Inflation has risen over the past several quarters to a level the U.S. hasn’t seen in four decades. Inflationary pressures can affect Apple’s sales while also eroding the value of the company’s prodigious mountain of cash.
For firms with significant cash holdings, inflation is a double whammy: it affects their sales and profit margins, but also the value of their balance-sheets.
With high inflation and rising interest rates, excessive cash hoarding becomes very costly… Apple still hoards huge amounts of cash. As of December 25, 2021, Apple’s balance sheet lists $37.1 billion in cash and cash equivalents, $26.8 billion in marketable securities, and an additional $138.7 billion in non-current marketable securities, for a total of $202.6 billion, or 53.1% of its total assets.
In 2019 Apple’s return on its cash and marketable securities was about 2.4%. By 2021 that return declined to about 1.5%. And those meager financial returns have been eroded by high inflation, yielding significant negative real returns.
MacDailyNews Take: Time for Apple to finally free the moths (if they’re still alive) by cracking open the ol’ wallet to pay out greater dividends to investors?
Unlikely. Apple shareholders will be lucky to get up to 25-cents per share.
More likely is the company announcing plans for a massive $100+ billion increase in buybacks when reporting earnings after the bell on Thursday.
‘Tis best to get a handle on inflation, if you know how, while you still can. – MacDailyNews, May 11, 2021
Earlier this year, Interactive Brokers founder Thomas Peterffy said, “Inflation is 7% — 1% or 2% [in interest rate hikes] doesn’t mean anything. If they really wanted to stop inflation, they would have to raise rates to 4%, 5%, 6%.”
Inflation is repudiation. — Calvin Coolidge
When a business or an individual spends more than it makes, it goes bankrupt. When government does it, it sends you the bill. And when government does it for 40 years, the bill comes in two ways: higher taxes and inflation. Make no mistake about it, inflation is a tax and not by accident. — Ronald Reagan
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