What Does The Current U.S. Corporate Rush To Borrow Money Tell You?

What Does The Current U.S. Corporate Rush To Borrow Money Tell You?

It tells you they anticipate higher interest rates once the U.S. Fed in June ends its massive stimulus plan and they want to secure all the cheap money they can now.

Many of these giant companies are already cash rich. Google, Johnson & Johnson, Texas Instruments and many others are borrowing money they seemingly don't need. But if interest rates jump sharply, this money they borrow now will be inexpensively available to them, already in their corporate coffers.

Don't assume they will necessarily invest it in the U.S. They will put it to work within their business plans and to get the highest rates of return they can to benefit their shareholders. China, South Korea, Germany and other stable and growing economies may be among the fortunate recipients.

If you believe as they and I do that interest rates will be rising, and you are in the process of borrowing money, you would be wise to get your transaction done now, preferably using a long term fixed rate.

For more details, please see "Companies Rush to Borrow," The Wall Street Journal, 5/18/11
http://online.wsj.com/article/SB10001424052748703509104576328991198283176.html

From: http://sane-ramblings.blogspot.com/2011/05/what-does-current-us-corporate-rush-to.html (posted with permission)

…would crash the economy and hand the election to the Republicans.

The posters made two good points. The person who said they’ll pay the money back in cheaper dollars was absolutely right. Point very well taken and I may modify the piece on saneramblings accordingly. The one concerned that raising interest rates now would give the 2012 election to the Republicans, I don’t agree with. It is the Fed that would raise the rates, not the Democrats. And Ben Bernanke I think is a Republican. But more importantly, these giant corporations are betting the marketplace will raise the interest rates.