It sounds perverse, but one of the emerging problems for investors and company executives is cash, too much cash.
According to Standard and Poor's, cash on hand at the nonfinancial S&P 500 companies will top half a trillion dollars for the first time ever by end of this quarter. While it's only an estimate, because not all companies have reported yet, so far, with 193 companies already in, cash and short-term equivalents is up 17% over the first quarter of 2003, which itself was up 25% over 2002, according to Howard Silverblatt of Standard and Poor's.
How much cash is there? Think of it this way: Microsoft, with $51 billion in cash, could give 51,000 entrepreneurs $1 million to start new businesses.
General Motors has some $37.5 billion in cash. Intel is sitting on $15.7 billion. At a share price of about $26, roughly 9% of its stock price is just cash.
Meanwhile, even with interest rates very low, long-term debt has risen more slowly, up just 6% from 2003. A record number of S&P 500 companies, 43, have less than $5 million in long-term debt, according to S&P.
Behind the rise in cash are surging revenues amid still-stringent cost containment. Meanwhile, companies have been paying lower taxes, both part of the Bush tax-cut plan along with increased use of loopholes. Corporate taxes as a percentage of gross domestic product in 2003 were just 1.2%, their lowest level in 21 years.
Elsewhere in the article the columnist Steve Liesman says, "The unlocking of this cash through higher salaries and increased hiring would really secure the economic recovery, creating that virtuous circle of increased salaries and spending that will supplant the stimuli of tax cuts and mortgage refinancings."
Because we aren't seeing the increased hiring and higher salaries as a result of this cash bonanza, it's obvious that the dubious tax cuts and the refinancing craze are just so much gas to pump up a punctured balloon.
No investment in jobs, capital infrastructure, or research... just more and more and more tax-free dividends for the leisure class. A half trillion dollars and counting.
That was the plan all along.
Meanwhile, here's an idea: American businesses that profited so handsomely from unwise Bush economic policies ought to foot the bill for another of its unwise foreign policies.
Let's have the S&P 500, with its $500 billion in cash, pay for Iraq.
