More debt

Last week nearly $20 billion of debt was sold in the form of corporate bonds, according to Dealogic, including Google who issued bonds for the first time ever.  So companies continue to have a record amount of cash on their balance sheets, but are also raising MORE cash by issuing low-cost debt.  There are only a few things CEOs can do with all this cash – give it back to shareholders in the form of dividends, buy back shares, spend money adding people, facilities, and technology, or they can invest in acquiring companies.   In my opinion, the one most attractive to CEOs is M&A because it has potentially big strategic and financial payoffs and frankly has much more ego appeal than the others.  I am sticking with my long-held prediction that the second half of this year we will see sharp increases in M&A activity.  I think these burgeoning war chests are another sign that this will happen.  Stay tuned.