In the years following the Great Recession Apple and many other companies were borrowing money (at super cheap rates) in order to funnel it out to shareholders as stock buybacks and dividends --which is obviously not a sustainable business model. But it kept the stock market in a 10 year bull market -- the largest period of sustained growth in its history (Well, actually, the 2nd longest).
But, now that the Fed is raising rates, that mechanism is no longer viable. So, rather than letting the stock market crash to its fundamental value, they thought up a new ponzi scheme: The federal government borrows the money, funnels the proceeds to corporations and the corporations funnel it out to their stock holders via share buybacks and dividends. Essentially, the U.S. government borrows the money from China and gives it to stock holders...
Like all scams, it's a brilliant scheme that works really, really well. Until it doesn't.
Ah, we have economic soothsayer in our midst... my favorite line: "Works really well. Until it doesn't".
Is Apple trying to buy itself out of the stock market circus?
No. Buying back stock isn't about going private. It doesn't move Apple any closer to being private or, likely, make it easier for someone to take it private. (I'd argue, for reasons I won't get lost in here, that in this case the buy backs make it a tiny bit less likely that Apple would get taken private. That effect isn't particularly relevant though because it would be extremely unlikely anyway.)
A company can't take itself private. It can't buy back enough stock that it becomes a private company. Someone else - or some combination of someone elses - has to, in effect, buy the company.
Apple taking solid advantage of the idiot noise traders.
Kudos, Mr. Maestri.
I wouldn't say that Apple took advantage of the noise traders. It isn't like Apple was only buying back stock when the price was suppressed by, e.g., reports that iPhone X demand was weak. Apple was likely buying back stock throughout the quarter and, at any rate, the average price it paid during the quarter was very close to the average closing price of the stock during the quarter - $171.48 versus $171.88. So it didn't just load up when the price dropped to $160.
That said, I'm not complaining about Apple buying back so much stock. And I think it would be fair to say that Apple is taking advantage - at least from its perspective - of the stock being undervalued in general.
At the end of the day, those ANALyst are still employed and preparing to predict the next quarter to be gloom again and next quarter after that....hayayay.....fake analysts
Is Apple trying to buy itself out of the stock market circus?
No. Buying back stock isn't about going private. It doesn't move Apple any closer to being private or, likely, make it easier for someone to take it private. (I'd argue, for reasons I won't get lost in here, that in this case the buy backs make it a tiny bit less likely that Apple would get taken private. That effect isn't particularly relevant though because it would be extremely unlikely anyway.)
A company can't take itself private. It can't buy back enough stock that it becomes a private company. Someone else - or some combination of someone else's - has to, in effect, buy the company.
Right, because they’re really just promise notes (well, they’re not even that) and nothing to do with controlling the company. So buying the shares is really about their value and nothing more. So Apple is just doing what everyone else should be doing: buying low and selling high.
They must be pretty confident then that these shares are going to be worth a lot more than they are now at some point in the future.
At the end of the day, those ANALyst are still employed and preparing to predict the next quarter to be gloom again and next quarter after that....hayayay.....fake analysts
And when they do, Apple will pick up another few billion in shares on the cheap.
Is Apple trying to buy itself out of the stock market circus?
No. Buying back stock isn't about going private. It doesn't move Apple any closer to being private or, likely, make it easier for someone to take it private. (I'd argue, for reasons I won't get lost in here, that in this case the buy backs make it a tiny bit less likely that Apple would get taken private. That effect isn't particularly relevant though because it would be extremely unlikely anyway.)
A company can't take itself private. It can't buy back enough stock that it becomes a private company. Someone else - or some combination of someone else's - has to, in effect, buy the company.
Right, because they’re really just promise notes (well, they’re not even that) and nothing to do with controlling the company. So buying the shares is really about their value and nothing more. So Apple is just doing what everyone else should be doing: buying low and selling high.
They must be pretty confident then that these shares are going to be worth a lot more than they are now at some point in the future.
Apple retains no value from them. They are in effect burned and removed from the market. They have no remaining value after Apple buys them back and worth exactly zero even at "some point in the future".
