As Fed Raises Cash Flow, Some Opt to Bury Treasure
If you have any doubt that people are deeply troubled over the economy and the war, consider this: The public has suddenly begun stashing cash--literally hoarding hard currency.
Currency in circulation had leveled off at about $245 billion in the fall. Then, in late December, the total began surging. By Jan. 28, the latest figures available, cash held had jumped to $254.3 billion, Federal Reserve Bank of St. Louis data show.
Lacy Hunt, economist for Hongkong Bank group in New York, calls the sharp rise in currency holdings “extraordinary. . . . The surge is so abnormal that it suggests people are withdrawing money from banks and thrifts and literally putting the cash in mattresses, the back yard, safes in the home or something comparable.”
The war certainly has frightened many people. And the economy’s slide into recession--with the accompanying jump in layoffs--may have persuaded more people to mothball their credit cards, economists say. Instead, consumers may be keeping more cash from their paychecks and living only within their means each week.
It’s also likely that confidence in the banking system was badly shaken by the failure of some privately insured Rhode Island credit unions and the Bank of New England in January. Some depositors probably figure they’re better off burying their savings in the back yard.
Gary Schlossberg, economist at Wells Fargo in San Francisco, says some of the increase in cash outstanding also stems from the growing use of U.S. currency as a proxy for local currencies in troubled countries, such as in South America. If you’re an Argentine, you’d much rather hold dollars than your own rapidly deflating australs.
Cash hoarding may not seem like a problem for the economy, but it could be a big one: The Federal Reserve is trying to rejuvenate lending by pumping more money into the banking system. If depositors continue to withdraw cash from banks, however, they drain away a lot of what the Fed pumps in. So if you see your neighbors in the back yard with shovels--that could be the economic recovery that they’re burying.
Bateman Analysts Get the Ax: Los Angeles brokerage Bateman Eichler, Hill Richards is disbanding most or all of its securities analysis team here, a move that will further reduce stock research coverage of Southland firms.
Bateman’s parent, Chicago-based Kemper Corp., has fired four of the eight Bateman analysts. The other four have been offered posts on a new Kemper analyst team to be headquartered in Chicago. The cuts had been rumored for weeks.
Kemper, which also owns brokerages in Denver, Houston, Milwaukee and Cleveland, has been losing big money on those operations as the securities business has slumped. To cut costs, Kemper has increasingly centralized control of the brokerage units in Chicago. The units had operated more or less independently in the 1980s.
As of last summer, Bateman had the biggest stock research staff of any Los Angeles brokerage, with 12 analysts. The number had dwindled to eight with layoffs and defections in recent months.
Bateman insiders say the four remaining analysts will almost certainly have to move to Chicago to keep their jobs. The four won’t discuss their plans, and Kemper officials in Chicago won’t say what’s next. Allan Sher, head of Kemper’s Western retail operations, said some analysts might remain in Los Angeles, “but I’m not sure.”
Does it matter that L.A. loses the Bateman team? Michael Abrahams, who had followed bank stocks for Bateman, was cut. He says Kemper is making a mistake pulling analysts out of their regions. Abrahams argues that a centralized staff in Chicago won’t have the same ability to ferret out local stocks of interest to investors in a region.
But Sher argues that centralizing the research team will mean brokers at each Kemper securities firm will have access to all analyst research, not just that of their region.
Some Bateman brokers agree that centralizing research will give them more ideas to work with. And some say it won’t matter much what Kemper does, because brokers everywhere are notorious for ignoring their own analysts’ research anyway. “Every broker I know thinks their own firm’s research stinks, and that it’s always better somewhere else,” says one Bateman broker.
The four remaining Bateman analysts are: Rae Alperstein, who covers health-care firms; Martin Cosgrove, consumer services; Lawrence Harris, aerospace, and Paul Marsh, entertainment.
Besides Abrahams, the analysts who were let go were Norman Mains, research chief; Sarah Stack, covering retail firms, and Chris Kirby, who covered technology.
