In a victory for corporate taxes everywhere, Apple has been ordered to pay as much as €13 billion ($14.7 billion) in back taxes to Ireland. Or, perhaps, in a loss for workers everywhere, a reluctant Ireland is forced to go back on its agreement with Apple to base its European operations there in exchange for much needed tax breaks. Or, perhaps, corporate tax harmonization has been dealt a terrible setback as the European Union (EU) has claimed their turf in what should be hammered out through an international agreement.
What we do know for sure is the massive penalty, the largest ever imposed, is a big blow to Apple, amounting to …. around 7% of their massive $200 billion cash reserves. Unless, of course, the Republic of Ireland can justify a smaller bill, which they are very much keen to do. So nevermind.
Like corporate taxes themselves, today’s big story is completely negotiable and dependent on your perspective. There will be more to this, but nothing even remotely obvious will happen in the immediate future.
“This is no time to panic. There’ll be plenty of time to panic later.”
– Author unknown (but I was sure it was Groucho Marx)
The stock market took a beating today, with the S&P 500 off 2.1%. This came for a lot of reasons but mostly because of a global selloff sparked largely by the ongoing meltdown in China. The question on everyone’s mind has to be, “How bad will it get?”
The short answer is that it can only get worse from here for a lot of reasons. Very few of them matter in the long haul, but who actually believes that the stock market is paying attention to anything beyond next quarter?
The S&500, the broadest measure of stocks, hit a new high of 1884 today. The stock market celebrated by stopping trading for a moment to watch a debate on the future of the market unfold on CNBC.
It was a strange spectacle that also lit up twitter when IEX’s Brad Katsuyama took the challenge verbally shoved at him BATS Global Markets president William O’Brien and explained, in detail, how the market is rigged. Volume on the market noticeably dipped during the course of the debate and twitter lit up. It was a big moment in this history of the market.
Though the stock market is hitting new highs, many people are less than impressed. It’s commonly believed that the Federal Reserve’s $85B per month spending on mortgage backed bonds is all that is holding things up more than reality. That was backed by the big rally after Bernanke announced the program (aka QE3) would not “taper” in the near future, but continue.
But the truth is that corporate profits are at levels that they have never been before, meaning that there is underlying value in the stock market that is driving the rise. More importantly, corporate profit margins (profit over gross revenues) are also at unknown highs. It points to not only how we get out of the job shortage that is the reason the Fed keeps buying, but also the most obvious ways to close the budget deficit – and gives a little more definition to the boomtimes that probably like ahead in the 2020s.
The economy is indeed getting stronger – and is probably setting itself up for the best holiday season since the big downturn in six years. That’s a strong statement to make five years after the collapse of Lehman Brothers in September 2008 which set off the worst recession and second slowest recovery since the Great Depression. But there is every reason to believe that 2013 is indeed going to be the year that everything turned around – and by mid 2014 we will have recovered all the jobs lost since the downturn started.