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Minyan Mailbag: Corporate Cash Points


...both sides of the balance sheet are bloated.



Question for you relating to the recent corporate cash points on the Buzz:

Can you clarify/reconcile the bullish "corporates-have-lots-of-cash-and-stronger-balance-sheets" argument with the bearish "corporate-pension-deficits-are-an-accident-waiting-to-happen" view?

To my mind, they both go to defining a macro view of U.S. corporate health, but I never hear these two issues addressed in the context of the same analysis. Would appreciate any light you can shed on this...


Minyan PCB


The debt is unbelievably overwhelming compared to those few companies with all the cash. Just look at a chart of total credit market debt/GDP, consumer debt/GDT, installment debt/GDP, mortgage debt/GDP, etc., forgetting for a moment the under-funded pensions. (Can you BELIEVE GM is still using a 10% assumption for their pension plan returns?)

Intel (INTC) announced a huge buyback lately and look what the stock has done. It can buy all it wants 3 points lower after the pop. I think it is a sham to issue stock options, buy stock for anti-dilution and then sell your own stock in the public market (insider sales are and have been for 2 years staggeringly large).

The real problem is this: Yes the consumer has a 'record net worth' of $42 trillion. Only problem is that both sides of the balance sheet are bloated. So the asset side needs to keep growing--God forbid it should fall--MARGIN CALL. The debt side doesn't go away. Hope that answers it.


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