This is pretty much what happens:
- As interest rates lower, the amount of money banks make on holding deposits increases because they just move the goalposts. So right now if you keep money in a savings account you are lucky if you even get 0.1%, but the bank is still issuing credit cards at 19.9% APR and mortgages at whatever rate the market will bear in competition with other banks.
- If a large company has assets, any assets, that acts as collateral for financing. So a company is deemed incredibly safe to loan to, hence it gets an extremely low interest rate. In the case of Apple itself, it wasn't even taking on debt until some bean counters realized that they were actually losing money by not doing so. How does this work? The lowering interest rates of course. Let's assume for the sake of argument that Apple is saving it's foreign cash in banks that are paying 2%, but borrowing from US banks at 1%. That's an extra 1% it's actually making for itself, without having to do anything. Now without going into leverage (which is how investment banks get into deep trouble) let's say that the American banks will loan Apple a few billion dollars at a tiny interest rate, and Apple's Savings in the foreign banks balance out the interest being paid on the cash in bond markets or something. Tada, Apple magically has money equal to that of their cash hoard overseas in USD without paying any of the taxes to repatriate the cash.
Apple is not the only company that does stuff like this. Your wireless carriers also do it. They go "we have X million subscribers that will pay a Y termination fee if they cancel early" that's seen as a safe investment, and why it's in the wireless companies best interest to make you pay through the nose to cancel. Either way the wireless company is guaranteed a set amount of money to use as collateral to take out loans that either pay the shareholders or invest in infrastructure, or whatever.
...yes. Will wind down or reduce share repurchase. I hope the total amount of dividends are not increased (i.e. div/sh will increase but without spending a nickel more).
This is not true for many large dealerships. Not sure why, but maybe because the dealership is given large incentives by the manufacturer's finance arms to process loans (rather than to take all cash)? I'm surprised myself but seems that cash is not quite king at dealerships.
The dealer probably gets a kickback for setting up the loan, just like they get a kickback on the sale. Try buying a car on a credit card, everyone will balk at it, and insist on "cheaper" financing. That's because the dealership would have to eat like 3% of the cost.
Maynard Um is a moron, He is the same douche that is bearish on Apple right now and is one of the lowest stock price estimates out there, in fact I think that he has already been upside down 2 or 3 times in january. Anyone that would follow his stock price forecasts is equally stupid.
Comments
This is pretty much what happens:
- As interest rates lower, the amount of money banks make on holding deposits increases because they just move the goalposts. So right now if you keep money in a savings account you are lucky if you even get 0.1%, but the bank is still issuing credit cards at 19.9% APR and mortgages at whatever rate the market will bear in competition with other banks.
- If a large company has assets, any assets, that acts as collateral for financing. So a company is deemed incredibly safe to loan to, hence it gets an extremely low interest rate. In the case of Apple itself, it wasn't even taking on debt until some bean counters realized that they were actually losing money by not doing so. How does this work? The lowering interest rates of course. Let's assume for the sake of argument that Apple is saving it's foreign cash in banks that are paying 2%, but borrowing from US banks at 1%. That's an extra 1% it's actually making for itself, without having to do anything. Now without going into leverage (which is how investment banks get into deep trouble) let's say that the American banks will loan Apple a few billion dollars at a tiny interest rate, and Apple's Savings in the foreign banks balance out the interest being paid on the cash in bond markets or something. Tada, Apple magically has money equal to that of their cash hoard overseas in USD without paying any of the taxes to repatriate the cash.
Apple is not the only company that does stuff like this. Your wireless carriers also do it. They go "we have X million subscribers that will pay a Y termination fee if they cancel early" that's seen as a safe investment, and why it's in the wireless companies best interest to make you pay through the nose to cancel. Either way the wireless company is guaranteed a set amount of money to use as collateral to take out loans that either pay the shareholders or invest in infrastructure, or whatever.
The dealer probably gets a kickback for setting up the loan, just like they get a kickback on the sale. Try buying a car on a credit card, everyone will balk at it, and insist on "cheaper" financing. That's because the dealership would have to eat like 3% of the cost.
Maynard Um is a moron, He is the same douche that is bearish on Apple right now and is one of the lowest stock price estimates out there, in fact I think that he has already been upside down 2 or 3 times in january. Anyone that would follow his stock price forecasts is equally stupid.