David Kirkpatrick

October 28, 2010

Want to know where some of those missing jobs are?

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 6:56 pm

A great place to start looking is corporate balance sheets.

From the link:

US companies are hoarding almost $1 trillion in cash but are unlikely to spend on expanding their business and hiring new employees due to continuing uncertainty about the strength of the economy, Moody’s Investors Service said on Tuesday.

As the economy stabilizes companies are also more likely to spend on share repurchases and mergers and acquisitions, Moody’s (MCO: 26.60 ,-0.54 ,-1.99%) added.

Companies cut costs, reduced investment in plants and equipment and downsized operations in order to boost cash holdings during the recession.

As the corporate bond market reopened many companies also boosted cash levels by selling debt and refinancing near-term debt maturities.

Nonfinancial U.S. companies are sitting on $943 billion of cash and short-term investments, as of mid-year 2010, compared with $775 billion at the end of 2008, Moody’s said.

This would be enough to cover a year’s worth of capital spending and dividends and still have $121 billion left over, it said.

However, “we believe companies are looking for greater certainty about the economy and signs of a permanent increase in sales before they let go of their cash hoards, which they suffered so much to build,” Moody’s said in a report.

“Given low demand and capacity utilization within certain industries, companies are wary of investing their cash in new capacity and adding workers, thereby doing little to abbreviate the jobless recovery,” it added.

 

 

August 3, 2010

From the department of, “no duh” — corporate cash hoarding

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 8:13 pm

Companies are hoarding cash at insanely high levels. Bad for the overall economy and bad for the companies who retain overly large cash reserves as well.

From the link:

It isn’t for a lack of resources. Non-financial companies in the S&P 500 index reported $837 billion in cash at end of March, a hefty 26% increase over the previous year’s $665 billion, according to S&P. These are unusually high levels — companies are holding cash reflecting 10% of their value today. Since 1999, companies on average held cash equal to 6.6% of their value.

In many ways, the record levels reflect the scars of the financial crisis. Chief executives learned the hard way what happens when credit markets freeze, as they did in late 2008 and early 2009. And the country’s relatively grimmer economic forecasts aren’t helping as consumer spending continues to slump. The U.S. Commerce Department reported last week that GDP growth slowed during the second quarter, growing by 2.4% compared to 3.7% the previous quarter.

But while companies try to play it safe by upping their stashes of cash, hoarding does little good in the way of improving the broader economy. What’s more, it could hinder companies from prepping for future growth.

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