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More Myths and Illusions: Corporate Cash & Debt

user profile picture Chris Martenson Dec 19, 2011
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There are several hard things about this particular crisis, especially for the aware. One is the waiting for the other shoe to drop, as we all know it must. The vast imbalances that led to the 2008 crisis are mainly still intact, and in many cases are larger than they were before.Another difficult thing is constantly reading all the horribly wrong and misleading information out there that is designed to shape opinion almost universally in the direction towards more profligacy and consumption. Statistics are constantly bent, and other bits of information running counter to the idea that a new round of robust consumer expansion is nearly upon us are conveniently buried or overlooked.
Consider this article from Bloomberg:

Cash Punished as S&P 500 Spenders Beat Savers
Dec 19, 2011
In a year when American companies piled up record amounts of cash, the worst stocks were the savers and the best gave the money back to investors with dividends and buybacks.
Companies that hoarded cash such as CareFusion Corp. (CFN), Western Digital Corp. and 18 other members of the Standard & Poor’s 500 Index lost an average 15 percent in 2011, according to data compiled by Bloomberg. The 40 that repurchased the most stock or offered the biggest dividends climbed 5.7 percent, led by DirecTV and Reynolds American Inc. (RAI), the data show.
Bulls say gains in companies that returned money will help unlock almost $1 trillion of cash that chief executive officers have been hoarding for three years. Thomas Lee, the chief U.S. equity strategist at JPMorgan Chase & Co., says distributions should increase 28 percent to $1.1 trillion into next year. Bears say dividends and buybacks will be insufficient to keep the rally going as mandated budget cuts curb growth.
“Investors are more yield-hungry than ever before,” said Jacob de Tusch-Lec,…

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I’m currently reading Secrets of the Temple: How the Federal Reserve runs the country. It details a lot of the bailouts of banks and several...
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