Why would the author substitute the terms 'cash', 'savings' and 'profits' in the article given their entirely different meanings? Corporations could be sitting on trillions of dollars in 'cash' if they wanted, with zero 'savings' and zero 'profits'. The whole article seems somewhat contradictory.
Why Are Corporations Hoarding Trillions?
101–110 of 412 posts
Re: Why Are Corporations Hoarding Trillions?
#102Looks like the TL;DR of this article is: "Corporate leadership, being so much smarter than the rest of us dummies, sees something big on the horizon coming. They're saving all their cash so they can later invest because "the next transformative innovation could be just around the corner". Apparently they're smart enough to hoard all this cash, but not smart enough to know exactly what that transformative innovation i…
As a corporation, the traditional thing to do with cash you don't need is to return it to your owners, either through dividends or through share repurchases: If the owners wanted to own money sitting in a bank account, they could put the money in a bank account themselves. If they wanted to own a company, they'd be better off owning just the business part without a chunk of low-return cash attached. Beyond basic liqu…
> If the owners wanted to own money sitting in a bank account, they could put the money in a bank account themselves.
This logic is completely absurd. The assumption of a shareholder trusting a company to hold cash "in a bank account" is that there's value in the ability for the company to deploy it rapidly in the event that they need it. If the shareholders held it in their collective bank accounts, then in the event that the company had an opportunity requiring a big chunk of cash, they'd have to go through some complicated (and perhaps too slow) steps to acquire it.
I have a brokerage account and a checking account, and an ATM card for the latter alone: and yet I keep a reasonable sum of money in the brokerage account so that I can execute a trade with short notice (i.e. without first waiting for a cash transfer from my checking acct). By your logic, "If I wanted to hold cash in the bank, I would hold it in a bank".
Re: Why Are Corporations Hoarding Trillions?
#103Looks like the TL;DR of this article is: "Corporate leadership, being so much smarter than the rest of us dummies, sees something big on the horizon coming. They're saving all their cash so they can later invest because "the next transformative innovation could be just around the corner". Apparently they're smart enough to hoard all this cash, but not smart enough to know exactly what that transformative innovation i…
As a corporation, the traditional thing to do with cash you don't need is to return it to your owners, either through dividends or through share repurchases: If the owners wanted to own money sitting in a bank account, they could put the money in a bank account themselves. If they wanted to own a company, they'd be better off owning just the business part without a chunk of low-return cash attached. Beyond basic liqu…
Tech companies specifically have seen their historical predecessors disappear very quickly - Sun and SGI nearly evaporated, IBM has had 16 quarters of shrinking earnings. So tech company execs hoard cash in the hope that if they get blindsided they'll have time to recover. I'm pretty sure this is Eric Schmidt's explicit strategy.
Also, as someone else noted, a lot of this cash is "trapped" overseas as it would cost 35% to repatriate it to the US. The logical thing to do would be to move more operations out of the US to balance expenses with revenues but I guess there are issues with doing that.
Re: Why Are Corporations Hoarding Trillions?
#104The US is out of demand. Workers are spent out. Thus, there's no need to increase output, because nobody has the money to buy it. The US has huge excess manufacturing capacity, thousands of malls which could handle more traffic ("there's always parking at Sears", a rather pathetic ad), and services which could handle more business. There's a glut of capital, plenty of available unemployed or underemployed workers, no…
> The US is out of demand
How is the US out of demand? Peak consumption years of population are between twenties and fifties and the biggest cohort of US demographics - the millennials - is just getting started. They crossed over the Boomers last year and now are the largest group. Behind them the younger (Gen Z) equally large in size is ready to backfill in another 15 years. It is true that demand from Boomers is done, but the Gen X's are not big enough to backfill the falling demand.
Re: Why Are Corporations Hoarding Trillions?
#105Earlier quoted context omitted.
The trick is, you don't invest during the downturn, hence all the cash hoarding. You invest after it bottoms out for a while. Macro economies do not recover like a rocket, the window to invest is very large, so large that if you only recognized the bottoming out a couple years later, you still haven't missed the opportunity.
