davidw

GeorgeBMac said:

DanielEran said:

GeorgeBMac said:

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.

Apple borrowed Bonds against the value of itself, effectively its cash overseas. So it paid extremely low interest for flexibility to avoid paying very high tax penalties. It can now hold that debt and spend its cash pile, and pay off its debt from earnings (or cash, but it can probably invest its cash with a far better return!)

Rates are rising, but Apple no longer needs to issue debt.

How do you think the fed govt "funneling money to corporations"? Apple is distributing its earnings to shareholders. Apple also holds billions in US Govt securities. 

The federal government cut corporate taxes -- which they will have to borrow money to pay for.   Most of that borrowed money is not being invested.  It is being distributed to share holders as dividends and stock buy backs.

GeorgeBMac said:

brucemc said:

SpamSandwich said:

badmonk said:

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.

The buybacks at current elevated stock levels make less sense than ever. Apple should continue to provide value to investors by growing the company. A buyback amounts to an accounting trick. And I’m thankful that the current administration, not the previous one, had the wisdom to make repatriating overseas funds a reality. 

Let's try this one more time for you.

- Corporations are "owned" by the shareholders.  They are not owned by the US gov't, nor (generally) by whiny people on Internet forums, analysts, or the tech media.
- When a company makes more cash than their business needs (accounting for R&D, growth, new products, M&A, etc), then that is "free cash flow".  The question is what to do with this.  A company could look at taking on more organic growth (increasing R&D in order to deliver new products), purchase other companies to grow business, or return the cash to the owners of the company - the shareholders.
- Having too much excess cash on the balance sheet (e.g. just keeping it) is considered a liability for a company (could be wasted in future by SpamSandwich and thus its future value is less than present).

What is unique about Apple is that they are generating SO MUCH FREE CASH, that they cannot use it all in while "PRUDENTLY / EFFICIENTLY" running their business.  Apple's whole corporate DNA is about focusing on a few "great ideas".  You can only spend so much on those.  It takes time, not just money, to bring new products to market.  Just starting a whole bunch of side projects "because we have the money" is how companies lose focus and destroy their long term value.

So Apple has given back to the shareholders - over $275B USD in the last 6 years it would seem.  If Apple had not done this, their net cash balance would be over $400B, just sitting on the books.  Let it grow too large, and some hedge fund could (try anyways) to raise money to buy out Apple, since with so much cash it would help with the debt load to buy them, and the cash is not reflected well in the share price.  Then said hedge fund would milk the company for all it was worth and that would be it.

While share buybacks at most other companies has been considered controversial, as it is perceived as a means to "goose" the share price in the short term (while siphoning off from investment in business, or accruing large debt), that is not why Apple is doing it.  It is the most efficient means for them to return the cash to the shareholders by having each remaining share (those who don't want to sell) have a larger ownership stake in the company.  

Good story!

The truth is:  The stock buybacks began several years back when Carl Icahn raised enough fuss as an activist shareholder to force it.  At that point, Apple had to borrow the money in order to pay it out to the shareholders.  But, with interest rates near zero that wasn't a big deal.  

Now interest rates are rising which makes that strategy far less appealing.   So, the federal government borrowed money (or will borrow it) to issue tax cuts -- which Apple is now distributing to its stock holders.   So, eventually the American people will have to pay the debt that Apple is distributing....

That is a totally distorted view of what is actually happening.

Apple was sitting on over $200B in cash in overseas accounts because they didn't want to pay the current (at the time) tax rate in order to bring money that they don't need, into the US. Money that Apple don't need in the US because their US operation generated enough revenue and profits. Money that Apple had no problem leaving overseas, untaxed by the US. It's been like this for over a decade with Apple. That more than $200B in profits is the result of over a decade of Apple keeping their overseas profits oversea and Apple could keep doing this for another decade. Meanwhile, the Federal government collected nearly 0% in taxes from those oversea profits. And as long as Apple US operation is profitable, the Federal government would continue to collect nearly 0% of those overseas profits.

In the meantime, the taxes that the Federal government wants to collect on overseas profits becomes less and less valuable each year, as inflation eats away at its value. It's no different than keeping money in a bank account that is earning 1.5% interest for 10 years.  After 10 years, when accounting for inflation, the money (along with the interest) in that bank account would be worth less than what it was 10 years ago. So unless the Federal government raise the tax rate on the profits in corporate overseas account every year, to make up for inflation, the Federal government is losing money for every year that those profits sits overseas, untaxed.  And as long as there's inflation, they will continue to lose value on the taxes that they can not collect from those overseas profits.

By lowering the tax rate for bringing in overseas profits, the Federal government collected $38B from Apple alone, when Apple decided to bring their overseas profits into the US. The Federal government gained $38B in taxes from Apple and it cost the Federal government and US taxpayers nothing. That's because if the Federal government did not lower the tax rate, Apple would have just kept their overseas profits overseas and the Federal government would continue to see value of the uncollectible tax money on it eroded away with inflation.

