Apple already has more money than God - $155 billion, to be exact - but now it's borrowed $3.5 billion more in European markets.
Why does it need to add to its war chest? Is it burning through its cash pile on R&D for an iCar?
Or on its own non-lame version of Google Glass?
Of course not! There's no such thing as a non-lame version of Google Glass.
This is just tax arbitrage, pure and simple.
Financial engineering, (click here) in other words, is Apple's hotly anticipated new product.
I think repatriation when used in relation to financial institutions is mostly a Republican word.
Income abroad
The result, as the Center on Budget and Policy Priorities points out, was a flood of money that exclusively went to share buybacks and dividends, even as those companies cut jobs. Even worse, this just made corporations shift even more income abroad in anticipation of these "one-time" holidays becoming a regular part of our tax calendar. That's part of the reason why tech giants like Apple keep looking for every overseas tax loophole - sometimes paying nothing - as their foreign cash has piled up to almost absurd levels.There's one little problem, though. What if the repatriation holiday never actually, you know, happens. Then corporations will be left with more money than they know what to do with overseas, which they can't use here. Now they can use it to buy other companies without incurring the wrath of the taxman - and they have - but they're out of luck if they want to, repeat after me, maximise shareholder value by paying out profits as buybacks or dividends.
Well, unless they use borrowed money to do it. That's because they only have to pay US taxes if they bring home money they earned, not money they borrowed. So Apple might issue $3.5 billion worth of euro-denominated bonds to take advantage of the even lower interest rates over there, and then use that money to buy its own stock....
When Ford Motor borrowed large amounts of cash at zero percent interest rate it was a very smart thing to do. To the best of my knowledge they dealt with American money and not tax havens overseas. Ford avoided the fate of GM when it front loaded any chance a world economic collapse would cause the company harm.
But, when Apple did it, there was no eminent threat against it's value. Apple front loaded lots of cash in anticipation of American forgiveness of wayward companies in a law that Mitch McConnell will pass called "Repatriation." The last time that was done was with "W" in office.
There was a lot money that played into the elections of 2014. A lot. From unknown sources. Now, perhaps, the American public will realize why and why they were puppets to Wall Street power.
Be sure to take notes so it won't happen again.
