Friday, October 22, 2010

Cash On The Sidelines

One of the more popular bullish arguments for the future direction of the stock market is all the cash on the sidelines that companies are currently holding. 

The chart below shows the top 50 companies in the US by size.  The green line shows their cash holdings, and the pink lines overlapping them show their debt. 



The total cash holdings currently stand at a record $3.71 trillion.  This is the number you hear on the news and from mutual fund sales people.

The total debt holdings currently stand at a record $4.45 trillion.  This is the number you do not hear about.  This is the other side of the ledger.

The total cash holdings are at negative $749.6 billion.

The 5 banks at the top are even more interesting in that they are hoarding cash for future write downs on their balance sheets.  They have hidden losses that are currently rotting in a dark location.

Two of the companies, Apple and Google, have a tremdendous amount of cash and essentially no debt.  They have the ability to be large players in the acquisition department over the next few years.

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