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Larry Fink says the strong dollar is bad for the U.S. economy. That's no surprise. But the Blackrock boss didn't mention, in his April 6 interview with the Financial Times, that the skyrocketing dollar could trip up the biggest tech companies – those that thought themselves smart for parking squillions overseas to avoid U.S. taxes.
The head of the world's largest asset management firm read from the usual playbook about how a strong dollar will cause exports to suffer, but he adds that that the pain for U.S. companies will go beyond this. He told the salmon-tinged daily, "We believe that this will lead to an erosion in confidence on the part of CEOs with the potential to slow both investment decisions and future growth in the U.S."
Put less delicately, what Mr. Fink refers to is the fact that CEO's in the largest U.S. corporations – like Microsoft, Apple and Google – have been hoarding cash overseas for years, both as a means of funding offshore operations and avoiding U.S. taxes.
They are rightly concerned that their foreign cash has taken a precipitous decline in value against the dollar, and, unless their shareholders are willing to be paid in a foreign currency, if they do decide to repatriate their cash, there will be significantly less available to pay out via share buybacks and dividends.
Investors should take this into consideration, and perhaps enjoy the opportunity to feel doubly good about focusing on companies who keep their cash in the U.S.