then you should be able to claim power consumption costs for bitcoin mining as a tax deduction. Which could alter the profitability of mining.
Ask an accountant and tax attorney if possible.
The actual production of bitcoin might itself be taxable, so that the capital gain is only change in value after producing it -- and on production, the bitcoin is immediately taxable in the fair market value of the entire bitcoin value generated.
If it is, (which is most likely case), then the electricity consumption for that unit of bitcoin produced either becomes -- deductable expense used to produce income --- and the cost basis of that bitcoin is set at the entire value of that lot of bitcoin on the day that bitcoin value was created, for capital gain purposes (Capital gain will be/changes/ to the value in the future, NOT a delayed tax for the original generation of value).
OR... if the bitcoin is not taxable at the time it is generated, then the elctricity consumption for that unit of bitcoin probably becomes -- the cost basis for that capital asset, that cannot be deducted as an expense, until the asset is sold, where it reduces the amount of gain based on the portion of the cost basis allocated to that unit of bitcoin.
If you can't prove either way, in case of an audit... the IRS agent will most likely be calculating your liabilities and penalties baesd on the interpretation that most favors the government (the first one).
It is not every transaction it is just capital gains tax. If you 'mined' BitCoins then the cost was the electricity needed to generate them. I
Yes... unfortunately, how you figure this electricity cost may be complicated.
You have these lumps of X bitcoins, if you trade Y fractions of a bitcoin; you need to allocate a certain electricity
cost to every lump of bitcoins you got, and then you have equipment you used for mining, and its depreciation costs.
It's unlikely that the electricity costs will be the same for every bitcoin, so you will probably need a tax advisor to help with the calculations, and in the event of an audit, the tax authority s likely to disallow the electricity costs and capital equipment costs into the cost basis, unless you have kept very detailed records that you can substantiate.
So you should consult with your tax advisor before mining bitcoins, and definitely before spending them.
Which may increase costs significantly, after you consider the cost of hiring the tax advisors.
Please expain to me why the government should get a cut if i transfer money from one human to another.
I don't know, but what does this have to do with bitcoins? The fact is, they tax incomes regardless of source, and regardless of what forms the income takes, as long as there is an increase in value, and (if necessary) an income realization event.
This level of taxation goes FAR BEYOND what it takes to run a nation.
Different nations require different cost to run. The US, and other governments through their voted representatives have decided to do far beyond the minimum; generally, for the express purpose of providing external benefits, that would not be otherwise available.
Some good examples would be the weather service, the Military, Medicaid, Welfare/food stamps, and there are plenty of government programs and initiatives that we the people have voted in, through our elected representatives.
In fact... the revenue from every transaction involving income is not only needed, but insufficient... the US government is near broke, as-evidenced by mounting piles of debt, and interest rates that will likely increase, regardless of its market manipulation efforts to keep rates low.
and can be pretty unfair when property has frequent large price fluctuations.
Hey, you could clear the price fluctuations, by selling all your property at the end of every year --- change all your assets into cash on Dec 31, of every year, or donate all your capital assets to your charitable trust. Then on January 1st, start accumulating new things.
But especially for appreciating assets, it turns out to be advantageous to defer the tax for as long as possible.
Because money today is worth more than money in the future... $1 today is worth about $1.02 a year from now, and once you have considered compounding, the benefits of tax deferral can become extremely large over a sufficiently long holding period.
You can take advantage of this in many ways as an investor, that would not be possible if you had to pay taxes on value changes early.
In fact... the taxes would be a lot more harmful in that case, and maybe make investing not worth it
This is all well and good with investing, but once you've traded something -- it no longer applies.
If you receive or spend bitcoins, in a transaction, you don't get to delay the gain, on the bitcoin value that changed hands.
Actually you do. If you're given or are paid in Apple shares, you're taxed the value of the shares at the time you were given them. When you sell the shares, you pay additional taxes,
Yes... this is analogous to receiving bitcoins.
But what about the act of spending bitcoins? The act of spending bitcoins may be a capital gains realization of income event too.
What happens, if you give a shopkeeper an Apple share for a $100 product?
In that case, maybe you possess only Apple shares, you have no dollars in your pocket to pay the tax.
This differs considerably from the situation where you sell some Apple stock for USD to realize a gain; of course you can pay tax in USD -- you got USD as proceeds.
The idea, that you gave bitcoin for a product, well, equitable fair treatment would insist that you be allowed to pay your tax in the form of a portion of what you got, without sacrificing the thing you got (In other words: PAY tax in bitcoin, since you gave bitcoin,, and it's the only tangible thing you had to have to make that trade, and the product is the only tangible thing you got from that trade).
it’s fair market value that drives the underlying tax code.
While it's a great theory for how taxes should be defined. it may be problematic... Suppose, you use X bitcoins to buy a digital product, such as an eBook, that is not for sale by any other means
(it is not available to be purchased for USD).
You have a problem, since the product doesn't have a fair market value that can be uniquely discerned.
The value of the product is a matter of opinion. Some books are sold brand new for $5, others $50, others $5000...
In a sense, if the book is a one of a kind item, there is no way of having a fair market value for it.
Furthermore, what, if any fair market value, the bitcoin transfer might have, is also indiscernible.
Unlike with a real currency, there is no market for the bitcoins either.
