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over 13 years ago

March 28, 2011

Corporate Cash, Japanese Exports, U.K. Protest
Today's Economic & Resource Stocks Commentary
by Ian R. Campbell, FCA, FCBV

Corporate Cash

Japanese Exports

U.K. Protest

Additions to SRP Company Universe

Yesterday's Insider Trade Highlights

Corporate Cash

You probably have read in many of the daily commentaries available in the Media and on the Internet of the large cash balances held by many U.S. public companies. A 60 Minute segment last night dealt broadly with the way many U.S. Corporations are organized internationally to minimize their income tax obligations. On consolidation, those corporate tax savings (that would otherwise be paid if related incomes had to be included in U.S. income, are reflected in the overall reported corporate income tax rate. According to '60 minutes', over one trillion U.S.$ has been earned after-tax by these U.S. (International) Corporations and resides in countries other than the U.S. There is no suggestion on the 60 Minutes program that the U.S. Corporations who have structured their corporate activities within the law have done anything wrong. However, from my perspective this highlights a further way the U.S. system is demonstrated to have serious problems that need to be addressed. For U.S. Corporations to generate earnings that they can't repatriate to the U.S. without paying further taxes to me means those earnings are not available for investment in the U.S. which in turn arguably would create jobs for U.S. residents when they are badly needed. I have said in numerous of my e-mails that the U.S. is 'between a very hard rock, and a very hard place'. From my perspective, this is but one more example of why that is the case. If you haven't seen it, you can watch the '60 Minutes' segment here - viewing time about 10 minutes.

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Japanese Exports

As a ongoing follow-up to Japanese problems (and those of its trading partners) arising from the earthquake two weeks ago, two articles I suggest you read are:

Made in Japan: What Is Country Exporting? - reading time 1 minute. This article reports Japan, the world's 4th largest exporter, accounts for about 14% of world export of automotive products, as well as machine tools, precision instruments, and semiconductors; and,

Global Supply Lines at Risk as Shipping Lines Shun Japan - reading time 3 minutes. This article reports that some of the world's largest container shipping lines "have restricted or barred their ships from calling on ports in Tokyo Bay over concerns about radiation". Aside from this creating an incremental negative impact on Japanese exports in the near term at least, those container ships carrying Japanese cargo are, in at least some instances, being screened for radiation at their arrival ports. If nothing else, this will add to both transportation costs and will cause unloading delays.

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U.K. Protest

Consistent with my concern that 'taking things from people they have come to expect will result in leaving them unhappy, and ultimately may lead to social discord' witness the protest that took place in London, England on Saturday. According to an article titled 'Up to 500,000 protestors attend anti-cut demo' - reading time 4 minutes - between 400,000 and 500,000 U.K. teachers, nurses, firefighters, public sector employees and others marched in a protest through central London to rally against cuts in jobs and services. While the demonstration broadly was reported as civil, it came with some minor 'acts of violence'. That said, it strikes me as one more serious warning sign that the debt circumstances faced by many countries may well result in negative societal consequences that none of us may find attractive.