The Future of an Illusion: Playing Trump’s Infrastructure Giveaway

Will Donald Trump’s proposed corporate trough slopping prompt Apple boss Tim Cook to send minions out to fill Cupertino’s potholes? The logic seems, well, crabbed. At least as much as the concept behind the Orange-o-Crat’s scheme to get tech giants to repatriate the squillions they hold overseas to dodge taxes. This is being sold as an infrastructure measure. It’s not. But it’s a short-term buying opportunity for stock punters.

See, it has been tried before. The optimistically named Homeland Investment Act of 2004 gave corporate tax dodgers a break if they brought their cash home and invested it in plants and jobs. They brought it home… some $230 billion. But they didn’t invest it. They paid 92% out to shareholders.

Expect something similar. Today it’s vanishingly unlikely that the cash that Apple, Alphabet (Google) and others would spirit back under Trump’s 10% incentive rate would be productively invested. Despite Fed boss Yellen’s Hamlet-on-the-Potomac routine over raising rates, cash for investment purposes remains cheap. Any productive investment opportunities can be financed with debt, which remains far cheaper than equity for sound companies.

Analysts say Apple could use the cash to reduce its float by 20%. That would drive its stock through the roof, and flatter the earnings per share figures used to calculate the compensation of Cook and others in its C Suite. 

They, and those with shares in the tech giants, will do well.That should be consolation enough for the tens of millions of taxpayers left with a ballooning deficit and nothing to show for it.

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