Roben Farzad Explains Why Corporate Cash Is Trash [Video]

As if the economy and the markets weren't behaving oddly enough in the wake of the world financial crisis, a new trend has blue-chip companies wallowing in cash but still raising money. Investor demand for bonds has made it too attractive for the best companies not to raise cash. As Bloomberg BusinessWeek's Roben Farzad explains in this interview, many of these companies are paying less in interest on their bonds than they are offering as dividends to their equity investors.

In this 5 minute interview, Farzad touches on a few interesting points:

• Too much cash can cause volatility for a company, as when the same set of conditions set off the LBO boom of the 1980s.
• Companies are not money market funds. Their corporate mission is to reinvest capital or return it to shareholders.
• With small investors fleeing the equity markets and flooding debt markets, corporations are facing a tsunami of cash with few places to put it to work.
• This is one reason the Fed keeps pushing on string to force that cash into something productive.
• Growth companies like Cisco and Microsoft are finally admitting that they're maturing.
• In the future, money managers may become evangelists for big companies to return unused capital (cash) to investors in the form of bigger dividends.