Cash Cow – Why Obama Is Having One

Readers who slogged through the debates no doubt noticed that President Obama was rather, er testy, whenever the economy came up. He looked like he wanted to punch Mitt Romney. The emotion is easy to understand. The economy is still listing after 4 trillion dollars of stimulus, and Obama has nothing to show for pushing and then breaking the deficit envelope.

Companies are hoarding their cash. They are not investing and hiring. Part of this is due to hostile regulatory policy, part is due to uncertainty about the strength of the so-called recovery, and part is due to fears concerning the tax cuts due to expire at year-end and the looming “fiscal cliff”. Congress must act, but when Congress goes into action mode, people get nervous. Come to think about it, so do cows.

Jeff Cox of CNBC reports that companies continue to hold record levels of cash:

Amid a lackluster earning season that has featured many companies missing sales expectations, cash balances have swelled 14 percent and are on track toward $1.5 trillion for the Standard & Poor’s 500, according to JPMorgan. Both levels would be historic highs.

If companies don’t invest, their earnings prospects will suffer:

The current climate, though, does not bode well for 2013 earnings if companies can’t find ways to grow their top-line revenue pictures. Strategas Research Partners said S&P 500 aggregate earnings should come in at $98.25 for the full year in 2012, then dip to $95.50 in 2013 before rebounding to $105.50 in 2014.

Follow the link above to delve into the rest of the picture, including a video explaining the downside momentum of the stock market for the past few days.

Photo credit: Daniel Schwen via Wikipedia