So, if a company wants to build liquid savings in a way that doesn’t come with all sorts of complexity, that doesn’t add monetary energy to their competition, and that doesn’t require moving capital abroad to better performing equity markets, they have historically been out of luck. There have not been any great options, which is why they decapitalize themselves.

For example, both Coca Cola (KO) and Pepsico (PEP) have negative tangible equity. Their liabilities exceed their assets. Why do such successful and profitable companies run their treasury strategy like that? Because it’s better for them to be net short fiat currency, than to be net long fiat currency. And with their fairly consistent cash flows, they can get away with such a levered position. But many cyclical businesses have rather thin balance sheets as well, which can be quite dangerous.