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U.S. corporations are sitting on huge stockpiles of cash
Key Excerpts from Article on Website of Seattle Post-Intelligencer/Associated Press
Posted: November 11th, 2006
http://seattlepi.nwsource.com/business/271828_market27.html
Imagine the dilemma of having so much cash in your bank account that you didn't know what to do with it. This pipe dream for the average American is now reality for the country's biggest corporations. The industrial companies that make up the Standard & Poor's 500 index...have a staggering $643 billion in cash and equivalents. "We're in a time that is out of whack with all historical numbers," said Howard Silverblatt, equity market analyst at Standard & Poor's. "People are demanding why corporations need so much cash, what are they going to do with it?" Companies began propping up their reserves through 16 straight quarters of double-digit profit growth. Leading the pack with the most cash is Exxon Mobil Corp., which has about $36.55 billion on its balance sheet. That amount is nearly equal to its 2005 profit of $36.13 billion, the highest ever for a U.S. company. Some results of the cash riches: An unprecedented $500 billion of stock buybacks. Last year, ExxonMobil spent $18.2 billion buying its shares. One of the biggest avenues in which companies have spent this excess money has been through mergers and acquisitions. Some 75.4 percent of all deals under $1 billion so far this year were done purely with cash.
Note: A Google search reveals that though this Associated Press article was widely picked up by medium-sized newspapers in the U.S., none of the top 10 papers picked it up. The Seattle newspaper above also removed the word "huge" from the title after it was published. $36 billion means that more than $100 for every man, woman, and child in the U.S. went into ExxonMobil profits last year, and another $100 for each person went into their cash reserves. If ExxonMobil and other oil companies have so much extra cash, why are gas prices so high? It's also quite interesting that the advertisements of these mega-corporations continually invite us to go into debt buying their products, while their profits and cash reserves grow ever higher.
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