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Monday, September 09, 2013

Profits boom

In 1947, American’s labor’s share of non-farm business income was 65 percent; in 2000, it was 63 percent. In 2013, it’s 57 percent. On a global scale of 22 advanced countries labor’s share fell from 73 percent in 1980 to 65 percent in 2011.

American capitalists are hoarding their profits. From 2007to 2012, domestic corporate profits climbed 35 percent while investment in plants and equipment rose only 2.6 percent. U.S. companies have accumulated a huge cash liquidity of $1.8 trillion as of the end of 2012.  Capitalists seem content to sit on their profits and invest only when the needs and the returns are indisputable.

Qualcomm Inc the most cash-rich semiconductor company (phone-chips) , Chief Executive Officer Paul Jacobs said “Having a good war chest makes people realize you have the ability to absorb a good blow and come back,” Qualcomm ended its fiscal third quarter with $30.4 billion in cash and marketable securities and has no debt. Qualcomm is aiming to keep at least $5 billion in domestic reserves and currently has twice that amount, Jacobs said. The balance, held overseas, will stay there unless the U.S. government changes its policy on taxing profit that’s brought back into the country, he said.

US companies are stock-piling huge amounts of cash abroad to avoid US tax.

 Microsoft (has topped the list of American tech companies with the biggest overseas cash hoards, according to Bloomberg Rankings. Microsoft had $76.4 billion in foreign profits in its books last year, all of which untaxed by the U.S. IBM came in a distant second with $44.4 billion, and Apple with $40.4 billion. Intel reported cash and investments of $17.4 billion at the end of the latest quarter.

Cisco announce it will cut 4,000 jobs (5% of its workforce), citing a difficult economic climate. The company reported it has an incredible $50.6 billion in cash, up more than $3 billion from the previous quarter.

In India it is a similar story. Coal India was sitting on a cash- pile of Rs 62,236 crore as of March 31. Reliance Industries had  Rs 50,456 crore kitty. BHEL was possibly the richest capital goods firm in terms of cash holdings with reserves of Rs 6,734 crore . NTPC (Rs 18,091 crore) and NHPC (Rs 7,795 crore) in the power industry and Tata Steel (Rs 9,859 crore) and SAIL (Rs 6,662 crore) in the steel sector. [1 crore = 10 million rupees = US$153,000]

Menwhile,  with access to cash, some companies are taking advantage of others misery and buying foreclosed homes.

 Investors, hedge funds, private equity firms, and real estate investment trusts have raised more than $18 billion and bought more than 100,000 single-family homes.

Blackstone Group L.P.'s Invitation Homes unit has spent over $5 billion buying more than 32,000 single-family homes. They are the largest owner of homes in the United States. American Homes 4 Rent, which went public last month and is the second-largest single-family homeowner in the United States, has spent $3.4 billion buying up almost 20,000 single-family homes and said in their August earnings call that they're spending $100 million a month buying more homes.

These institutional buyers aren't buying new homes in bulk; they're buying existing homes.  

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