Apple — and Italy — can borrow money more cheaply than Uncle Sam

[mahatmakanejeeves]

Apple — and Italy — can borrow money more cheaply than Uncle Sam

By Allan Sloan December 4

Have financial markets lost their collective mind? In some ways, it’s starting to look like that. Here is the United States, whose bonds are the world’s safest investment, if only because the federal government can print dollars to redeem them, paying a higher interest rate to borrow money than less-than-prime credits such as Italy. And also, as it turns out, the U.S. Treasury is paying more to borrow money than Apple is.

This irrational stuff makes me feel uneasy as an investor and should make you uneasy, too. So should other excesses, including the bidding wars for higher-end residential and commercial real estate in Manhattan, San Francisco and other parts of the country, and the ridiculous prices being paid in high-end art auctions. It feels like some sort of market top.

How should we retail investors think about this? Very warily.
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But just because something irrational has been going on for a long time doesn’t mean that it will continue indefinitely. Corporations are locking up long-term money at very low rates now because they can. Someday, the borrowers will be taking victory laps, and owners of their debt securities will be weeping and wailing. I just don’t know when.
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[PoliticAverse]

1. Not the first time in history a corporation can borrow cheaper than the federal government.

I once saw this happen with IBM years ago. The federal government has missed debt obligation
payments in the past.