As evidenced by the front page of today’s WSJ, a big bull case for the economy and also for stocks is all the cash on company balance sheets. We hear it all the time. But, in order to fairly analyze this argument one must look at the entire balance sheet, not just the asset side where cash sits. In the Q3 Fed flow of funds statement out yesterday where $1.93T of cash is cited on corporate America’s balance sheet, the liability side has corporate debt at an all time record high of $7.3T. Cash as a % of this debt is thus at 26.4%. It is at a high level but not much different than where it was in ’05 and ’06 when it was 27.3% and 25.5% respectively and not far from 25.2% at year end 2009.
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