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Can People or Corporations Have Too Much Cash?
Townhall.com ^ | February 15, 2013 | Mike Shedlock

Posted on 02/15/2013 1:49:32 PM PST by Kaslin

Is it possible to have too much cash for your own good?

I believe the average 7th grader would easily recognize the inherent absurdity of such a question. However, the average economic writer does not understand what the average 7th grader does.

For example, please consider Apple isn't the only company with too much cash on CNN Money by author Paul La Monica.

Issuing preferred shares that pay a big dividend may not be the best use of Apple's more than $137 billion of cash and liquid investments. But hedge fund manager and Apple shareholder David Einhorn, who is pushing the maker of iEverything to reward investors with a new class of high-yielding stock, has a point.

Apple should be doing something more productive with its more than $137 billion in cash. Did I mention that Apple (AAPL) has more than $137 billion in cash?

And it's not alone. Several leaders in the tech and pharmaceutical industries are hoarding cash. ....
Mercy Me

Mercy! Corporations have too much cash! And they are hoarding it!

My Goodness. It's no wonder their stocks are doing poorly. Why everyone knows making money is bad business and spending money isn't.

Yes readers, this is the way economic writers on mainstream media think.

Although I am not opposed to higher dividend yields, I am also not opposed to the concept of waiting for better opportunities.

Recall that Microsoft bid $44.6 billion for Yahoo in 2008. Microsoft's offer was over $30 a share. The current price, after a huge rally is $21.

But No! Heaven forbid corporations "hoard cash". La Monica wants corporations to do something with their cash now.

The fact is the S&P just had a rally over 100%. Stocks are likely to correct (and hard). Buying companies at lofty prices is a fool's game, and I commend Apple for not doing it.


TOPICS: Business/Economy; Culture/Society; Editorial
KEYWORDS:

1 posted on 02/15/2013 1:49:36 PM PST by Kaslin
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To: Kaslin

Nobody’s business, least of all not government’s business.


2 posted on 02/15/2013 1:51:50 PM PST by PapaNew
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To: Kaslin

There are a number of ways to look at excess within a company. I worked for a company fifteen years ago that accumulated a vast amount of cash, for the purposes of eventually paying off the CEO who created the company (there was a $200 M stock-pay-off when he eventually choose to leave), and they had this desire to buy a minor competitor after they were supposed to win a government contract.

Some companies sit on cash for a long time....with desires to buy back their own stock. Some companies want to continually hint of a massive stock dividend, but keeping putting it off.


3 posted on 02/15/2013 1:54:16 PM PST by pepsionice
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To: Kaslin

Cash is a blessing.


4 posted on 02/15/2013 2:07:25 PM PST by Berlin_Freeper
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To: Kaslin

Given high inflation, yep!


5 posted on 02/15/2013 2:12:13 PM PST by Paladin2
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To: Kaslin

In the corporate world there is definitely the concept of too much cash. You’re supposed to be using the cash to grow the business, if you’re sitting on a horde investors want to know why it isn’t going anywhere.


6 posted on 02/15/2013 2:14:27 PM PST by discostu (Not just another moon faced assassin of joy.)
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To: Paladin2; a fool in paradise; Slings and Arrows
If it's in the trillions, then yes, it can be too much!


7 posted on 02/15/2013 2:15:25 PM PST by Revolting cat! (Bad things are wrong! Ice cream is delicious!)
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To: Kaslin

Government-created inflation will put a stop to these selfish “hoarders”


8 posted on 02/15/2013 2:15:25 PM PST by varyouga
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To: Kaslin

With todays government and climate, there is no good place to invest that kind of cash


9 posted on 02/15/2013 2:19:01 PM PST by GeronL (http://asspos.blogspot.com)
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To: Kaslin
Does it say "Michael Moore contributed to this story" at the end of La Monica's column?
10 posted on 02/15/2013 2:20:24 PM PST by newgeezer (It is [the people's] right and duty to be at all times armed. --Thomas Jefferson, 1824)
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To: Kaslin
Hmmm ... interesting question.

Is there a difference between too much and more than you need?

To me, money is the vehicle to accomplish tasks.

If my earthly needs are taken care of ... and my desires are met, the only thing left is (to me) humanitarian aid.

Don't know how I'd deal with that.

11 posted on 02/15/2013 2:27:24 PM PST by knarf (I say things that are true ... I have no proof ... but they're true)
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To: Kaslin
Economically, yes, politically, no.

I'm not going to go into Austrian economics here, but to elaborate on something that is not common knowledge, even among Christians.

The Torah's lending system without usury and with debt forgiveness together with the Jubilee system were the anti-trust laws of their day. The monetary goal of that system was to increase monetary velocity and maximize the marginal value of capital, putting every penny into the hands of those most likely to produce as much wealth from every penny as possible, thus maximizing total aggregate wealth.

By contrast, stored cash produces nothing. Beyond the maximum of that marginal value curve, the more one has, the less valuable each monetary unit becomes.

