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Strategies & Market Trends : Value Investing
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To: E_K_S who wrote (56798)2/1/2016 9:39:11 PM
From: Graham Osborn  Read Replies (1) of 78764
 
I was thinking about the overseas reporting myself. Maybe in a few years I'll care enough to go check :)

The other thing about growth through acquisitions - just my view. If two identical companies do a merger of equals through a stock offering each has theoretically doubled revenue, although in fact nothing operational has happened. If a bond offering is used instead the stockholders are replaced with bondholders which increases the upside for the equity holders but the downside as well. Because interest rates have been so low that upside has been viewed as virtually unlimited of late, which is true. But the same is true to the downside. What has happened globally, in China the US and everywhere else, is investors got confused between the organic negligible growth and the leveraged stupendous growth. The ability to raise debt and equity (valuations as proxy) became reflexively self-re-enforcing. Hence the global weakening of emerging market currencies/ debt crisis in China/ ongoing collapse of various leveraged industries including energy and pharma. When the bond markets tighten the anemic organic growth has nowhere to hide. Everyone focused on whether companies could service their existing debt forgetting that the ability to raise new debt was requisite to the business model. Most people don't bother to plot rev vs LT debt over a course of years - I do. And I look at the tbook payoff as well.

Anyway, to AAPL, I hope they hold their cash a few years rather than do something foolish like a buyback or huge acquisition. Any deal of that size will be stupid by definition.
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