Why Apple is investing $148 billion in corporate debt

“If Apple Inc. were a bond fund, it would dwarf the competition,” Claire Boston reports for Bloomberg News. “The iPhone-maker has $148 billion of its record $257 billion cash pile invested in corporate debt alone, according to a company filing from Wednesday. That’s enough to buy all the assets in the world’s largest fixed-income mutual fund, the Vanguard Total Bond Market Index Fund, which has about $145 billion of assets including company, government and mortgage bonds… After corporate bonds, Apple’s next-largest holdings in its pile of cash and marketable securities are $53 billion it allocates to Treasuries and $21 billion it keeps in mortgage and asset-backed securities”

“Like many technology companies, Apple has resisted transferring the money it earns abroad back to the U.S. to avoid triggering corporate income taxes on the earnings,” Boston reports. “Instead, the Cupertino, California-based company invests in corporate bonds and other assets like money market funds and U.S. Treasuries. With more than 90 percent of its war chest abroad, the company regularly issues bonds of its own to help fund programs like share buybacks and capital spending.”

“Apple and other cash-rich companies are holding out, hoping that they may soon be able to bring their cash home at a lower tax rate,” Boston reports. “President Donald Trump’s tax plan includes a repatriation provision, though it didn’t specify a rate. He proposed a 10 percent levy when campaigning, and Treasury Secretary Steve Mnuchin has said the rate would be ‘very competitive.'”

Read more in the full article here.

MacDailyNews Take: Free money.

Apple raises $10 billion in debt ahead of President Trump’s repatriation tax plans – February 3, 2017
Apple has now amassed nearly $80 billion in debt – September 12, 2016


    1. As I said in a related thread yesterday, interest rates are so low currently that a top-rated borrower like Apple can sell bonds for less than it is making on its investments. This is the same situation as a homeowner who could pay off his 4% mortgage but prefers to invest the money at 8%.

      1. Apple has every right to make money, but Apple has a responsibility to produce the best products for the consumer. Apple is now focused on improving its profits at the expense of design and production. There is no balance.

  1. No, not “free money”. Apple and others are holding out on paying their corporate tax in the hope of being able to get a tax break that gives them a LOWER tax rate than any normal citizen gets (who wouldn’t wish he could hold off paying tax until he only has to pay 10%?). Which is money the State aka the citizens of the USA should get but do not. The final consequence is that the State aka the citizens get poorer (had a look at the debt lately?), and are in effect subsidizing big corporations. And with Trump and his billionaire friends all profiting they’ll talk about how it will all trickle down to the hard working man on the street … because that worked so brilliantly under Bush …

    Fool me once, shame on you. Fool me twice, …

    1. This is money earned outside of the USA, and has taxes already paid on it at the point of origin. If the rates are not as high as the USA, tough shit. Not Apple’s problem.

    2. Partly agree with you, but worth pointing out that part of your argument is rhetoric. Somewhere north of 40% of all filing Americans pay no federal income tax – so lots of “normal” citizens pay 10% or less of their income.

      Also, people confuse “marginal tax rates” with effective tax rates.

      That said, the continuing migration of all assets to the 1% is highly concerning and a threat to the country nonetheless.

      1. Not paying Federal income tax ≠ not paying Federal tax.

        All workers regardless of income pay Social Security and Medicare taxes. Those taxes are not assessed on income in excess of $108k per year.

    3. duh truth: “Which is money the State aka the citizens of the USA should get but do not.” Funny how some think other’s $$ somehow belongs to them.
      “Subsidizing big corporations?” That’s curious since the US corporate tax rate is amongst the highest in the World!
      “Under Bush?” I think you might be confusing the common phrase “trickle down” with Reagan…at least he’s the Prez that really coined the term in modern culture. I’ll bet you don’t think Mr. Obama acted in the same way? If so, your partisanship is blinding you.
      I’ll bet you think “you should get some of that,” like in a check for $$ fairness? That’s more like presumptuous. Have you ever been hired by a poor man/woman? I haven’t, but I’ve been hired many times by people wealthier than me. Their wealth enabled me to gain wealth with a JOB…not some percentage of their wealth sent to me “just because.” That’s “trickle down” in it’s best form. If a business/corp tax reduction occurs, it sounds like you’ll cry unfair, but it’ll enables the CEO/owner to invest more (take risk), invent, research, etc and hire more. Trickle down in this way is an amazing thing…except if you think there should be “auto-share” of the wealthy’s $$.

    4. LOL, the arrogance of calling yourself “TheTruth”!

      According to tax watchdogs, Apple pays 31% on their US income, and paid about $5B to the US Treasury last year.

      Apple paid about 6% on their foreign income to foreign treasuries last year. AND, they booked US income tax at 35%, on a majority of that foreign income. The payment of that tax is deferred until brought back to the US.

      Not everyone agrees that the US should tax foreign-earned income that has already been taxed. In fact, most countries do not. Most use a territorial tax system. Companies like Apple wait on repatriating that income, even if they’ve booked the tax, because Congress has shown in the past that they may apply a tax holiday. It’s their fiduciary responsibility to maximize shareholder returns, so any person in their right mind will wait, if there’s no absolute need to bring that money back.

      The US runs a progressive tax system. The citizens are not subsidizing big corps. Progressive means the wealthy subsidize the poor.

      We won’t know how this will all shake out until Congress goes thru the details and the reconciliation process. As of this moment, based upon what little we know, I’ll have to pay alot more, due to elimination of a lot of deductions! Having said that, I’m opposed to double taxation, where corps pay tax once, and then taxpayers, aka shareholders, pay tax again on the same income. So, if corps get lower taxes, and I have to pay higher taxes, that’s okay. Taxes do need to be reformed, since they are totally out of wack. There will be winners and losers, and I figured the actual people who pay tax, will pay more, like me.

  2. It’s all about quarterly reports, narrow focus, short term activity. It’s all manipulation, exploitation, spinning. Apple has forgotten or forsaken it’s original purpose and promise.

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