So the user of bitcoins has some serious practical problems, until such time as the tax on bitcoin transactions is payable in bitcoin....
The run up is such that exactly matches the cost of shorting (borrowing the shares). That is the mistake that you and the OP keep on making: there is a cost of capital to exploit the run up in price, so it matches exactly that of the run up.
The cost of capital may be negligible... if there is a noticeable run-up, the cost of capital to exploit it doesn't explain it.
Because for some players, the cost of capital is pretty much zero, and people would not meaningfully comment about run-ups totaling less than the bid/ask spread plus the ordinary daily variations in stock price.
Example 1: broker thinks there will be a run-up, so they sell shares that don't exist, at T+1 settlement, broker fails to deliver.
After ex-dividend, they buy shares on the open market, and then deliver shares to buyer.
The shares didn't technically exist during the short, so they didn't cost anything.
Example 2: entity thinks there will be a run-up, makes deal with broker, to exploit predicted run-up.
Buys a contract for a commission, that says if there is a $1 increase in the stock price, the entity is awarded $0.75 for every $1 X the number of shares bet on (at 75% level); if there is a $1 decrease in the stock price, the entity pays $1.25 for every $1 change X the number of shares bet on.
Broker avoids assuming risk, by either retaining a share of stock or matching every bet of this nature, with a bet in the opposite direction (a different entity betting that there will be a short term decrease instead of a run-up).
The point is... any run-up at all if actually true and reliably occuring, is exploitable.
If the "run-up" is less than 1% of the stock price, then it doesn't really count as a "run up"; it would be well within the statistical noise/randomness.
Exactly. And my entire point is that whoever is counting on an inefficient market to somehow support Apple's stock price is a fool.
Yes, but not because of market being inefficient or not. Anyone expecting a company's stock price to be "supported" at a certain level over a significant but insufficiently long period of time is a fool.
There are all sorts of risks. If the market is efficient, it can suddenly become an inefficient one, where the price becomes excessively low (irrational negativity); or if the market is inefficient, it can suddenly become like an efficient one.
Stocks can deviate by large amounts... one of the exciting thing about the class of asset, is... in the short term, you don't actually know what will happen, although, with varying levels of confidence, you can use statistical techniques and projections to make guesses, based on history, financial statements, news, public perception, and comparison to similar companys' recent performance responses.
The safe bet... is in the long run, if the company's business is successful, and they make the appropriate numbers, their stock price will eventually reflect this increase in value at some point (You will be able to find a point in time in the future, that you could sell, for a higher price); it might not be in the same month, quarter, or year, but it will eventually happen, if you can wait long enough, and the company continues to generate the appropriate profits.
I have to admit, that actually *is* sorta cool. Imagine, you can probably repair a bit on that computer with a well-bent paperclip.
The trouble is... that being broken, and getting 'stuck' at an incorrect value, might not necessarily be detected, as quickly as a blue screen would be detected...
Punch card devices have this problem of verification, where a card could get lost, misread, or incorrectly punched
So you need additional error checking at higher layers, that a PC would take care of at a lower level, in the operating system... or in the memory (ECC technology on the hard drive RAID, CPU, and system RAM; checksums in data transmission and storage, to provide tamper resistance; audit logs, regarding access to data and changes....)
This company is probably the only one in the area that will still be operational in case of a nuclear war. that type of computing device is pretty much impervious to EMPs.
Good thing too... post-EMP... clean water will be very hard to get; and in extraordinary demand, the ability to take dirty water and clean it, in order to survive. I can see a thriving business for liquid filters, even after all other businesses (including their suppliers) have shut down.
OK, I get it, Sparkler hates trees. But the insanity of someone protecting their job by never updating technology is just amazing. I would love to see what they have spent on maintenance over the years for that electromechanical junk.
Come on... there are a few advantages here. (1) They don't need a firewall, or IT department constantly patching things.
(2) They don't need to worry about malware, or expensive security software, for antivirus, patch management, computer software inventory management, encryption; web filtering to stop accountants surfing on company time --- there are literally hundreds of costs that exist with PCs that aren't needed with simpler equipment.
(3) They don't need to buy new copies of windows, and retrain their accountants to use the latest version of Windows.
It's not like personal computer maintenance is free.
I would argue... the maintenance is quite possibly a lot cheaper.
The question should be, what are they risking... and are the benefits/rewards for THE COMPANY (not the 40 year punch card vet) better than the potential productivity gains to be made in initiatives that would require major changes?
Such poor management could be an opportunity for someone else to take over the company, and fix the problem of revenues being suppressed due
to reliance on very very old systems; that while proven, are probably less efficient -- if they weren't less efficient, why aren't more organizations still using punch cards?
There's no way those other companies' managements ditched punch cards just because PCs looked like a cooler technology, there are plenty compelling cases to be made.... (it's just that hardware maintenance isn't one of them)
they try to use the system to replace the existing ones, vs. changing the organization to work with the new system.
Any system your business has to conform to is a bad one; unless the changes to the way the organization works are actually improvements in themself (not because of the system having arbitrary constraints that restrict the way you can run your business, or force otherwise unnecessary change on your business).
And what happens when the lady that's running this system dies of a heart attack and the only people that even know how to use one of these computers are all retired and senile?
