Why Read: Because those who operate business may well (read likely) have a better understanding of what is going on in their respective segments of the economy than do those who write in the mainstream media and on the Internet.

Featured Article: An article last week reported on a recently conducted survey that ended June 5. The article says that "Canadian executives are sitting on cash and bracing themselves for higher financing costs, worried that turmoil in Europe will spill over into North America in the months ahead". The article further reports that of the executives surveyed:

• almost 50% said their companies are holding cash reserves, as contrasted with reinvesting or distributing them;

• 47% said they expected it to be harder for their firms to raise equity over the coming year;

• 34% said they expected it to be harder for their firms to raise debt over the coming year;

• 90% said European political instability has them very concerned or somewhat concerned; and,

• 70% said they are concerned about a slowing Chinese economy.

All that said, more than 80% of executives polled think the Canadian economy will expand in the next year, and 71% think the U.S. economy has improved and will experience modest growth (time frame not stated).

Commentary: So what does all that mean:

• first, with the exception of some specific geographies (Alberta's Oil Sands, for example) new job openings in Canada are unlikely to be abundant,

• second, there may be increased merger and acquisition activity in Canada if viable companies are unable to access the capital markets. Those companies may have to turn, at an earlier stage than they might otherwise do, to well-financed companies who may be able to realize operating synergies by purchasing all or part of them;

• third, their concerns with respect to difficulties in the near-term in raising both equity and debt, combined with their near-term concerns with respect to European political instability and a slowing Chinese economy, all support their predilection to preserve cash;

• fourth, broadly they must believe the current problems they see are shorter-term than longer-term in nature. This is because their views on expansion of the Canadian economy in the next year, and modest growth for the U.S. economy, don't entirely square with their near-term concerns.

Europe's woes have Canadian firms holding on to cash
Source: The Globe and Mail, Richard Blackwell, June 18, 2012
Reading time: 4 minutes

Canadian CEO's Hold Onto Cash! - by Ian R. Campbell - June 25, 2012

Why Read: Because those who operate business may well (read likely) have a better understanding of what is going on in their respective segments of the economy than do those who write in the mainstream media and on the Internet.

Featured Article: An article last week reported on a recently conducted survey that ended June 5. The article says that "Canadian executives are sitting on cash and bracing themselves for higher financing costs, worried that turmoil in Europe will spill over into North America in the months ahead". The article further reports that of the executives surveyed:

• almost 50% said their companies are holding cash reserves, as contrasted with reinvesting or distributing them;

• 47% said they expected it to be harder for their firms to raise equity over the coming year;

• 34% said they expected it to be harder for their firms to raise debt over the coming year;

• 90% said European political instability has them very concerned or somewhat concerned; and,

• 70% said they are concerned about a slowing Chinese economy.

All that said, more than 80% of executives polled think the Canadian economy will expand in the next year, and 71% think the U.S. economy has improved and will experience modest growth (time frame not stated).

Commentary: So what does all that mean:

• first, with the exception of some specific geographies (Alberta's Oil Sands, for example) new job openings in Canada are unlikely to be abundant,

• second, there may be increased merger and acquisition activity in Canada if viable companies are unable to access the capital markets. Those companies may have to turn, at an earlier stage than they might otherwise do, to well-financed companies who may be able to realize operating synergies by purchasing all or part of them;

• third, their concerns with respect to difficulties in the near-term in raising both equity and debt, combined with their near-term concerns with respect to European political instability and a slowing Chinese economy, all support their predilection to preserve cash;

• fourth, broadly they must believe the current problems they see are shorter-term than longer-term in nature. This is because their views on expansion of the Canadian economy in the next year, and modest growth for the U.S. economy, don't entirely square with their near-term concerns.

Europe's woes have Canadian firms holding on to cash
Source: The Globe and Mail, Richard Blackwell, June 18, 2012
Reading time: 4 minutes