Cash Holdings of Apple and Other Tech High Fliers Are A Massive Risk in This Debt Jubilee Era
Interest-Rates / Credit Crisis 2016 May 26, 2016 - 06:53 PM GMTBy: Jeff_Berwick
Throw every “norm” out the window. This Keynesian, central banking world has everything so distorted that nothing makes sense anymore.
There are currently more than $7 trillion in bonds, worldwide, offering a negative interest rate. Wrap your head around that! People are actually paying trillions of dollars to give their money to mostly bankrupt governments with the promise they will receive less at a later date.
Treasury Bonds used to be described as having a “risk-free return.” Now they are “return-free risk”.
This system is so backwards, inside-out, manipulated and bankrupt that what once used to be seen as “prudent and sound” is very obviously risky.
For example, Moody’s reported last Friday that Apple, Microsoft, Alphabet (Google), Cisco Systems and Oracle are sitting on $504 billion in cash and “cash equivalents.”
Moody’s Investor “Services” (and we put “Services” in the proverbial air quotes, because these are the same people who called bundles of mortgages loaned to dead and jobless people Triple-A) made this statement in their Friday report: “Corporate America’s rising pile of cash is becoming increasingly important to investors as profit growth and the stock market stalls.”
They are right that profit-growth is slowing. The economy is stalling as we rest on the precipice of complete collapse.
In more normal times it would be prudent for companies to hold a large amount of cash to get through an economic downturn. Not now!
Holding large amounts of cash – or even worse, cash “equivalents” (basically bankrupt government bonds paying a negative interest rate) is now increasingly unwise.
Consider currency risk. A company like Apple, with subsidiaries worldwide, likely holds numerous currencies including euros and Japanese yen.
The Eurozone, as admitted by almost everyone, is on the verge of collapse. And Japan too.
Both the euro and the yen may not even exist a few years from now. And, even if they do, they’ll likely be so hyperinflated as to be on their way to becoming worthless.
The US dollar is in no better shape. Countries around the world are moving away from using the dollar and the petrodollar system itself is failing. The dollar could be quickly headed towards the dustbin of history.
And, Apple, meanwhile, has $215 billion in cash. Much more is actually in held in the debt of bankrupt governments (which is even worse)!
Apple’s market cap is currently about $500 billion. Nearly half of that is held in pieces of paper that could be valued at zero in just the next few years.
This, in fact, should be an investors biggest concern. You have nearly half the market cap of Apple being held in highly risky instruments. And then there is the bonus risk of having 30% more being absconded by the Internal Rape Service (IRS) if Apple were to even repatriate that money to the US based parent company.
In other words, these large cash holdings are a major risk… and most people don’t even realize it.
If companies like Apple had any sense, they’d be diversifying out of fiat currencies into metals. But, they are not… mostly because the CFOs of these companies went to Keynesian business schools. They watch CNBC, and think that the Federal Reserve is here to “help”.
And, to be fair, even if they did understand, most other people also have no idea what is going on. Apple and the others would likely receive a backlash from investors for “risking” their assets in barbarous relics like gold if they tried to make the transition.
Of course, when the hour comes, the entire economic fabric of Western civilization is going to be ripped asunder. (We’ve documented that with our videos and White Papers. You can see our latest video HERE.) That’s the plan. That’s the intention of those at the very top of the economic structure. But try telling that to the average investor.
Gold rallied against the dollar by nearly 30 percent in the first four months of this year. And that would have provided quite a boost to Apple’s bottom line if the company had “cash” holdings in the yellow metal. It should have, but it didn’t.
Gold and silver are now the assets of choice for those who are awake to what is happening as we move further into Jubilee Year 2016. Billionaires like George Soros, Stanley Druckenmiller and Carl Icahn have all taken considerable positions in gold of late. We’ve reported on these moves and we understand exactly why they’ve taken place.
In fact, we’ve been ahead of the curve and sold (temporarily) quite a few of our positions just as Soros and others were buying. TDV’s Senior Analyst, Ed Bugos, told subscribers to sell many of their positions just prior to the recent pullback in gold after making huge gains in the first quarter of this year. He’ll be letting subscribers know when the best time is to get back in to even further profits.
I would suggest you subscribe to our TDV newsletter HERE so that you can get a sense of how to approach this type of defensive investing. The Fed has indicated rates might rise in June and that has strengthened the dollar against gold. But the stock market rally is seven years old. Sovereign, corporate and personal debt are scaling heights not seen since 2008. And there are so many black swans out there that it is impossible to tell which ones will come home to roost.
Even the US government is beginning to prepare for calamity. Only a few days ago, Congress introduced the “No Bailouts for State, Territory, and Local Governments Act.” The new bill prohibits any federal agency from funding ANY bankrupt city, state, or territory. The bill also prohibits the Federal Reserve from “financially assisting State and Local governments.”
Congress is well aware of a massive wave of defaults about to hit cities and states. Puerto Rico is just the beginning. We can see from this new bill that the federal government wants to make sure that every dime available ends up in its pockets. Nothing for cities or states. But the US federal government is just as bankrupt as they are.
This coming collapse will be one for the history books and very few see it coming and even less know how to prepare.
Those invested with Apple and other large corporations may think they have insulated themselves from the worst of the volatility because of their large cash holdings. In fact, in a way, Apple is now mostly a money market fund and they may have just risked billions on a failing system.
Anarcho-Capitalist. Libertarian. Freedom fighter against mankind’s two biggest enemies, the State and the Central Banks. Jeff Berwick is the founder of The Dollar Vigilante, CEO of TDV Media & Services and host of the popular video podcast, Anarchast. Jeff is a prominent speaker at many of the world’s freedom, investment and gold conferences as well as regularly in the media.
© 2016 Copyright Jeff Berwick - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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