Greetings folks and a warm welcome to the 81ST Edition of Friday Finance Weekly. This weekend is supposed to be a scorcher…so enjoy! Go Canucks Go!
The bond markets are active in a big way. Both Nike and Apple issued huge bond offerings. Nike boosted the industry’s biggest cash hoard by entering the bond market for the first time in a decade, with a new $1 billion offering. The athletic-footwear maker sold equal $500 million portions of 2.25 percent, 10-year debt and 30-year securities with a 3.625 percent coupon which is the lowest among similar corporate bonds issued in the U.S. this year (Bloomberg). The 2023 notes yield 58 basis points more than Treasuries, with the 2043 bonds paying a spread of 75. Nike’s sale adds to the $4 billion of cash and marketable securities the company had on Feb. 28 (Bloomberg). This is telling about the bond pricing, the markets are essentially saying that Nike is only marginally riskier than the US government. Proceeds are mainly for capital expenditures and acquisitions. The key word is acquisitions. Let’s see what they get up to. Apple somewhat dwarfed Nike, by issuing $17B in bonds. This is partly to quell investor demands of share buybacks or dividends. That being said, by issuing debt as opposed to repatriating its foreign cash reserve, Apple is expected to save $9.2B in taxes. Brilliant to say the least. Apple’s new iOS 7 is due out in September and if the past is any indication, they will continue to add piles of cash. I honestly think that the US government should borrow funds directly from the private sector. That’s a novel balance your budget strategy; unless of course the BC NDP has already proposed that. (Source: Bloomberg, CNET)
Some positive and negative news coming out of the states these days: The US debt ceiling deadline (yes it’s an actual thing now) has been pushed to mid-September. Previously it was set for August. The government boosted its total revenues as the economy has improved and there have been changes to the tax policy (basically gone up). Whew, those Washington politicians can now take a well-deserved summer break. Perhaps they will contemplate creative ways of filibustering; reading the dictionary will no longer cut it. Now for the bad news: The richest Americans got richer during the first two years of the economic recovery while average net worth declined for 93% of the nation’s households (PewResearchCenter). The Pew report says wealth held by the richest 7% of households rose 28% from 2009 through 2011, while the net worth of the other 93% of households dropped 4%. Pew says the main reason for the widening gap is that affluent households have stocks and other financial holdings that increased in value, while the less wealthy have their homes as their main asset, which haven’t fully regained their value since the housing downturn. Interesting how they make no mention of new debt. (Source: Bloomberg, USA Today)
Monster Beverage Corp. has asked a federal court to halt efforts by San Francisco City Attorney Dennis Herrera to place restrictions on its popular energy drinks, arguing such regulations are a federal matter. In a lawsuit filed Monday in U.S. District Court in Riverside, Calif., Monster said the San Francisco city attorney’s office was acting illegally by trying to force it to cap serving sizes and limit marketing, among other curbs. The Corona, Calif.-based company is the leading seller of energy drinks in the U.S. based on volume. The move comes amid heightened scrutiny of energy drinks, which promise a lift from caffeine and ingredients such as taurine and ginseng but have raised safety concerns among public-health officials. Shares for the company are up 2.03% for the week and 9.39% for the year. Smart move by the energy companies, but this is reminiscent of actions taken by cigarette companies. I have a solution that will fix things. How about a health tax on food products considered bad for you? There is a tobacco tax, so why not apply it to fast good. The monies can be used to fund increased health care related expenses. Or perhaps start putting pictures of angry, testosterone fueled teenagers on monster energy cans. (Source: Wall St Journal)
Wealthy Russians have recently found a way around the country’s horrid traffic jams: fake ambulances, outfitted with plush interiors for relaxation while specially trained drivers use unauthorized lights and sirens to maneuver through cluttered streets. London’s Daily Telegraph reported in March that “ambulance” companies charge the equivalent of about $200 an hour for these taxis. (Source: Daily Telegraph)
Have a fantastic weekend and please don’t hesitate to forward this newsletter. Many thanks,