The Fed, with cheap interest rates, have been supporting this corporate welfare of low rates, while screwing over people who are retired and hold bonds and does not promote saving.
Spot on sir. Apple does not have sufficient cash to do the buyback's without bringing some of their money "home". In actuality most of it is here in the US but in bank accounts owned by foreign subsidiaries so technically held overseas.
I'm clearly not a finance guy, but it occurred to me that since they are using some of the money to buy back shares, why couldn't the foreign subsidy buy Apple shares and retire them? I also wondered why Apple couldn't pay the contractors of Campus 2 from a foreign bank? There should be any number of ways to spend the foreign cash. Our company accepts payments from virtually every country. They either wire it or use credit cards. There is no need for us to have an account in those countries. I just don't understand why Apple let all of their cash accumulate overseas.
I'm clearly not a finance guy, but it occurred to me that since they are using some of the money to buy back shares, why couldn't the foreign subsidy buy Apple shares and retire them? I also wondered why Apple couldn't pay the contractors of Campus 2 from a foreign bank? There should be any number of ways to spend the foreign cash. Our company accepts payments from virtually every country. They either wire it or use credit cards. There is no need for us to have an account in those countries. I just don't understand why Apple let all of their cash accumulate overseas.
Good questions. I've never researched it myself but I'll be surprised if someone here doesn't know the facts about it.
Would you rather pay 40% tax rate or 2% interest rate?
Obama's administration is so greedy on corporate foreign tax with that ridiculous rate to bring the cash back. If they approved the Barbara Boxer and Rand Paul's proposal of 6.5% flat, it's a different story now.
I'll never understand economics and financials enough to get a grasp on things like this. Companies with huge amounts of cash on hand borrow money? As an individual I would never take out a loan for something if I had sufficient cash. To scale it down: Apple has about $180B on hand and has $29B in long-term debt. Assume I have $180k on hand and want to purchase a $29k car. I would never take out a loan for that car even if it were a very low interest rate.
The theory is what else could you do with the money? As long as you can get more back than your interest, you might as well keep it and invest.
Take your example, you take out the loan and pay say 3% interest. Average rate of return on the stock market is at least twice that per year. So over the long term your generally better off (barring bad timing) getting that loan and paying it as scheduled while keeping the assets invested as part of a well-diversified stock portfolio.
So the only reason you should do as you suggest is if your risk adverse enough that the stock market is a no-go zone. Which is fine, but that's the ultimate issue: What is your risk tolerances?
The Fed, with cheap interest rates, have been supporting this corporate welfare of low rates, while screwing over people who are retired and hold bonds and does not promote saving.
One misguided mission of the Fed (there are several confused missions assigned to this rogue organization) is to 'encourage' full employment...an impossibility. Availability of cheap currency has ballooned into another massive stock market bubble. Now, no one in the driver's seat knows where to go without potentially causing a 330 million car pileup.
Obama's administration is so greedy on corporate foreign tax with that ridiculous rate to bring the cash back. If they approved the Barbara Boxer and Rand Paul's proposal of 6.5% flat, it's a different story now.
Sog is exaggerating. It's not as high as that, but it's also reduced directly by any tax paid out in other countries. Figuring out origination isn't always straightforward, but as long as they file properly in those countries, whatever tax was paid there is subtracted directly from tax owed here (which still isn't 40%). I would have to look up whether that still applies in Boxer's or Paul's proposals. Neither one of them is ever genuine with their words, but I suspect it's closer than you might think.
Quote:
Originally Posted by SpamSandwich
One misguided mission of the Fed (there are several confused missions assigned to this rogue organization) is to 'encourage' full employment...an impossibility. Availability of cheap currency has ballooned into another massive stock market bubble. Now, no one in the driver's seat knows where to go without potentially causing a 330 million car pileup.
It's not technically a rogue organization when they're supposed to be independent of Congress. That being said I actually somewhat agree with you for once.
You are joking, right? Their effective tax rate on repatriated profits is way less than your top marginal rate. Do you think Apple does not benefit directly from safely shipping your iPhone or Mac Air by sea or air from its Chinese factories to your American door because of the US military?
Do you think Apple does not benefit directly from safely shipping your iPhone or Mac Air by sea or air from its Chinese factories to your American door because of the US military?
By that theory shouldn't the US be taxing all global commerce that you seem to think is protected by the US military?
I know you see a logic in borrowing money to distribute profits. Kudos to you.
When Steve was not still dead he kept his team focused on marketing and innovation, not playing money games with the profits.