The lady herself might not mind this, as she'll be dead, it's probably the farthest thing from her mind.
Even if the very same lead accountant, would recognize this problem in any other department, and ensure that it was fixed.
The lead accountant might often double as responsible manager role, and address that issue elsewhere in the organization, while being blind to the fact that they themselves are a single-point-of-failure risk.
For some reason, also, companies often seem to give the people in charge of their accounting department a whole lot of latitude, in deciding what systems they use, and quietly making choices that suffer that problem, as long as the data is produced to management's satisfaction; almost as if accounting becomes an "island", and is the last department to ever come under scrutiny;
even when companies' management teams force their other departments, and use that criteria, that every process has to be able to continue if any one person gets hit by a bus, and noone unreplaceable.
It's as if "accounting department is management", and "different rules apply to management";
we never think of "What if the CEO or CFO gets hit by the bus?".
Perhaps the personal pain of thinking about that drives them away from responsible action, even when they can clearly see, what is responsible action, with regards to non-management.
You would never allow a clerical worker to implement a proprietary filing system for paper document storage that noone else could use;
such as a "proprietary" sorting order, with a randomized alphabet memorized by one worker.
And you usually need someone with intimate knowledge of the legacy system, which can require massive reverse-engineering if the system is older than most of your employees.
Ah but not all the employees, and it sounds like maybe one employee has got a personal attachment going, and therein lies the problem.
This could be a little bit of a conflict of interest, as it provides job security for the head accountant; whereas, it would be in the
business' best interests to be using commodity equipment, and data processing procedures well-understood by the accounting industry,
which are also more easily outsourced, or farmed out to external accounting organizations, for purposes of auditing, verification, or actually hiring external org to do all the company's accounting, for example.
Management should not be allowing the lead accountant to be choosing such an unusual accounting system, when it should be replaced.:)
Yeah, sometimes you have to bite the bullet, but I tend to think the biggest reason should be: "Who is going to fix this thing in 10 years when Bill is retired or dead?"
Maybe that means you don't need to do anything right now... just have Plan B ready to execute at will, in about 10 years?
They are slowly migrating to using PCs according to article. They turned down offers to buy the machine from the Computer History Museum, so they must be using it or else have a lot of nostalgia for it (a perfectly valid reason to keep it).
Perfectly valid reason for a person/individual to keep something (personal sentiment / emotion); not a valid reason for a business to keep it, if the business owns it, and they can make more money by not having it, then keeping it would be a poor business decision in that case.
Since any company not experiencing endless growth is a failure in the eyes of investors and vultures, Apple's failure to take this opportunity to swallow a competitor or expand into a new market is a negative sign.
Since no product expands infinitely in the real world, it makes sense that they would develop new products.
The cash they actually do have might be too small to expand into new markets with acceptable risk.
Swallowing a competitor, only works if you actually have a competitor that you can swallow, that is a financially responsible choice.
Open source competitors aren't easy to deal with -- swallow one, another springs up.
Acquiring more patents is a better idea. Speaking of patents...
I think so far, all Apple's like-product competitors are Android-device selling companies they are in the process of attempting to stop through the use of litigation.
And then there's Microsoft, which they wouldn't want to swallow up, because it would come with all this regulatory baggage. More financially beneficial to be as monopoly-like as possible, without being regulated like a monopoly:)
Swallowing up other companies is great, if they have better big ideas than you... but if they don't, then swallowing them up takes resources that could be yielded to investors instead.
If the other companies have a good product, Apple can just sort of copy it, like they did with incorporating Windows 7 into OS X (such as Spotlight, based on start menu search), and the dock based on taskbar pinning, and OS X dashboard, based on Windows sidebar/widgets, right?
Acquisitions aren't necessarily required to expand into more markets.:)
After considering current inflation, the interest rate is essentially zero...
A buyback means that they don't have immediate (or short to mid term) uses for that money.
More like, they don't have immediate more compelling need for that money, and they feel their stock is so undervalued, that it is the most fiscally responsible choice for the use of that money.
But as an investor it tells me that they don't have big ideas and that I'd rather put new money elsewhere.
They may have big ideas that are already more than adequately financed, and/or that they don't require all that cash for; or that are more risky.
When you have a big idea; squandering an infinite amount of cash (however much you happen to have) on it, is not necessarily the right approach -- there comes a point, where returns are diminishing, and excessive investment into the big idea (even if it will be the best thing since sliced bread) just serves to reduce returns.
If they see that for now their excess cash has exceeded what their work in progress demands, then they could still have an excellent number of high impact ideas about to roll out, but still not require the insanely large pool of cash they have at hand.
Dividends encourage investors to hold their shares for long periods of time by giving some income along the way. A buy back is something which boosts the price of the shares, but does nothing to generate a revenue stream for the investor.
Dividends take stockholder value out of the company represented by the stock itself, and convert it into a cash form, that is then send to the stockholders (value is removed from the stock and sent to shareholders).
Buybacks take stockholder value out of the company represented by the stock, or by acquiring debt, that is then used to reduce the number of shares outstanding.
In theory... a buyback does not change the value of the company, or its business prospects -- a big enough one may effect the share price, similar to a reverse split, since there are fewer shares on the market (the company just owns them circularly), but the market capitalization should be the same, or worst (if the buyback was financed).
