You might want to read John Tamny’s post on how Apple’s successful bond issue indicates that repatriation, low interest rates, and quantitative easy are all futile. I could try to summarize it but you’d be better off just reading the post.
As a teaser we should keep in mind that supply and demand and the flight to quality can’t be repealed by the Federal Reserve or the Treasury.
Its an interesting take.
Flight to quality or yield chase?
Perhaps both. But I think people know where I stand.
I suspect the repatriation debate is not accounting for a lot of factors, but I have not looked into it. I have a lot of questions.
Is this money being held in banks? If so, what currency? If not US dollars, does a weak/strong dollar affect the repatriation decision? Is this money used for local operating/capital budgets? What is an American company? Does Sony, Toyota, etc. repatriate to Japan? If not, are these companies being encouraged to begin repatriation? Other than increasing their taxes, why would American companies repatriate their money? Are American companies passing up investment opportunities to save taxes? If so, why are other investors not grabbing these opportunities?
I am not looking for answers. I am just wondering if these are being included in the debate. I suspect the debate is more about taxes than investment.
I read the piece again; thought about it this afternoon. Look, folks, what have I said about free money.
This is horrible public policy. Just horrible. It serves current political interests. I get it.
20 years from now, when God, er Obama, is long gone people are going to look back and ask…….what the hell were we thinking?
Sad.
This line remains unproven:
Why are junk bonds only yielding 5%. Why are lendingclub and prosper becoming more and more popular?
Using his apartment analogy, the Fed is reducing the supply of apartments, buying them at whatever price necessary. This is not at all the same as declaring them as “cheap”. The point is for the Fed to buy up those apartments so you are forced to look for an apartment elsewhere. The fact that people are still willing to spend whatever it takes to get those apartments means they aren’t taking the Fed seriously enough.
* and the Fed has more work to do, not less.
Take the article with a rather large dash of salt. The author confuses assets with liabilities, misunderstands that reserves are not really money, thinks deposits are loaned out and does not appear to realize U.S. dollars never leave the U.S. Nor does he realize QE does not and cannot increase what too many economists refer to as the “money supply” or act to increase inflation.
Sell APPL. they have no better use for cash than play games. bond issue is indicative of slower growth curve. Dump it.