-- Posted Friday, 22 July 2011 | | Disqus

Rick’s Picks

Friday, July 22, 2011

“Phenomenally accurate forecasts”

Where would you invest $76 billion if you had it?  That’s the size of Apple’s cash hoard at the moment, and it would appear that they have no better idea of what to do with all that money than you or I.  Apple isn’t the only company with this “problem,” if you could call having a mountain of spare cash in the bank a problem. According to Standard & Poor’s data reported by the Wall Street Journal the other day, the 500 largest U.S. companies alone currently hold cash or cash equivalents that totaled $963 billion at the end of the first quarter, up from $837 billion a year ago.  Tech companies in particular are glutted with cash they apparently cannot use. Microsoft’s got $60.9 billion sitting around; Google, $39.1 billion; and Cisco, $43.4 billion. What’s a company to do? Traditionally, high-tech companies have shunned paying dividends because shareholders expect the companies to use the cash more aggressively for growth. But the likes of Apple and Google have been growing plenty fast without dipping into their so-called war chests. Come to think of it, maybe they should start a war with China, Europe or Brazil.  Hasn’t war always been good for business? As for the excuse that they need to hold cash in case a great acquisition opportunity comes along, Apple, Google and numerous other NASDAQ world-beaters could borrow all they want for next to nothing, at any time.

And so they have been. We reported on the surge in corporate borrowing a while back, mystified as to why a corporate sector with nearly $2 trillion to spare was nevertheless borrowing hand-over-fist. The ostensible reason is that the money can be borrowed for nearly nothing – and so, why not?  Indeed.  Even so, we can’t help thinking that a wave of borrowing on top of a cash surplus mounting into the trillions can only end badly. Very badly, actually. But exactly how? We must confess that we lack the imagination to see how a literal mountain of dollars would somehow wind up doing the companies that hold them little or no good.  It’s not as though they are borrowing against real estate equity, as homeowners did until the market crashed in 2008. So how do they lose? Hyperinflation is the obvious answer, sincem if one were to occur, any saver sitting on a pile of cash would be a dead duck.  

Fun Guys: Branson & Cuban

Maybe there’s an opportunity here for Carl Icahn, the sleazeball corporate raider. Instead of piously pretending he’s looking out for shareholders’ interests when he puts a company “in play,” he could swoop in on all that corporate cash and do some real good with it.  Let him finance the greening of planet earth: wind farms, solar panels stretching for miles across the flyover states, tidal generators, etcetera.  Of course, we’d rather all that money were in the hands of fun guys like Richard Branson or Mark Cuban. But sitting in Microsoft’s bank account?  What a waste.

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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indication of future results, so let the buyer beware. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts.  Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2011, Rick Ackerman All Rights Reserved. www.rickackerman.com 

-- Posted Friday, 22 July 2011 | Digg This Article | Source: GoldSeek.com

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