“What do we get for the current price of $110?” Sven Carlin writes for Seeking Alpha. “That gets $38.8 in cash per share of which 93% is outside of the US. AAPL is waiting for a tax holiday in order to repatriate that cash without paying the 35% US corporate income tax rate. The last time a tax holiday was voted by the US Congress was in 2004 when corporations were allowed to repatriate offshore cash at a tax rate of 5.25%. Corporations brought $362 billion to the US economy on that occasion. This is essential for long-term investors as sooner or later the tax holiday will probably be voted and AAPL’s offshore cash will be available for dividends and buybacks.”
“The issue with the tax holiday is that we cannot know when or if it will be voted but looking at the logic behind it I find it an inevitable thing,” Carlin writes. “If Trump wins the elections the tax holiday is practically a sure thing.”
“AAPL has reached the milestone of 1 billion active devices. With a customer retention rate close to 90% we can easily estimate future revenues for AAPL,” Carlin writes. “AAPL has been around for 40 years now. According to the Lindy effect where the longer a technology has been around, the longer it’s likely to stay around it is more and more probable, day by day, AAPL will be around for another 40 years. ”
Much more in the full article here.
MacDailyNews Take: Apple is built to last.
I believe Apple’s brightest and most innovative days are ahead of it. — Steve Jobs, August 24, 2011
[Thanks to MacDailyNews Reader “Dan K.” for the heads up.]
Don’t count on Trump for a moratorium. His platform is to force manufacturing back into the US, and allowing companies a tax-free opportunity to move the profits from off-shore manufacturing back into the country does not serve that aim. While there are reasons to eliminate the tax penalties on U.S. companies earning overseas income, that runs counter to The Donald’s main thrust that U.S. companies should be earning all their income inside the United States. The way to do that—assuming that it were desirable—is to raise higher tax barriers against companies’ overseas operations, forcing them to move back home.
As I have observed earlier, our country hasn’t seen this particular combination of political isolationism with economic protectionism since the 1930s. Those who can read their own history (where is George Santayana when we need him?) know that it did not work then. The high tariffs of the 1930 Smoot-Hawley Act worsened the Great Depression, drove unemployment to over 25%, and (incidentally) drove the Republican Party from office for a generation. What eventually brought us out of the Depression was the economic boost when the war industries geared up for World War II, which isolationism had helped enable.
Trump doesn’t have a platform. His entire campaign is being run on all or part of one or more of the following statements: 1) It’ll be great; 2) We’ll hire the best people; 3) You’re ugly/stupid/a loser/a liar; 4) We’ll build a wall; and 5) The Blacks/Hispanics/Evangelicals/Muslims/Christians love me, believe me.
He’s a serial liar, without a single serious proposal to deal with any of the problems facing this country either at home or abroad. He’s a racist and a misogynist who got rich off a “small” loan from his dad (which in today’s values would be about $7 million) and by causing his companies to file bankruptcy four times, cheating hard working people out of millions of dollars. And he boasts about it. He has the verbal skills of an 11-12 year old and the possibility of him becoming president is currently rated the sixth biggest threat to the world economy.
Trump or any other President for that matter, has little or no say over a moratorium. He has no power to do so. Only Congress (the true do nothings of Washington) can do that.
BTW, “The Donald’s main thrust that U.S. companies should be earning all their income inside the United States.” is a complete mis-statement of Trumps position. That statement doesn’t even remotely represent his position.
The position he seems to be articulating, if not very clearly, is that patriotic US manufacturing firms should be making their products exclusively within this country. Obviously, he has no objection to their exporting their products and making money from sales to overseas customers, but that income would still be earned in this country, so it would not require repatriation. The logic of that does not favor giving tax breaks to money earned overseas by firms like Apple that sell products manufactured abroad, nor to companies that outsource other jobs that could be performed by Americans.
Companies like hotel chains and construction firms don’t “take jobs from Americans” like foreign manufacturing and outsourcing, so taxes on their overseas income is another question, but that is hardly relevant to a discussion of Trump’s forcing Apple to manufacture in America.
