[csharptwdec19]

Part of the issue is modern accounting practices discourage holding on to money for a 'rainy day', the end result being our current state where profits tend to be immediately reinvested in growth or paid out as executive bonuses.

[pas]

It's not due to accounting per se, it's the corporate finance worldview. Money that's just sitting there is not making any returns. So let's put it somewhere (stock buybacks? "zero-risk" money market fund? some AAA++ rated synthetic CDO? dogecoin? well, the sky's the limit, just don't forget to risk-adjust the expected returns).

Businesses operate "lean", and if they need more money to weather the rainy days, they can issue bonds, or ask the shareholders to inject more capital.

And to make mattes even "leaner" basically market forces pushed risk management out to "specialists" too. Underwriting, counterparty risk, credit risk, traditional insurance, "default insurance" are all just financial products now, that can be built into standard language of shipping contracts.

[rsj_hn]

Blaming "worldviews" is fun and all, but the IRS will charge you if you retain too much cash.

https://www.law.cornell.edu/uscode/text/26/532

The tax code is set up with the assumption that corporations are pass-throughs -- they either re-invest funds or pay them out. Funds paid out are taxed as capital income by the recipient (often called "double taxation"). Corporations that sock away cash for a rainy day are viewed as evading this double taxation and are penalized rather harshly. This is another reason (but not the primary reason) why if you want to keep cash for a rainy day you need to have it overseas somewhere where the IRS can't penalize you for holding it.

[pas]

Earmarking money for "rainy day" is accepted by the IRS as "Specific, definite, and feasible plans for the use of the earnings accumulation" as far as I know.

Or course if that pile gets too big this won't fly.

[samstave]

So, what are all the shell/holding companies in the Panama Papers, carribean etc doing with that money? Is it being invested?

I recall an article a few years back saying Apple is the largest hedge fund in the world, run buy a small office in Reno NV - and they had a gigantic cash reserve sitting in the bank:

https://en.wikipedia.org/wiki/Braeburn_Capital

[pas]

The real-real-real true genuine answer is: it doesn't matter. We are not capital constrained. The central banks of the world issue/print money to keep the economy growing at a steady rate of ~1 percent. (For example the official target for the US central bank [the Federal Reserve System, aka the Fed] is 2 percent year-on-year PCE [personal consumption expediture] growth. But (!) at the same time the Fed has a dual mandate, to ensure close to full employment. And recently the Fed started becoming even more aggressive in addressing that: https://www.stitcher.com/show/voxs-the-weeds/episode/fix-rec... )

So it doesn't matter if Apple has a trillion dollar in the bank just sitting. The central bank will conduct open market operations to lower the rates of credit so people/companies are incentivized to start new ventures, finally invest in upgrading their old shit, buy a house with a lower APR, etc. And similarly when Apple starts "dumping money into the economy" the Fed will promptly raise rates to keep inflation in check.

Technically for those particular shell companies, yes likely.

For the general offshore companies (like Apple's), a very big yes.

This is a very accessible and detailed paper about how FDI (foreign direct investment) through offshore companies work, and how the high-tax-regime countries benefit the most (eg. the US): https://repository.law.umich.edu/cgi/viewcontent.cgi?article...

[lotsofpulp]

I recommend not using websites such as Zerohedge or CNET as sources of information.

[rmah]

Apple's money is not "sitting in the bank". Most of it is invested in various debt instruments (probably mostly US Treasuries).

[samstave]

I was referring to an article I read about this Reno office - and they specifically said that - that they were investing, but they ALSO had a crap ton of cash in the bank...

They closed that office and now I cant find that article.