Morning Report Wednesday 11 February 2015
Cheap money is going to get very interesting in the future
The cost of money for AAA rated companies is simply outrageously low and hence companies with enormous cash war chests are raising even more money. This is a very clear signal from extremely clever people that this period of record low interest rates is a great opportunity. We are witnessing a classic example of polarisation of wealth – “the rich get richer”. We only have to look back in history to visualise actually how cheap money currently is – see charts 1 & 2.
• Apple had almost $US20bn in cash at the end of 2014, raised another $US6.5bn last week through the bond market and is looking to raise over $1bn in Switzerland who recently cut interest rates to zero. • Microsoft had over $US6bn in cash at the end of 2014, raised another $US10.8bn on Monday through the bond market with some of the debt maturing in 40 years costing only 4%.
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