Their CFO and those under him don't directly work on marketing or innovation. The references to Jobs really need to go away, because they're pointless, misleading, and impossible to prove correct.
Comments
Is the interest on the debt tax deductible?
The Fed, with cheap interest rates, have been supporting this corporate welfare of low rates, while screwing over people who are retired and hold bonds and does not promote saving.
Spot on sir. Apple does not have sufficient cash to do the buyback's without bringing some of their money "home". In actuality most of it is here in the US but in bank accounts owned by foreign subsidiaries so technically held overseas.
I'm clearly not a finance guy, but it occurred to me that since they are using some of the money to buy back shares, why couldn't the foreign subsidy buy Apple shares and retire them? I also wondered why Apple couldn't pay the contractors of Campus 2 from a foreign bank? There should be any number of ways to spend the foreign cash. Our company accepts payments from virtually every country. They either wire it or use credit cards. There is no need for us to have an account in those countries. I just don't understand why Apple let all of their cash accumulate overseas.
Its about taxes.
Would you rather pay 40% tax rate or 2% interest rate?
Obama's administration is so greedy on corporate foreign tax with that ridiculous rate to bring the cash back. If they approved the Barbara Boxer and Rand Paul's proposal of 6.5% flat, it's a different story now.
I'll never understand economics and financials enough to get a grasp on things like this. Companies with huge amounts of cash on hand borrow money? As an individual I would never take out a loan for something if I had sufficient cash. To scale it down: Apple has about $180B on hand and has $29B in long-term debt. Assume I have $180k on hand and want to purchase a $29k car. I would never take out a loan for that car even if it were a very low interest rate.
The theory is what else could you do with the money? As long as you can get more back than your interest, you might as well keep it and invest.
Take your example, you take out the loan and pay say 3% interest. Average rate of return on the stock market is at least twice that per year. So over the long term your generally better off (barring bad timing) getting that loan and paying it as scheduled while keeping the assets invested as part of a well-diversified stock portfolio.
So the only reason you should do as you suggest is if your risk adverse enough that the stock market is a no-go zone. Which is fine, but that's the ultimate issue: What is your risk tolerances?
Is the interest on the debt tax deductible?
If one is in debt, how does one earn interest?
The Fed, with cheap interest rates, have been supporting this corporate welfare of low rates, while screwing over people who are retired and hold bonds and does not promote saving.
One misguided mission of the Fed (there are several confused missions assigned to this rogue organization) is to 'encourage' full employment...an impossibility. Availability of cheap currency has ballooned into another massive stock market bubble. Now, no one in the driver's seat knows where to go without potentially causing a 330 million car pileup.
If one is in debt, how does one earn interest?
Interest you pay on business loans is usually a deductible business expense.
Obama's administration is so greedy on corporate foreign tax with that ridiculous rate to bring the cash back. If they approved the Barbara Boxer and Rand Paul's proposal of 6.5% flat, it's a different story now.
Sog is exaggerating. It's not as high as that, but it's also reduced directly by any tax paid out in other countries. Figuring out origination isn't always straightforward, but as long as they file properly in those countries, whatever tax was paid there is subtracted directly from tax owed here (which still isn't 40%). I would have to look up whether that still applies in Boxer's or Paul's proposals. Neither one of them is ever genuine with their words, but I suspect it's closer than you might think.
One misguided mission of the Fed (there are several confused missions assigned to this rogue organization) is to 'encourage' full employment...an impossibility. Availability of cheap currency has ballooned into another massive stock market bubble. Now, no one in the driver's seat knows where to go without potentially causing a 330 million car pileup.
It's not technically a rogue organization when they're supposed to be independent of Congress. That being said I actually somewhat agree with you for once.
You are joking, right? Their effective tax rate on repatriated profits is way less than your top marginal rate. Do you think Apple does not benefit directly from safely shipping your iPhone or Mac Air by sea or air from its Chinese factories to your American door because of the US military?
I know you see a logic in borrowing money to distribute profits. Kudos to you.
When Steve was not still dead he kept his team focused on marketing and innovation, not playing money games with the profits.
Do you think Apple does not benefit directly from safely shipping your iPhone or Mac Air by sea or air from its Chinese factories to your American door because of the US military?
By that theory shouldn't the US be taxing all global commerce that you seem to think is protected by the US military?
I know you see a logic in borrowing money to distribute profits. Kudos to you.
When Steve was not still dead he kept his team focused on marketing and innovation, not playing money games with the profits.
Their CFO and those under him don't directly work on marketing or innovation. The references to Jobs really need to go away, because they're pointless, misleading, and impossible to prove correct.