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Apple Inc. is expected to report Tuesday that its stockpile of cash has topped a quarter of a trillion dollars. This is an unrivaled hoard that is greater than the market value of either Wal-Mart Stores Inc. or Procter & Gamble Co. It also exceeds the foreign-currency reserves held by the U.K. and Canada combined.

The money, more than 90% of which is stockpiled outside of the U.S., has drawn fresh attention as President Donald Trump has proposed slashing business taxes and granting a one-time tax holiday on corporate cash brought home. Those policies could ratchet up pressure on the tech giant to dole out more money to shareholders or make splashy acquisitions.

Apple’s quarterly results will show the company has doubled its cash in just over 4½ years. In the last three months of 2016, it racked up cash at a rate of about $3.6 million an hour.

Apple Chief Executive Tim Cook early this year said he was eager to bring cash home if tax changes enabled it. Chief Financial Officer Luca Maestri said such a move would give Apple flexibility to do more capital returns.

When Apple had its 1990s bankruptcy scare, then CEO Steve Jobs arranged an infusion from Microsoft, setting his resolve to keep reserves for emergencies. Mr. Jobs also believed Apple could better boost its stock price by using its money to develop products than through buybacks or dividends.

The cash topic has long been sensitive at Apple. Mr. Jobs, who saw Apple almost run out of cash after he returned to the company in 1996, frequently told colleagues he was against returning cash to shareholders. He was convinced to do a buyback in the wake of the Sept. 11, 2001, terrorist attacks as the stock market fell, according to a person familiar with the matter. After that, several executives thought the company should continue to do buybacks because the stock price seemed very cheap, this person said.

Apple hired bankers to study the impact of a buyback, according to this person, who said Mr. Jobs rejected the idea before it went anywhere.

Apple’s biggest product, the iPhone, has only supercharged the cash machine. Apple has sold more than 1 billion of the devices in the decade since it was introduced, and today claims 91% of all the profits in the smartphone sector.

Source: Apple’s Cash Hoard Set to Top $250 Billion

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Call your congressman and tell him/her to not tax your 401(K)!

In the early stages of negotiating tax reform, Congress is already considering whether to reduce the benefits of contributing to a 401(k) and similar retirement plans

A reliable retirement is “a four-legged stool,” says David Kabiller, co-founder of AQR Capital Management in Greenwich, Conn., and co-author of a recent article on how to design retirement programs. Those four legs are a traditional pension, a 401(k)-type plan, Social Security and supplemental savings in taxable accounts. “Eliminate or restrict any of those,” he says, “and you make achieving a secure retirement more challenging.”

Yet that is what Congress, perched securely on its taxpayer-funded four-legged stool, is considering for the rest of us.

In the next round of tax reform, “it’s not really a question of whether retirement plans will get a haircut, but of how much,” says Bradford Campbell, a partner in the law firm of Drinker Biddle & Reath in Washington, D.C., who served as assistant Secretary of Labor under Pres. George W. Bush.

That’s because the money you contribute to 401(k)s and several other types of retirement plans isn’t subject to current income tax. Nor are your future earnings on those accounts — until you take them out to live on in retirement, when your withdrawals will be taxed as ordinary income.

If your retirement dollars were treated, instead, like contributions to a Roth Individual Retirement Account or Roth 401(k), they would be taxed before you put them in. You could ultimately withdraw the money tax-free in retirement, but the incentive of getting an upfront tax break would be gone.

Taxing retirement-plan contributions Roth-style would generate roughly $1.5 trillion over the next decade the way the government reckons the numbers, estimates Mr. Campbell. So giant a pot of honey may be hard for Congress not to raid.

“We definitely need comprehensive tax reform,” says Mr. Campbell. Unfortunately, when lost revenue has to be replaced, “it’s a game of winners and losers, and the retirement system is poised to be one of the losers.”

It’s hard for most people to save for a goal that glimmers faintly decades in the future. Take away the tax incentive, and many savers might no longer see the point of even trying.

Fully 39% of Americans don’t feel very confident in their ability to fund a comfortable retirement, according to a recent survey. It’s safe to say none of those worried folks are members of Congress.

Instead of penalizing retirement saving, lawmakers should be making it easier, perhaps even mandatory — as it is for members of Congress.

For workers struggling to set money aside, says Mr. Kabiller, “mandatory savings could help impose the discipline of giving up compensation today in order to fund your longevity down the road.”

Source: Grab Your Pitchforks, America, Your 401(K) May Need Defending from Congress – MoneyBeat – WSJ

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EVERY chief executive hopes to lead his company to success. Jeff Bezos, Amazon’s boss [stckqut]AMZN[/stckqut], wants something more epic. A prominent wall in the company’s headquarters in Seattle is covered with narratives from historic explorations: excerpts from “The Odyssey”; notes from the journey of Lewis and Clark as they ventured across America; the transcript of the first moon-walkers talking to mission control. At the end, ones and zeroes spell out how far the company has got: “Day One”.