Plus Apple and other corporations might start bringing in (to the US) their yearly overseas profit because the corporate tax is now more reasonable and aligned with the rest of the World. So the Federal government may very well see a rise in corporate taxes collected, as there's now less of a tax incentive for corporations to keep their overseas profits, overseas. Where the Federal government collected nearly 0% in taxes.

In fact, keeping overseas profits overseas might now be a liability for corporations as the amount of tax savings, over time, might not make up for inflation. It would be like putting money into a bank account that is only collecting 1.5% interest for 10 years. Corporations might now be better off paying the US tax and spending their overseas profit in the US, as they are earned, rather than have it sit untaxed (by the US) in an overseas account, all the while losing it's value due to inflation in the US.


It's like if you were trying to sell a product, that cost you $5 to make, for $10 and there were hardly any buyers. Plus you took out a loan to finance this venture. So you lower the price to $8 and sold more that you thought you would ever sell. Did you lose $2 on every one sold? Or did you gain $3 on every one sold? Logic will dictate that you made $3 for every one sold.  And since you barely sold any before you discounted it by $2, you could not have lost $2 per item sold as that $2 never really existed when you were trying to sell your product for $10. That was just wishful thinking on your part. Did you have to borrow the $2, in order to sell your product for $2 less than you wanted?

And all the while, when your product was sitting on the shelves, waiting to be sold for $10, in was losing value as you risk someone else coming along and making a similar product and selling it for $8. Not to mention having to use money from other sources to make your loan payments because your product is not generating any cash flow, while it's sitting on the shelf waiting to be sold for $10. 

gatorguy said:

Rayz2016 said:

carnegie said:

Rayz2016 said:

Possibly a silly question then:

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.   

nht said:

davidw said:

Soli said:

I agree that absolute statements can paint one into a corner, but I am having a hard time seeing how rechargeable batteries have a downside for personal items. If it's a gift, it would be great to include rechargeable batteries—hell, make the gift rechargeable batteries and charger—but it's the one area where I can understand why one wouldn't have to both save money and the environment. What's the counter to, say, having a digital scale that takes 4 AAA batteries that I can now charge once every 6 months instead of replacing every 45 days?

 One place where you do not want to put rechargeable batteries is in your emergency survival kit. Rechargeable batteries only hold a good usable charge for about 4 to 6 months before needing to be recharged back up to full. Unless they're lithium ion. So there's greater need for maintenance in having rechargeable batteries in you emergency survival kit. What if an emergency hit after your rechargeable batteries been sitting there for 5 months and you're without power? Best to place several packs of alkalines in your kit for your battery needs, replace them with new ones every year or so and use the old ones elsewhere. New alkalines have a shelf life of over 5 years. So you it's not that critical to change them out every year.  Just replace them when it times to replace your can food. 

If you must keep rechargeable batteries in your emergency survival kit, make sure to pack a charger that operates off a car lighter. This way you have a way to recharge them if there's no power.  And while your at it, throw in the cable you need to recharge your mobile phone from a car lighter.

As Soli mentioned Li-Ion are the bulk of rechargeables today and retain 70% charge after 10 years for the latest Eneloops.  Alkalines leak even before their end date when stored in warm places like your car where you should keep an emergency kit.  Even in a cool environment once they start to run low they can leak before their end date.

If there is no power your alkalines will die too and it makes no difference.  At least with Eneloops you can recharge them if you have a power source.

Car lighter?  No.  Pick a charger that will charge from USB.  Then a USB battery pack can recharge either your phone or your flashlight/radio/whatever.  Especially if the "emergency" is a dead car battery.

Keep one of the emergency jump starter batteries in your car and you can jump start it (maybe, depends on vehicle) or re-charge your phone.

My "can" food is Mountain House with a 10+ year shelf life.

No, the bulk of the rechargeable batteries are NimH. Eneloops are  NimH. Lithium ion are 3.7v. They do not come in standard 1.5V or 1.2V AAA,  AA, C or D. Though there is a company that makes an AA 1.5v li-on battery. The closest li-on battery to an AA is the 18650. It's about 30% larger. There are many high power LED flashlights that uses them. But it's still a 3.7V battery.

The bulk of non standard size rechargeable batteries found in cell phones, headphones, digital cameras, laptops, MP3 players, etc. are Li-on. 

There's a good reason why li-on batteries do not come in standard sizes, many people might mistakenly put them in a standard NimH or NiCad charger. Li-on batteries can explode if not charged correctly. They require special chargers. 

The 70% after 10 years is how much charge it will still hold after charging, after 10 years of non use, not how long it will hold a full charge. NimH will only hold a charge for about 6 months. The larger the battery the longer it will hold a charge. But most AA and AA will need recharging every 4 months. 

For a long lasting charge, it's very tough to beat a 12v, seal lead acid, deep cycle battery. I have a friend that has one hooked up to a trickle charger that is plugged into the light socket of his electric garage door opener. Every time he opens his garage door, the battery gets a 5 minute trickle charge when the light turns on. The battery is always ready for an emergency, with very little maintenance.

