Netting Cash

We're talking bout the dollar bill
And that old man who's over the hill
Now what are we all to do
When money's got a hold on you
--Simply Red

Many pundits cite high degrees of cash on the sidelines as a reason to be bullish. Imagine the increase in prices, they dream, if (when) this 'liquidity' gets put to work in Microsoft (MSFT) or General Electric (GE)!

Given our indebted position, isn't this cash merely a product of leverage? Gross cash rather than net cash. This money is not free and clear, rather it's linked to a liability.

If the debtors decide that they need to pay back their loans, then this 'cash' up and disappears, doesn't it?

Such a situation characterizes a deflationary environment.

no positions