Seeking Alpha

The corporate cash crisis: There's too much of it, and the S&P 500 is sitting on a record...

The corporate cash crisis: There's too much of it, and the S&P 500 is sitting on a record collective $960B pile. You might not have known that the payout ratio is at a 75-year low of 28.9%. With that much cash, and uncertainty rampant, the interests of management and shareholders may align less and less; Benjamin Graham had something to say about that.
Comments (54)
  • bbro
    , contributor
    Comments (9911) | Send Message
     
    There is 2.748 trillion sitting in money market accounts...the ratio of
    these assets to S&P 500 capitalization is 22.63%( it was 19% at the bottom of the 1987 crash)....in earlier times
    this would have been considered excessive but after the recent
    dark decade this is a normal response. No wonder interest rates
    are so low ( no not because of the FED)....
    28 May 2011, 09:30 AM Reply Like
  • tigersam
    , contributor
    Comments (1711) | Send Message
     
    Next five years this cash level will be 5T for corporations.
    28 May 2011, 09:47 AM Reply Like
  • yblarrr
    , contributor
    Comments (947) | Send Message
     
    Now lets talk about the money they have overseas and can not bring it home because of stupid government policies. Companies need
    incentives to spend so that JOBS are created here in the USA.
    28 May 2011, 10:10 AM Reply Like
  • Monngie
    , contributor
    Comments (928) | Send Message
     
    This is BS. They can bring it home. The operative word is home. They need to realize they should pay their fair share for being American companies and enjoying the protection they have because THEIR country is the most powerful on the planet. They need to contribute to the defense budget too! To say nothing of the infrastructure they use in the United States.

     

    NO, let them have a free ride.......it'll trickle down. If some poor smuck working his ass off for a living did the same thing you'd be the first to throw his ass in jail.

     

    Personally, I think their behavior is treasonous.
    28 May 2011, 11:56 AM Reply Like
  • ebworthen
    , contributor
    Comments (2811) | Send Message
     
    Aye, there's the rub. They have no country; the world is their country.

     

    Treason? They are pirates with letters of marque from the central banks and aristocracy of the banking world, they have no allegiance.
    28 May 2011, 12:44 PM Reply Like
  • dividend_growth
    , contributor
    Comments (2896) | Send Message
     
    You said it. Multinational corporations have outgrown national borders since long time ago, and they are good at playing countries against each other: gimme tax breaks or I'll dump zig thousands unemployed at your feet!
    28 May 2011, 12:55 PM Reply Like
  • itsAme
    , contributor
    Comments (99) | Send Message
     
    While there are accounting policies which help distribute income overseas that might have been earned in the US, the majority of that income is actually earned OVERSEAS... They are doing nothing wrong.

     

    I think everyone will finally realize in 5-10 years that there is no such thing as an American multinational company like Ge, Pepsi, McDonalds, etc...

     

    These are Global companies that just happen to be headquartered in the US.
    28 May 2011, 02:10 PM Reply Like
  • Windsun33
    , contributor
    Comments (4277) | Send Message
     
    "Fair share"??

     

    What exactly does that mean?

     

    In many cases that money was earned overseas, made overseas, and sold overseas. If I make $20 billion all in overseas operations, and the only incentive for me to bring it "home" is so I can pay a free-spending congress 35% in taxes, what do you think my decision will be?
    28 May 2011, 05:54 PM Reply Like
  • Windsun33
    , contributor
    Comments (4277) | Send Message
     
    And if the US keeps up being the country with the highest corporate tax rate in the world, more and more of those companies might start calling the Bahamas home.
    28 May 2011, 05:57 PM Reply Like
  • kmi
    , contributor
    Comments (4085) | Send Message
     
    Earned overseas?

     

    IP developed in the US, by a US company, then sold to a subsidiary in the Bahamas, with no physical presence, offices, or employees, and leased to the US entity through another subsidiary in Ireland, funneled through yet another subsidiary in the Netherlands also with no employees, offices, or presence, is gaming the system.

     

    That's the multinational paradigm people rail against, it has nothing to do with honest to goodness goods and services sold and produced properly and taxed appropriately.
    29 May 2011, 08:54 AM Reply Like
  • Windsun33
    , contributor
    Comments (4277) | Send Message
     
    While such things are not uncommon - there is one building in the Bahamas that has around 350 "company offices" (and room for about 10) - it does not tell the whole story.

