You’ve Got to Know When to Hold ‘Em

American businesses continue to sit on over $2 trillion in cash reserves this year, reportedly too nervous to infuse the economy with much needed investment.  This is understandable considering the uncertainty that lingers about the economy, notably due to the policies of the Obama Administration, including taxes (see: What's Really Inside Obama's Framework for Business Tax Reform?) and regulations (see: Obama’s Regulatory Record).

Worse yet, we are in an election year with control of the White House and the U.S. Senate up for grabs.  So, business-as-usual in Washington means that nothing will get accomplished at a time when bold reforms of our government are sorely needed, especially for the sake of business.

In a recent CFO Magazine Deep Dive Survey, business leaders made it clear that they continue to sit on the sidelines and have little incentive to invest their cash.

  • 35% of business leaders say their companies have too much cash and need to put some to work
  • 55% of business leaders say they are unlikely or unsure that their companies will begin to deploy their cash reserves in the next 12 months.
  • Companies show cash as a percent of total company assets include:
    • NASDAQ-traded  companies = 28% (up from 23% in 2010)
    • NYSE-traded  companies = 16% (up from 15% in 2010)
    • Privately-held companies = 14% (equal to 2010)

Businesses need straight talk to be able to determine when and how to invest their cash.  Unfortunately, we are not seeing it from this White House.  Furthermore, in the event of a second Obama term, we are likely to see a very anemic economic recovery based on this dynamic and the continued theory that greater government spending and control hold the answer to our woes, yet they are actually the very source of them.

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