Earnings season is off and running and for now talks about the debt ceiling and turmoil in the European banking system are taking a back seat. So far things are looking strong on the earnings front as many big name companies have exceeded estimates and painted rosy pictures about the future. My reaction is “thank God for that.”
High profile companies like Apple (AAPL), IBM (IBM), and Intel (INTC) all posted excellent earnings results and showed why they are the cream of the crop in Corporate America. I thought that if it weren’t for companies like this, our economy would be even further in the tank. The corporate sector is driving what little economic growth is occurring right now because things are certainly dismal in the public sector and consumer arena.
Chicken and Egg
One thing that came to my mind is how these companies are doing it. Don’t they need a strong economy to prosper? Or does their strength create a strong economy? Obviously they are both intimately related, and one feeds off the other. Usually weakness in one spells weakness for the other, but these are strange times.
The corporations ace in the hole is a strong global economy for the most part, especially the emerging markets. Europe is a mess, but Asia is still growing like a weed, especially China and India. China just reported 9.5% GDP growth, putting some hard landing fears to rest for now. We live in an increasing globalized world, and many of our big companies are taking full advantage of that. Asia is adding millions to the middle class every year, which increases the potential buying power for our products.
Imagine how strong corporate earnings would be if the rest of our economy and Europe was healthy. That should be a comforting thought for bulls who need some encouragement with all the gloomy news constantly hitting the wires. It’s crazy to think what Apple would have reported under this scenario.
One Thing That Would Help
I think if many of our cash-rich companies offered special dividends, our economy would get a big jolt. For example, Apple has $76 billion of cash sitting on its balance sheet and that number grows daily. A special dividend would put that cash in the hands of shareholders, who are more likely to spend that and stimulate the economy. Remember that consumer spending is over 70% of the economy. Apple is just one company, but there are many more with mountains of money on their balance sheet in many cases just sitting idly. Just something to think about Corporate America.
Corporate America: The Economy’s Bright Spot is an article from: 