     

    What is somewhat surprising to me is why nobody seems to be asking WHY these companies are going to so much trouble. Yes, a lot of it is tax avoidance, but it might also indicate that some reforms are needed to encourage them to keep the money here.
    29 May 2011, 05:50 PM Reply Like
  • Monngie
    , contributor
    Comments (928) | Send Message
     
    I say okay. Don't pay taxes. The next time some two bit dictator nationalizes their assets we just keep our military basking in the sun on the beach and let the SOB have the assets. Indeed, encourage the CIA to support any dictator that has a nationalization inclination. Let them defend their own asses.
    29 May 2011, 07:44 PM Reply Like
  • Monngie
    , contributor
    Comments (928) | Send Message
     
    I can encourage them. Let the Bahamas look out after the interests of companies with their headquarters there. I'm sure they can project a lot of military power for them. I'm sure there is a lot more negative S#!+ we can send there way.

     

    Yes, encourage them.
    29 May 2011, 07:47 PM Reply Like
  • Windsun33
    , contributor
    Comments (4277) | Send Message
     
    "...The next time some two bit dictator nationalizes their assets we just keep our military basking in the sun on the beach..."

     

    You mean like Venezuela did? Or Cuba did, Or Chile did?

     

    How much good did our military power do there?
    29 May 2011, 07:57 PM Reply Like
  • Tack
    , contributor
    Comments (13780) | Send Message
     
    Government wants corporations of all kinds to pay taxes only because average fools, we otherwise call taxpayers, are too stupid to realize that the corporations just the middle men in the whole process. Corporations don't really pay taxes; they just collect them for the Government and pass the costs on to consumers -- the real taxpayers-- in the form of higher prices. The Government engages in this strategy, accompanied by the usual demagoguery against corporations-- simply because the public is generally too ignorant to understand how it all works.
    29 May 2011, 08:15 PM Reply Like
  • kmi
    , contributor
    Comments (4085) | Send Message
     
    Regardless of your position on whether corporate taxes are appropriate or not, the fact that some companies can pull this runaround and drop their effective rates and I cannot means the government and the tax system is picking winners.

     

    Certainly any change in the tax system to disable the practice should be balanced by adjusting the corporate tax rate and looking at all the possible repercussions, but at least any benefit from a change in the tax system would be extended to ALL corps domiciled here, not just the ones capable of setting up multinational operations just to evade paying tax.
    30 May 2011, 09:53 AM Reply Like
  • Poor Texan
    , contributor
    Comments (3533) | Send Message
     
    Excellent comment kmi. You put your finger on the problem.
    30 May 2011, 10:06 AM Reply Like
  • 7footMoose
    , contributor
    Comments (2266) | Send Message
     
    Let me inject a "second derivative" of this, bank borrowings by these cash flush corporations will remain weak until the corporations have drained their own pools of liquidity. This, to me, translates into weak bank earnings for some time to come. Neither the consumer nor the large corporations is in a position to borrow big and the mid-market companies cannot access bank credit when they need it. I am invested in a couple of banks but believe the future is dim for some time to come.
    28 May 2011, 10:21 AM Reply Like
  • tigersam
    , contributor
    Comments (1711) | Send Message
     
    Bank earnings will go up when unemployment start going down and housing market start going up.

     

    As far as bank stocks going up, these banks are making money but all have headline risks. As long as headline risks are there, investors are scared to invest in them.
    28 May 2011, 10:32 AM Reply Like
  • bbro
    , contributor
    Comments (9911) | Send Message
     
    Recovery of bank stocks will come not because of top line growth but
    because the chargeoffs ( including putback claims) will normalize... at that point they will have the return of a utility....
    28 May 2011, 11:46 AM Reply Like
  • HiSpeed
    , contributor
    Comments (1123) | Send Message
     
    "What Will It Take for Companies to Unlock Their Cash Hoards?"

     

    How about an administration that isn't hostile to businesses that aren't in bed with it?
    28 May 2011, 10:41 AM Reply Like
  • Monngie
    , contributor
    Comments (928) | Send Message
     
    Hostile to business????? They've given in to business and the Republicans more than any Republican administration. Your delusional.
    28 May 2011, 11:59 AM Reply Like
  • itsAme
    , contributor
    Comments (99) | Send Message
     
    It would be nice if you can respond with links to actual facts instead of just this made up comment.
    28 May 2011, 02:11 PM Reply Like
  • Michael Stuart
    , contributor
    Comments (149) | Send Message
     
    I totally agree! In an era of record corporate profits and trillions sitting in corporate coffers, this is totally the most anti-business government since Mao or Stalin...
    28 May 2011, 06:28 PM Reply Like
  • Windsun33
    , contributor
    Comments (4277) | Send Message
     
    Not really, no it is not. If you want really bad, look at Greece.

