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Yes. This is very typical. What do you think Apple does with the hundreds of billions on its balance sheet? It’s not sitting in a savings account earning intere

by tbrock 9y ago

Yes. This is very typical. What do you think Apple does with the hundreds of billions on its balance sheet? It’s not sitting in a savings account earning interest. Sure Apple uses some cash to build factories and technology but has an internal hedge fund invest the majority of it. Same goes for Google, Microsoft, etc.

tarsinge 9y ago
So in the end companies use their cash to invest in each other? I have a hard time wrapping my head around the economic impact but it doesn’t look very healthy to me (or is it?)
- spdy 9y ago
  Its a solid route to take if the market goes south the states have to intervene as they did in 2008. Privatize profits socialize loses.
- Johnie 9y ago
  They don't invest in each other. They buy low risk securities, like Treasuries.
- PeterisP 9y ago
  It kind of makes sense from the investor's perspective. Let's say that I've invested 100m in Apple, and that's the amount I wish to have invested. Apple does not need cash at the moment and is currently reinvesting it in other companies. The alternative would be for them to redistribute money to shareholders - say, I'd get 20m back, and could reinvest it in other companies myself. But there's a big difference - if I'd do it, the 20m would get taxed; if Apple does it directly, then it's not.
  - Retric 9y ago
    Stock buybacks are a much better approach than simple dividends from a tax standpoint. I invest in Apple get say 1%. Over next 20 years Apple buys back 50% of it's stock. I now own 2% of Apple without paying any taxes.
    - moccachino 9y ago
      Hm.. You still own 1% of Apple right? Otherwise, what happens at the end of 20 years when a 100 investors each buy 1%?
      - Retric 9y ago
        Apple can only buy stock when someone sells it. Consider there are 100 shares and you own 1 of them. Now Apple buys 1 share from someone that sold it, that means there are 99 shares and you own 1 of them. Repeat until Apple buys 50 shares, there are 50 outstanding and you own 1 share. Now, apple does a 1:2 split so there are 100 outstanding shares and you own 2 of them post split. It's true that the people selling stocks have to pay capital gains. However, they always need to do that when selling shares to anyone.
- bogomipz 9y ago
  >"So in the end companies use their cash to invest in each other?" I don't think that's necessarily true. For instance Apple's money manager Braeburn Capital invests their money in very conservative, highly-rated bonds for instance. See: https://qz.com/393093/the-mysterious-fund-in-the-desert-that-manages-apples-cash/ https://qz.com/393093/the-mysterious-fund-in-the-desert-that...

by tbrock 9y ago

tarsinge 9y ago

So in the end companies use their cash to invest in each other? I have a hard time wrapping my head around the economic impact but it doesn’t look very healthy to me (or is it?)

spdy 9y ago
Its a solid route to take if the market goes south the states have to intervene as they did in 2008. Privatize profits socialize loses.
Johnie 9y ago
They don't invest in each other. They buy low risk securities, like Treasuries.
PeterisP 9y ago
It kind of makes sense from the investor's perspective. Let's say that I've invested 100m in Apple, and that's the amount I wish to have invested. Apple does not need cash at the moment and is currently reinvesting it in other companies. The alternative would be for them to redistribute money to shareholders - say, I'd get 20m back, and could reinvest it in other companies myself. But there's a big difference - if I'd do it, the 20m would get taxed; if Apple does it directly, then it's not.
- Retric 9y ago
  Stock buybacks are a much better approach than simple dividends from a tax standpoint. I invest in Apple get say 1%. Over next 20 years Apple buys back 50% of it's stock. I now own 2% of Apple without paying any taxes.
  - moccachino 9y ago
    Hm.. You still own 1% of Apple right? Otherwise, what happens at the end of 20 years when a 100 investors each buy 1%?
    - Retric 9y ago
      Apple can only buy stock when someone sells it. Consider there are 100 shares and you own 1 of them. Now Apple buys 1 share from someone that sold it, that means there are 99 shares and you own 1 of them. Repeat until Apple buys 50 shares, there are 50 outstanding and you own 1 share. Now, apple does a 1:2 split so there are 100 outstanding shares and you own 2 of them post split. It's true that the people selling stocks have to pay capital gains. However, they always need to do that when selling shares to anyone.
bogomipz 9y ago
>"So in the end companies use their cash to invest in each other?" I don't think that's necessarily true. For instance Apple's money manager Braeburn Capital invests their money in very conservative, highly-rated bonds for instance. See: https://qz.com/393093/the-mysterious-fund-in-the-desert-that-manages-apples-cash/ https://qz.com/393093/the-mysterious-fund-in-the-desert-that...