The Administration should make it clear that it will closely scrutinize mergers and acquisitions and freely reject them.

That is an awfully statist policy, OJ. No doubt done with the best of intentions.

1 word: Microsoft. that company has been overrun with cash for a decade, yet i see it rather far from collapsing. better yet, they've recently announced huge dividends in the coming years as a better form of investment than merrill lynch could ever offer.

and no, the gov't should not come close to touching M&A. the mere idea of some civil servants reviewing those deals sends chills down my spine.

Bruce:

Conservatives rightly oppose concentrations of power everywhere--except in business, where their common sense deserts them.

When companies hoard, the economy suffers, because the money is just sitting there;

I don't think they're all keeping it under a mattress somewhere. Isn't company cash usually kept in bank accounts, and don't the banks lend out (i.e. invest) that money?

Uh huh. Sa-a-a-y, what do you think a Democratic Administration could do with decision making power like this?

Bruce:

Prevent mergers and acquisitions.

No cash, no commercial paper. No commercial paper, and a lot of businesses would shut down.

In the corporate world, having a lot of cash does not confer power. It draws a big target on your back that says, "Raid me."

Only the very biggest can safely pile up cash any more.

oj that's just silly. You oppose concentrations of power -- and your remedy is to concentrate still more power in the hands of the State. I'm beginning to suspect that you're actually Ralph Nader, blogging under a pseudonym.

We give the State power to protect ourselves. We need protection from corporations.

This is just crazy talk.

What does a corporation want with a slightly eccentric observer of our time from NH? What can a corporation do to said eccentric? Is GM going to build a factory behind your house? Is Wal-Mart going to turn your front yard into a parking lot? Is ADM going to spray your yard with chemicals? Please elaborate.

This article is total rubbish. They are not spending that cash right now because there are no good investments. It is a sign of an impending downturn. They are looking at a 2 to 5 year horizon and seeing very little increased demand for their products and services that would justify increases in capital infrastructure. Consumer demand is spent. Rates will be on the rise. The cash is a survival cushion.
If they can't raise prices to defray the increased cost of capital, then the companies that can fund their operations internally without resorting to borrowing will have the edge.

The markets are telling you everything you need to know about the economy, you just have to be willing to accept what they are telling you.

jim:

MicroSoft, for example, has retarded development of the most important technologies of our time.

Robert:

There are plenty of good investments, not least because they need to upgrade the technology in their own companies. They're sitting on the money because of uncertainty, just like everyone's antsy about the market. It's just psychology.

oj is right on this. The really big rich companies are worse than governments at suppressing inovation. The only thing worse is a big government owned company like most of the postal unions of the world.

Some merger/acquision schemes work for a while (I'm waiting for Citibank to go south) but most crack up all by themselves because there is no business reason for them to exist, except to be big.

ATT got taken down. Good. In the late 50's their 1200 baud (maybe less) modems cost over $100/month and there were four, count them 4, available for all Connecticut potential users. UTC got two of them.
Imagine runnining the internet using those babies.

US Robotics (or some other company) made much less expensive (cheaper?) modems but ATT would not allow any non-ATT company to connect alien hardware to their phone lines.

IBM was another dedicated accumulator of cash and blocker/delayer of inovation. Without the kick in the butt they got, probably no PC's even today.

Socialism means big and no competition.

Capitalism doesn't mean big, it means meaningful competition.

Uncle Bill;

Of course, AT&T was created by the government, so it's part of the cure you and OJ are supporting. As for IBM, it was done in by competition, not by anything the government did. As for OJ's claim that Microsoft has stifled innovation, as someone who's been a professional in the industry since before Microsoft existed I find that claim ludicrous. I suppose no one remembers anymore, but it was Apple under Sculley that stopped innovating and allowed Microsoft the catch up. Most of the whining about Microsoft stifling innovation is from UNIX companies that haven't innovated themselves in decades.

The most important thing is to see companies begin to hand out dividends again. That, obstensibly, is why stock purchases are made to begin with. You want to share in their profits.

To bad no one seemed to remember this when they were buying anything with a dot com in it.

Amen, Chris.

On the other hand, capital intensive businesses are unable to retain profits for renewal and expansion, because the market executes them.

Markets are not nearly as great as some people like to think.