JohnBlog

Lend me your mind's ear — communications and portals

Cash, corrections, the end and feeling fine

with 2 comments

 It’s all about the cash (and being able to sleep at night) when it comes to the stock market correction: Finding optimism in the insomnia of the moment

Didn’t the Twist go out a long time ago?

Somebody should tell the U.S. government that half-measures hardly ever satisfy anyone. Doing the Twist may be the middle ground, but now is the time for leadership and focusing on one’s convictions.

Is the glass still half-full?

Cash on Corporate Balance Sheets

In “Too much cash on corporate balance sheets: So, does this mean we can expect higher payouts?”, I wrote about the Everest of cash sitting on balance sheets. Today, Thursday, September 22, as I write, markets are moving down aggressively suggesting the Fed’s doing the Twist wasn’t what the markets wanted. There’s still one overwhelming fact that we shouldn’t overlook:

• Corporations are sitting on mountains of cash

What are they going to do?

Since they’re not in the business of becoming money market funds, (though some companies are starting to look like balanced funds by the mounds of cash they’re hording [more on this in a moment], these corporations need to do something with all this cash. After all, just like investors sitting on GICs, corporations sitting on cash aren’t going to get much of a return on it.

Now, let’s Think Apple, for example.

Seems the apple’s full of cash. But Apple’s not a balanced fund. It’s a company. Not everyone’s enamoured of Apple’s strategy.

While a lot of this cash hording relates directly to our current economic times, it still raises the ire of many people. High unemployment, especially amongst students, doesn’t make people rejoice when they hear you’re sitting on $76 billion.

With that amount of cash on the balance sheet, it seems management at Apple’s got the Mayan calendar out and are waiting for the end of the world. If that’s their forward-looking scenario, an iPhone or iPad won’t be much use …

“Hi … Mom, dad, I just thought I’d say bye … The end is coming …”

Perhaps investors in Apple have more confidence in Apple’s future than Apple management does?

But let’s revisit what’s most important to remember:

• Corporations have to do something with all this cash
• And some are

Microsoft recently raised its dividend: One of many companies to do this. It’s about sharing the wealth.

The fact that Apple hasn’t issued a dividend seems like a strategic mistake. It will be interesting to see how long investors will tolerate so much cash on Apple’s books.

Since opportunity appears in times of crisis, it’d be foolish to forget that all this cash has to go somewhere eventually.

Where?

  • Dividends
  • Mergers, acquisitions
  • Buying back shares
  • Towards hiring the most important resource, people, as the economy improves

Part Two is here.

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2 Responses

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  1. Love how you approach with humour…

    Looking forward to your next.

    Harry Bent

    November 4, 2011 at 5:00 pm

  2. Thanks, Harry! Hope you enjoyed my latest.

    johnrondina

    November 17, 2011 at 7:15 pm


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