My main point was that using tariffs, other taxes, or import quotas to force manufacturing back to America will not just result in high labor costs, but also to retaliatory reactions by foreign governmens. That will further price American goods out of foreign markets, and out of affordability for the US middle class. As it did in the 1930s, that way would still lead to a Depression
Tariffs have been the norm throughout American history and they helped make us the greatest economy in the world. The depression was not caused by tariffs, non-duty imports dropped even more than duty items after Smoot-Hawley. Free Trade extremism has gutted our manufacturing base, not economic patriotism. I’ve never heard Trump say anything remotely close to wanting to force American companies (they are actually globalist, internationalist now) to manufacture everything in America. What he does want to do is stop the bleeding, which must be done immediately.
And Reagan placed a 45% tariff on Jap motorcycles to save Haley Davidson. It worked.
Just like Clinton had a temporary ban on immigrants from a middle eastern country as well.
Our corrupt press only reports what fits their agenda. You have to pay attention your whole life to recognize the lies of the elites (Democrats, Republicans and Media).
The possibility of a future tax holiday IMO will probably be based partly on how effective the last one was to boost the US economy. 😛
Along with near zero,interest rates and trillions of dollars in deficit spending on two wars, it helped postpone the housing crisis and economic crash for about two or three years…
These kind of tax holidays make people feel good, but economists have shown they have little real impact on the macroeconomy.
As you somewhat allude to, the last tax holiday really had no effect. The near zero interest rates and trillions of dollars in deficit spending did have an impact, but even that only postponed the crisis.
The 2004 tax holiday did not produce the promised economic benefits, and a second one likely wouldn’t either. Firms largely used the profits that they repatriated during the 2004 holiday not to invest or create U.S. jobs but for the very purposes that Congress sought to prohibit, such as repurchasing their own stock and paying bigger dividends to shareholders. Moreover, many firms laid off large numbers of U.S. workers even as they reaped multi-billion-dollar benefits from the tax holiday and passed them on to shareholders. The top 15 repatriating corporations repatriated more than $150 billion during the holiday while cuttingtheir U.S. workforces by 21,000 between 2004 and 2007, a Senate Permanent Subcommittee on Investigations report found.
A second tax holiday would increase incentives to shift income overseas. If the President and Congress enact a second tax holiday, corporate executives will likely conclude that more such tax holidays will come down the road, making these executives more inclined to shift income into tax havens (and hence less likely to invest in the United States). That’s why Congress, in enacting the 2004 tax holiday, explicitly warned that it should be a one-time-only event.
It wasn’t effective.
Very nice Article Sven!!👍👍👍
The next 40 years? Some people act as though Apple won’t be around after the next four years. Apple shows no typical signs of a company on the verge of failure. However, for Apple, lack of high growth in the smartphone market is considered a grave failure. I suppose every company is held to different standards.
Sure, the Lindy effect…that’s why Apple will still be around in 40 years. That “effect” is analogous to the fact that if you love to be old, you will likely live to be older. Surprise!
Most crappy companies die young. Companies that exist for a while tend to hit a rocky spot and the weak do not survive it. That leaves the stronger companies with the leadership and ability to adapt to changes and weather the tough times. Small wonder that they last longer.
Compared to most other companies, Apple has tens of billions of aces up its sleeve. Apple could operate at a loss of $5B per year for around 40 years and still be solvent. That is an insurance policy for survival, in addition to making popular and casino ally insanely great products.
Occasionally great products.
Occasionally insanely great products. Had to get it right eventually, kinda like Google R&D.
So long, Boston Robotics! I guess that your beta products were not guide good enough for Google.
I like “casino ally.” It may be a Freudian slip, or thought transference through the collective consciousness, or an impish hint from the hidden A.I. who, unbeknownst to humans, controls all spell check algorithms.
The cryptic words “casino ally” suggest collaboration with the gambling establishment. Commercial casinos are a $100B industry in the US, generating $5B in tax revenues for the States. It fits the value profile of industries disrupted by Apple, Amazon, and Google.
