Companies Sit on More than $2 Trillion in Cash
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What is the episode about and who is hosting this Money Briefing?
Your Money Briefing. Money and Market Stories from The Wall Street Journal. I'm Charlie Turner in New York. U.S. companies have trillions of dollars of cash on hand, and they might use more of it for stock buybacks. We'll have more on this in just a moment. First, these money headlines. With tax day gone, the Wall Street Journal says President Donald Trump and the Republican Congress have pulled off quite a feat. The tax cut plan they turned into law late last year has Republicans feeling much better about their tax bills. Republicans typically drive low-tax sentiment in the U.S., but not now. According to a Gallup poll, just 45 percent of Republicans say their taxes are too high. That's down from 72 percent in 2016, and it's lower than at any point since before 2001.
The tax law started showing up in reduced paychecks in February, and it's also lowering taxes for corporations and closely held businesses, though some households will pay more. Overall, 45 percent of Americans say their taxes are too high, which Gallup says is effectively a tie with 1961, 2009 and 2012 for a recorded low point. Want to work at Facebook? According to the company's annual proxy statement, Facebook employees earned a median pay package of more than $240,000 late last year, while Chief Executive Mark Zuckerberg's total compensation was more than $8.8 million. Mr. Zuckerberg's compensation was about 37 times higher than the median Facebook employee. As in years past, Mr. Zuckerberg's base salary was $1 in 2017, and he didn't receive a bonus or any equity rewards.
How did recent U.S. tax changes affect Americans' views and corporate taxes?
But the 33-year-old billionaire's security and travel costs rose 54 percent to roughly $8.85 million in 2017 as he embarked on a 30-state tour of the U.S. Coming up, what corporations may end up doing with all that cash. You're listening to your Money Briefing from The Wall Street Journal. Welcome back, everyone. U.S. corporations are awash in cash, and that money could end up in shareholders' hands. Wall Street Journal reporter Ben Eisen writes that that is one reason some investors are turning more optimistic about the stock market. Ben is here now to tell us what exactly companies might do with that cash. Ben, J.P. Morgan Research has some numbers on how much cash companies have held onto. The numbers are pretty eye-popping.
Yeah, definitely. It's up to $2.4 trillion, which is a record for a time like this. And it's something that's sort of been climbing over the last few years during this post-crisis period as companies have become more profitable. But now it really is at very high levels.
And you quote one analyst from J.P. Morgan saying, no other time in history have companies held so much cash in a low-rate environment.
Yeah, absolutely. And there's a lot of questions about what companies are going to do with this cash, and I think that those questions are coming more to the forefront this year because we've had this tax code overhaul, which is likely to bring a lot of that cash back to the U.S., whereas it was stashed abroad so that some of these companies didn't have to pay the U.S. corporate tax rate. There's now been some tax incentives to bring that cash back.
Yeah, you're right. The bill included a one-time tax on profits held abroad, and that was meant to encourage companies to bring their foreign profits back to the U.S. Now, could this cash go towards stock buybacks?
Yeah, absolutely. People who are watching this space are really wondering whether we're going to see companies invest in things like capital expenditures and research and development, or whether we'll see that money go to shareholders in terms of buybacks and dividends. Generally, history has shown when you have companies bringing a lot of cash back from overseas, that tends to go into buybacks. In 2004, there's a tax repatriation holiday and you ended up seeing buyback surge around that period. There's a lot of expectations that we're going to see some buybacks.
How much are buybacks expected to rise this year compared to last, according to JP Morgan?
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