Corporations are being "prudent" and holding onto historic levels of cash for good reason—to buy "insurance against further crisis," Chairman of the consulting firm SBCC Group Tanya Beder told CNBC today.
In 2008, well into the financial crisis, corporations found out that "the commercial paper market was failing, the auction rate security (ABS) market was failing" and banks sent letters saying "their lines of credit" were no longer going to be there, Beder said.
As a result, corporations are keeping more cash on hand, which allows flexibility during this time "where risks far outweigh opportunities," she said. For example, here are four tech giants with billions of cash stashed on the sidelines:
- Apple has $41.7 billion in cash
- Microsoft has $39.7 billion in cash
- Google has $26.5 billion in cash
- Intel has $16.3 billion in cash
In addition, companies are pro-actively doing deals in the marketplace ahead of the time when cash is needed.
With earnings seasonheating up next week, Beder expects to hear CFOs talking about the lack of "risk-adjusted opportunities" to use the cash on-hand relative to the cost of investing.
Beder thinks this could be a "raining decade," with the market in an "extended sideways up and down period." Take the big downturn in the early 70's: the period between 1972 and 1982 "started and finished in the same place," she said.
Financial regulation "appears to be an uneven playing field," she said, which is a "hey-day" for investors, particularly hedge funds.
The best investment may wind up being regional banks, because they may have "less fees to pay and competitive advantages by virtue of lower restrictions on the activities relative to the bigger players," Beder concluded.
"The Strategy Session," hosted by David Faber and Gary Kaminsky, airs weekdays at Noon ET on CNBC.