GIULIETTA TALEVI: Hello cash, my old friend
Yet, as markets have bounced in the past week or so, I couldn’t help but wonder: have I missed the boat?
I’ve been reporting on stock markets for almost two decades but I confess that, aside from my pension, I’ve not had any market exposure since deciding to spend a chunk of cash on some home renovations two years ago.
Then I had a daughter and thought: best get the little nipper sorted for her graduation, because if mommy stays in journalism, it’ll be from the University of Wichita’s online ukulele class and not much else.
All well and good, but the problem is, I’m utterly disorganised in the personal finance department. The result is that I’ve been sitting on cash for a few months now, since I repeatedly forgot to Fica myself to put that money to work.
And for once, this chaos actually worked in my favour. As markets tanked, I was able to avoid the carnage. Now, as markets have bounced in the past week or so, it’s left me more than a little uneasy. Have I missed the boat?
Perhaps not (crosses self).
We’ve mentioned him before, but John Authers, who used to run the Financial Times’s Lex column and now works for Bloomberg, is one of our favourite market writers. Here, he writes this great piece that ties into the festival of Passover – which this year, like Easter, will be a much lonelier affair for millions of families.
At a time like this, having some cash to gaze at fondly does make for fewer anxious nights, and I’ve always wondered at the glib way that corporate financiers and asset managers are wont to dismiss a company for having a “lazy balance sheet”.
Sure, if a company fails to find avenues in which to grow, which would necessitate spending money, the criticism can be entirely valid. But not keeping money in reserve for a rainy day strikes me as equally nonsensical.
The good times can change with brutal ferocity – as we have seen this year. Which is why this April 7 story in the FT, makes for such a great read. Imagine having 17 years’ worth of cash to tide you over if you failed to make a single sale: that is what one Japanese company can boast – and it's not an especially freakish outlier, either.
Finally, Japan’s cash-hoarding corporates can come into their own after years of criticism, while the rest of the world’s companies gasp for breath. It’s a point worth considering when next you’re urged to “gear up the balance sheet”.
The issue of company dividend payments has become politically fraught – and you can sort of understand why. It makes sense that governments, which are almost always called upon to unjam the financial system when the going gets tough, should want to see companies, like banks, hold onto cash earmarked for shareholders to sustain them through the Covid-19 crisis.
Of course, this has huge implications for investors – and pensioners – who rely on dividend income, particularly as bond yields have sunk so low in the past decade. But Nir Kaissar, founder of asset management firm Unison Advisors, argues that dividend cuts are probably likely to be short-lived.
Talevi is the FM Money & Investing editor
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