First it's corporate cash surpluses, next it will be property and wealth. Angered by a private sector investment strike that they helped create, many governments want to move back to the commanding heights of the economy

 

Earlier this week, the world’s most profitable company, Apple, raised $6.5bn by issuing bonds of varying maturities at prices that even the UK government struggles to match. Perhaps unsurprisingly, given that this is a company with $178bn of cash or cash equivalent sitting on its balance sheet and which therefore scarcely needs the money, the bonds were in hot demand.

 

Apple was pretty much a busted flush by the tail end of the 1990s. That investors would happily cough up for such expensively priced paper is on one level testimony to what a remarkable success the company has since become. But on another it is also evidence of the complete madness into which much corporate, and indeed government, finance has descended.

 

If this were money to fund new investment, job creation and further innovation, you could only applaud. But it is not; it is to pay for the buybacks and dividends which shareholders, understandably keen to get their hands on Apple’s embarrassment of cash riches, have begun to demand. Ludicrously, the American tax system forces Apple to go through the rigmarole of raising money from investors in order to pay investors, many of whom will be the same, money which it already has, albeit offshore to avoid oppressive rates of US corporate taxation. Even the twisted logic of Lewis Carroll’s Tweedledee would struggle with such absurdity.

David Fuller's view

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This problem is not of Apple’s making.  It is currently the world’s most successful corporate Autonomy.  These companies have outgrown their native countries and have a significant presence in many countries.  They are the greatest commercial successes of the 21^st Century, and have unprecedented global influence.  They spend money to develop their products, and services.  They also save a chunk of cash, remembering the travails of 2000 and 2008, and knowing that difficult environments are a reoccurring hazard.  That is a good business practice.

Some things never change, and among them are governments that would happily take a larger share of the Autonomies earnings.  These firms inevitably pay taxes in the countries where they operate, but they do not work for governments.  They work for themselves, their employees and their shareholders.  The world is better off for their presence. 

Just as companies must compete for customers, governments must compete for a portion of the Autonomies’ businesses in their countries.  If they overtax, not least in terms of overseas earnings, Autonomies have the option of leaving cash in countries where it is best served.

Last but not least, successful Autonomies are among the best investment choices available to investors.  Iconic Autonomies can also influence market sentiment.  For instance, a break above $120 by Apple should help US Indices to reach new highs.  Disney is also a positive influence, particularly for future investors.  If you want your young children or grandchildren to become interested in the stock market, buy them a few shares of Disney.