The Great Corporate Cash Shell Game - InvestingChannel

The Great Corporate Cash Shell Game



… the amount of bonds issued by these companies has surged, rising 66 percent from mid-2009 to $5.24 trillion of bonds outstanding as of the end of June, Federal Reserve data show. .. That isn’t necessarily a recipe for default because a large chunk of this is an exercise in financial engineering aimed at avoiding onerous taxes [by keeping earned profits offshore]. But it has consequences. First, it limits the benefit to the economy if and when those tax policies are changed because much of the money has already been released through the bond market.

And second, to the extent that companies have cash, they’re not using enough of it for exciting projects. There hasn’t been a tremendous wave of innovation or salary increases. Instead, companies have repurchased billions of dollars of their own shares, which is great for the stock market but doesn’t do a whole lot to bolster economic growth.”