Corporate Cash Is At $1.9 Trillion

Story here.

Corporate Cash Sets Another Record At $1.093 Trillion, Liabilities Climb To $5.9 Trillion

Bob Pisani reports here:

"Cash set a record in the first quarter of 2013 on an absolute basis: $1.093 trillion in the S&P 500. It has set a record for 18 of the last 20 quarters."

--------------------------------------------------------------------------

Yeah, but nonfinancial corporate business sector bond liabilities have climbed, too, from $3.7 trillion in 2007 to $5.9 trillion in the latest report.

Financial business sector bond liabilities have declined from $6.2 trillion to $4.9 trillion over the same period.

Corporate Cash For S&P500 Swells To $1.5 Trillion

Story here:

Amid a lackluster earning season that has featured many companies missing sales expectations, cash balances have swelled 14 percent and are on track toward $1.5 trillion for the Standard & Poor's 500, according to JPMorgan. Both levels would be historic highs.

Repatriating Overseas Corporate Cash Primarily Benefits Shareholders

Claims it will boost the dollar, job growth, new investment and the stock market are exaggerated, according to Marc Chandler, here.

He points out that overseas cash may be as high as $2 trillion but that perhaps 40 percent of it is already parked in low tax havens abroad. Why move it?

Based on the last repatriation in 2004 and 2005, when about $300 billion came home, only on the most generous reading about 250,000 new jobs were created compared to a predicted 500,000, if 2003's anemic 100,000 new private sector jobs per month is the baseline. And dollar gains could just as easily be attributed to incremental 25 basis point upticks in interest rates by the Federal Reserve.

For the full argument, follow the link above.

Only Dreamers Think Corporate Cash Will Be Used To 'Create Jobs'

Robert Lenzner opines on the naive hopes for repatriating about $1 trillion in corporate cash, noting how corporations are already sitting on a similar sum here and could just as easily use it to create jobs if they needed to:

[Companies] aren’t in business to serve the public patriotic interest by using that money to create jobs unless there is demand over and above what is being filled today.

Which would mean that a tax break for repatriating the cash would just be a "sweetheart deal," the favor   of which would no doubt redound to the politicians granting it, in the time-honored form of campaign contributions, or revolving door jobs in industry.

It's the same story with using taxpayer funds to "create jobs." There's no economic demand for the jobs created, otherwise they'd exist already. They're a sweetheart deal, usually for the affected government and/or union workers whose jobs, and (Democrat) votes, they're designed to preserve.

Corporate Cash Earned Overseas, Presently About $1 Trillion, Cost the US Treasury About $90 Billion in 2008

So says a detailed and insightful story at Bloomberg here by Jesse Drucker, showing how companies book earnings abroad through the Netherlands, Switzerland and Bermuda, lawfully, to minimize taxation both in the US and in high tax European countries.

The next time some pinhead US politician says he wants to take away your $88 billion mortgage interest deduction, tell him this corporate tax loss expenditure is just as big, and getting bigger. 

When you consider that corporate taxes represent less than a third of the tax revenues which individual payers contribute to the federal government under current arrangements, there's plenty of room to rebalance that income portfolio more fairly.

Maybe we could start by rewarding companies for earning their money here instead of over there. If the Netherlands, Switzerland and Bermuda can do it, why can't we?

Well? 

S and P 500 Companies Sit on $800 Billion in Cash, A New Record

This sum, however, is still less than half the total of all corporate cash.

The story from John Melloy is here:

“This is a systemic problem post-Lehman,” said Larry McDonald, author of ‘A Colossal Failure of Common Sense, the Lehman Brothers Inside Story.’ “After a near death experience with the capital markets closed for a record 18 months, they've raised cash now and are cautious. Imagine if you're a CFO and you went through this near death experience.”

Corporate Cash Reaches New Record Yet Corporate Borrowing is at Staggering Levels

Corporate cash reached a new record of $1.9 trillion in Q1 according to the Federal Reserve's Flow of Funds report. The figure is referenced in discussions here and here, among other places.

But what rarely seems to get mentioned in these sorts of discussions is the debt side of the equation involving all this corporate cash. To cite the growth in cash as evidence that corporations don't need a tax cut and aren't investing simply misses the larger reality which helps explain the phenomenon.

John Carney here points out among many other important considerations that corporations are behaving out of fear just like individuals had when they increased their savings in the wake of the recent financial crisis. Many businesses experienced first hand just how difficult times can be without sufficient liquidity in a situation where no one is lending. Increasing cash should be viewed in part as insuring against a repetition of a similar lending lock up in future. 

Other more extenuating circumstances should also be considered when evaluating the issue of corporate cash. One is Federal Reserve induced low interest rates.

David Zeiler calls attention here to the fact that the current low cost of borrowing is too attractive for corporations not to lock in before QEII ends and the cost of borrowing inevitably rises:

The amount of debt companies have issued this year is staggering. As of May 18, companies with investment-grade ratings had issued $392 billion of bonds, an increase of 30% over the same period last year.

Another consideration is related also to formal government policy, namely that much corporate cash may simply be too unattractive to use for tax reasons:

"Many tech companies have looked to raise capital in the [U.S. debt] market over the past year, for a multiple of reasons, including acquisitions, the maturing of businesses and the inability to tap offshore cash without tax consequences," Keith Harman, a managing director in debt capital markets at Bank of America Merrill Lynch told Reuters.

The issue of offshore cash is a significant one. For many companies, offshore money accounts for the bulk of their cash. About 46% of Google's cash is overseas; 90% of Cisco's and virtually all of Microsoft's.

Because of a reluctance to pay the 35% U.S. corporate tax on that money, that cash remains offshore and unavailable for many uses, such as stock buybacks and infrastructure investment. (Microsoft used some of its offshore cash to buy Luxembourg-based Skype earlier this month.)

This suggests that repatriating corporate cash should be a fundamental goal of tax reform in the US. That would mean making it more attractive to keep it here by reducing corporate tax rates.

Come to think of it, why stop there? Why not patriate everyone's cash in the world to America as a matter of formal government policy?

The more cash, the better.

Record Corporate Cash? Doodleysquat

Says the master of the S and P:

Mr. Silverblatt complains that he has repeatedly seen analysis showing US companies with a big cash hoard, which fails to note that much of it is being held by financial institutions as deposits or in expectations of higher capital requirements. In short, the companies can't spend it.

Read more about the man behind the numbers in The Wall Street Journal here.

Corporate Cash Really Isn't

Mish has an interesting post which contrasts "corporate cash" with corporate debt. The upshot is the cash is concentrated in just four big financials (Goldman Sachs, JP Morgan Chase, Citigroup and Bank of America), and overall in about 50 companies. But corporates with cash are also in debt up to their eyeballs, so much so that the debt outweighs the cash by a TARP-size bailout amount:

As you can see, the total cash (in green) for the top 50 companies is $3.71 trillion, which sure sounds like a hell of a lot of cash, and it would be were it not for the debt (in red) totaling $4.45 trillion.

Read it all and see the graphic here.