Good fact based WSJ article on who pays taxes in America

[briansd1]

Business is about leverage, jstoesz. It’s about making money using other people’s money. That’s what capitalism is all about, especially when you talk big business.

My point remains that government spending and borrowing have not dried up credit for the private sector, far from it.

Ideological orthodoxy is not the same as reality on the ground.

[sdduuuude]

[quote=briansd1]My point remains that government spending and borrowing have not dried up credit for the private sector, far from it.[/quote]

No, but it has certainly dried up demand.

[briansd1]

[quote=sdduuuude][quote=briansd1]My point remains that government spending and borrowing have not dried up credit for the private sector, far from it.[/quote]

No, but it has certainly dried up demand.[/quote]

That makes no sense.

[Anonymous]

[quote=jstoesz]Saying businesses is sitting on tons of cash is like saying, homeowners who HELOC’ed their paid off residence are flush with cash. Yes, they have cash, but net, they have nothing…[/quote]

No, it isn’t the same. Not even close.

Apple computer has more than $27 billion in cash.

Exxon has $17 billion.

We could go on all day with this list – many large companies have similar positions.

No go find us a single HELOC borrower who still has any cash from the original loan.

Brian is right, businesses today have plenty of cash but they are choosing not to invest it.

It’s a so easy to spot a “Tea Party” dimwit these days: They don’t check even the most basic facts. Much easier to spout off whatever mythology they’ve been told to obey on Fox news.

BTW: That “chart” comparing debt vs. cash is a joke of a distortion. Here’s a little homework for ya: calculate the cash/debt ratios for each.

[jstoesz]

[quote=harvey][quote=jstoesz]Saying businesses is sitting on tons of cash is like saying, homeowners who HELOC’ed their paid off residence are flush with cash. Yes, they have cash, but net, they have nothing…[/quote]

No, it isn’t the same. Not even close.

Apple computer has more than $27 billion in cash.

Exxon has $17 billion.

We could go on all day with this list – many large companies have similar positions.

No go find us a single HELOC borrower who still has any cash from the original loan.

Brian is right, businesses today have plenty of cash but they are choosing not to invest it.

It’s a so easy to spot a “Tea Party” dimwit these days: They don’t check even the most basic facts. Much easier to spout off whatever mythology they’ve been told to obey on Fox news.

BTW: That “chart” comparing debt vs. cash is a joke of a distortion. Here’s a little homework for ya: calculate the cash/debt ratios for each.[/quote]

Your post is a classic example of cherry picking anecdotal cases to disprove something that applies to the aggregate. I don’t give a flying crap what amount of cash Apple has. They are such a small portion of the overall gdp, it means nothing. I could come up with just as many companies that are being swallowed in debt. Car manufacturers come to mind. If you want to believe everyone who disagrees with you is some brainless zombie, have at it, but I think you are being intellectually dishonest.

The 2 trillion in excess cash meme, seems illusionary, considering companies have the taken on more debt to achieve it. The home owner analogy was just that an analogy.

FYI, I don’t have a cable connection or even rabbit ears, so Fox news is a little hard to come by (2.5mb dsl line is all I can get).

That chart shows the debt to cash ratio to be comparable? So what, is that surprising? If you increase your debt, doesn’t your cash on hand go up by a comparable amount. It sounds quite logical really. What is more interesting than the cash to debt ratio, is the fact that while debt went up by 1.8 trillion, the cash only went up by .5 trillion…

How does that show US companies in good shape to go spend like the like crazy?

[dumbrenter]

[quote=harvey][quote=jstoesz]Saying businesses is sitting on tons of cash is like saying, homeowners who HELOC’ed their paid off residence are flush with cash. Yes, they have cash, but net, they have nothing…[/quote]

No, it isn’t the same. Not even close.

Apple computer has more than $27 billion in cash.

Exxon has $17 billion.

We could go on all day with this list – many large companies have similar positions.

No go find us a single HELOC borrower who still has any cash from the original loan.

Brian is right, businesses today have plenty of cash but they are choosing not to invest it.

It’s a so easy to spot a “Tea Party” dimwit these days: They don’t check even the most basic facts. Much easier to spout off whatever mythology they’ve been told to obey on Fox news.

BTW: That “chart” comparing debt vs. cash is a joke of a distortion. Here’s a little homework for ya: calculate the cash/debt ratios for each.[/quote]

Harvey, giving examples of a couple of companies to dispute Jstoesz’s overall data does not make sense. If you dispute Jstoesz’s data or source of data, I’m interested.
Apple could be sitting on a trillion dollars, but at the same time, many other infra/auto/transportation companies are up to their necks in debts. And they employ more people than Aapl/goog/msft kind of companies.

Actually, I think that HELOC example is a good analogy: companies took on debt to build assets but those assets are not worth as much as the companies spent on them. Maybe those companies should have bought new cars and taken vacations to Hawaii instead, like the homeowners!!

