Jamesb101.com

commentary on Politics and a little bit of everything else

US companies are holding on to their cash……

Afraid of these rough and tumble economic times…

They make sure they have liquidity…..

Makes you shake your head, Huh?


U.S. companies are holding more cash in the bank than at any point on record, underscoring persistent worries about financial markets and about the sustainability of the economic recovery.

The Federal Reserve reported Thursday that nonfinancial companies had socked away $1.84 trillion in cash and other liquid assets as of the end of March, up 26% from a year earlier and the largest-ever increase in records going back to 1952. Cash made up about 7% of all company assets, including factories and financial investments, the highest level since 1963.

While renewed confidence in corporate-bond markets has allowed big companies to raise a record amount of money, many are still hesitant to spend the cash on hiring or expansion amid doubts about the strength of the recovery. They are also anxious to keep cash on hand in case Europe’s debt troubles lead to a new market freeze.

“Cash is still king,” said Jeff Hand, chief operating officer at Ross Controls, a Troy, Mich., maker of pneumatic valves and other products that is holding more cash as it struggles to recover from a sharp drop in business last year. “We’re coming out of that, but the uncertainty is still there.”

“We just went through this liquidity crunch that’s made them realize the value of a dollar in hand,” said John Graham, an economist at the Duke Fuqua School of Business.

Even now, banks continue to pull back on lending. The Fed reported Thursday that net lending by the financial sector—including banks, credit unions and other lenders—was down 5.4% in March from a year earlier.

The comfort of having cash on hand, though, comes at a high price companies may not be willing to pay for much longer. They are earning almost no interest on their holdings of cash, making it more difficult for them to achieve the returns shareholders typically expect from them. That will put pressure on companies to pare down the cash holdings eventually.

More…..

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June 10, 2010 - Posted by | Blogs, Media, Other Things, The Economy, Updates | , ,

2 Comments »

  1. It doesn’t make you shake your head it shows that we are still in uncertain economic times, if something else goes wrong we could fall down again. IF things continue the way they are we will take years to recover and that also isn’t a very profitable option, though in the long term it wold be the best option.

    Comment by BenjaminDOG | June 11, 2010 | Reply

  2. The money they are holding is NOT in the system….

    Not good for the economy….

    Comment by jamesb101 | June 11, 2010 | Reply


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