If I have $20,000 invested in a company before buyback, then after buyback, the market capitalization after the buyback is the same (only that outsiders hold fewer of the shares), at best -- in the short term, I should still have $20,000 invested in the company, and my share should still be worth approximately the same, not really improved by a buyback; hey the company bought all these shares -- great, now my share in the company includes these shares, the company has just converted some cash to shares.
Now, if the company borrowed money to perform the buyback, and cannot produce earnings at a sufficient rate, my shares could actually lose value over buyback, due to the added cost of the debt..
Another way I could lose money, is when the company does a buyback and then provides shares as compensation to insiders, or issues extra options or shares as executive compensation --- buyback does not assure that my value will not be diluted.
The buyback makes sense if the company's shares are greatly undervalued, as the leverage of my shares are essentially increased.
This only works, if the company buys back the shares for substantially less than they will ultimately be valued at.
Example: say I own 100% of the stock of a company's whose assets are $50, which is undervalued by 10x.
If the value is realized in a few months, there will be great profit for me, much more than if the company had simply held $50 in cash, and earned 2% interest on it.
If the company's shares are undervalued by 5x, and the company buys back 1/4 of its shares... the increase in stockholder value could be tremendous, at the time in the future, when the market begins to give the shares the value that they deserve.
Nope. The dividend is the reward for holding the stock for a full quarter. Thus the stock price at the beginning of the quarter would be the amount that makes the dividend comparable to the interest rate the stock price would earn if it owned corporate debt.
Different investors are going to view this differently, and in some sense... it depends if the dividend is a sharing of quarterly profit, something like an interest payment.... or an actual capital distribution that lowers the holders' cost basis in the stock and has different tax implications.
While long term holders may view it as a 'reward'; the company is actually paying money from their coffers, and after they pay the dividend out, the stock shares do actually represent a smaller percentage of the value; while the corresponding dividend represents another portion of the investor value.
So it makes perfect sense that the stock price dips after ex dividend, because some of the company's value has been moved out of the company's stock, and into this dividend payment.
That explains a decrease in stock price after ex dividend.
Although you can't really exploit that dip necessarily through trading: if you short the stock, you wind up owing a substitute fee to cover the dividend (which eliminates your profit from shorting), if you sold your shares before the dip, you lose the dividend too (which eliminates your profit from selling).
I don't think you can be assured of a run up in price ahead of the ex dividend... if you could, savvy arbitrage folks would exploit that through shorting, before ex dividend, which would tend to nullify that effect.
What I described has a simple, two word name: efficient market. Say, did you ever read a finance textbook?
Apparently you missed the "Just kidding" section, or the part, where they actually explain, that in the real world, there is actually no such thing as a truly efficient market. There are some cases where market behavior is close to that of what an efficient market would be deemed to be, however, there are massively many counterexamples.
But there is no conceivable market larger than the phone market.
It could be the iCommunicator, or the iText
A simple feature "phone" option.
And an option with the 'phone' capability removed that still has SMS texting and 4G support.
It's just a historical accident that the iPhone is a phone... people carry these "smart phones" around all the time, but they don't talk on them -- they surf the web, they send/receive text messages.
Voice comms over GSM are an afterthought, obsoleted by Facetime; so we don't need our personal communication devices to be called phones anymore; they're really just iPads..
So we could rename the iPhone to the iPad Nano, as well.
And develop a complementary addon set of products; the iKey (authentication device to unlock your front door and start your car), and iWallet; a wallet-sized touch screen device that acts similar to a credit card; you type a PIN code and swipe, or it prints out a little slip of digital paper, or displays a QR bar code with the Bitcoin ID and private key for this transaction, etc, etc, and allows transaction completion using NFC RFID or other wireless communications....
The combination of that plus a dividend increase means that they have more money than they can possibly use.
Naw... it means they think their shareholders will benefit more from using that bit of cash in these ways than reinvesting that bit of cash in the business.
Interest rates are so darn low right now, that holding onto cash not needed immediately in the short term is possibly a bad idea.... finance that growth using debt, if possible. Give shareholders the cash back, so they can either invest in more shares -- or buy something else.
Either way it gets away from this issue, of the big cash reserve being eroded by massive inflation levels.
In my opinion, they just will burn their cash. It is inevitable: they must lower device prices, so their shares will fall. No way out.
Not necessarily.... if the lower price is more optimal than the current price, lowering the price may net them greater profit due to increased sales (although smaller margin per sale).
They might capture the market still willing to pay more, by offering a 'better' more appealing version still at the higher price.
(4) Numbers owns by a Telco to create traffic. Many Telcos in third world countries uses this scheme. They create random numbrers, when you call there it's playing music or a thanks message or something like that. They then pay people to call those phone number from overseas Telcos.
That's a very interesting scary concept... although, when you consider, there will be international termination charges paid to those providers, generated by their own calls.
Well, that is also a form of fraud.
Similar to the idea of telcos servicing some very expensive destination LATAs in the US paying people in other areas to dial into that LATA, adequate consideration to encourage them to do so, but less than the amount they will get to charge the originating provider for terminating that call, and pocketing the difference.
Also a form of fraud; however, they would likely not engage in it, for fear of having their licenses to operate revoked.
