Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of money.
Apple Bonds
The big Apple bond offering hit this week and keeping with recent tradition it was big news. The bond offering involved a strategy to borrow money mostly at rates below inflation to buyback stock. This was on top of the dividend raise announcement. It seemed to be more about short-term shareholder appeasement. But it worked. And the overall cost of the debt is minimal compared to the company’s earning ability.
To be clear Apple is a unique situation. And it won’t be the last company to take advantage of the low rate environment. In fact, high debt companies have done this the past two years. It wouldn’t surprise me to see more companies getting in this opportunity before rates rise.
With all the news surrounding the Apple bond offering – this interesting tweet caught my eye and it’s worth pointing out.
$AAPL debt offering may have marked the top in corporate bonds. That’s what you didn’t hear on air from Wilbur Ross.
— Melissa Lee (@MelissaLeeCNBC) May 1, 2013
If that’s true, corporate bond prices could be on slow downward trajectory. Not great for current bond owners. But the good news is yields on new bond offerings would be higher. A welcome sight for income investors. It’s a good reason to own short-term bonds and bond funds. Of course, don’t expect this to happen overnight. Remember it took several years for yields to fall this far. It could take just as long to climb higher.
Trading On Search
A new research came out late last week that studied the frequency of search terms used and market performance. Not surprising there is some correlation to the two. Since investors are human, it’s only natural to want to know what will happen next with their money. The easiest place to find out, is through a search. Unfortunately, the information they find can draw them into making an emotional decision about their money.
It’s certainly an interesting concept. After last weeks flash crash it wouldn’t surprise me to see high frequency trading firms try to build algorithms to take advantage of this data. Of course, you don’t need an algorithm to find this information. Google Trends freely provides it for you.
Last Call
- The Cheapest ETF for Every Investment Objective – the best resource for finding the lowest cost ETF yet.
- Investors Earn Handsome Paychecks By Handling Buffett’s Business – focus on what it took to get them to that position.
- How to Value a Business: Uses and Misuses of the 7 Most Important Valuation Ratios – a good intro to valuation methods with pros and cons of each.
- There’s Even Bigger Problems in the Reinhart & Rogoff Thinking…. – If you’ve watched this unravel, here’s some more problems with their argument.