http://www.businessweek.com/stories/2009-08-18/money-money-everywhere-but-not-a-drop-to-spend

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Money Money Everywhere, But Not A Drop To Spend


With the majority of Q2 10Qs in, cash & equivalent for the S&P Industrials (S&P 500 less Financials, Utilities, and Transportation) is set to post a new high. The increase from the Q1,’09 period appears to be from reduced expenditures, cash flow and not from changes in membership (actual membership change slightly reduced cash). While cash has hovered in the $600 - $665 billion range since 2004, the current issues calculate out to the $700 billion mark. Additionally, the make of the asset, the amount held as cash and the amount held as short term investments, has changed, again. The change in 2008 to cash and away from investments (ie: commercial paper) has now reversed itself from the pre-liquidly scare period, and is another example of corporations trending back into the market (just a toe in the water).

The Information Technology sector continues to be the largest holder of cash, with $240 billion accounting for 34.2% of all cash. Health Care is next ($209B, 29.8%), although much of it is abroad and untaxed (see S&P 500 2008 Foreign Sales report) and remains a topic in Washington. On a cash percentage of market value (using the June balance and the current market value) Health Care is the highest at 18.3% and IT at 16.3%.

On an issue level, I found 44 issues with more cash than Current Liabilities and LTD combined (23 had no LTD), with 31 of them in the Information Technology sector (16 of which had no LTD). Fifty-five issues had at least 25% of their market value in cash (25 IT and 11 Health Care), with 16 having over $10 billion in cash.

On aggregate, companies have cash, sidelined investors have cash, and governments have cash (or at least printing presses), but the question remains, when will they spend it? The data from the last few weeks shows that given the right bargain investors and consumers will buy. However, whether that bargain price will permit sufficient profits for P/E expansion remains to be seen.


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