Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

U.S. Companies Spending Record-High Cash Piles On Everything But Jobs

Companies / Corporate News Mar 29, 2011 - 05:20 AM GMT

By: Money_Morning

Companies

Best Financial Markets Analysis ArticleKerri Shannon writes: U.S. companies have started to spend their record high piles of cash, but most won't be using it to boost hiring.

Since the credit crisis, U.S. companies have collected about $940 billion in cash. Per-share profit surged 36% in 2010, the biggest jump since 1988, and companies cut capital expenditures 26% in 2009 to compensate for the ailing economy.


Some of the biggest cash hoarders as of the end of 2010 include Cisco Systems Inc. (Nasdaq: CSCO) with $40.2 billion cash, Microsoft Corp. (Nasdaq: MSFT) with nearly $40 billion and Google Inc. (Nasdaq: GOOG) with nearly $35 billion.

Analysts now expect companies to start spending as an improved economic outlook bolsters executives' confidence. Many economists say the best way to lower the unemployment rate is for these companies to spend the cash on new hires, but most prefer to spend in other ways, creating a wide gap between capital spending and employment. Corporate investment will climb 11% this year while employment only rises 1.7%, according to a Bank of America Merrill Lynch report.

"Machines have the upper hand," Neil Dutta, the economist who wrote the report, told Bloomberg News. "You see this huge pickup in capital spending, but there isn't a meaningful increase in employment; it's being grudgingly pulled along. The consumer is not going to perform the way people expect."

The report states inventory rebuilding, low borrowing costs and tax breaks for equipment buying are encouraging companies to spend, not hire. The lack of hiring will keep consumer spending low, dulling a U.S. economic recovery.

Cummins Inc. (NYSE: CMI) plans to increase capital spending by 79% this year, up to $650 million, but will only increase its U.S. workforce by 15%. Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) also plans to up spending by 79% this year to restock after years of cutbacks, but will only increase U.S. hiring by 12%.

"In terms of priority, it's capex, capex, capex, capex," said Freeport Chief Executive Officer Richard Adkerson.

Many companies also are turning more to temporary staffing for flexibility in employment. And an uncertain outlook for healthcare benefit requirements has led some companies to avoid large staff increases.

Investors Benefit from Company Cash Piles
Rather than expanding their operations through hiring many companies are instead looking for a more investor-friendly way to dispel their capital.

"Shareholders have raised the bar," Alan Gayle, senior investment strategist at RidgeWorth Capital Management, told Bloomberg. "Companies are going to have to find ways to generate more return. The idea of sitting on idle cash in a zero interest rate environment is increasingly viewed as a nonviable option."

Many executives are using companies' record savings for takeovers, stock buybacks and dividend increases.

Takeovers reached more than $257 billion in 2011's first quarter. Global merger and acquisition activity in 2011 is expected to total more than $3 trillion, compared to $2.8 trillion in 2010.

AT&T Inc. (NYSE: T) announced last week a $39 billion offer for Deutsche Telekom AG's (PINK ADR: DTEGY) T-Mobile, and eBay Inc. (NYSE: EBAY) said yesterday (Monday) it would buy Internet marketing services company GSI Commerce for $2.4 billion.

U.S. companies also are putting the cash back into investors' hands, approving $149.8 billion in share repurchases so far this year. Companies on the Standard & Poor's 500 Index conducted 38% more stock buybacks in 2011's first quarter than the first quarter of 2010. And dividends could hit as high as $31.07 a share in 2013, according to data compiled by Birinyi Associates Inc. and Bloomberg.

"Having this much cash on the balance sheet earning essentially nothing is hurting companies' numbers, it's hurting their return on equity, it's hurting their ability to provide income in the long run for investors," said David Kelley from JPMorgan Chase & Co. (NYSE: JPM). "If they can't find something better to do with it than leave it as cash, the best thing is to return it to shareholders."

Companies that have cut their outstanding shares are performing better than the market. The PowerShare BuyBack Achievers Fund (NYSE: PKW), tracking U.S. companies that have repurchased at least 5% of their stock in the past year, is up 6.3% this year compared to the S&P 500's 4.5% gain.

Cisco Systems announced it would pay a dividend for the first time. ConocoPhillips (NYSE: COP) boosted its dividend in February and added $10 billion to its stock buyback plan. The company plans to increase its dividend by 10% each year.

Investors can expect more profit opportunities as U.S. companies continue their spending sprees through 2011.

"The capital-spending boom will continue this year and into next year," said Robert Baur, chief global economist at Principal Global Investors. "Companies underinvested to such an extent and for so long that there's a great deal of catch-up to be done."

Source : http://moneymorning.com/2011/03/29/...

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules