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Despite Apple stock recently taking a hit, Money Morning's Capital Wave Strategist Shah Gilani appeared on FOX Business' "Varney & Co." to explain why Apple Inc. (Nasdaq: AAPL ) is still a winner. He emphasizes the positive impact of Apple's cash flow on Apple stock.
Also, hear Shah's simple explanation of how Apple's bond offering is actually going to be a positive for Apple stock, as he breaks down complicated financial metrics and accounting rules for viewers.
Apple: Don't Hate the Player, Hate the Game
Apple Inc. (Nasdaq: AAPL) CEO Tim Cook was summoned to Congress last week to face outraged legislators over his company's failure to pay corporate income taxes to any national government on more than $74 billion in overseas earnings.
This is a perfect example of a situation that is simply the tip of the "offshoring" iceberg. Below, I'll address what it means for your money and why the outcome may not end up at the "obvious" solution.
According to a Congressional investigation, the Cupertino giant paid no taxes whatsoever to any national government on more than $74 billion in revenues - a fact that Apple doesn't dispute.
As galling as this is, what Apple did was perfectly legal. Using well-documented and well-known loopholes in the U.S. and Irish tax codes, Apple set up Irish shell corporations that allowed them to funnel dividends and earnings from offshore investments in such a way as to not incur tax liabilities...in any country.
Interestingly, Senate aides associated with the investigation said they've never seen companies use subsidiaries that didn't owe taxes. Evidently, they haven't looked very hard.
What Apple's doing is nothing new or unique. Almost every multinational corporation operates in the same shady territory. Most have thousands of accountants and lawyers on staff whose sole job is to make sure everything those companies do is tax "efficient."
Foreign subsidiaries are just the beginning. There's transfer costing, loans between subsidiaries, options-based compensation, tax deductions for malfeasance, and intellectual property offshoring -- just to name a few of the favorite tax dodges in widespread use today around the world, quite literally.
For example, Microsoft Corp. (Nasdaq: MSFT) sends an estimated $0.46 cents on every dollar through Puerto Rico to pay for patent costs associated with discoveries that are "mostly" made inside the United States, according to the Institute for Policy Studies or "IPS" for short.
Microsoft CEO Steve Ballmer's crew stashed $60.8 billion offshore last year alone and didn't pay a dime in U.S. taxes. That's an estimated $19.4 billion it'd owe Uncle Sam if brought home.
Pfizer Inc. (NYSE: PFE) sells 35%-45% of its drugs inside the United States but has reported no U.S. profits in five years. The IPS estimates the pharma giant booked $73 billion in profits offshore last year.
How to Really Make a Fortune on the "Mobile Wave"
If you've been riding along with me for any length of time, you know I get really revved up whenever I talk about the "Mobile Wave" in technology.
The truth is, I can't help it: I look at the forecasts, calculate all the money that can be made, and end up feeling as jazzed as can be about the windfall profits we can reap from this transformational trend.
And I'm not the only one who's feeling this technology-fueled ebullience: The folks over at Amazon.com are clearly experiencing the same adrenalin-driven affliction.
Amazon, you see, is coming out with its own smartphone.
And not just any smartphone. Amazon's entry into smartphone derby is going to be one cool mobile device - highlighted by a 3D screen that will display photos so realistically that you'll want to just reach out and touch them.
Why in the world, you might ask, is an "e-tailer" entering the wireless-phone business?
Just look at the numbers.
Apple Bond Offering is Proof It'll Do Anything to Avoid Taxes
The record $17 billion Apple bond offering this week will do more than just placate shareholders eager to get some benefit from the company's $144.7 billion in cash.
It will help Apple Inc. (Nasdaq: AAPL) avoid paying taxes, a feat that the Cupertino, CA tech giant has elevated to a high art.
The company has kept the bulk of its cash - some $102 billion - in overseas accounts to avoid paying the 35% corporate tax rate here in the United States.
Borrowing money to fund its plans for dividend increases and stock buybacks allows Apple to reward its shareholders without repatriating those foreign profits and paying U.S. taxes.
Better yet, the interest Apple will pay out in its bonds is tax deductible, which will reduce the company's tax bill even more.
It's all so elegantly devious - and perfectly legal.
Apple Stock is Up After Earnings – But Are Gains Here to Stay?
Apple stock was up 5% in after-hours trading Tuesday when its earnings report turned out to be better than expected - but, not great.
Everyone was bracing for the worst when Apple Inc. (Nasdaq: AAPL) released second-quarter earnings Tuesday after the close. The big question was just how bad things were going to be.
The answer turned out to be... not so awful. The iPhone maker surprised Wall Street with better than expected numbers, mostly because expectations were so low.
However, as expected, forward guidance was glum.
Apple: Cash or Trash?
With Apple Inc. (Nasdaq: AAPL) off nearly 50% from its $705.07 a share high set last September, many investors want to know if it's a buy.
Not in my book. Here's why:
1. The company has held on to its premium pricing strategy for too long. Going out on price as it has recently with iPhones, for example, is the death knell of competitive differentiation. Businesses that engage in price wars have a very difficult time climbing back up the proverbial ladder.
2. The present management team is having trouble fulfilling the late Steve Jobs' vision, and execution appears to be stumbling. The Maps thing, for instance, was an unmitigated disaster and shattered Apple's image of invincibility. The public noticed.
Dumping Apple Stock for Google: How Investors Could Get Burned
The trend has some wondering if investors are consciously moving their money from one tech giant to the other.
"There's a lot of money that likes the tech sector, and I think Google has kind of taken over from Apple," Eric Kuby, chief investment officer at North Star Investment Management, told Reuters.
Looking at the charts, it's clear that Google stock is now enjoying the kind of momentum that Apple had for years, while sentiment toward AAPL almost couldn't get any more bearish.
Since Apple stock hit its all-time high of $705.07 in September, it has plunged 40% and lost more than $260 billion in market capitalization. AAPL is down more than 20% year to date.
Google hit several new highs recently, and poked briefly above $840 in early trading Wednesday. Google stock is up 48% from its mid-June low last year, and up 17.5% so far this year.
And at least two analysts recently put a $1,000 price target on GOOG, reminiscent of last year when analysts were rushing to put a $1,000 price target on Apple.
"The bulls are in Google's camp, and the bears are in Apple's camp at the moment," Neil Mawston, the executive director of Strategy Analytics, told CNBC.com, which speculated that Google could be replacing Apple as the dominant tech giant, as Apple supplanted Microsoft Corp. (Nasdaq: MSFT) in the past decade.
But any Apple investors who haven't already dumped shares in favor of jumping on the Google stock bandwagon might want to think twice before doing so now.
Apple iWatch, Google Glass First Shots in New Clash of Tech Giants
Coming less than a year after Google unveiled its Google Glass Web-connected eyeglasses, reports that an Apple "iWatch" is in the works emphatically confirm that the battle is now joined for dominance over the next wave of tech - wearable computing.
According to the reports, Apple Inc. (Nasdaq: AAPL) has 100 people working on an iWatch users would wear on their wrists, but that would have many of the same capabilities as an iPhone.
But wearable computers could enable new uses, particularly in the area of healthcare, while perhaps providing the spark to encourage some promising technologies that have yet to catch on, like contactless payments.
Four of the biggest names in tech - Apple, Google Inc. (Nasdaq: GOOG), Sony Corp. (NYSE ADR: SNE) and Microsoft Corp. (Nasdaq: MSFT) - either are selling, have announced, or are known to be working on wearable computing ideas.
Why This Week's Apple Earnings Matter So Much More than Usual
Monster Apple earnings in the December quarter would do wonders for Apple stock - but don't count on that happening.
Apple Inc. (Nasdaq: AAPL) earnings for Q1 2013 are due out Wednesday after market close, and Wall Street estimates range from a 14% decline to a 12% gain. Apple's own guidance is for earnings of just $11.75 per share, while the consensus on Wall Street is for earnings of $13.41 per share.
Even if Apple earnings match Wall Street expectations, $13.41 per share would actually be a decline of more than 3% year-over-year, a far cry from the stunning 118% gain the company reported last year. The psychological impact of declining year-over-year profits for the first time in nine years could ding the stock.
An actual earnings miss - even by just a few pennies - would be more dangerous for Apple stock, meaning the likelihood that Apple stock will fall after earnings is higher than usual.
Here's how Apple got in this vulnerable position.
The China Smartphone Brand That's Beating Apple (Nasdaq: AAPL)
Most investors who pour money into smartphone makers look to dominant players like Apple Inc. (Nasdaq: AAPL) - but they're missing a bigger part of the market.
The global smartphone industry is changing dramatically, as China surpassed the United States in 2012 to become the world's largest smartphone market by volume. Smartphone shipments to China in the third-quarter of 2012 hit a record 60 million.
Apple has noticed this shift. In fact, Apple CEO Tim Cook recently told Chinese-run Xinhua News Agency that he believes China will become the company's biggest market in the future.
But for now, it's the domestic brands that have won.
"Chinese brands have taken more than half the Chinese smartphone market this year, and they will take much more," Sandy Shen, the head of consumer research at technology research company Gartner in Shanghai, told the Financial Times.