{"id":2444,"date":"2010-12-10T08:45:40","date_gmt":"2010-12-10T15:45:40","guid":{"rendered":"http:\/\/www.jasonapollovoss.local\/?p=2444"},"modified":"2018-08-17T08:48:08","modified_gmt":"2018-08-17T12:48:08","slug":"its-chickens-that-sit-on-eggs","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2010\/12\/10\/its-chickens-that-sit-on-eggs\/","title":{"rendered":"It’s chickens that sit on eggs"},"content":{"rendered":"

This morning the Wall Street Journal is reporting an astounding statistic from the Federal Reserve:<\/span><\/p>\n

U.S. companies are sitting on $1.93 trillion in cash!\u00a0 That works out to 7.4% of the total assets of U.S. corporations.\u00a0 If U.S. companies are unwilling to spend this cash in an environment when gross domestic product has not only erased the losses of the recession, but also grown beyond pre-recession levels, then this begs many questions:<\/span><\/p>\n

1.\u00a0 What is it exactly that they are waiting for?<\/span><\/p>\n

2.\u00a0 Cash held by businesses beyond daily working capital needs is a no-no.\u00a0 That cash should be spent on projects that earn a higher return than cash.\u00a0 If businesses don’t have projects that earn more than the paltry interest rates than are available at a bank, then they ought to consider…<\/span><\/p>\n

3.\u00a0 Why not pay out the cash to shareholders?\u00a0 Technically shareholders own the business and therefore the cash is theirs.\u00a0 Equity investors in a business don’t want to earn returns that are in line with bank interest rates.\u00a0 After all, they take on the risk of investing in a business as an owner specifically because they want to earn more money than is available in the bank.\u00a0 Shareholders can sell their interest in a business at any time and sink those funds into a bank account.\u00a0 Businesses ought to be putting that money to work for shareholders, or <gasp!> pay the damn cash out as a dividend.<\/span><\/p>\n

4.\u00a0 Why not hire new employees?\u00a0 New employees don’t just take the pressure off of exhausted, overworked workers currently employed by a business, they also bring new ideas and new ways of doing things.\u00a0 I have a hard time believing that a new employee can’t contribute a return to a business in excess of the rate of return available on a bank savings accounts.<\/span><\/p>\n

Figure that companies would like to keep approximately 3% of their assets in cash to cover working capital needs.\u00a0 That 3% represents 40.5% of the $1.93 trillion in cash, or $782.4 billion, leaving businesses $1.148 trillion of, what I will call, excess cash.\u00a0 Your median income American earns $44,000 per year.\u00a0 So that $1.148 trillion in cash represents…are you ready for it?…26 million jobs!!!!!<\/span><\/p>\n

The Bureau of Labor statistics reported that there were 15.1 million unemployed citizens in November 2010.\u00a0 So if U.S. businesses hired all of these folks they would still have a huge pile of “excess” funds to cover any perceived disasters.<\/span><\/p>\n

*****<\/span><\/p>\n

The game of chicken between U.S. consumers and businesses continues.\u00a0 But guess who has the power?\u00a0 Guess who has the cash?\u00a0 Guess who is really the flock of chickens sitting on their eggs?<\/span><\/p>\n

Jason<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

This morning the Wall Street Journal is reporting an astounding statistic from the Federal Reserve: U.S. companies are sitting on $1.93 trillion in cash!\u00a0 That works out to 7.4% of the total assets of U.S. corporations.\u00a0 If U.S. companies are unwilling to spend this cash in an environment when gross domestic product has not only […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-2444","post","type-post","status-publish","format-standard","hentry","category-the-blog"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/2444","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=2444"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/2444\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=2444"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=2444"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=2444"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}