Slashdot Mirror
then you should be able to claim power consumption costs for bitcoin mining as a tax deduction. Which could alter the profitability of mining.
Ask an accountant and tax attorney if possible.
The actual production of bitcoin might itself be taxable, so that the capital gain is only change in value after producing it -- and on production, the bitcoin is immediately taxable in the fair market value of the entire bitcoin value generated. If it is, (which is most likely case), then the electricity consumption for that unit of bitcoin produced either becomes -- deductable expense used to produce income --- and the cost basis of that bitcoin is set at the entire value of that lot of bitcoin on the day that bitcoin value was created, for capital gain purposes (Capital gain will be /changes/ to the value in the future, NOT a delayed tax for the original generation of value).
OR... if the bitcoin is not taxable at the time it is generated, then the elctricity consumption for that unit of bitcoin probably becomes -- the cost basis for that capital asset, that cannot be deducted as an expense, until the asset is sold, where it reduces the amount of gain based on the portion of the cost basis allocated to that unit of bitcoin.
If you can't prove either way, in case of an audit... the IRS agent will most likely be calculating your liabilities and penalties baesd on the interpretation that most favors the government (the first one).
It is not every transaction it is just capital gains tax. If you 'mined' BitCoins then the cost was the electricity needed to generate them. I
Yes... unfortunately, how you figure this electricity cost may be complicated. You have these lumps of X bitcoins, if you trade Y fractions of a bitcoin; you need to allocate a certain electricity cost to every lump of bitcoins you got, and then you have equipment you used for mining, and its depreciation costs.
It's unlikely that the electricity costs will be the same for every bitcoin, so you will probably need a tax advisor to help with the calculations, and in the event of an audit, the tax authority s likely to disallow the electricity costs and capital equipment costs into the cost basis, unless you have kept very detailed records that you can substantiate.
So you should consult with your tax advisor before mining bitcoins, and definitely before spending them. Which may increase costs significantly, after you consider the cost of hiring the tax advisors.
Please expain to me why the government should get a cut if i transfer money from one human to another.
I don't know, but what does this have to do with bitcoins? The fact is, they tax incomes regardless of source, and regardless of what forms the income takes, as long as there is an increase in value, and (if necessary) an income realization event.
This level of taxation goes FAR BEYOND what it takes to run a nation.
Different nations require different cost to run. The US, and other governments through their voted representatives have decided to do far beyond the minimum; generally, for the express purpose of providing external benefits, that would not be otherwise available.
Some good examples would be the weather service, the Military, Medicaid, Welfare/food stamps, and there are plenty of government programs and initiatives that we the people have voted in, through our elected representatives.
In fact... the revenue from every transaction involving income is not only needed, but insufficient... the US government is near broke, as-evidenced by mounting piles of debt, and interest rates that will likely increase, regardless of its market manipulation efforts to keep rates low.
and can be pretty unfair when property has frequent large price fluctuations.
Hey, you could clear the price fluctuations, by selling all your property at the end of every year --- change all your assets into cash on Dec 31, of every year, or donate all your capital assets to your charitable trust. Then on January 1st, start accumulating new things.
But especially for appreciating assets, it turns out to be advantageous to defer the tax for as long as possible. Because money today is worth more than money in the future... $1 today is worth about $1.02 a year from now, and once you have considered compounding, the benefits of tax deferral can become extremely large over a sufficiently long holding period.
You can take advantage of this in many ways as an investor, that would not be possible if you had to pay taxes on value changes early.
In fact... the taxes would be a lot more harmful in that case, and maybe make investing not worth it
This is all well and good with investing, but once you've traded something -- it no longer applies. If you receive or spend bitcoins, in a transaction, you don't get to delay the gain, on the bitcoin value that changed hands.
Actually you do. If you're given or are paid in Apple shares, you're taxed the value of the shares at the time you were given them. When you sell the shares, you pay additional taxes,
Yes... this is analogous to receiving bitcoins.
But what about the act of spending bitcoins? The act of spending bitcoins may be a capital gains realization of income event too.
What happens, if you give a shopkeeper an Apple share for a $100 product?
In that case, maybe you possess only Apple shares, you have no dollars in your pocket to pay the tax.
This differs considerably from the situation where you sell some Apple stock for USD to realize a gain; of course you can pay tax in USD -- you got USD as proceeds.
The idea, that you gave bitcoin for a product, well, equitable fair treatment would insist that you be allowed to pay your tax in the form of a portion of what you got, without sacrificing the thing you got (In other words: PAY tax in bitcoin, since you gave bitcoin,, and it's the only tangible thing you had to have to make that trade, and the product is the only tangible thing you got from that trade).
it’s fair market value that drives the underlying tax code.
While it's a great theory for how taxes should be defined. it may be problematic... Suppose, you use X bitcoins to buy a digital product, such as an eBook, that is not for sale by any other means (it is not available to be purchased for USD).
You have a problem, since the product doesn't have a fair market value that can be uniquely discerned.
The value of the product is a matter of opinion. Some books are sold brand new for $5, others $50, others $5000... In a sense, if the book is a one of a kind item, there is no way of having a fair market value for it.
Furthermore, what, if any fair market value, the bitcoin transfer might have, is also indiscernible.
Unlike with a real currency, there is no market for the bitcoins either.
