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If you can make a 5% return on investment and borrow money at 0% interest than you're going to invest a lot. As the interest rate approaches 5% your willingnes

by fwungy 4y ago

If you can make a 5% return on investment and borrow money at 0% interest than you're going to invest a lot. As the interest rate approaches 5% your willingness to invest falls. Tech runs wild on low interest rates because the return potential is so high. It falters on high interest rates because the risk is high.

MuffinFlavored 4y ago
> As the interest rate approaches 5% your willingness to invest falls. Do we have proof based on their financial statements quarterly that they are actively investing their cash in risk free assets yielding 5% instead of investing in projects? I find it hard to believe that a team of $200k-$300k/yr earning employees at Google can't find a way to generate more than 5% net margin for the company?
- fwungy 4y ago
  The particulars don't matter. That was just an example. If a company sees an opportunity that it thinks it can profit on above its costs it will do so, if it has the resources.
- vineyardmike 4y ago
  > I find it hard to believe that a team of $200k-$300k/yr earning employees at Google can't find a way to generate more than 5% net margin for the company? But does the decrease of 6% of those employees have a resulting income decrease? Likely most teams will continue to function without the missing employees. Also plenty of the employees are recruiting and HR and other non-income-generating employees. Also yes they have billions in marketable securities, in debt, and interest income, etc https://abc.xyz/investor/static/pdf/20220427_alphabet_10Q.pdf?cache=fd1a189 https://abc.xyz/investor/static/pdf/20220427_alphabet_10Q.pd...