A Headline Worth 1,000 Words

moneybagsU.S. Firms Build Up Record Cash Piles

Under that headline, The Wall Street Journal reports this:

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.

And, of course, this:

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.

“Stockholders don’t want them to keep sitting on cash at a zero return,” said Paul Kasriel, an economist at Northern Trust. “They’re going to use it,” either to increase hiring and investment or to make payouts to shareholders in the form of dividends or share buybacks, he said.

Wanna bet which one it’ll be? Didn’t think so:

Earlier this week, retailer Target Corp. raised its quarterly dividend to 25 cents a share from 17 cents, saying that the company’s cash holdings were “well above the amount needed for optimal reinvestment in our core business.”

How fortunate for everybody that we love free markets and don’t begrudge people getting rich! And that we have a president who knows how things work, and that “Ultimately, true economic recovery is only going to come from the private sector.”