     

    This administration is not blanket anti-business. My problem with it, and with most past administrations is that it is selective - it tries to pick and choose winners. I don't think there is any government anywhere in history that has been successful at picking winners, but they keep trying.
    28 May 2011, 07:20 PM Reply Like
  • kmi
    , contributor
    Comments (4085) | Send Message
     
    Greece is not anti-business, I am confused at its relelvance in your comment. Greece has a small business sector and is so desperate to grow revenues it bows to business needs and bends over the middle class rather routinely.

     

    I have close associations with a large industrial international manufacturer in Greece, and if anything the crisis has underlined to Greece politicians that more growth and support for what manufacturing and exist exists is needed to help grow the economy. The gov't is highly pro-business there.
    29 May 2011, 08:59 AM Reply Like
  • Windsun33
    , contributor
    Comments (4277) | Send Message
     
    Then why does the World Bank list Greece almost dead last, even behind Bangladesh? www.doingbusiness.org/...

     

    But other reports would seem to indicate that Greece has best "work ethic" and lowest wages in the EU and is a great place to do business in many ways.

     

    www.uhy.com/media/PDFs...

     

    So what is holding Greece back? - that seems to something that is unsaid or understated in many of the official reports. I think this article sums most of the unofficial problems in Greece www.slate.com/id/2244878/
    29 May 2011, 06:16 PM Reply Like
  • Monngie
    , contributor
    Comments (928) | Send Message
     
    Give me a freakin break itsAme, in the words of Windsun33, "use google it will set you free".
    29 May 2011, 07:52 PM Reply Like
  • kmi
    , contributor
    Comments (4085) | Send Message
     
    Greece ranks last because of a crony capitalist system which benefits a few elites over anyone else. For example, I investigated the possibility of introducing broadband internet service there before the gov't run phone company introduced it, and before large existing telephone/data providers were granted access to Greece's market. There's a lot of intransigence unless you know people at the top.

     

    That does not mean however one cannot start a business or that Greece is incapable of competing at an int'l level. I have a good friend who started out in a tiny 20'x 20' machine shop and is now a large, international exporter of machinery. He credits for part of his success and growth Greek and EU incentives as well as a hard work ethic.

     

    Generally speaking, what holds Greece back is its traditionally closed economy, which wasn't a problem before the common currency, and its problem is that the common currency was basically incompatible with the way it did business.
    30 May 2011, 09:48 AM Reply Like
  • Joe Morgan
    , contributor
    Comments (1503) | Send Message
     
    Mongie, you are it again...take your Ritalin.....

     

    Mongie, corporations act as middle men, if you raise the taxes of them, eventually you pay the price, so keep ranting all you want.....your master Obama got the message last elections, no more taxes......
    30 May 2011, 09:55 AM Reply Like
  • Topcat
    , contributor
    Comments (441) | Send Message
     
    The admin is not hostile to business, you have got to be kidding...look at all that cash, and about 40% of Fortune 500 evaded Fed Income tax last year. Obama wants them to create jobs! Of course, we need some regulations for safely in some industries. Look of where lack of oversight and regulation in the financial industries got us.
    28 May 2011, 10:51 AM Reply Like
  • Windsun33
    , contributor
    Comments (4277) | Send Message
     
    Read his entire comment: "...to businesses that aren't in bed with it.."

     

    But it is not just this administration, crony capitalism has been a fact of life for decades, it just seem worse now than ever. The effect is that some companies get more favorable treatment than others - which is great for those being favored, but puts a disproportionate burden of the taxes on those companies that are out of favor and/or not big enough to afford herds of lobbyists.

     

    Those companies are most often the small to mid size comanies, so they are not only competing against the lobbyist heavy mega-corps, but also the government.
    28 May 2011, 06:03 PM Reply Like
  • tigersam
    , contributor
    Comments (1711) | Send Message
     
    The current administration is very friendly to the businesses. These corporations learned to do business with less number of employees. My boss tells me everyday that I am lucky to have a job. I am working over 60 hours every week without any extra pay. There are several people like me.
    28 May 2011, 11:00 AM Reply Like
  • IgnisFatuus
    , contributor
    Comments (2136) | Send Message
     
    My boss indicated the same thing on February 23, 2011...so I retired the next day at the age of 56. Best move I ever made...the look on his face when I handed him my retirement papers was priceless. Guess he didn't realize you don't threaten people when they have options!
    28 May 2011, 12:38 PM Reply Like
  • tigersam
    , contributor
    Comments (1711) | Send Message
     
