Where's the Cash?

by Gerri Willis

What a problem to have!

Apple, the world's biggest company, says it just has too much money!

But now it has a plan.

Apple is sitting on nearly $98 billion dollars in cash and securities.

Now it will start paying some of it out to shareholders in the form of a dividend and share buyback program - something the company hasn't done since 1995 because Steve Jobs resisted such calls.

The quarterly dividend will be $2.65 per share starting in July.

That works out to just over ten bucks annually, or just under two percent of the current stock price.

Apple said the $10 billion dollar share buyback program will begin at the end of September, and run for three years.

Investors had been expecting the move driving up Apple shares 37 percent since January.

Today, shares are hitting an all time record of $601 dollars.

Current CEO Tim Cook says when Apple began analyzing how much it could give out to shareholders, it looked at how much cash it has in the U.S.

They are just using "domestic cash" when it comes to these dividends.

Like many other big companies, which I’ll outline in a moment, Apple has much of its cash overseas.

But Apple is reluctant to bring back that $64 billion dollars because of this number: 39 percent.

That's the U.S. corporate tax rate; the highest in the world once Japan lowers its rate in April (when you combine federal and state tax rates.)

So those profits, which have already been taxed in their respective countries, would then be subject to the 39 percent corporate tax rate.

Apple's CFO Peter Oppenheimer says: "current tax laws provide a considerable economic disincentive to U.S. companies that might otherwise repatriate a substantial amount of foreign cash."

And, as I mentioned, in no way is Apple alone with this problem.

According to Moody's Investors Service, non-financial U.S. companies are sitting on one and a quarter trillion dollars in cash as of December.

But, get this: More than half of that money, or nearly $700 billion dollars is being stockpiled overseas.

The two other biggest culprits?

No surprise here... General Electric and Pfizer.

GE has more than $100 billion dollars overseas; Pfizer $63 billion.

Tech giants Google and Microsoft joined Apple with boosting their overseas profits in 2011 by more than 40 percent.

So what, if anything, is Washington doing about this problem?

As usual, not much because each side of the aisle wants something different to be changed.

According to reports, companies like Google, Cisco, Qualcomm and Oracle are waiting for Congress to repeat a 2004 tax repatriation holiday that would set a maximum rate of five and a quarter percent.

Republican Congressman Kevin Brady from Texas has sponsored such a bill.

But Obama and other democrats argue a one-time tax holiday is too much of a giveaway to big corporations.

And we all know how this administration feels about big business!

The other idea is a more permanent fix. A proposal from Republican Congressman Dave Camp of Michigan shifting the U.S. tax code to a "territorial tax system" that exempts 95 percent of foreign profits.

According to Bloomberg, this plan is very similar to the tax systems in the UK, Japan and Germany.

All four republican presidential candidates support this plan.

And that's what it's going to take for changes to the tax code to become a reality.

Someone in the White House who is not anti-corporation, not anti-profits.

Until this country fixes its onerous double taxation problem, don't expect to see these big corporations bring this money back home, and put it to use hiring people in America.

Get Your Shovel Ready

by Gerri Willis

Get out your shovel because here comes the latest jobs pitch from Congress and the President.

Congress is currently squabbling over transportation bills that would cost hundreds of billions of dollars and the promise of millions of jobs.

 

Harry Reid just the other day pushing the merits of one such bill before the Senate:

"We're trying to pass a bill that would save about 1.8 million jobs and produce about 700,000 more jobs. That's what this is about."

 

A similar bill backed by Speaker John Boehner costing $260 billion fell apart earlier this year. House Republicans wouldn't vote for it.

They're working on another one.

 

The President is pitching his own plan. This one costs nearly half a trillion dollars over six years, but it's unlikely that will get through Congress.

But one thing is consistent in all these plans and proposals.

The authors argue this kind of spending on roads and bridges and other so-called shovel ready projects is the best way to “create or save jobs,” but recent history has shown that argument to be tenuous at best.

Even the President admitted as much:

"Shovel-ready was not as …uh…shovel-ready as we expected."

 

The Federal Highway Administration says for every one billion spent on highways it leads to 35,000 jobs.

But economists say it's almost impossible to put a precise figure on the number of jobs created by transportation spending.

One thing is clear: big government programs are not the way to create jobs.

Getting out of the way of the private sector is.

 

Take Apple for example.

No government bailouts there, and no taxpayer handouts either.

And, for the first time ever, Apple has attempted to quantify how many jobs in this country can be credited to its line of iPhones and iPads.

Apple says it created or supported 514,000 American jobs.

The precise number can be debated, and to be sure, Apple has created more job outside this country.

But it shows you just how ineffective the government is in creating jobs compared to the private sector, and leads to the inevitable conclusion that the best way for Washington to help manufacturers here in the United States is to get out of the way.

And it wouldn't hurt to cut the corporate tax rate in the U.S., which is about to become the highest in the world.

These numbers make it clear. It's the private sector that creates jobs; not the public sector.

Don't Kick Yourself Over Apple

by Gerri Willis

Are you kicking yourself because you didn't buy Apple 200 bucks ago?

The company's shares are topping $500 billion in market value today.

It's now the only company above the half-trillion mark, and only the sixth in history to ever grow so big.

The stock has gone up around $240 in a year. So, if you aren't one of the lucky few to get in on the ground floor of this mega-company, you think you're missing out on an amazing investment, right?

But here's the thing. You may actually own Apple, and not even know it!

Over the last five years, the number of Apple-holding mutual funds has tripled! Tripled!

According to Morningstar, there are nearly 4,200 mutual funds holding Apple stock.

To put it in perspective, that number amounts to 30% of the entire universe of mutual funds!

And it gets better!

The number of funds that have more than 5% of their portfolio invested in Apple is seven times greater now.

And more than 100 mutual funds have invested more than 10% of their assets in Apple.

These 4,200 mutual funds aren't unheard-of secret funds. They include some pretty big names.

Some of the most widely held funds include Fidelity contra-fund, the Janus fund, Oppenheimer main street and many many more! If you're investing in the Nasdaq index as a whole, you have Apple to thank for your profits.

The mega-stock accounts for nearly a quarter of that index, which is more than Qualcomm, Google, Microsoft, Oracle, Amazon and Cisco combined!

The reason for the stock boom, Apple is now the world's most valuable company. The gap between it and number two – Exxon Mobil - has widened rapidly in the past month.

And apple has raised investors' hopes it might institute a dividend.

It is in rare company.

Only Exxon Mobil, Microsoft, Cisco, Intel and GE have ever reached that $500 billion milestone, but none of them stayed very long.

That means its market cap is greater than the entire economies of Poland, Belgium, Sweden, and Saudi Arabia. In fact, if Apple was a country, it would be the 20th largest country in the world!

Look, when you hear about Apple rising, don't think it doesn't impact you because you're not a shareholder or don't have an iPad. Chances are you hold a mutual fund that holds Apple shares!

In fact, you may own multiple mutual funds all of which are investing in Apple, which means instead of owning too little of the rock star company, you may own too much!

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