So the user of bitcoins has some serious practical problems, until such time as the tax on bitcoin transactions is payable in bitcoin....
The run up is such that exactly matches the cost of shorting (borrowing the shares). That is the mistake that you and the OP keep on making: there is a cost of capital to exploit the run up in price, so it matches exactly that of the run up.
The cost of capital may be negligible... if there is a noticeable run-up, the cost of capital to exploit it doesn't explain it. Because for some players, the cost of capital is pretty much zero, and people would not meaningfully comment about run-ups totaling less than the bid/ask spread plus the ordinary daily variations in stock price.
Example 1: broker thinks there will be a run-up, so they sell shares that don't exist, at T+1 settlement, broker fails to deliver. After ex-dividend, they buy shares on the open market, and then deliver shares to buyer. The shares didn't technically exist during the short, so they didn't cost anything.
Example 2: entity thinks there will be a run-up, makes deal with broker, to exploit predicted run-up. Buys a contract for a commission, that says if there is a $1 increase in the stock price, the entity is awarded $0.75 for every $1 X the number of shares bet on (at 75% level); if there is a $1 decrease in the stock price, the entity pays $1.25 for every $1 change X the number of shares bet on.
Broker avoids assuming risk, by either retaining a share of stock or matching every bet of this nature, with a bet in the opposite direction (a different entity betting that there will be a short term decrease instead of a run-up).
The point is... any run-up at all if actually true and reliably occuring, is exploitable.
If the "run-up" is less than 1% of the stock price, then it doesn't really count as a "run up"; it would be well within the statistical noise/randomness.
Exactly. And my entire point is that whoever is counting on an inefficient market to somehow support Apple's stock price is a fool.
Yes, but not because of market being inefficient or not. Anyone expecting a company's stock price to be "supported" at a certain level over a significant but insufficiently long period of time is a fool.
There are all sorts of risks. If the market is efficient, it can suddenly become an inefficient one, where the price becomes excessively low (irrational negativity); or if the market is inefficient, it can suddenly become like an efficient one.
Stocks can deviate by large amounts... one of the exciting thing about the class of asset, is... in the short term, you don't actually know what will happen, although, with varying levels of confidence, you can use statistical techniques and projections to make guesses, based on history, financial statements, news, public perception, and comparison to similar companys' recent performance responses.
The safe bet... is in the long run, if the company's business is successful, and they make the appropriate numbers, their stock price will eventually reflect this increase in value at some point (You will be able to find a point in time in the future, that you could sell, for a higher price); it might not be in the same month, quarter, or year, but it will eventually happen, if you can wait long enough, and the company continues to generate the appropriate profits.
I have to admit, that actually *is* sorta cool. Imagine, you can probably repair a bit on that computer with a well-bent paperclip.
The trouble is... that being broken, and getting 'stuck' at an incorrect value, might not necessarily be detected, as quickly as a blue screen would be detected...
Punch card devices have this problem of verification, where a card could get lost, misread, or incorrectly punched
So you need additional error checking at higher layers, that a PC would take care of at a lower level, in the operating system... or in the memory (ECC technology on the hard drive RAID, CPU, and system RAM; checksums in data transmission and storage, to provide tamper resistance; audit logs, regarding access to data and changes....)
This company is probably the only one in the area that will still be operational in case of a nuclear war. that type of computing device is pretty much impervious to EMPs.
Good thing too... post-EMP... clean water will be very hard to get; and in extraordinary demand, the ability to take dirty water and clean it, in order to survive. I can see a thriving business for liquid filters, even after all other businesses (including their suppliers) have shut down.
OK, I get it, Sparkler hates trees. But the insanity of someone protecting their job by never updating technology is just amazing. I would love to see what they have spent on maintenance over the years for that electromechanical junk.
Come on... there are a few advantages here. (1) They don't need a firewall, or IT department constantly patching things.
(2) They don't need to worry about malware, or expensive security software, for antivirus, patch management, computer software inventory management, encryption; web filtering to stop accountants surfing on company time --- there are literally hundreds of costs that exist with PCs that aren't needed with simpler equipment.
(3) They don't need to buy new copies of windows, and retrain their accountants to use the latest version of Windows.
It's not like personal computer maintenance is free.
I would argue... the maintenance is quite possibly a lot cheaper.
The question should be, what are they risking... and are the benefits/rewards for THE COMPANY (not the 40 year punch card vet) better than the potential productivity gains to be made in initiatives that would require major changes?
Such poor management could be an opportunity for someone else to take over the company, and fix the problem of revenues being suppressed due to reliance on very very old systems; that while proven, are probably less efficient -- if they weren't less efficient, why aren't more organizations still using punch cards?
There's no way those other companies' managements ditched punch cards just because PCs looked like a cooler technology, there are plenty compelling cases to be made.... (it's just that hardware maintenance isn't one of them)
they try to use the system to replace the existing ones, vs. changing the organization to work with the new system.
Any system your business has to conform to is a bad one; unless the changes to the way the organization works are actually improvements in themself (not because of the system having arbitrary constraints that restrict the way you can run your business, or force otherwise unnecessary change on your business).
And what happens when the lady that's running this system dies of a heart attack and the only people that even know how to use one of these computers are all retired and senile?
