US companies sitting on $1200 billion in cash...

Discussion in 'Wall St. News' started by ASusilovic, Dec 13, 2011.

  1. [​IMG]


    American corporations are sitting on record amounts of cash, but that doesn't mean their greenbacks are safely tucked away at a bank down the block from headquarters. To the contrary, billions of dollars worth of corporate cash and short-term securities sit in foreign subsidiaries located in undisclosed countries. A lot of this money might not even be in dollars.

    In a serene world with healthy financial markets, the whereabouts of all this cash might give few people pause. But Europe's sovereign-debt woes alone, not to mention worries about the solvency of the continent's large banks, ought to beg the question: How safe is that money?

    We're not talking small change here. Cash and short-term investments of non-financial companies in the Standard & Poor's 500 topped $1.1 trillion as of the end of the year's third quarter, according to Capital IQ. That's up 70% from 2007 and roughly 200% in the past 10 years. Companies have boosted their cash positions amid uncertainty about the economy and the availability of financing through banks and the capital markets. "Since the financial crisis, companies have built up cash to hold larger liquidity buffers," says Ron Chakravarti, a managing director and head of Global Solutions, Liquidity and Investments, at Citigroup.

    How about repatriating this cash and generate jobs in the US of A? Ask your local politician....
  2. Roark


    Ask them to do what? Seize the money and give it to me? Or repeal some regulations so it's worthwhile to put capital to work in the US?
  3. d08


    Why should the corporations do that? They are huge in size and derive a large portion if not the majority of profits from the "international" markets, in your view they owe something to the unemployed in the US?
    It's likely they are expecting a downturn next year so they're just waiting to take over their soon-to-be-troubled competitors and/or handle the next round of layoffs.
  4. its a scam. this from forbes. not exactly a left wing mag.

    The reality, sadly, is quite different. There is no evidence that a similar break created any new jobs when Congress tried it in 2004. Instead, most of the repatriated dollars went to shareholders in the form of dividends or stock buybacks (which raise equity prices).

    Yet, multinationals are salivating over the prospect of a holiday. Jesse Drucker over at Bloomberg reports that 160 lobbyists are working the issue. Even Apple and Google—normally bitter corporate rivals—are singing from the same hymnal.

    No wonder. The Hagan-McCain bill would allow firms to pay just an 8.75% tax to bring home overseas earnings—far lower than the top corporate rate of 35 percent. They can get the rate down to 5.5% if they increase payroll in 2012 (not hard if the economy improves as many expect).

    But with corporate tax reform in the wind, a holiday today could provide an extra windfall. Here’s why:
  5. IF/WHEN politicos ever wake up and acknowledge the problem... to provide incentive to expand employment in the US (and I don't mean no piddly, stupid tax credit for hiring a minority)... then that cash will be deployed to a degree.

    Until then, they will probably maintain as-is.
  6. AK100


    What about the other side of the balance sheet?
  7. zdreg


    the US is headed for capital controls.
  8. bozwood



  9. Both EU and US are screwed, nothing anyone can do any more. Let politicians in EU have meetings and agendas, let the ones in US increase the debt ceiling.

    We know who has deliberately ignored the problems for decades.

    Now the money is GONE. Western banks are empty, companies not really profitable, immense capitals parked in anonymised tropical accounts.

    No wonder the market moves like a drunken beggar.

    Short as much as you can, but be careful 'cos:

    1. The game is rigged
    2. Your broker (whichever it is) holds your money