Thursday, May 4, 2017

Apple is really an investment bank that makes iPhones. Apple has $255 billion in cash

The original idea for this story comes from "Vox Apple has $250 billion in cash." (Hat tip)

$250 billion in cash is about 1/80th of the 18 Billion dollar US economy.

We have long believed that Americans over consume.  Over consumption includes buying luxury items or super sizing your meal.  It also includes buying products with features we like but may never use.

Another form of over consumption is buying products with status appeal such as foreign cars, soft leather goods(SLG) and handbags, or Apple iPhones. Thorstein Veblen first noticed that some goods are more valued because they have higher prices. He created the term "Conspicuous Consumption."


Apple has become the most profitable company on earth by tapping into the market for conspicuous consumption. They are king of the affordable luxury market. Today, we are going to look at how rich Apple actually is. And how Apple resembles an investment bank more than a high-tech company.  

Apple has yearly sales of about $200 Billion of which 67% are sales of iPhones.  Apple also has a huge amount of cash on hand.

Based on the Apple 10-Q from April 2017, Apple has

Cash                                $15 Billion
Short Term Securities     $52 Billion
Long Term Securities     $190 Billion

Or about $255 billion in cash.  Just cash, not assets, CASH!!!

They have net income from sales of about $40 billion a year and spend about $10 billion on R&D.

They continue to earn huge amounts of investment income on the marketable securities ($12 billion mark up) this quarter. And roll over the cash ($99 Billion in securities purchases this quarter) into new marketable securities. The biggest holdings are US Treasury Securities($53B) and Corporate Securities ($157B). The biggest use of the money(about $30 Billion a year) is for share repuchases. 

They also have $84 Billion in debt at ridiculously low interest rates.  Most of the bond rates are between 1.00% and 2.00% along with one special set of long term debt ($24 Billion) at 0.28%.  Yes, that 28 basis points.  Not only is Apple loaded with cash, they are using other peoples money to make even more money.

Apple looks like an investment bank that just happens to make iPhones.

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