U.S. Firms Hold Most Cash Since 1952

[Ed Barrow]

Source: Wall Street Journal

U.S. companies are holding more cash in the bank than at any point in the past 58 years, underscoring persistent worries about the sustainability of the economic recovery and the potential for a renewed financial crisis.

The Federal Reserve reported Thursday that non-financial 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 increase on 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 money on hiring and expansion amid doubts about the strength of the recovery. They're also anxious to keep cash on hand in case Europe's debt troubles lead to a new market freeze.

"Cash is still king," says 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."


Read more: http://online.wsj.com/article/SB10001424052748704312104575298652567988246.html?mod=WSJ_hpp_MIDDLETopStories

[DURHAM D]

1. Wow. That is interesting...

I can say that as a small business owner I am doing the same thing. I am holding off on equipment purchases, upgrades, etc. It really had not occurred to me that biggies are doing the same thing. For me it was just instinctive - didn't even think about it - I just started holding back.

[ParkieDem]

2. This is the problem with long recession

People and businesses don't save for a rainy day, they save for a rainy year. About the only thing this does is keep interest rates low, because money is cheap -- if people are hoarding cash, banks don't have to pay high interest rates; they also won't charge super-high interest either. But if no one's taking the risk of borrowing, either, that's not a net benefit.

[teknomanzer]

3. The irony is if they don't hire anyone there will be no recovery.

[madrchsod]

4. the uncertainty is caused by the lack of regulated trading policies

why would anyone invest-spend cash just to watch someone overseas dump the same product into this unregulated market.

i do`t look for this administration to do anything to restore the balance of trade and protection of our manufacturing base.

[msongs]

5. they are afraid of their own dishonest corporate speculator friends lolol nt

[Zynx]

6. This is pretty typical behavior after an economic shock.

When firms come close to the brink, they suddenly believe there is no such thing as too much cash. A lot of companies that thought they were in better shape than they were came very close to the end in the October of 2008 to March of 2009 period when it credit markets dried up and sales plummeted at annual rates of north of 20%. They will not soon forget that.

[Abq_Sarah]

7. Every business that can

is socking away cash. If you are depending on lines of credit, you can find yourself out in the cold if it is reduced or eliminated.