Articles

Where Is All The Money Going?

According to the overwhelming impression created by the current media commentary, there is no money to be found anywhere.

Yet mandated superannuation contributions continue to flood in globally, assets sales and fund redemptions are creating general liquidity and central banks are releasing more cash into circulation. Despite the headlines, unemployment has not skyrocketed and household incomes continue to rise.

So where is all the money going?

Right now banks are seeing term deposit inflows turn from trickles into floods. These ‘guaranteed’ financial institutions are starting to accumulate stockpiles of lazy cash that is not earning its keep and must, in the near future, be employed to earn a return.

As far as retail cash-flows are concerned, household expenditure continues to rise with their disposable income levels. The days of easy money being ‘thrown at you’ may be over (many of us would say ‘thank heavens’) but cash and debt finance is still available.

What has changed though is the governance that has re-entered not just shopper’s choices, but also the finance market.

While many would argue the pendulum has swung too far into fear, mistrust and extreme caution, investors and financial institutions are crying out for sound, well-rationalised investment opportunities that represent a strong business case and solid (if unspectacular) investment returns. The funds are there and must be deployed.

The onus is now back on retail businesses to develop well structured arguments that excite investors and financiers. They are desperately looking for an investment ‘oasis’ in the middle of a hot, hostile desert and should you have a good story to tell, the support is there. Commercial interest rates and foreign exchange positions aside, money has to be employed but it is no longer being given away.

Retailers are not afraid of hard work and good retailers have always been able to explain why their businesses are supported and deserve to be supported by shareholders and lenders.

Now is not the time to listen to headlines and give up hope. Now is the time to work out a plan of attack. Positive action will allow many businesses to take advantage of the vast strategic opportunities that will flow their way in the short to medium term. Many of these will need funding and that funding will only be achieved with the right business case to support it.

But the funds are out there and they are looking for a home.