USA Today reports that non-financial corporations are holding on to $837 billion in cash instead of hiring or investing in new plant.

Non-financial companies in the Standard & Poor’s 500 have a record $837 billion in cash, S&P says. That’s enough to pay 2.4 million people $70,000-a-year salaries for five years. For context, 2.2 million to 2.8 million jobs were saved or created by the $862 billion stimulus that President Obama signed into law in February 2009, according to a report released in April from the Council of Economic Advisers.

Another myth exposed. Our risk-taking entrepreneurs are actually rabbits hiding in the shadows. That makes them safe from predators who respond to motion, but not those that can sniff them out.

The stockpiling of cash is troubling to some, who say that if companies keep hoarding money instead of investing in new facilities and products, it will put a lid on what the economy really needs to get going: new jobs. “Managers are being overly conservative until they’re positive the crisis is over,” says Kathleen Kahle, professor of finance at the University of Arizona. “They don’t want to invest and add jobs, so they’re delaying and don’t want to be the first movers.”

Keep in mind that’s more money than went into the Obama stimulus program which still has at least a year to be fully implemented, mostly because spending that much money wisely takes time. (If you’re shipping it off to Iraq on pallets, $9 Billion can be gotten rid of in a matter of days).

Bigger than ever. The $837 billion in cash and short-term investments non-financial S&P 500 companies hold as of the first quarter, the latest data available, is not only a record, but up 26% from $665 billion a year ago, says Howard Silverblatt of S&P.

I thought it was only the gnomes of Wall Street that were sequestering our money. Which leads me to question how come their holdings are being excluded for this report. The answer, I think, is that the financial sector doesn’t have to make its accounts public.

Then there’s this:

Investors don’t want companies to rush out and invest and hire just because they have cash, says Marc Gerstein, research consultant for market data provider Portfolio 123. “Getting a low return on cash is the second-worst thing companies can do. The worst thing is to waste the cash.”

Hiring people is a “waste?”

Kathleen Kahle, a professor of finance at the University of Arizona opines:

Once companies get more comfortable about the economy’s future, the hoarding mentality might ease a bit.

What makes her think money hoarders are different from the other kind?

The Wall Street Journal puts it all in perspective. Keeping in mind that the entire Federal budget for a year is $3 Trillion, what does it tell us that non-financial corporations have socked away $1.8 Trillion in cash?

The Federal Reserve reported Thursday that nonfinancial companies had socked away $1.84 trillion in cash and other liquid assets as of the end of March, up 26% from a year earlier and the largest-ever increase in records going back to 1952. Cash made up about 7% of all company assets, including factories and financial investments, the highest level since 1963.

###

Monica Smith

Monica Smith writes Hannah's Blog. Born in Germany, she came to the United States as a child, living first in California, then after an interval in Chile, in New York. Married to a retired professor at the University of Florida, where she lived for 17 years, she moved to St. Simons Island, Georgia, in 1993 and now divides her time between Georgia and New Hampshire. (New Hampshire, she says, is always interesting during a presidential election.) She and her husband have three children and five grandchildren. Ms. Smith says she "learned long ago that I am not a good team player when I got hired at the Library of Congress, fresh out of college with a degree in political science and proficiency in four foreign languages, to 'edit' library cards and informed my supervisor that if she was going to insist I punch the clock exactly on time, my productivity was going to fall from being the highest to being the same as everyone else's. The supervisor opted to assign me to another building where there was no time-clock. After I had the first of our three children, I decided a paycheck wasn't worth the hassle."