Apple Finalizes $7 Billion Five-Part Bond Sale

The wonders of capitalism. Cheaper to borrow money than spend your own savings.

That isn't because of capitalism (only). It's an issue of much of Apple's cash being "stuck" outside the U.S. because of less than ideal U.S. tax laws. Corporate taxes, some people argue, are the opposite of capitalism (or at least interfere with capitalism). A common definition of capitalism is: "an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state". With that in mind, one can argue that it's cheaper for Apple to borrow money because of statist/socialist/communist economic policies instituted by the federal government. A purely capitalistic society would have no business taxes. It would then be cheaper for Apple to bring the money back to the U.S. rather than borrow.

Anyway, that's enough politico-economic discussion from me today.

The wonders of capitalism. Cheaper to borrow money than spend your own savings.

When we stop punishing the productive by higher tax rates, the this craziness will stop.

The wonders of capitalism. Cheaper to borrow money than spend your own savings.

I see the year 2046 in this article... doesn't that make the assumption that Apple will still be around in 2046?

2019 and 2021 seem like safe guesses that Apple won't vanish before then. 2026 doesn't seem unreasonable... although 10 years is a long time in tech. 2046? That gives us enough time that a company that hasn't even formed yet somehow undoes Apple.

By 2046, the singularity may have occurred already.

People often complain about Apple using different jusrisdictions to reduce tax owed. Apple operates in a whole bunch of countries. Some for manufacturing employment, some for retail, some for distribution, and some for IP. Perfectly normal activity. The complainers are wrong, but . . .

The complainers want to bring it back for the purpose of taxing it. The current capital gains tax here is 23.8%. The income tax around 45% including state and federal, and "Obamacare" add-ons. They want more tax, not more investment. Where it is now, it is providing more investment with minimal taxation. In order to use it in the USA where they want they have been taking out massive loans, about $70B against those assets in various currencies, to invest the loan proceeds in the USA which is legal without taxation. The cost of course is the massive interest they pay on an absolute basis, if not a relative basis. That is a cost.

The good news from all this is Apple has learned to bypass wacky US Federal tax laws to be able to invest MORE in the USA than they otherwise could.

New balance: $75.9B

About 1/6 short term, 1/6 5 year, 1/3 10 year and 1/3 30 year overall. So it will roll off over the next several years to a notable degree. The return on average assets is currently 10.24%, so the payment is fully covered by growth.

Time for more GBP bonds.

It used to be a good thing that Apple was debt free, especially what happened back in 90s. Now, they have ~$80 billion dollars in debt, which is insane. They are not going to increase their cash reverse until they have a brand new technology and cars won't be it. This means Apple is just burning through their cash reserve as growth is slowing down on everything, Apple will not have a hyper-growth % anymore as all markets they're in are saturated (except for watch).

I hope Apple doesn't repeat the 90s but everything is telling me that they're going there and it is going to hurt worse than before.

Lotsa tax experts here ;)

I'm not a financial expert but it seems like Apple's stock is very undervalued. They're basically putting billions back into the stock in buy-backs and dividends and stock is trading very low as a part of EPS compared to other tech companies. It's like wall street is constantly in this mode of "apple is 6 weeks away from dying" and afraid to go in big. the stock split didn't help, ASP of the iPad and iPhone didn't help, buy backs aren't helping, dividends might be helping but not in a huge way.

Where is the pro-AAPL discussion? Or is them taking on massive debt despite their overseas holdings causing more problems for them in stock price because investors see the bonds as a liability?

From the corporate finance perspective, raising debt gives positive signaling than raising capital through equity. Raising debt is a good thing for Apple if they can keep up its growth (assuming Apple Car). This will increase its financial leverage and tax shield. It is cheaper to borrow debts than issue more equities because debts - bonds only require a marginal premium above TBill due to its AA rating, but equity holder will require much more return to their cash than bonds holders.