Garrett Baldwin

The Fed is Crushing Corporate Investment – Money Morning

U.S. and global companies may be sitting atop piles of cash as the stock market hovers near all-time highs, but total capital expenditures likely will fall over the next two years.

Reductions in capital expenditure in heavy spending commodity sectors, such as energy and mining, will drive down inflation-adjusted spending by 2 percent in 2013 and 5 percent in 2014, according to Standard and Poor’s.

Capital expenditures, the money used by businesses to purchase or upgrade physical assets, are one of four ways that companies typically spend profits.

Despite stocks soaring over the last few months, mixed feelings over the global economic recovery, falling commodity prices, and profit margin pressures are holding back company spending on much-needed project development for future growth, according to the ratings agency.

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Why Companies Aren’t Hiring Now – Money Morning

The stock market was rattled on Tuesday by underperforming manufacturing data.

The Richmond Federal Reserve Index, which measures manufacturing performance in the upper Southeast and mid-Atlantic regions, fell to -11 in July, down from a 7 in June. This signals a significant drop in new orders and shipments.

This comes just a week after the Philadelphia Federal Reserve Index reached a two-year high, which had rallied the market. Such a drastic swing in confidence in the manufacturing sector suggests that uncertainty will stretch into the late summer.

The data comes at a pivotal time for the Obama administration. For the eleventh time in his presidency (by ABC News’ count), Obama announced that he will pivot back to the economy in an effort to create jobs, with a strong emphasis on U.S. manufacturing.

Even though the New York Stock Exchange (NYSE) recently touched all-time highs, American companies are reluctant to hire, particularly with greater uncertainty on the horizon. Perhaps if the President wishes to create new jobs, the administration should address the primary reasons why companies are not hiring in ways that would reflect strong economic growth, as the markets falsely reflect.

Here are five reasons why companies are not hiring right now.

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Senators Move to Create 21st Century Glass-Steagall Act – Money Morning

Elizabeth Warren (D-Mas.s) , John McCain (R-Ariz.), Maria Cantwell (D-Wash.), and Angus Kin (I-Maine) introduced legislation that would again separate bank’s traditional activities (like deposits currently backed by the Federal Deposit Insurance Corp.) from riskier activities like investment banking, insurance underwriting, swap dealing, and hedge funds.