The lady herself might not mind this, as she'll be dead, it's probably the farthest thing from her mind. Even if the very same lead accountant, would recognize this problem in any other department, and ensure that it was fixed.
The lead accountant might often double as responsible manager role, and address that issue elsewhere in the organization, while being blind to the fact that they themselves are a single-point-of-failure risk.
For some reason, also, companies often seem to give the people in charge of their accounting department a whole lot of latitude, in deciding what systems they use, and quietly making choices that suffer that problem, as long as the data is produced to management's satisfaction; almost as if accounting becomes an "island", and is the last department to ever come under scrutiny; even when companies' management teams force their other departments, and use that criteria, that every process has to be able to continue if any one person gets hit by a bus, and noone unreplaceable.
It's as if "accounting department is management", and "different rules apply to management"; we never think of "What if the CEO or CFO gets hit by the bus?".
Perhaps the personal pain of thinking about that drives them away from responsible action, even when they can clearly see, what is responsible action, with regards to non-management.
You would never allow a clerical worker to implement a proprietary filing system for paper document storage that noone else could use; such as a "proprietary" sorting order, with a randomized alphabet memorized by one worker.
And you usually need someone with intimate knowledge of the legacy system, which can require massive reverse-engineering if the system is older than most of your employees.
Ah but not all the employees, and it sounds like maybe one employee has got a personal attachment going, and therein lies the problem.
This could be a little bit of a conflict of interest, as it provides job security for the head accountant; whereas, it would be in the business' best interests to be using commodity equipment, and data processing procedures well-understood by the accounting industry, which are also more easily outsourced, or farmed out to external accounting organizations, for purposes of auditing, verification, or actually hiring external org to do all the company's accounting, for example.
Management should not be allowing the lead accountant to be choosing such an unusual accounting system, when it should be replaced. :)
Yeah, sometimes you have to bite the bullet, but I tend to think the biggest reason should be: "Who is going to fix this thing in 10 years when Bill is retired or dead?"
Maybe that means you don't need to do anything right now... just have Plan B ready to execute at will, in about 10 years?
They are slowly migrating to using PCs according to article. They turned down offers to buy the machine from the Computer History Museum, so they must be using it or else have a lot of nostalgia for it (a perfectly valid reason to keep it).
Perfectly valid reason for a person/individual to keep something (personal sentiment / emotion); not a valid reason for a business to keep it, if the business owns it, and they can make more money by not having it, then keeping it would be a poor business decision in that case.
Since any company not experiencing endless growth is a failure in the eyes of investors and vultures, Apple's failure to take this opportunity to swallow a competitor or expand into a new market is a negative sign.
Since no product expands infinitely in the real world, it makes sense that they would develop new products.
The cash they actually do have might be too small to expand into new markets with acceptable risk.
Swallowing a competitor, only works if you actually have a competitor that you can swallow, that is a financially responsible choice. Open source competitors aren't easy to deal with -- swallow one, another springs up. Acquiring more patents is a better idea. Speaking of patents...
I think so far, all Apple's like-product competitors are Android-device selling companies they are in the process of attempting to stop through the use of litigation.
And then there's Microsoft, which they wouldn't want to swallow up, because it would come with all this regulatory baggage. More financially beneficial to be as monopoly-like as possible, without being regulated like a monopoly :)
Swallowing up other companies is great, if they have better big ideas than you... but if they don't, then swallowing them up takes resources that could be yielded to investors instead.
If the other companies have a good product, Apple can just sort of copy it, like they did with incorporating Windows 7 into OS X (such as Spotlight, based on start menu search), and the dock based on taskbar pinning, and OS X dashboard, based on Windows sidebar/widgets, right?
Acquisitions aren't necessarily required to expand into more markets. :)
debt has a positive one
After considering current inflation, the interest rate is essentially zero...
A buyback means that they don't have immediate (or short to mid term) uses for that money.
More like, they don't have immediate more compelling need for that money, and they feel their stock is so undervalued, that it is the most fiscally responsible choice for the use of that money.
But as an investor it tells me that they don't have big ideas and that I'd rather put new money elsewhere.
They may have big ideas that are already more than adequately financed, and/or that they don't require all that cash for; or that are more risky.
When you have a big idea; squandering an infinite amount of cash (however much you happen to have) on it, is not necessarily the right approach -- there comes a point, where returns are diminishing, and excessive investment into the big idea (even if it will be the best thing since sliced bread) just serves to reduce returns.
If they see that for now their excess cash has exceeded what their work in progress demands, then they could still have an excellent number of high impact ideas about to roll out, but still not require the insanely large pool of cash they have at hand.
Dividends encourage investors to hold their shares for long periods of time by giving some income along the way. A buy back is something which boosts the price of the shares, but does nothing to generate a revenue stream for the investor.
Dividends take stockholder value out of the company represented by the stock itself, and convert it into a cash form, that is then send to the stockholders (value is removed from the stock and sent to shareholders).
Buybacks take stockholder value out of the company represented by the stock, or by acquiring debt, that is then used to reduce the number of shares outstanding.
In theory... a buyback does not change the value of the company, or its business prospects -- a big enough one may effect the share price, similar to a reverse split, since there are fewer shares on the market (the company just owns them circularly), but the market capitalization should be the same, or worst (if the buyback was financed).
