Companies Hoard Cash Says WSJ
"Companies Are Hoarding Record Cash Amid Delta Fears" says an article in Monday's Wall Street Journal. They write, "Companies are sitting on a record amount of cash amid lingering uncertainty about disruptions from Covid-19, defying expectations earlier this year that a waning pandemic would unleash a spending spree. Cash and short-term investments on corporate balance sheets globally are at an all-time high of $6.84 trillion, according to data from S&P Global, extrapolated from second-quarter earnings reports. That is 45% higher than the average in the five years preceding the pandemic and a 2.6% increase from the previous quarter." The piece says, "Cruise-line operator Carnival Corp. has been gradually bringing some of its ships back into service after the pandemic effectively shut down its operations. But it currently has around $9 billion of cash, compared with its usual balance of around $2 billion to $2.5 billion before the pandemic. It has 23 of its ships in operation out of 91. 'My thought on liquidity was to plan for the worst and hope for the best,' said Carnival Chief Financial Officer David Bernstein in an interview.... Airlines also are continuing to increase their cash positions. United Airlines Holdings had $23 billion of liquidity at the end of the second quarter, more than quadruple the same period of 2019 and up $3.3 billion over the six months through June. Delta Air Lines added $1.6 billion to its cash pile in the most recent quarter for a total of $17.8 billion of liquidity. It had $3 billion of cash at the same point of 2019." They quote Marc Baigneres of JPMorgan Chase, "Major corporates have been sitting on a large liquidity position for a while now," ... noting that they also have limited their spending even as many have "generated cash flows that are higher than expected." The Journal adds, "Investors say they are generally averse to companies keeping large cash balances and would prefer them to put the capital to work or return it through dividends or share buybacks. But in a time of lingering uncertainty, it is more acceptable, according to Ken Taubes, chief investment officer of Amundi SA's U.S. branch."