    I wish I could do that. I still have to put two kids thru college.
    28 May 2011, 08:05 PM Reply Like
  • Monngie
    , contributor
    Comments (928) | Send Message
     
    A really good capitalist would have your kids fend for themselves.
    29 May 2011, 07:55 PM Reply Like
  • Poor Texan
    , contributor
    Comments (3533) | Send Message
     
    You have a distorted view of capitalism. Capitalism is amoral and provides a framework for utilizing private property for asset growth. While we have some who exploit others in the name of capitalism, they are not capitalists; they are hoodlums.
    29 May 2011, 08:17 PM Reply Like
  • HiSpeed
    , contributor
    Comments (1123) | Send Message
     
    Given that the current administration favors job-killing policies like cap-n-trade (thank God that's dead, for now) which would increase energy costs, and given that energy is the life-blood of an economy, yes, it indeed creates a climate that is hostile to business and job formation.
    28 May 2011, 11:20 AM Reply Like
  • Monngie
    , contributor
    Comments (928) | Send Message
     
    Let's face it HiSpeed. Tar sands and shale oil will not become profitable until oil prices rise. The American people hate that fact, but, in the long run, energy independence will benefit us all. Couple that with alternate sources and natural gas, and in ten years there will be an American Renaissance. We have more oil than Saudi Arabia locked up in Tar sands and shale, with enough NG for a few hundred years. Let the price rise and we'll be golden.
    28 May 2011, 12:06 PM Reply Like
  • kmi
    , contributor
    Comments (4085) | Send Message
     
    Cap and trade was pushed and promoted by the very utility companies who would be subject to it (noir.bloomberg.com/app...) i.e. - it was favorable to the businesses affected by it - making your claim the administration is hostile to business false.

     

    Additionally, it would have encouraged domestic sourcing of energy, which would have been good for the economy. Your 'job killing' claim is also false.
    29 May 2011, 09:06 AM Reply Like
  • Windsun33
    , contributor
    Comments (4277) | Send Message
     
    "..encouraged domestic sourcing of energy..."

     

    Except for oil, which is used mainly for transportion, something like 98% of the energy in the US is already domestic. Cap 'N Trade was aimed specifically at coal, and not all utility companies supported it - only those that would benefit from selling carbon credits.
    29 May 2011, 06:28 PM Reply Like
  • Ed's perspective
    , contributor
    Comments (262) | Send Message
     
    A GROSS number stated as the "most ever" tells us little.

     

    I saw a rather compelling analysis on Microsoft the other day and they are the poster child of the thinkers on this issue .... and yet .... their "cash hoard" covers something simple like 8 quarters of operating expenses. Turns out CORNING (GLW) has more on a pro-forma basis. Doesn't sound like such a "hoard" anymore ...does it? Candidly ..... it scared me for Microsoft .... they really must some have serious excess cash .... and use it to burn thru to pure RAThole projects.

     

    My other question of data like this how does this so called 'off shore" hoard effect this calculation? Do they have to bring it home to pay dividends? I'd gladly accept check drawn a Swiss bank account if that really matters! ;->
    28 May 2011, 11:42 AM Reply Like
  • nobby73
    , contributor
    Comments (1177) | Send Message
     
    Spot on, there's a lot of leverage and often hid in things such as operating leases.
    28 May 2011, 05:12 PM Reply Like
  • SlingWing9
    , contributor
    Comments (493) | Send Message
     
    The 2012 elections scare the bejesus out of everyone, all knowing that if the current administration stays in power, we will have a boatload of new taxes. The problem is that all new taxes, regardless of whom they are levied upon, end up on the backs of the middle class consumer. That has enormous consequences on everything from housing to population growth. That's one part.

     

    The other part is that companies that manufacture in this country cannot stay globally competitive if their tax rates here are through the roof. So those companies that can, will survive by establishing their presence elsewhere on the planet.

     

    The consequences of this are huge and foretell a major retooling of the U.S. economic structure. But first our country must pass the breaking point and we are not there yet.
    28 May 2011, 02:57 PM Reply Like
  • Tack
    , contributor
    Comments (13780) | Send Message
     
    Let's see, our Government has told corporations in the last three years that:

     

    we'll regulate against and/or punish you for taking risks, we'll punish you for paying your executives, we'll punish you if you hire employees (benefit mandates), we'll fine you for any imagined offense we can conjure up (to add to our own coffers), and we'll tax you as much as possible, and more, if we can get it passed. Oh, and we'll relentlessly bash you as un-American and evil, using our happily complicit liberal, big-government-supporting mass media.