In 8 of 9 years time Apple will buy the (it’s) last Apple share and in that magic moment invalidates almost a trillion dollar. Someting to be proud of I’m sure.
The only way to make a quick buck off a solid stock that grows slowly and steadily is to create a false narrative to drive the stock down temporarily for a buy, then a quick sell on the rebound. When will the government stop this naked manipulation? When all elections are publicly funded, that’s when.
In 8 of 9 years time Apple will buy the (it’s) last Apple share and in that magic moment invalidates almost a trillion dollar. Someting to be proud of I’m sure.
I plan on being the one that owns the 'last' share.
In 8 of 9 years time Apple will buy the (it’s) last Apple share and in that magic moment invalidates almost a trillion dollar. Someting to be proud of I’m sure.
I plan on being the one that owns the 'last' share.
Get in line. I plan on being the one who owns the last 6500 shares. Which I’m already holding. 🙂
Thanks DED for the spirited defense of the buybacks! I find it funny that the haters disparage the buybacks. It is up their with notch-hate, macpro-hate, no-headphone-jack-hate, siri-hate and my all time favorite home-pod-hate which generates even more controversy than a trump tweet.
In 8 of 9 years time Apple will buy the (it’s) last Apple share and in that magic moment invalidates almost a trillion dollar. Someting to be proud of I’m sure.
I plan on being the one that owns the 'last' share.
That would be a smart move, the only way to cash in would be to sell it to someone stupid enough to pay a trillion dollar for it, but Apple makes sure shareholders can sell their shares, so in this case Apple buys your share and burns it afterwards. Incredible.
The issue with bond sales is that the federal interest rate was lower than the rate of return on the bond, which in turn means that the government is essentially paying corporations to borrow money. It's a risk-free proposition. It's also an economic dynamic that's not available to the average citizen, thus the criticism of it in an era of record corporate profits and record stock market levels. It's just adding insult to injury to the vast majority of citizens who got burned by the global financial meltdown and have had an incredibly difficult time just breaking even in the years since.
The issue with stock buybacks is that they're being done with tax cut money that was promoted as being a boon to job growth and wages by the corporate world and by many politicians. So it's just more annoying double-talk. Obviously, no one should really expect Apple or any other corporation to act differently with the money, but then again, the message being delivered to the public prior to that point is not very honest.
The part I don't understand is that these "analysts" seem to retain the credibility even though they're routinely wrong about Apple. Every quarter they peddle the same old **** and each time they're wrong. Interestingly, this doesn't happen much with discussion of other companies - a bit but not much. With those, analysts are pilloried and ignored after a series of incorrect/dumb/boneheaded calls. So why the difference with Apple? Anyone - why only with Apple ??
Because websites and media are still click whores, and negative Apple "news" still brings in clicks, so they'll publish any trash in that vein regardless.
Is Apple trying to buy itself out of the stock market circus?
No. Buying back stock isn't about going private. It doesn't move Apple any closer to being private or, likely, make it easier for someone to take it private. (I'd argue, for reasons I won't get lost in here, that in this case the buy backs make it a tiny bit less likely that Apple would get taken private. That effect isn't particularly relevant though because it would be extremely unlikely anyway.)
A company can't take itself private. It can't buy back enough stock that it becomes a private company. Someone else - or some combination of someone elses - has to, in effect, buy the company.
Just a point in fact. A company can take itself private, I did it to my company to 'get out of the circus' as said. Apple is not in a position to do so but I can be done.
Is Apple trying to buy itself out of the stock market circus?
No. Buying back stock isn't about going private. It doesn't move Apple any closer to being private or, likely, make it easier for someone to take it private. (I'd argue, for reasons I won't get lost in here, that in this case the buy backs make it a tiny bit less likely that Apple would get taken private. That effect isn't particularly relevant though because it would be extremely unlikely anyway.)
A company can't take itself private. It can't buy back enough stock that it becomes a private company. Someone else - or some combination of someone else's - has to, in effect, buy the company.
Right, because they’re really just promise notes (well, they’re not even that) and nothing to do with controlling the company. So buying the shares is really about their value and nothing more. So Apple is just doing what everyone else should be doing: buying low and selling high.
They must be pretty confident then that these shares are going to be worth a lot more than they are now at some point in the future.
