Companies not parting with cash as economy wilts

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Seeking capital expenditure

Hope that companies will begin deploying cash to grow sales and hire workers remain just that—hope that it will happen but defied by a reality showing that corporate America is still playing it relatively safe.

Business investment remains elusive for companies that have watched their share prices soar by cutting costs and returning money to investors.

Capital expenditures—or capex—have been the missing link for the economy, with firms instead plowing about $1 trillion into share buybacks and dividend increases since the end of the recession and the onset of historically easy monetary policy. In the meantime, cash on the balance sheet remains at an elevated $1.9 trillion while long-term unemployment persists and corporate infrastructure continues to age.

"Public companies should not make money just to buy back stock," analyst Don Rissmiller at Strategas said in an economic research note. "The purpose of the capital markets is to fund growth—as is commonly noted, the people with the good ideas are not always the people with money. The capital market matches the two."