[Anonymous]

http://finance.yahoo.com/news/corporate-cash-spikes-time-high-185700472.html

Corporate Cash Spikes to All-Time High, 11% of U.S. GDP

This is very old news, corporations have been accumulating cash for years, some data suggests decades:

http://www.ritholtz.com/blog/2010/07/corporate-cash-has-been-piling-up-since-1982/

A handful of big companies have debt issues, like GM, but these don’t influence the big picture much. (BTW: Much of GM’s “debt” is unfunded pension obligations and not actual bonds.)

The point is that there is plenty of capital available. Companies have cash, they can easily borrow, the market is strong and they can issue more equity.

But they aren’t doing it because there is no demand.

It’s not taxes and it’s not regulation that are preventing companies from investing. Those are bullshit explanations by a political party that is trying to differentiate themselves and discredit the other team. There is no CEO in America that is choosing not to expand because of taxes or regulation – they are holding back because they are concerned that their markets cannot grow.

(You will hear of CEOs that complain about taxes and regulation in order to be consistent with the party-line, and because it still helps their bottom line to change these policies, but taxes and/or regulation are NOT the driving issue in the economy right now – they are just the political meme from one side of the aisle.)

The capital is there, plenty of it. Nobody is using the capital to expand because not enough consumers are able to buy what corporations are building. There is overwhelming data to support this argument.

[scaredyclassic]

i have had strong demand for leather gloves lately. Ive bought 3 pair recently. nice work gloves.

I wear them all the time, just around …
I think they are going to help preserve my hands from looking like old people’s hands.

i am trying to alert the market to keep up glove production.

maybe more of us should start wearing gloves more.

good int he car when the sterring wheels hot. think on how much sun your hands get.

try it.

[mike92104]

[quote=harvey]http://finance.yahoo.com/news/corporate-cash-spikes-time-high-185700472.html

Corporate Cash Spikes to All-Time High, 11% of U.S. GDP

This is very old news, corporations have been accumulating cash for years, some data suggests decades:

http://www.ritholtz.com/blog/2010/07/corporate-cash-has-been-piling-up-since-1982/

A handful of big companies have debt issues, like GM, but these don’t influence the big picture much. (BTW: Much of GM’s “debt” is unfunded pension obligations and not actual bonds.)

The point is that there is plenty of capital available. Companies have cash, they can easily borrow, the market is strong and they can issue more equity.

But they aren’t doing it because there is no demand.

It’s not taxes and it’s not regulation that are preventing companies from investing. Those are bullshit explanations by a political party that is trying to differentiate themselves and discredit the other team. There is no CEO in America that is choosing not to expand because of taxes or regulation – they are holding back because they are concerned that their markets cannot grow.

(You will hear of CEOs that complain about taxes and regulation in order to be consistent with the party-line, and because it still helps their bottom line to change these policies, but taxes and/or regulation are NOT the driving issue in the economy right now – they are just the political meme from one side of the aisle.)

The capital is there, plenty of it. Nobody is using the capital to expand because not enough consumers are able to buy what corporations are building. There is overwhelming data to support this argument.[/quote]

Can you tie this argument into a reason that taking that excess cash from them in the form of taxation would increase demand?

[jstoesz]

[quote=harvey]http://finance.yahoo.com/news/corporate-cash-spikes-time-high-185700472.html

Corporate Cash Spikes to All-Time High, 11% of U.S. GDP

This is very old news, corporations have been accumulating cash for years, some data suggests decades:

http://www.ritholtz.com/blog/2010/07/corporate-cash-has-been-piling-up-since-1982/

A handful of big companies have debt issues, like GM, but these don’t influence the big picture much. (BTW: Much of GM’s “debt” is unfunded pension obligations and not actual bonds.)

The point is that there is plenty of capital available. Companies have cash, they can easily borrow, the market is strong and they can issue more equity.

But they aren’t doing it because there is no demand.

It’s not taxes and it’s not regulation that are preventing companies from investing. Those are bullshit explanations by a political party that is trying to differentiate themselves and discredit the other team. There is no CEO in America that is choosing not to expand because of taxes or regulation – they are holding back because they are concerned that their markets cannot grow.

(You will hear of CEOs that complain about taxes and regulation in order to be consistent with the party-line, and because it still helps their bottom line to change these policies, but taxes and/or regulation are NOT the driving issue in the economy right now – they are just the political meme from one side of the aisle.)

The capital is there, plenty of it. Nobody is using the capital to expand because not enough consumers are able to buy what corporations are building. There is overwhelming data to support this argument.[/quote]

Are you intending to deny the debt side of the equation? No one is denying companies have cash…

[no_such_reality]

[quote=harvey]
Exxon has $17 billion.
[/quote]
Exxon has $15.8 billion in debt.

Now, increase demand for Exxon, what will they invest in?

