The largest US companies have more than double the amount of cash on their balance sheets than when the Russian financial crisis and the subsequent collapse of Long-Term Capital Management prompted the US Federal Reserve to cut interest rates in 1998.
According to the S&P industrials (an index of large US corporates), excluding financial and utility stocks, the cash/asset ratio rose steadily each year from 1991 to 2004, and it is likely that the small dip to 8.9% of total assets in 2006 will have risen in 2007. So with cash already at record levels, how far can these levels go in 2008 as corporates seek a safe haven from the volatility of the money markets?
