Apple’s $5 Billion Leveraged De-Equitization Shows Folly of Repatriated Cash Tax Break

Soooo… Why again do they need that tax holiday?

And what does it mean when you’re your biggest investor?

Via Bloomberg:

 

Apple is about three-fourths of the way through a program that’s returning $300 billion of capital to shareholders by the end of March 2019. At the start of July, the company was sitting on more than $261.5 billion of cash — 94 percent of which was outside the U.S., Chief Financial Officer Luca Maestri said on an earnings call.

 

 

via Apple Sells $5 Billion of Debt to Fund Share Buybacks, Dividends – Bloomberg

Advertisements

Trump’s Amazing Historical Ignorance, “Priming the Pump” Edition

From the transcript of a recent interview with The Economist:

But beyond that it’s OK if the tax plan increases the deficit?
It is OK, because it won’t increase it for long. You may have two years where you’ll…you understand the expression “prime the pump”?
Yes.
We have to prime the pump.
It’s very Keynesian.
We’re the highest-taxed nation in the world. Have you heard that expression before, for this particular type of an event?
Priming the pump?
Yeah, have you heard it?
Yes.
Have you heard that expression used before? Because I haven’t heard it. I mean, I just…I came up with it a couple of days ago and I thought it was good. It’s what you have to do.

via Q&A: Transcript: Interview with Donald Trump | The Economist

After Massive Loan Growth Under Obama, Credit Stalls Under Trump

Coincidence? Via Wolf Street:

US-commercial-industrial-loans-2012_2017-05-10Over the past five decades, each time commercial and industrial loan balances at US banks shrank or stalled as companies cut back or as banks tightened their lending standards in reaction to the economy they found themselves in, a recession was either already in progress or would start soon. There has been no exception since the 1960s. Last time this happened was during the Financial Crisis.

via Oops, this Wasn’t Supposed to Occur in a Rosy Credit Scenario | Wolf Street

Can Goldman’s Rapacity and Trump’s Stupidity Together Actually Save Banking?

Trump’s two main economic advisors are telling him to do something great – resurrect Glass Steagall! He is too stupid to realize these two – Goldman pod people Cohn and Mnuchin – are doing this so all their gazillions in deferred investments in the firm grow even more grotesque. But so what? For once, having a malleable moron in the White House could be a good thing!

A new Glass-Steagall would split (taxpayer-insured, whether de jure or de facto) commercial banking from the casino of investment banking and go a long way toward unloading the Too Big To Fail gun that tumescent, serially incompetent commercial-investment bank hybrids like Citi hold to the heads of policymakers.

Effect on  (pure-ish play investment bank) Goldman? Zilch. Unless you count how happy they’ll be to see their big competitors – Citi, JPMC, BofA et al – kneecapped. You can bet Cohn and Mnuchin are smiling at The Donald’ s cluelessness. For once, we can, too.

Via Bloomberg: Trump Says He’s Considering Moves to Break Up Wall Street Banks https://bloom.bg/2p1Eufs

 

 

 

 

NPR Labels Wilbur Ross, Trump Commerce Pick, a “Leader” in Private Equity. Great. It’s a Value Destroying, Rapacious Con Game.

This is a piece I wrote on “private equity” in 2014. Hearing Trump’s choice for Commerce Secretary, Wilbur Ross, described on NPR as a leader of the private equity industry, prompted me to repost it.

bn-don-and-wil

The implosion of the junk bond market in the early 1990s, along with a number of high profile LBO failures – Federated Department Stores, Macys, Revco, and of course, the deal dubbed “the Burning Bed,” Ohio Mattress – made the term “leveraged buyout” somewhat unsavory. Then, in one of the most successful rebrandings in financial history, dealmakers thought up a new moniker and since then have operated under the accurate if unwieldy name “private equity.”

But the blush was soon off the rose. Buyout shops hit an even worse rough patch during the financial crisis, when some of the biggest LBOs of all time – Tribune, Harrah’s Entertainment, Station Casinos, Realogy – went toes up and the high yield market cratered again.

European politicians came to refer to buyout shops as “locusts,” and private equity in the US unfortunately became associated in the public mind with the hapless Blackstone boss, Steve Schwarzman, who compared a proposal to change the tax treatment of funds like his to the Nazi invasion of Poland. By 2008, private equity was once again a pejorative term .

Today, it’s almost a smear. Regulators are publicly calling the industry to the carpet for dodgy and fraudulent practices. News outlets smell blood. On May 21, the Wall Street Journal reported that the iconic LBO shop KKR appeared to be holding on to millions of dollars that should have gone to investors in one of its funds. This comes a couple months after an SEC official, Drew Bowden, released the scathing results of the agency’s investigation into private equity practices (hat tip Naked Capitalism).

Bowden said, “Some of the most common deficiencies we see in private equity in the area of fees and expenses occur in firm’s use of consultants, also known as ‘Operating Partners,’ whom advisers promote as providing their portfolio companies with consulting services or other assistance that the portfolio companies could not independently afford.”

Yves Smith of Naked Capitalism goes on to write, “If anything, Bowden’s boss Mary Jo White had been more pointed in the section of her Congressional testimony at the end of April.”

White said, “Some of the common deficiencies from the examinations of these advisers that the staff has identified included: misallocating fees and expenses; charging improper fees to portfolio companies or the funds they manage; disclosing fee monitoring inadequately; and using bogus service providers to charge false fees in order to kick back part of the fee to the adviser.”

Ouch. Somewhere a bunch of guys in blue shirts with white collars and red ties must be putting their heads together to devise a new name for their business. They might consider “public disgrace” or even “private machinations.” In any case, to paraphrase an old saw, the third name’s a charm.