For companies, mountains of cash show high anxiety

Source: Reuters

NEW YORK (Reuters) - American companies are now sitting on record mountains of cash in an indication of deep worries about the economy's future.

Even though analysts forecast a return to U.S. economic growth by the third quarter, companies have yet to show any major signs of rehiring or spending.

And with consumers also hoarding cash at near record levels, a cautious stance by companies could add to worries about the sustainability of an economic recovery.

Earnings growth could be relatively flat as cash piles build, but then surge once consumers, and businesses, become more confident in the economy, analysts said.

The increased cash holdings are "negative in that they're not going to lead a recovery, but would react to evidence that there's an improving economy," said Jim Awad, managing director at Zephyr Management in New York.

It provides further evidence that "businesses are just holding back," said Fred Dickson, market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon.

"There's still a very high level of anxiety regarding the timing and speed and sustainability of an economic recovery." he said.

Standard & Poor's 500 companies' cash levels, which have stood at around $600 billion to $665 billion since 2004, jumped to $700 billion in the second quarter, S&P analyst Howard Silverblatt said.

He said the amount covers the entire S&P 500 minus financials, utilities and transportation companies, which carry high cash reserves as a normal part of business.

Information technology companies held the largest amount of cash at $240 billion, accounting for 34 percent of all the cash holdings, followed by health care, with $209 billion, he said.


Read more: http://www.reuters.com/article/ousiv/idUSTRE57J6TM20090820

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They want to country to FAIL! Unpatriotic bastards!

Never have made so little with so much work just to get work.

http://www.youtube.com/watch?v=UUJpT6j6uMM

The worst economic conditions I have seen in twenty years on my own.

Consumers are "hoarding cash?" I think it's more appropriate to say their no longer spending like drunken sailors. That doesn't seem like an altogether unhealthy thing for the long term.

long history that salaries were reduced and lay off occurred...ships are sitting empty......he is worried..

Where is it? :shrug:

When you feel like you might have to save that cash to pay future bills, in case the money doesn't come in. Though it sounds more thrifty and what we should have been doing all along. Limit spending to what is essentially needed again.

Raiders will LBO the companies, using their own cash as collateral.

We should see a rash of takeovers by the end of the year.

They did "leveraged" buy outs. Which means they would borrow most of the money to do the takeover.

But the shadow banking system isn't lending as much to them any more. Their junk bonds and collateralized debt obligations aren't selling.

Not their own.

I guest you understood me to mean that the companies with cash would be the raiders, but what I meant is that companies with cash will be raided, and their own cash will be used as collateral. If a company's book value exceeds their capitalization, they are plump targets.

is really the all important thing for the LBO business. There will be no LBOs of any significance anytime soon - no bank is dumb enough to commit capital to any LBO in the near future.


...and the poster above - what the hell does a CDO have to do with an LBO?

If book value exceeds capitalization, you can buy the company, liquidate the assets, and make a profit.

If you first triple the budget deficit, then trim it back by a tenth, you get to claim you're a "deficit hawk."

Or, if you raise taxes by 10%, then pull them back by 2%, you just became a "tax cutter."

You get the idea.

people actually saving and being frugal. Compared to the lustfilled whoring that most Americans have indulged in the last decade, I guess it might look like hoarding. I call it smart. That's something our infallible Stock Market (as if it's a living entity not run basically by wealthy firms and investors)is going to have to adjust to.

Also, as the astute business owners on this blog have pointed out, they are not sitting on cash. I think it's the big Wall Street Whores, who are doing so. Isn't Corporate America (Wall Street) supposed to get us out of this mess themselves? No Gov.intervention needed say the free market GOP wonks. Well, where the hell are they? Why isn't every horrible sub prime and adjustable rate loan being modified at this point for the sake of the country? Spend that money then. Stimulate the Economy that you ruined Wall Street. Wait, they will spend it. Gotta pay for those bonuses when the TARP money runs out.

The irony is that my company's powers that be say we need interest rates to go up to help our Margin Interest. Well, I see it as the larger Wall Street brethren to our firm being the ones dropping the ball on this. Get it going you bastards and then Ben will consider raising rates.

The pervasive, and completely justified, fear in American today over losing one's job cannot be understated. The fact is that most Americans understand or sense that the jobs, both white and blue collar, that propelled us as a nation to the top of the global economy are being moved out of this country FAST to cheap labor pools elsewhere and they are likely never to return. Or, if they do return, they will be at vastly lower pay ranges.

We're trying to save every cent. "Pay down" debt is a pointless comment for us, since we only owe a mortgage, and that's a traditional fixed rate mortgage (still, we're trying to pay it down more quickly than required).

We don't know what's going to happen to fuel prices in the short to intermediate term. Or to energy prices in general under cap and trade. With a 20-mile commute, and living in an area where air conditioning is the only thing that makes it possible to sleep at night for 6-7 months out of the year, this matters.

We don't know what's going to happen to health care--are we low-enough income to be positively affected, or high enough to be negatively effected? Will my wife's job hold, even though she works for a formerly "wealthy" university who's endowment was squashed after being pressured to spend more of it?

These are biggies. There are smaller concerns.

Even locally, our municipal utility district can raise taxes, and might, simply because it was assumed that more housing would be built to carry the debt. No more housing is being built around here, for the usual obvious reasons. Then again, governments don't like cutting budgets when they can find a way of raising taxes, so will our property taxes increase? How about insurance costs, given that insurance companies tend to invest in things like securities to cover future expenses?