If I have $20,000 invested in a company before buyback, then after buyback, the market capitalization after the buyback is the same (only that outsiders hold fewer of the shares), at best -- in the short term, I should still have $20,000 invested in the company, and my share should still be worth approximately the same, not really improved by a buyback; hey the company bought all these shares -- great, now my share in the company includes these shares, the company has just converted some cash to shares.
Now, if the company borrowed money to perform the buyback, and cannot produce earnings at a sufficient rate, my shares could actually lose value over buyback, due to the added cost of the debt..
Another way I could lose money, is when the company does a buyback and then provides shares as compensation to insiders, or issues extra options or shares as executive compensation --- buyback does not assure that my value will not be diluted.
The buyback makes sense if the company's shares are greatly undervalued, as the leverage of my shares are essentially increased.
This only works, if the company buys back the shares for substantially less than they will ultimately be valued at.
Example: say I own 100% of the stock of a company's whose assets are $50, which is undervalued by 10x. If the value is realized in a few months, there will be great profit for me, much more than if the company had simply held $50 in cash, and earned 2% interest on it.
If the company's shares are undervalued by 5x, and the company buys back 1/4 of its shares... the increase in stockholder value could be tremendous, at the time in the future, when the market begins to give the shares the value that they deserve.
Nope. The dividend is the reward for holding the stock for a full quarter. Thus the stock price at the beginning of the quarter would be the amount that makes the dividend comparable to the interest rate the stock price would earn if it owned corporate debt.
Different investors are going to view this differently, and in some sense... it depends if the dividend is a sharing of quarterly profit, something like an interest payment.... or an actual capital distribution that lowers the holders' cost basis in the stock and has different tax implications.
While long term holders may view it as a 'reward'; the company is actually paying money from their coffers, and after they pay the dividend out, the stock shares do actually represent a smaller percentage of the value; while the corresponding dividend represents another portion of the investor value.
So it makes perfect sense that the stock price dips after ex dividend, because some of the company's value has been moved out of the company's stock, and into this dividend payment.
That explains a decrease in stock price after ex dividend. Although you can't really exploit that dip necessarily through trading: if you short the stock, you wind up owing a substitute fee to cover the dividend (which eliminates your profit from shorting), if you sold your shares before the dip, you lose the dividend too (which eliminates your profit from selling).
I don't think you can be assured of a run up in price ahead of the ex dividend... if you could, savvy arbitrage folks would exploit that through shorting, before ex dividend, which would tend to nullify that effect.
What I described has a simple, two word name: efficient market. Say, did you ever read a finance textbook?
Apparently you missed the "Just kidding" section, or the part, where they actually explain, that in the real world, there is actually no such thing as a truly efficient market. There are some cases where market behavior is close to that of what an efficient market would be deemed to be, however, there are massively many counterexamples.
But there is no conceivable market larger than the phone market.
It could be the iCommunicator, or the iText
A simple feature "phone" option.
And an option with the 'phone' capability removed that still has SMS texting and 4G support.
It's just a historical accident that the iPhone is a phone... people carry these "smart phones" around all the time, but they don't talk on them -- they surf the web, they send/receive text messages.
Voice comms over GSM are an afterthought, obsoleted by Facetime; so we don't need our personal communication devices to be called phones anymore; they're really just iPads..
So we could rename the iPhone to the iPad Nano, as well.
And develop a complementary addon set of products; the iKey (authentication device to unlock your front door and start your car), and iWallet; a wallet-sized touch screen device that acts similar to a credit card; you type a PIN code and swipe, or it prints out a little slip of digital paper, or displays a QR bar code with the Bitcoin ID and private key for this transaction, etc, etc, and allows transaction completion using NFC RFID or other wireless communications....
The combination of that plus a dividend increase means that they have more money than they can possibly use.
Naw... it means they think their shareholders will benefit more from using that bit of cash in these ways than reinvesting that bit of cash in the business.
Interest rates are so darn low right now, that holding onto cash not needed immediately in the short term is possibly a bad idea.... finance that growth using debt, if possible. Give shareholders the cash back, so they can either invest in more shares -- or buy something else.
Either way it gets away from this issue, of the big cash reserve being eroded by massive inflation levels.
In my opinion, they just will burn their cash. It is inevitable: they must lower device prices, so their shares will fall. No way out.
Not necessarily.... if the lower price is more optimal than the current price, lowering the price may net them greater profit due to increased sales (although smaller margin per sale).
They might capture the market still willing to pay more, by offering a 'better' more appealing version still at the higher price.
Their stock price could in fact go up
(4) Numbers owns by a Telco to create traffic. Many Telcos in third world countries uses this scheme. They create random numbrers, when you call there it's playing music or a thanks message or something like that. They then pay people to call those phone number from overseas Telcos.
That's a very interesting scary concept... although, when you consider, there will be international termination charges paid to those providers, generated by their own calls.
Well, that is also a form of fraud.
Similar to the idea of telcos servicing some very expensive destination LATAs in the US paying people in other areas to dial into that LATA, adequate consideration to encourage them to do so, but less than the amount they will get to charge the originating provider for terminating that call, and pocketing the difference.
Also a form of fraud; however, they would likely not engage in it, for fear of having their licenses to operate revoked.