That is a really interesting point. So I've never invested in stocks before (preferring to invest in my own business) but have decided to diversify and am only seeking returns in a 5-15 year bracket (but want to minimize 1-5 year downside so it could potentially work as an extra emergency fund too). I had assumed being 20%+ off of the highs, it'd be a good idea to start getting involved now, but.. maybe I should wait…
So long as you don't wait forever. The market bottom of any exchange or stock is $0.00. The market, will likely never actually "bottom out". Look into DCA Dollar Cost Averaging. I personally, and professionally, manage DCA strategies with applying additional infusions during obvious lows (example: markets are down 10% in a given period). The bottom of a cycle can undulate "sideways" a bit over a period of weeks, months, years, decades with few discernible entry or exit points. Sometimes after an "event" occurs, the market/stock jumps XX% and opportunities may not occur again in the near future (goes sideways at new level). I note sideways markets/stocks and calculate the risk/reward if I deem it an opportune time. In most markets stocks don't go sideways forever.
Re: Why Are Corporations Hoarding Trillions?
#106The US is out of demand. Workers are spent out. Thus, there's no need to increase output, because nobody has the money to buy it. The US has huge excess manufacturing capacity, thousands of malls which could handle more traffic ("there's always parking at Sears", a rather pathetic ad), and services which could handle more business. There's a glut of capital, plenty of available unemployed or underemployed workers, no…
> The CEO of WarMart has mentioned this
So a business model of screwing every penny out of your staff and suppliers can result in customers too poor to buy your merchandise?
Who could have forseen this?
Re: Why Are Corporations Hoarding Trillions?
#107The US is out of demand. Workers are spent out. Thus, there's no need to increase output, because nobody has the money to buy it. The US has huge excess manufacturing capacity, thousands of malls which could handle more traffic ("there's always parking at Sears", a rather pathetic ad), and services which could handle more business. There's a glut of capital, plenty of available unemployed or underemployed workers, no…
a simple response would be progressive taxation. Tax assets, ideally non productive ones, and redistribute to the poor for use in non discretionary spending - like dinner. A modern "new deal" for elder care would also do the trick..
> A modern "new deal" for elder care would also do the trick..
Oh please no! Boomers have already pillaged and mortgaged the futures of the youth enough already. The last thing we need is for them to stick it one more time with a new set of unpaid indefinite obligations.
For a simpler approach, just give everybody $X (00 or 000?) either one off or repeatedly. It's as progressive as it gets and at least some youth will benefit.
Re: Why Are Corporations Hoarding Trillions?
#108The US is out of demand. Workers are spent out. Thus, there's no need to increase output, because nobody has the money to buy it. The US has huge excess manufacturing capacity, thousands of malls which could handle more traffic ("there's always parking at Sears", a rather pathetic ad), and services which could handle more business. There's a glut of capital, plenty of available unemployed or underemployed workers, no…
> The CEO of WarMart has mentioned this So a business model of screwing every penny out of your staff and suppliers can result in customers too poor to buy your merchandise? Who could have forseen this?
How much do you want to pay for goods in order for that cashier to make 40K?
Re: Why Are Corporations Hoarding Trillions?
#109According to this Bloomberg article, companies have $2.1 trillion sitting offshore for tax reasons [1]. They're probably waiting for Congress to let them bring home the cash, tax-free. However, the last time that happened (2004), it was done to encourage companies to create jobs. Instead, they spent it buying company stock. [2] 1 - http://www.bloomberg.com/news/articles/2015-03-04/u-s-compan... 2 - http://www.theguar…
As far as I know the US taxes the income of its citizens even when they live outside the US. So why can't the US just tax the offshore income of the companies?
Re: Why Are Corporations Hoarding Trillions?
#110The US is out of demand. Workers are spent out. Thus, there's no need to increase output, because nobody has the money to buy it. The US has huge excess manufacturing capacity, thousands of malls which could handle more traffic ("there's always parking at Sears", a rather pathetic ad), and services which could handle more business. There's a glut of capital, plenty of available unemployed or underemployed workers, no…
> The US is out of demand How is the US out of demand? Peak consumption years of population are between twenties and fifties and the biggest cohort of US demographics - the millennials - is just getting started. They crossed over the Boomers last year and now are the largest group. Behind them the younger (Gen Z) equally large in size is ready to backfill in another 15 years. It is true that demand from Boomers is do…
And what good is a large population of people in their peak consumption years if they have no money with which to consume?
So long as you have a low-paid workforce who have to save their money (either themselves or via insurance companies) in case they get an infected tooth or need to see a doctor for an antibiotic prescription, you'll have low consumption spending and low growth.