Apple retains no value from them. They are in effect burned and removed from the market. They have no remaining value after Apple buys them back and worth exactly zero even at "some point in the future".
Actually Apple does retain some value from the stocks they buy back and retire, in that they longer have to pay the dividend on those shares. Even if the AAPL shares that Apple bought back are worthless to Apple, every quarter Apple can calculate how much they are saving in dividend payments by calculating how much they are paying to their shareholders vs how much they would have been paying if they didn't buy back and retire those shares and they will see some value in those bought back shares. And that saving is likely close to or more than what it would cost Apple to borrow the same amount that they used to buy back those shares or on the interest Apple was collecting on the money when it was sitting in a foreign bank account. It is only when Apple stop paying a dividend that Apple will no longer retain or see any value for the AAPL shares they bought back and retired.
It's kind of like the money used to make an extra mortgage payment every year, that goes toward the principle. It doesn't do anything to reduce your monthly mortgage. But if you look at how much principle and interest you are paying with each monthly mortgage payment, more will go toward the principle and less toward the interest at a faster rate than if you didn't make those extra payments. Thus being able to pay off the loan years a head of time by reducing the amount of interest you have to pay over the life of the loan. Only if there was no interest on the loan, that there would be no real value retained by making that extra payment every year.
An extra payment on the first year of a 30 year loan will save 29 years of interest on that payment amount. Some time in the future, the amount of money Apple use to buy back and retire a share will be less than the dividend it would had had to pay on that share, over the same amount of years. So long as there's a dividend and the shares remain retired.
I wonder if this is why apple doesn't respond to the doom & gloom analyst reports coming out every other week.
Keep in mind that publicly traded companies go into a quiet period for 4 weeks prior to the end of a quarter. It's probably not a coincidence that the controversy heats up during this time frame.
Comments
Ah, we have economic soothsayer in our midst... my favorite line: "Works really well. Until it doesn't".
Wow. Priceless. Who'da thunk!
No. Buying back stock isn't about going private. It doesn't move Apple any closer to being private or, likely, make it easier for someone to take it private. (I'd argue, for reasons I won't get lost in here, that in this case the buy backs make it a tiny bit less likely that Apple would get taken private. That effect isn't particularly relevant though because it would be extremely unlikely anyway.)
A company can't take itself private. It can't buy back enough stock that it becomes a private company. Someone else - or some combination of someone elses - has to, in effect, buy the company.
I wouldn't say that Apple took advantage of the noise traders. It isn't like Apple was only buying back stock when the price was suppressed by, e.g., reports that iPhone X demand was weak. Apple was likely buying back stock throughout the quarter and, at any rate, the average price it paid during the quarter was very close to the average closing price of the stock during the quarter - $171.48 versus $171.88. So it didn't just load up when the price dropped to $160.
That said, I'm not complaining about Apple buying back so much stock. And I think it would be fair to say that Apple is taking advantage - at least from its perspective - of the stock being undervalued in general.
They must be pretty confident then that these shares are going to be worth a lot more than they are now at some point in the future.
And when they do, Apple will pick up another few billion in shares on the cheap.
The issue with stock buybacks is that they're being done with tax cut money that was promoted as being a boon to job growth and wages by the corporate world and by many politicians. So it's just more annoying double-talk. Obviously, no one should really expect Apple or any other corporation to act differently with the money, but then again, the message being delivered to the public prior to that point is not very honest.
It's kind of like the money used to make an extra mortgage payment every year, that goes toward the principle. It doesn't do anything to reduce your monthly mortgage. But if you look at how much principle and interest you are paying with each monthly mortgage payment, more will go toward the principle and less toward the interest at a faster rate than if you didn't make those extra payments. Thus being able to pay off the loan years a head of time by reducing the amount of interest you have to pay over the life of the loan. Only if there was no interest on the loan, that there would be no real value retained by making that extra payment every year.
An extra payment on the first year of a 30 year loan will save 29 years of interest on that payment amount. Some time in the future, the amount of money Apple use to buy back and retire a share will be less than the dividend it would had had to pay on that share, over the same amount of years. So long as there's a dividend and the shares remain retired.