The phrase, reflecting Mr Bezos’s belief that Amazon’s journey has just begun—and begins again each day—is the company’s mantra. At any other firm such grandiosity would invite derision. At Amazon, it makes investors drool and rivals quake.

Amazon, which went public 20 years ago, is now the world’s fifth-largest company by value, worth over $400bn (see chart). Its e-commerce site accounts for about 5% of retail spending in America, roughly half the share of Walmart, the biggest firm in the sector. It is the biggest online retailer in America, and accounts for over half of all new spending. Its cloud-computing business, Amazon Web Services (AWS), is larger in terms of basic computing services than the three closest competing cloud offerings combined.

Since the start of 2015 Amazon’s share price has risen by 173%, seven times the growth of the preceding two years. Operating profits have expanded, too, but at $4.2bn remain relatively small—which is how shareholders like it. Amazon has always emphasised the value of long-term growth (presumably with some bigger profits down the line), and investors have come to accept this. In February, when Amazon reported higher profits but lower revenue than expected, its share price temporarily dipped. Shareholders worried it might not be set to grow as quickly as they had hoped.

Morgan Stanley, a bank, expects Amazon’s sales to rise by a compound average of 16% each year from 2016 through to 2025: that is higher than its estimates for Google or Facebook. That is a slower pace than Amazon managed over the past decade; but the bigger a company is, the harder it is to keep growing. Amazon’s annual sales of $136bn are almost 50% more than those of Alphabet, Google’s parent, and over four times Facebook’s. Credit Suisse, another bank, calculates that only ten firms with sales of more than $50bn have managed to grow by an average of 15% or more for ten years straight since 1950; no company with sales of more than $100bn has done so. If Amazon were to pull it off, it would be the most aggressive expansion of a giant company in the history of modern business.

Source: Primed: Are investors too optimistic about Amazon? | The Economist

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Today is Tax Day. You may have already paid your taxes and told the government how much you earned and therefore paid. However, if you haven’t done it before today – you need to settle up with the US Government (and most states/cities/counties/etc.). With April 18 finally here, U.S. taxpayers are likely asking themselves:

Where exactly are my tax dollars going?

 

To answer the question, here is a “Taxpayer Receipt” showing how each $100 of taxes was spent, both for 2016 and five years earlier. It was prepared by the Committee for a Responsible Federal Budget (CRFB), a nonpartisan nonprofit group in Washington that monitors federal spending. The group’s three chairmen are Republican Mitch Daniels, Democrat Leon Panetta and independent Tim Penny.

Looking at the list of expenditures, it is clear why some say the U.S. is a giant insurance company with an army. Half of all spending goes for Social Security benefits and health programs such as Medicare and Medicaid, while another 20% is for defense and military benefits.

In the last five years, the shares of spending for Social Security, Medicare and Medicaid have each risen more than 15%. Social Security and Medicare increased largely due to the aging of the population, while the increase in Medicaid comes from aging, growth in health-care costs and expanded eligibility under the Affordable Care Act, also known as Obamacare.

Over the same period, the share devoted to national defense dropped 22%, in part because Congress reduced war spending and capped other military spending in 2011, according to CRFB senior staffer Marc Goldwein.

The tax figures include all federal revenue. The individual income tax provided nearly half the total (47%), while payroll taxes kicked in about one-third (34%). The rest came from corporate income taxes (9%) and other levies such as customs duties and excise taxes (9%).

Source: How $100 of Your Taxes Are Spent: 8 Cents on National Parks and $15 on Medicare – WSJ

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Ten analysts now predict Amazon’s shares will eclipse the $1,000 mark in the next year, and 13 others have price targets within 5% of that goal. Since I follow the company, I will be putting out my price recommendation in the next couple weeks.

Amazon is now the fourth-largest company in the S&P 500 by market cap, ranking behind only Apple, Microsoft and Google parent Alphabet. Its stock price is now setting new all-time highs above the $900 mark. Incidentally, after adjusting for stock splits, that $400 target on Amazon in 1998 equates to about $67 today.

Amazon’s soaring market value—up more than 50% in the past 12 months to more than $430 billion—allows founder and CEO Jeff Bezos to sell about $1 billion of his shares each year to fund his space exploration venture. But that hasn’t stopped Wall Street from seeing the stars. Ten analysts now predict Amazon’s shares will eclipse the $1,000 mark in the next year, and 13 others have price targets within 5% of that goal, according to S&P Global Market Intelligence.

Still, Amazon today isn’t quite the Amazon of old, trying to survive on razor-thin retail margins. Its fast-growing Web-services business has altered the company’s earnings and cash flow dramatically, as have other offerings. Brian Nowak of Morgan Stanley estimates that Amazon’s Prime membership, advertising and credit card programs generated about $9.3 billion in revenue last year and will grow to about $12.7 billion this year—all with a combined operating margin of around 70%. Helpful, as Amazon still needs all the fuel it can get.

Source: Amazon at $1,000, Wall Street’s Not-So-Bold Call