Soli said:

mike1 said:

clemynx said:

Soli said:

1) To me, the title and article make it sound like Apple is blaming the customer on having used 3rd-party batteries at all, but that's silly since Apple doesn't make AAA.

2) Has anyone else jumped from disposable batteries to only using Eneloop (or similar rechargeable batteries) for all their needs. I only need AA, AAA, and a few 9-Volts these days. They last considerably longer than disposable batteries and my math says it'll reduce both my cost and waste.

I only use rechargeable batteries, everybody should!

Why, because it's better for you? Many use cases where rechargeables are not practical or desirable. Smart people usually avoid absolute statements.

I agree that absolute statements can paint one into a corner, but I am having a hard time seeing how rechargeable batteries have a downside for personal items. If it's a gift, it would be great to include rechargeable batteries—hell, make the gift rechargeable batteries and charger—but it's the one area where I can understand why one wouldn't have to both save money and the environment. What's the counter to, say, having a digital scale that takes 4 AAA batteries that I can now charge once every 6 months instead of replacing every 45 days?

 One place where you do not want to put rechargeable batteries is in your emergency survival kit. Rechargeable batteries only hold a good usable charge for about 4 to 6 months before needing to be recharged back up to full. Unless they're lithium ion. So there's greater need for maintenance in having rechargeable batteries in you emergency survival kit. What if an emergency hit after your rechargeable batteries been sitting there for 5 months and you're without power? Best to place several packs of alkalines in your kit for your battery needs, replace them with new ones every year or so and use the old ones elsewhere. New alkalines have a shelf life of over 5 years. So you it's not that critical to change them out every year.  Just replace them when it times to replace your can food. 

If you must keep rechargeable batteries in your emergency survival kit, make sure to pack a charger that operates off a car lighter. This way you have a way to recharge them if there's no power.  And while your at it, throw in the cable you need to recharge your mobile phone from a car lighter.

AppleInsider said:

Apple and Google are being targeted by a host of European internet services firms, including streaming music leader Spotify, that are urging the European Commission to investigate the tech giants over "troubling" app store practices.

Spotify co-founder and CEO Daniel Ek. | Source: Spotify

In a letter sent to the European Union's antitrust body, the chief executives of Spotify, streaming music firm Deezer, startup investor Rocket Internet and other Europe-based companies claim dominant internet platforms "can and do abuse their privileged position," reports the Financial Times.

The European companies complain some mobile operating systems, app stores and search engines abuse their commanding marketshare to act as "gatekeepers" to consumer choice, thus impeding segment rivals attempting to market products that compete with first-party services, the letter says.

While not named in the letter, Apple and Google are clearly targets of the complaint. Together, Apple's iOS and Google's Android control more than 90 percent of the mobile operating system market and maintain a set of terms and conditions that third-party apps must follow in order to market their wares on the respective app stores.

In particular, internet companies argue they are not able to access analytics data when customers sign up for service through app store portals. Further, app store owners allegedly promote their own products ahead of third-party offerings. For example, Apple often publishes App Store banners advertising Apple Music, a competitor to Spotify and Deezer.

.....

First of all, even though Apple and Google control over 95% of the World mobile OS market, Apple iOS only account for about 18% of the World market. Google  Android has the other 80%. Therefore, the Apple App Store is not a dominate player. Maybe in the US, where iOS is on about 40% of the devices but surely not in Europe. Plus iOS users can subscribe to Spotify through a web browser. It's not as though iOS users can't subscribe to Spotify at all. So it can't be that great of a loss for Spotify because they don't want to put an app in the Apple App Store and pay the commission.

Second of all, even though Google control over of the 80% World mobile OS market, Android is "open". Thus one don't have to go through the Google Play Store to install an app into Android. For sure Google have made it so there are advantages to go through the Google Play Store, but it will cost you if you're going to make money on the app.

Third of all, Apple and Google built, maintain and own their stores. Do BestBuy allow Walmart to advertise their electronics sales, inside BB stores? When I shop at Lucky's, whenever a name brand item goes on sale, Lucky's own store brand also goes on sale and the store brand item is right next to the name brand item. The same as when I shop in Amazon. Amazon will advertise items from their own store, when I'm looking at items from a store in their Marketplace. The business model of a digital store is not that much different from that of a brick and mortar store.

Fourth of all, Google main (and really only) money making business model is based on collecting analytical data from the people using their products, which most of the time is given away for free and using it to sell targeted advertising. If Spofify want to advertise to a target audience, they can pay Google to do it for them. Google don't have to let someone else collect that data, while in their store and thereby ending up not needing to pay Google for targeted ads. Do movie theaters let you bring in your own popcorn, thus not needing to buy it from the concession stand? The theater concession stand is where theaters makes most of their profits. Most of the revenue from ticket sales goes to pay for the license to show the movie. Spotify basically wants be allowed to bring in their own popcorn, into Google's theater.