I didn’t call Trump a “fund of knowledge” intelligent, ethical etc.
He actually started out supporting Trump saying he was the best thing to happen to politics and he was talking about possibly being open to being his VP pick. Here is a timeline of the switch. Looks like he made the switch to Hillary because Trump kept saying more and more outlandish things.
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Lol, we’re looking at houses in Mt. Lebo
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Good points.
I’m wondering if these companies, like Apple, are waiting for a favorable tax rate to repatriate their cash and then spend on R&D. Rates are historically low, but why borrow if you have the cash?
What if there are no positive NPV projects for Apple to undertake with that cash in the US? Would it bring the iPhone 10 out 2 quarters earlier?
While the free flow of capital is always a good thing it only causes growth when there’s growth to be had. Promising massive growth and jobs is sketchy.
That seems pretty unlikely to me considering they are looking to break into several alternative industries.
Agreed.
I don’t think that’s what they’ve done. Unless I missed something.
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The politicians have. “If we let the capital back into the US there will be massive growth.” I think this is the wrong argument. The correct argument is “We are the only nation on earth with these stupid repatriation rules. A company shouldn’t owe US taxes on profits from foreign operations. That’s draconian and not befitting of the ‘land of the free’.”
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@Basement_Gainz @anon50325502 An article that goes along with your discussion about Apple and I would say is relevant to a lot of companies in the US
If President Trump wants iPhones manufactured in the U.S., Apple will need to front the cost to pay the much higher wages required in the U.S., which means that consumers will have to be willing to pay more. Either that, or it will have to rely a lot more on machines, which won’t create jobs, and might end up taking them.
http://www.cnbc.com/2017/04/30/iphone-factory-observer-why-trump-cant-bring-manufacturing-jobs-back.html?__source=yahoo|finance|headline|headline|story&par=yahoo&doc=104435294&yptr=yahoo
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Interesting article.
Every time automation comes up my response is: Who builds the robots? Who delivers the robots? Who programs the robots? Who installs the robots? Who maintains the robots?
People with jobs. Will these jobs be in the US? Why not encourage that? Give all those STEM majors something to do other than complain their coworkers are all dudes.
Funny anecdote. When I worked at a refractory company we installed robots to stack bricks coming out of the press onto kiln cars. The bricks were 40 lbs each and a person stacking them would move over 20 Tons in a single shift. Needless to say we had some sprains and strains.
So the whole board is there to watch the robots get switched on for the first time (nobody tested them first). The robots used pneumatic suction cups to hold onto the bricks. Well the robot’s speed was too high and it grabs the first 4 bricks off the press and throws them at the board. Narrowly missing them.
But more interesting when we looked at headcount at that department… it stayed the same. We traded one production guy per shift for one maintainence tech per shift for the robots. If a guy called off or got hurt before we just plug in a new guy. If tbe robots went down the whole line has to stop. So maintainence is a big priority. The line became far more productive after the robots were installed.
Automation =/= less jobs. It just means different jobs.
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Why borrow when sitting on cash?
Leverage, of course. ROI & ROE through the roof.
The insistent nature of quarterly reporting, huge compensations tied to ‘stock performnce’, and 24/7 business news make for an unwise myopic short term fixation, imo.
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Ya, we’ve had this conversation a few times here. You can not hope to increase US employment on existing technologies while maintaining current price points. It’s nearly impossible because of labor costs, much of which is driven by bureaucracy, are so much higher here than in other countries. Automation can create some new jobs here, but not nowhere near enough to cover everyone displaced (here and in other countries). Otherwise, automation wouldn’t make any financial sense.
Of course, it does. No one would automate if it didn’t reduce costs.
And I’ve said this many times, we should embrace automation and set ourselves up to lead the world in building and maintaining a global automation industry/infrastructure.
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I agree that the trendsetters will not lose employees, but with increased production - they will begin to shut down the non automated competitors. In the longer term, there will be less employed.
However, l have stated several times if there are only 10 jobs to pick up (operating automation) rather than the 100 we totally lost to Asia, l will take the 10.
100% of the time.
Used to work in automating in packaging… neat stuff in an admittedly nerdish way.
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It’s been a while since I’ve looked at WACC, but wouldn’t your ROI be higher using cash v. debt?
If you took 100K and bought a rental house outright vs buying 2 rentals and borrowing 50% - you will have higher return on the borrowed scenario. It will not be double because of the interest and initial loan costs, but it is greater.
You could plug in numbers to verify.
The risk is that now your assets must deliver, to repay your co-owner er lender, which ups the risk over just sitting on your unrented house.
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I always liked that argument. The Finance professors were quick to point out the interest tax shield as well.
But how do you explain Berkshire Hathaway and Warren Buffet? Every company they buy they de leverage over time. He’s done okay for himself (for many reasons). I think that over time the interest expense and the risk of default really do eat into returns more than WACC would predict. The more creditors you have the less options you have.
There’s a rumor going around in the financial sector that Apple is gearing up for to purchase Disney. I haven’t looked too far into the reasons for these rumors, but it’s a pretty interesting/scary thought.
In before Pocahontas is selling iPhones.
Right? I’m now imagining Tony Stark, now sponsored by Apple, with his brand new iRonman armor!
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From a simplistic viewpoint, it you can borrow $10 and make more profit than the interest by buying and deploying an asset, then your concern turns to will somone loan me, is there a market for the additional deployment, what happens if idea fails or how risk adverse am l?
@Basement_Gainz
I think Buffett deleverages because he is risk adverse. And debtfree ownership is less risky. Remember his mantra “l don’t buy high tech, l buy what l know.”
I don’t follow him anymore, but he always had a much deeper look at companies he considered because he was Warren freakin Buffett. A true investing machine!
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