David Einhorn, the tiny $7Billion Hedge Fund manager, has tweaked the nose of computing’s Goliath, Apple. Since a week Thursday, David has shocked the US business world with his direct, loud, and “uncivil’ attack on Apple’s huge cash hoard of nearly $130Billion. And Apple’s cash hoard islikely getting bigger on a growth rate of 10%per quarter for the next year or two at least. And Apple is not alone:|
But Apple is the biggest by far -at around $130Billion. To put this amount in perspective consider that it exceeds the total combined GDP of Slovenia, Jordan and Paraguay.
But Apple is not alone. Us companies are sitting on ever growing cash balances.
This chart shows the cash pile as of 2010 mid-year. But by 2012 mid-year the business cash hoard reached $2.2 trillion. Again, US Business is sitting on Cash equal to total GDP of France or the total combined GDP of Australia, Saudia Arabia, and Belgium.
And the public was told told by Paul Ryan and Mitt Romney that trickle down economics in which business get even more corporate income tax and capital gains breaks is vital to revive the economy. This is why David Einhorn’s challenge to Apple is so controversial in the business community. It gives lie to the facts that US Business needs tax relief plus local tax incentives by state and local governments[already pressed for revenues, state and local governments have to give up even more cash breaks to get businesses to locate in their area and preserve or add to precious jobs]. Given sustained and historically low interest rates since 2008, US Business is a)flush with cash and low cost capital costs…what possibly more could they need? The current US Business peeves are uncertainty in the economy, growing entitlements, and too intrusive government. Anything to disguise a largely Chicken-Little investments by US Businesses in the huge opportunities opening up in the US and World economies in such areas as Water Suffiency, Non-intrusive and Green Energy production, huge Infrastructure upgrades across the transportation, education, communications and other basic sectors.
Summary
Yes, David Einhorn is acting for his own GreenLight Fund which has $1.6 Billion in Apple stock. He is trying to shake the Apple tree and get some more Apple dollars to fall into his funds. What is really needed is for US Business to make more concerted and positive efforts in revitalizing the economy. But already, the Financial sector flunked this test on reaching reasonable accords with cash strapped mortgage holders in helping to revitalize the housing markets. Are big capital equipment vendors like Cummins and Caterpillar going to be equally short sighted in demanding state and local concessions in the face of the huge infrastructure needs in the US? Are the Energy and Utility companies going to hold onto outdated tax concessions and old traditional energy production methods in the face of the need for domestic energy sources that are clean? Or is US Capitalism like US Primary Education becoming rapidly second rate?