02/08/2013 08:21 am ET

Apple In Trouble For Hoarding: Seven And A Half Things To Know

Science has determined that people need to know 7.5 things per day, on average, about the world of business. You can't argue with science. Lucky for you, The Huffington Post has an email newsletter, delivered first thing every weekday morning, boiling down the day's biggest business news into the 7.5 things you absolutely need to know. And we're giving it away free, because we love you, and also science. Here you go:

Mark Gongloff is off the newsletter this week, so today's 7.5 Things are brought to you by Jillian Berman.

Thing One: Apple Has A Cash Hoarding Problem: There’s a worm growing inside Wall Street’s love affair with Apple. Activist investor David Einhorn is suing the tech giant to block a plan to eliminate a preferred class of stock, arguing that by doing so the company is limiting its ability to use its giant pile of cash to reward investors, according to The New York Times. The suit comes after Apple’s recent stock declines -- a phenomenon that was unheard of on Wall Street just months ago. But Einhorn, the famed billionaire hedge fund manager, told the NYT his suit has nothing to do with the stock drop.

Instead, the suit is about Apple’s “depression-era,” mentality, Einhorn told CNBC, which pushes the company to hoard cash and only take on the least risky investments. Though Einhorn’s suit is the biggest investor challenge to Apple in years, according to Reuters, the company has been criticized for stockpiling its cash before. Last year, Apple responded by launching a plan that would ultimately pay out $45 billion to investors over the next three years.

After that move, some investors had hoped that Apple CEO Tim Cook would be more receptive to rewarding shareholders with cash than his predecessor Steve Jobs, according to the Wall Street Journal. But with the stock declines and worries about loss of market share and lack of game changing products, investors are concerned that Apple isn’t putting its huge cash pile to use. The tech giant isn’t alone in hoarding cash; though corporations have a record amount of cash on hand they’re stockpiling it instead of investing, hurting job growth and the economy.

Thing Two: Hold The Government Conspiracy Theories: Hold the government conspiracy theories for now. It looks like the feds are considering filing a lawsuit against Moody’s if a similar one against its rival S&P works, according to Reuters. The U.S. is seeking $5 billion from S&P over claims it knowingly gave top ratings to shoddy mortgage securities in order to boost profits. Some, including S&P’s lead lawyer Floyd Abrams, had floated the idea that the government’s probe of S&P intensified after the company downgraded the country's top credit rating in 2011, something Moody’s did not do. At the same time the Justice Department and many states are filing their lawsuits, New York Attorney General Eric Schneiderman is launching a probe into S&P, Moody’s and their other major rival, Fitch, according to the Wall Street Journal. The investigation examines the companies’ ratings in the run up to the financial crisis, but it’s unclear if Schneiderman will be able to take any legal action because of a 2008 agreement his predecessor made with the ratings agencies.

Thing Three: 787 Tests Didn't Test Much: If the exploding batteries weren’t an indication already, the nation’s top transportation safety official said the method used to certify Boeing’s 787 Dreamliner for flight was all wrong. Deborah Hersman, the head of the National Transportation Safety Board, said the FAA accepted test results for the 787 in 2007 that didn’t properly test the risks that the planes batteries would catch fire, according to The New York Times. That seems to have been a mistake. Boeing’s test results found that the likelihood the plan’s batteries would catch fire was about 1 time in 10 million flight hours, the Wall Street Journal writes. The plane has flown 50,000 hours so far and its batteries have caught fire twice.

Thing Four: Payroll Tax Crunch: If your wallet suddenly feels lighter, it’s not just you. Americans are cutting back after a boost in the payroll tax took effect last month, and low-income Americans are getting hit particularly hard, according to The New York Times. Some are cutting back on small luxuries like dinner and a movie, others are delaying insurance and rent payments. Consumer confidence surveys are indicating that low-income consumers are frankly getting less confident. And businesses are feeling the effects, the Wall Street Journal reports, with one business owner telling the Wall Street Journal that January was his worst sales month in 2008.

Thing Five: Tech Giants Make Changes Overseas: Unfortunately for Dell, its proposed buyout means the company may not be able to avoid paying taxes quite as easily. The company is bringing back $7 billion worth of cash stashed overseas to finance its buyout, according to the Financial Times. That’s the opposite of what pretty much every other multinational company is doing: Keeping cash abroad to avoid paying U.S. taxes on it. Meanwhile another tech company is also adjusting the way it does business overseas. Hewlett-Packard is now instructing Chinese factories producing its products to limit the use of student labor, The New York Times writes. The practice, which has also recently drawn scrutiny from Apple, involves factories relying on high school students and vocational students to fill labor shortages. Often they’re forced by school administrators to work grueling hours and at a job that has little to do with their schooling.

Thing Six: EU Looks For A Closer Relationship: There’s hope yet that you might be able to get that Prada bag cheaper. European Union leaders are expected to announce today that they’ll push for a free trade pact with the U.S., according to Reuters. European leaders are hopeful that the free trade deal would help the region’s struggling economy. If the agreement goes through, the pact would bring the countries responsible for half of the world’s economic output closer together.

Thing Seven: Immigration's Odd Bedfellows: The push for immigration reform is producing odd bedfellows. Business and labor leaders are uniting to try and urge the government to overhaul the U.S. immigration system, according to The New York Times. They’re even coming closer to an agreement on guest workers, a long contentious issue that derailed hopes for President George W. Bush’s immigration reform plan in 2007. Their plan would use a data system to determine how many seasonal workers would be let in each year to work on farms, hotels and elsewhere.

Thing Seven And One Half: Your Happiness Is Pre-Determined: Apparently you have no control over how happy you are; it’s all determined by your parents. A new study shows that the year a person was born has a major influence on their well-being, according to BuzzFeed. For example, those born in the Great Depression are more likely to feel depressed. That doesn’t really bode well for all you 20-somethings.

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Heard On The Tweets:

@moorehn: The best part of the weather forecast this weekend: THUNDERSNOW.

@kevinroose: If you didn't get the blizzard alert, it means you're on Bloomberg's kill list. :(

@EpicureanDeal: Anyone care to wager how much David Einhorn's public attack on Apple was motivated by envy of the recent attention paid to Ackman and Loeb?

@ReformedBroker: Got a Blizzard Alert on my iPhone just now, reported directly to Dairy Queen as per instructions.

And you can follow us on Twitter, too, if you want, no pressure: @JillianBerman and @MarkGongloff



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