Together, these Judaic laws were designed to have every person producing at the maximum of their ability, which not only maximizes total wealth, it defrays the otherwise socialized risk of rebellion. Historically, the wealthy do not do well in popular rebellions. The Torah's system thus reduced the risk of political catastrophe, teaching the wealthy that what they have is not due to their own work but is a blessing from the Lord. IMHO, that "sealing" if you will, that protection from catastrophe, is why it the Jubilee was to commence on Yom Kippur.

12 posted on 02/15/2013 2:30:31 PM PST by Carry_Okie (The environment is too complex and too important to be "protected" by government.)
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To: discostu

When you do that and stil have a lot of $ left ,,, you must be good at what you do,,or ?


13 posted on 02/15/2013 2:30:46 PM PST by ▀udda▀udd (>> F U B O << "What the hell kind of country is this if I can only hate a man if he's white?")
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To: Kaslin
Mercy! Corporations have too much cash! And they are hoarding it!

Stupid article. Corporations aren't individuals. The managers of a corporation have, legally, a fiduciary duty to the stockholders, to maximize the stockholders' return on their investment. Hoarding cash when that cash could be either invested profitably in growing the business, or returned to the shareholders as dividends, may very well (depending on the facts, of course) be a violation of that legal duty. Comparing this to an individual's decision to save his or her money instead of spending it is a stupid analogy.

14 posted on 02/15/2013 2:33:55 PM PST by Lurking Libertarian (Non sub homine, sed sub Deo et lege)
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To: Kaslin

The companies that hoard cash may be ensuring that they can weather a downturn in sales and still pay employees and benefits. They may be hoarding money so that when their competitors go under due to the inability to get their debt limits extended, they can go on a buying spree.
Companies “hoarding” cash have big savings accounts and emergency funds - and are more likely to stay in business. IE, the smart ones.


15 posted on 02/15/2013 2:55:40 PM PST by tbw2
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To: Kaslin

How about creating a atmosphere that encourages investment and risk taking, and doesn’t penalize success? How about one that doesn’t think first about how much tax to take from profits, but one that tries to celebrates and encourages profits???


16 posted on 02/15/2013 3:02:31 PM PST by machman
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To: Kaslin
The person or company that EARNED the cash knows much better how to use it properly than all the grabby little Gollums in Washington put together.

17 posted on 02/15/2013 3:26:59 PM PST by BitWielder1 (Corporate Profits are better than Government Waste)
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To: tbw2
The companies that hoard cash may be ensuring that they can weather OBAMA CARE. They may be hoarding money so that when their competitors go under due to the inability to get their debt limits extended, they can go on a buying spree. Companies “hoarding” cash have big savings accounts and emergency funds - and are more likely to stay in business. IE, the smart ones.


Edited for historical context but otherwise spot on.
18 posted on 02/15/2013 3:47:32 PM PST by Idaho_Cowboy (Ride for the Brand. Joshua 24:15)
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To: Carry_Okie

Thank you.


19 posted on 02/15/2013 4:01:33 PM PST by freedomfiter2 (Brutal acts of commission and yawning acts of omission both strengthen the hand of the devil.)
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To: PapaNew
Darn! If Microsoft had only been allowed to keep a million of their profits. /sarc

Seriously, where do you think everything personal computer would have been without Microsoft and its drive for the billions. The millions and millions of jobs produced, cheap technology, advancement in technology, the huge consumer market for gadgets, etc. etc.

20 posted on 02/15/2013 4:23:16 PM PST by dhs12345
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To: freedomfiter2
You are quite welcome. I just happen to be untangling the structural relationships in those very laws in Lev. 25 & the corresponding blessings and curses of Lev. 26 as compared to known principles of ecology, politics, and economics.

It's been quite the challenge.

21 posted on 02/15/2013 4:56:20 PM PST by Carry_Okie (The environment is too complex and too important to be "protected" by government.)
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To: Kaslin
If my company was sitting on a lot of cash, I'd question whether the company was being managed well. There's nothing wrong with cash per se, but when I own a company I'm looking for it to do what it does well. Anyone can hold a pile of cash indefinitely. But if I own Ford, I want to know that the company is manufacturing new cars and developing new models of cars. For Microsoft, I want to see the company develop new software. If I own McDonald's stock, I sure hope they're selling lots of hamburgers and Happy Meals.

Maybe I'm missing the point here, but isn't a cash position even more ridiculous when interest rates are at record lows and inflation is a serious threat?

22 posted on 02/15/2013 5:57:56 PM PST by Alberta's Child ("I am the master of my fate ... I am the captain of my soul.")
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To: ├čudda├čudd

Or you’ve run out of ideas on how to grow and the younger hungrier companies are going to eat your lunch.


23 posted on 02/16/2013 5:58:49 AM PST by discostu (Not just another moon faced assassin of joy.)
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To: Kaslin

Depends on what they mean by “cash”. Bills and coins? CD’s? Munis or T-bonds? Ledger entries?

Each has it’s own opportunity cost, risk, and valuation.


24 posted on 02/16/2013 6:02:26 AM PST by P.O.E. (Pray for America)
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To: P.O.E.

it’s s/b its.

I hate when I do that.


25 posted on 02/16/2013 6:03:51 AM PST by P.O.E. (Pray for America)
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