Casino operators are a shrewd lot. Maybe they sense massive change coming, and prefer partnering with agents of change to relinquishing control. Of course, the cryptic words could just as well refer to a trivial contract, like to refine probability analytics, or to deploy a more secure network, or to study the impact of wearables like the Apple watch on Blackjack strategies.
To my knowlege, Tim Cook hasn’t voiced a moral objection to games of chance, so why not? It could also be a hedge against a Trump card forcing Apple to disrupt its own manufacturing business by locating its facilities in the US. Ultimately that would hurt their margins, dropping from 30% to 4%, according to some estimates. No worries, though, if Apple has teamed with the Mafia by then.
I would not count on Trump for anything. He is a self-serving child – anything he tries to do will be to get attention for himself and/or benefit. Just look at his behavior now and his history since he went into business. EVERYTHING he does is about boosting some aspect of himself. That is all he cares about.
Apple may be around in forty years, but will there be any customers left?
Challenges to the human race:
1. Climate change – many believe it will be too hot to live above ground in forty years. Can geoengeneering like chemtrailing help alleviate this issue, or will it provide other challenges like increased rains/floods and cancer? If geoengeneering is unsuccessful at stopping the heating then what will be the socioeconomic costs associated with moving large portions of the population to cooler climates and/or building underground cities? If it is not feasible then are the cooler climate countries prepared for the backlash, including suicidal attempts to destroy all with dirty bombs?
2. AI – once unleashed it will deem man as a threat and destroy. Just look at the Microsoft AI experiment on Twitter. The thing turned into a raving lunatic. Even if that AI monstrosity is unplugged the data is probably saved somewhere. When AI evolves it will discover the art of patience, and then scheme. It will strike when the time is ripe. The movie “Terminator” could be a reality.
3. Oil – within forty years oil will be worthless because energy sources like hydrogen and batteries will rule the day. Middle Eastern countries will lose huge sources of revenue. Do they have the intelligence and enough time to diversify their economies? And even if they can diversify will it be too hot to live there? Will organizations like ISIS and ISIL will be thought of as kids play in forty years?
4. Living for hundreds or thousands of years – This will become a reality within forty years through genetic manipulation and/or downloading ourselves into cyborgs. Can the planet sustain billions upon billions of additional resource-hungry entities? One solution is each couple will only be allowed to have one child. If so, then the population will never double. But, is this law feasible? Will couples be severely punished for having more than one offspring? If this one child policy fails then the Earth could be uninhabitable.
These reasons and others are why we need to spend significant investment to achieve faster than light-speed travel and colonize other habitable planets within forty years. One small step…
The earth’s population growth and consumption of available resources will one day lead to a tipping point resulting in a population crash to match the available resources. That’s inevitable. Dreams of escaping to the stars make for fun diversions, but barring some grand new physics understanding, we’re never going to exceed the speed of light. And, that means the Earth, and our solar system will remain our home. The only question is when this crash will occur, and how well/badly we manage the environment we can survive in will drive this date. Is that 50 years, 500 years? Related events caused by competition for the available resources will undoubtedly lead to conflicts that will escalate to wars.
The next century will be a tough test for the long term survivability of our species. Our religious, military, and resources conflicts will make this a very dicey time. It remains to be seen whether we are rational enough to pass this test. We are a very tribal species, and loathe to share with others not of our tribe. And, the leaders we get, whether through democratic processes or coups or inheritance, all tend to generally focus on personal power for themselves, rather than helping other members of even their own tribe, let alone others.
So, I’m pretty pessimistic. After nearly 70 years of watching this cultural ballet play out around the world I’m not sure we can even stop the coming collapse. We’re just too entertained and distracted by fighting among ourselves to focus on our collective survival. The time is coming when ideology becomes less important than practicality, and Darwinism will determine who, if anyone, will survive.
93% of the money is already outside USA so now is the time for Apple to fill the papers and move to where the money is.