[0] https://9to5mac.com/2019/09/05/apple-is-borrowing/
[1] https://wolfstreet.com/2020/03/11/boeing-crashes-as-43-billi...
Both return capital to share holders but dividends yields a negative impact to their Market Value since it's dispensing their profits outside of the company.
AAPL is currently valued at a 20.38 P/E ratio, the lowest of all FAANG stocks, hardly overvalued.
Shareholders were clearly happy with receiving slightly less capital (that which will be lost to debt costs) in exchange for receiving it sooner. That is not a bad exchange, so long as the debt cost is not steep.
Apple can trivially afford their low-cost debt, both out of their extreme cashflow and their cash hoard.
However, I still see it as a bit of a problem. I think it is partially a symptom of a market that has become too focused on a single metric (P/E ratio). The result is that reducing shares is more important than boosting book value.
I'd love for this hypothesis to be proven wrong, but I'm afraid that it is part of what is driving some very questionable practices.
Still, it was the first time when lowering interest rates didn't have a huge effect on the market, so the signs are there.
The issue is with corporate debt. A lot of it is unsustainable in the event of an economic downturn [1]. Already people are leaving the junk bond market [2]. There is a risk that BBB-rated bonds will get downgraded, which would mean that pension funds can no longer keep them in their portfolio. If this happens, these bonds will move into the junk bond market, increasing supply in that market with already decreasing demand. That means that interest rates on lower-rated bonds will go up, meaning that it will become harder for companies that are not in a strong position to obtain credit, which they might need to if times get harder.
Especially in a few sectors (tourism, shipping, oil) it's clear that companies are going to get hit this year. Central banks are aware that this is an issue and they are taking some steps to soften the blow.
[1] https://www.theguardian.com/business/2019/oct/16/global-econ... [2] https://www.bloomberg.com/news/articles/2020-03-11/junk-inve...
https://www.youtube.com/playlist?list=PLE88E9ICdiphYjJkeeLL2...
That article says nothing of the sort. It says Apple issued $7B in bonds despite sitting on $200B in cash, and independently mentions Apple having spent $122B on stock buybacks in the past 18 months. The article also explicitly states the new bond issue is being used to pay off existing, higher-interest bonds that are coming due this year.
> Boeing took out $43 billion in loans for stock buybacks[1]
Again, the article says nothing of the sort. It says Boeing spent $43.4B in cash over a six-year period on stock buybacks. As a result, it does not have sufficient cash reserves to handle the financial fallout from the 737MAX incidents, and so has to borrow to cover those costs and keep the company solvent. The amounts cited in the article are significantly less than $43.4B, though still significant in the absolute.
In the last two weeks or so the doomsayers have seen their bullhorns acquire large volume increases, they're being given far too much credibility (like Merkel's obscene, wildly irresponsible statement about how up to 70% of Germans could get Covid; back in reality, it'll be a tiny fraction of that). The emotion and irrationality has now swung too far, per typical herd behavior. That irrationality may get worse yet, the panic is beginning to set in more fully.
I've seen numbers in that range from multiple official places from people who are experts in the field. She didn't just pull that number out of the air. And I don't think it is obscene or irresponsible to share - it is a realistic and sobering reminder of the severity of the situation.
> in reality it'll be a tiny fraction of that
Yeah, I don't think I'll give much weight to someone who makes categorical sounding statements without giving any backing evidence...