     

    And, these same demagogic fools wonder(*) why corporations are sitting on piles of uninvested cash, not hiring people in droves and looking for increased opportunities to achieve revenues and move their operations offshore?

     

    * - They don't really wonder; they just don't care because their quiet aim is to destroy private enterprise, all in the name of Government supremacy in all things and to engender the complete dependency of the populace.
    28 May 2011, 08:33 PM Reply Like
  • kmi
    , contributor
    Comments (4085) | Send Message
     
    There is so much wrong with your comment based on US historical trends I don't know where to start...
    29 May 2011, 09:14 AM Reply Like
  • Tack
    , contributor
    Comments (13780) | Send Message
     
    kmi:

     

    Give it a shot. Absent some facts to counter the points asserted above, your innuendo is rather fatuous.
    29 May 2011, 12:07 PM Reply Like
  • Windsun33
    , contributor
    Comments (4277) | Send Message
     
    I don't agree with most of your conclusions, although a lot of that type of rhetoric has been out there, most has come not from the administration, but from the far-Left fringes of the administration and it's supporters.

     

    But Obama it seems operates from a position of cluelessness when it comes to business, and he has done little or nothing to counteract his Leftist supporters rhetoric. Some of his statements have demagogued businesses - in some cases they might have been aimed at banks or whatever, but his blanket statements seem to include any business. I don't think Obama is specifically anti-business, I think it is more that his ideology is, and he can't seem to get around that.

     

    Some statements are just stupid, like his "corporations need to hire more people" one. Not that Obama is much worse than most administrations, but it is hard to make a case that he has been any better.
    29 May 2011, 06:48 PM Reply Like
  • Doc 224899
    , contributor
    Comments (932) | Send Message
     
    We watch "progressives" in the US Senate browbeat the CEOs of America's last domestic manufacturing sector, and torment CEOs of America's last profitable energy-producing sector.

     

    We read reports of the CEOs of our largest banks being subjected to back-room arm-twisting by government thugs, then watch the surviving CEOs humiliated on TV and forced out of their positions one by one, during the "soft nationalization" of private banking.

     

    We watch the nation's real estate market continue sinking because debtors are protected with debt-restructuring laws, preventing creditors (banks) from operating in a market where people are rewarded for repaying their debts and punished for defaulting.

     

    We see our nation's healthcare system hijacked by legislation passed in the dark hours after midnight on weekends, hidden from the sight of voters.

     

    With all that, somebody wonders why there's cash-hording?
    29 May 2011, 01:01 PM Reply Like
  • Tack
    , contributor
    Comments (13780) | Send Message
     
    Doc:

     

    "Soft nationalization," a great term, and exactly what's happened, with the unsurprising stagnant results.
    29 May 2011, 01:28 PM Reply Like
  • Joe Morgan
    , contributor
    Comments (1503) | Send Message
     
    Excellent comment, companies would not use their cash because Obama administration is bent over to win the 2012 elections, so tune on for more bashing of profitable companies...
    29 May 2011, 02:12 PM Reply Like
  • Windsun33
    , contributor
    Comments (4277) | Send Message
     
    As much as I disagree with Obama on most issues, I would lay many of your listed complaints at the door of congressional politics and posturing.
    29 May 2011, 06:58 PM Reply Like
  • kmi
    , contributor
    Comments (4085) | Send Message
     
    Ugh. They browbeat them CEO's of the automotive sector because they were failures. They browbeat the CEOs of the energy sector because they reap billions in tax breaks while the middle class suffers.

     

    They 'backroom' armtwist the CEOs of the largest banks because they failed at such a magnificent level that they imperiled not jsut the US but the global financial system.

     

    At every step of the way these great CEOs have hijacked, stolen or destroyed the wealth of the nation. Your comment is an exersize is befuddlement.
    30 May 2011, 10:02 AM Reply Like
  • Windsun33
    , contributor
    Comments (4277) | Send Message
     
    They were browbeating them in public, but taking contributions at the same time. All that supposed arm twisting of the large banks has resulted in banks that are not not only too big to fail, but big enough to take down an entire world economy. At this tme 5 major financial institutions control 60% of the entire financial system of the US.

     

    Remember all those hearings (19 of them) over the past 25 years where oil execs were dragged in to testify? Name one single piece of legislation that was actually enacted.

     

    Just like the Enron fiasco, there was a lot of posturing and noise, but little was actually done to fix the basic problems.
    30 May 2011, 10:34 PM Reply Like
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