September 13th, 2024 - Volume 10 (2024), Missive 209 (Friday)
Fed’s Flow Of Funds Indicates A Financial Asset Imbalance
Less Control Has Meant Greater Growth For Now
Treasuries Way Under-Represented For The Deflation Risk
According to the Fed’s latest release of the quarterly Flow of Funds data yesterday afternoon, total financial assets of nonfinancial corporations decreased marginally by 0.37 percent in QII of 2024 compared to the increase of 1.7 percent recorded the previous quarter. As such, for the year, financial assets are still indicating positive growth for the year to date and are up 4.2 percent over the previous 4 quarters. These details, while important, are still overshadowed by just what comprises financial assets on these nonfinancial corporate balance sheets as the days of jamming them into a few standard categories are more than long gone which drives some significant insights of its own.
Financial assets pared back in QII, but only marginally so.
To say that managing a corporation’s financial assets is more complicated today than it has been in decades gone by is more than an understatement; it is misleading. The complexity of spreading the finances across sixteen assets classes versus that of ten isn’t the real significance, rather it is what those asset categories and which ones have grown the most and those that have subsequently lost the most share that is. Seventy years ago, it was trade receivables, checkable deposits and Treasuries that accounted for almost three quarters of all financial assets on a nonfinancial corporation’s balance sheet. Today, that combined share is down to
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