The companies in the S&P 500 (excluding financial, transportation & utilities) in the US have over $640 billion in cash on hand. Yep. This is a number beyond anything seen in modern times. Why the article I read did not include the financials, transportation & utilities I don’t know (suffice to say there is at least another $250 billion there).
Mind you these companies spent $500 billion in the past 6 quarters (year and a half) buying back their own stock. That is $500 billion spent buying back their stock! Now allot of these stock buy backs simply buy back the options they have awarded to their corporate officers. Their officers have seen this enormous build up of cash. They want to get their hands on it. In fact there should be no surprise the SEC is investigating a widespread practice of illegally backdating stock options to lock in low prices so when executives cash out they make more money.
What is really going on is the people running S&P 500 companies are trying everything possible to “cash out”, literally take the cash out of the companies and put it in their pockets. It is no wonder the top salaries kept rising through the dot com bust, the post 911 recession, and then the print money economy engineered by the Fed after 911. There is so much cash no one knows what to do with it all. Is there any wonder it is sloshing around chasing real estate or long dead in the water commodities like “precious” metals. Sorry but gold and silver stopped being “precious” some time ago, lets say around the time of the proliferation of the microchip.
It is also ironic that all this cash chasing commodities like oil has now had the sickening effect of piling MORE cash in the coffers of the oil companies who now hold over $100 billion in cash. ExonMobile alone has over $32 billion in the bank. Apple set up an asset management firm to manage it’s $6 billion and Dell Computer has over $9 billion sitting in the bank.
Seems many companies do things like buy 30 day rolling CD’s. Now where do you suppose this money goes? Banks get the money and lend it out at higher rates. Who, might you ask is borrowing a bundle these days? The US government is the big hog. How about all those hedge funds leveraging themselves to the hilt? They borrow daily to leverage and settle their accounts. The banks make a ton of money servicing these guys (“these guys” make a ton of money also). Wonder who else could be borrowing this kind of money?
Banks are making up to a quarter of their fat profits stealing it from their account holders in exorbitant fees. Yep, that is stealing. We need a law that regulates what banks can charge in fees. I understand something like this exists in the UK. Fees should be by law a true reflection of the cost incurred by the bank for that transaction. For example, I added a deposit incorrectly by exactly $100 recently. I was charged $9.00 for the bank to “correct” this addition error. $9.00!!! You tell me where the bank incurred $9.00 in costs to correct a $100 addition error on one deposit that had like 4 items on it.
Yes, Americans are being ripped off and they are clueless. Many companies have learned to operate lean and charge high fees. If you are an international company you have a simple formula, produce in the parts of the world where the majority of people live on less than $3.00 per day and sell to the part of the world that spends $3.00 on a cup of dirty sugar water. Now what do you do with all that money?
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1 comment:
Perhaps hidden away here somewhere is a bit too much ideology. But good point all the same.
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