/04 know that corporations were sitting on their wallets, and when they finally broke loose, we had a fabulous run in commercial real estate. Please know that this is going to happen again, and be in the right place and be ready with the right platform to take advantage of this next great run. Arguably, it will be the best we have ever seen.”
Now there’s an optimist! The economy continues to face a lot of headwinds, but fundamentally I agree with Pete that companies are primed for growth. They won’t hold onto that cash indefinitely.
Have a great weekend.
SVP, Chief Economist
Grubb & Ellis