$600 billion. According to S.& P., that's the total amount of cash held by companies in its industrial index. That's roughly 3x the amount they held in 1998. And as today's NYT reports, analysts are starting to wonder what they are going to do with it:
Some analysts also speculate that these cash-rich companies may start sharing their wealth with investors through special dividends, providing welcome stimulus for the economy.
Corporate spending on equipment and other capital expenditures has declined as savings have soared, suggesting that companies could stimulate the economy now by going on a hiring and spending spree. But that raises worries among some analysts that companies will spend their cash unwisely, making them more vulnerable in the future....This cash-saving trend may have a downside, though. Because companies can spend from their own account without scrutiny from the investment bankers or commercial bankers who might otherwise lend them money, corporate executives can do some really dumb things with their cash, said Amy Dittmar, an assistant professor at the Ross School of Business at the University of Michigan, who has studied corporate spending habits in the United States and abroad.
"There is a subtle line between having enough money to do what you have to do versus having enough money to do anything you want to do," Professor Dittmar said.
Manny Weintraub, a former managing director and top-performing money manager for Neuberger Berman who formed his own investment advisory firm in late 2003, agreed. "Like your mother told you, the rule should be that if you don't have anything nice to buy, don't buy anything," he said.
Here's a thought: Rather than providing dividends to investors, why not pay their workers more? The workers were far more instrumental in producing the profits than were the investors. What does it say about us as a nation that the NYT could do a huge story on this subject and not once - not once! - even mention the idea of paying workers more for their labor? Why is it that it almost always seems that the only people who matter in this economy are the investors? Don't the workers - you know, the ones who do all the work - deserve to share in at least part of the prosperity they worked to create?
Bonuses are given every day to executives, and often they arrive in six, seven, or even eight figure increments. Why not use some of this money to give bonuses to the people who work for them?
Subscribe to this blog's feed
