Photo: Bloomberg TV
JPM’s Tom Lee was on Bloomberg TV on Friday talking corporate cash holdings.The below partial transcript was provided to us by Bloomberg, and the gist is, basically, that it will end up going to more dividends and buybacks.
You can watch the video here.
On the record level of cash being held by U.S. corporations:
“It’s a record level of cash: $3.60 trillion, $670 billion dollars higher than 2007 when the market was at its prior peak. It really speaks to the idea that companies are generating a lot of profits, and they’re not distributing the cash. They’re sitting on it. It’s becoming a year where we are seeing them either really boost dividends or increase buybacks.”
On why all this record cash might boost the stock market:
“The cash here when it gets used is not going to help bonds, it’s going to help equity holders. Year to date, dividends are up $20 billion.”
“Buybacks are going to take a step up this year. It’s a reason why the stock market is still going up despite resale inflows being negative and hedge funds not buying stocks and pension funds not owning equities. It’s because corporates over the last 20 years have accounted for 87% of all inflows in the stock market.”
On the cash being held by banks:
“The banks are sitting on tons of excess cash. It’s something we hear a lot…banks aren’t lending, they have a lot of excess capital. But non-banks have a lot of cash.”
“If you look at where all this cash is sitting, it’s in technology, it’s in industrials and healthcare. It’s mostly a cyclical opportunity.”