Monday, July 18, 2011

Cash on the Sidelines

We've mentioned before that one thing holding the economy back from full recovery is the fact that many major American corporations are sitting on a lot of cash these days. In total, the S&P 500 has around $800 billion in cash sitting on the sidelines. Cash and cash equivalents make up about 7.4 percent of the S&P 500's total market capitalization.

Maybe the greatest example of this trend is Apple. At the end of its last reporting quarter, Apple had around $66 billion in cash or securities on its hands. It's been adding to that pile furiously lately: the total was under $20 billion as recently as 2008. Apple's cash hoard is worth more than the combined market caps of its rivals Nokia, Research in Motion, and Motorola Mobility. According to one estimate, Apple could fund all its operations till 2018 even if it had no revenue whatsoever.

This is, in a sense, good news for our economy. If these corporations ever decide they have a good reason to spend all that money, we'll see a tremendous boost to the economy.

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