Bitcoin & Crypto | Commodities | Equities | Fiscal Policy | US
The US corporate cash pile has grown to historically unprecedented levels and may soon flood into bitcoin and gold. The ratio of corporate financial assets – predominately cash and equivalents – to corporate net worth has surged to nearly 1.4 (Chart 1). That’s up from 1.2 just six months ago and almost double where it was 30 years ago. Back in August we suggested that the big, cash-rich US Tech firms, such as Apple, might start diversifying away from zero-yielding cash and bonds into bitcoin and gold. With a surprise announcement from Tesla this week, the shift could be imminent.
The Tesla Bombshell
With the world seeking ways to emerge from Covid lockdowns and reverse related slumps in economic activity, the investment climate is cloudy. Most corporations will probably struggle to find ways to invest heavily in their own businesses in the near term.
Consequently, in our view, it has become even more likely that tech companies will diversify. Sure enough, Tesla made a bombshell announcement just this week that they had already acquired some $1.5bn in bitcoin. The move is part of their new Treasury policy to shift a significant portion of capital out of cash and equivalents and into bitcoin and gold, among other possible alternatives to zero-yielding paper. This equates to about 9% of their balance sheet cash holdings at the time of filing.
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