You’re assuming the lack of investment is due to lack of demand and not lack on investments to be made. A company like Exxon needs to make investments, but needs to make investments that will provide the appropriate return to the share holders.

Right now, you can’t buy rentals unless you like the pathetic cap rates that are out there because there are too many people chasing the houses. i.e. too much money on the sidelines read to invest.

Similarly, businesses, lack the ability to make the investments that will provide the returns they need. In the end, they stockpile cash because the best investment they have is the M&A of upstarts.

[dumbrenter]

[quote=squat250]i have had strong demand for leather gloves lately. Ive bought 3 pair recently. nice work gloves.

I wear them all the time, just around …
I think they are going to help preserve my hands from looking like old people’s hands.

i am trying to alert the market to keep up glove production.

maybe more of us should start wearing gloves more.

good int he car when the sterring wheels hot. think on how much sun your hands get.

try it.[/quote]

Didn’t you say you got off the sauce sometime ago?
Anyway, who am I to judge? Just because of your advice, I’ll get some leather gloves. Ihope you are not pitchign life insuranc enext. Because I’d buy that too.

[Anonymous]

[quote=jstoesz]Are you intending to deny the debt side of the equation? No one is denying companies have cash…[/quote]

Actually, someone was denying it a few posts back, but anyway…

[quote=no_such_reality][quote=harvey]
Exxon has $17 billion.
[/quote]Exxon has $15.8 billion in debt.[/quote]

Although consumer debt and government debt are big problem in our current economy, corporate debt is not an issue.

Corporate debt and consumer debt are very different. Comparisons between corporate bonds and Joe Homeowner’s HELOC or credit card balance are usually flawed.

Exxon’s debt is long term, and their balance sheet is very strong by any measure. Their operating cash flow is $55B. They could pay off their debt quite readily if they choose to do so.

The key characteristic of corporate debt is that it is used for investment. (HELOCs and credit cards usually are not.)

Government debt can be used for investment also. (In theory, all government “spending” is really investment, but it’s hard to determine the ROI.)

There is no corporate debt problem in America. Aside from a a few special cases (GM, AMR), debt service is not a concern for American corporations.

It’s very normal, and actually quite healthy, for companies to have debt on their balance sheet. Debt used for investment is not a bad thing – it usually is a very good thing. Debt-based capital is one of the strongest examples of business “win win.”

[quote]Now, increase demand for Exxon, what will they invest in?[/quote]

Think about that for a moment.

If Exxon really had nothing to invest in, Exxon would be SOL regardless of their balance sheet.

The generic business answer is that they will invest in more capacity. Exxon is in the oil business, where increasing capacity is a little more complicated than say, building more iPhones. But I’m sure Exxon could build more refineries, upgrade existing facilities, increase exploration, etc.

[quote]Similarly, businesses, lack the ability to make the investments that will provide the returns they need. [/quote]

Right. And they don’t think they’ll get the returns because they don’t anticipate their markets growing. We are saying the same thing here.

In general, US corporations are holding back due to a lack of demand and not a lack of capital (and certainly not because of taxes or regulation.) That’s the key point.

How do you increase demand? There is no absolutely proven answer, but Keynes provided us with the best one we’ve got: Start spending money on useful things.

There are times where “tax and spend” is a good strategy.

Trivia question: During what period did the US “tax and spend” the most? Hint: Is was during a Democrat administration (but not Obama)

And how did the economy transform before/after that “tax and spend” period?

[livinincali]

[quote=harvey]
Government debt can be used for investment also. (In theory, all government “spending” is really investment, but it’s hard to determine the ROI.)
[/quote]

Actually it’s relatively easy but most people for government spending don’t like the answer it provides so they ignore it or claim it’s hard to determine.

GDP includes government spending so for every dollar of debt the government takes on there should be a corresponding increase in GDP, but for the last 30 years GDP growth has been less that government debt growth. This means that the ROI of government spending has been negative for most of those 30 years. Just look at last year where GDP grew by about 2% or $300 billion vs an increase of government debt of 1.2 trillion. A massive negative ROI.

[quote]
How do you increase demand? There is no absolutely proven answer, but Keynes provided us with the best one we’ve got: Start spending money on useful things.
[/quote]

And yet our government has not demonstrated that ability at all for the past 30 years. Your argument seems to be that if private companies won’t spend their capital then we must have the government confiscate it and spend it. Should we confiscate your retirement account and spend that too. Can’t have people saving for the future we must stimulate demand by buying more stuff we don’t need right now. We must do everything and anything to stimulate the demand side of the equation.

We’ve been trying this for years, have seen the failures and yet we keep arguing for more, more, and more spending. Trust me it will work this time, I know it didn’t work the previous 50 other times but this time it will work.

[no_such_reality]

LOL Harvey, are you really trying to say there is a shortage of demand for the products Exxon produces?

[Author]

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