Down goes the Dow

Lots of positive news on earnings/revenues/profits on the morning ticker.

Ma, ma, my Kuroda....

Ryan,

There was an interesting interview with an Apple analyst on CNBC this morning. He has a $115 price target on the stock. The analyst did highlight the challenges in China where Huwei smartphones are taking share from Apple and Samsung. He also mentioned how Chinese demand was a tailwind to earnings last year but not this quarter.

Igy

ryan foreman wrote:

Also, if your favorite candidate Hillary gets elected as you believe she will, I can almost guarantee she will sign legislation to repatriate cash back to the U.S. with little or no tax.

True. I bet her friends at Goldman are already drafting proposals.

The underlying issue though is that Apple doesn't charge their foreign subsidiaries a high enough amount for each iPhone they sell.

Apple does 99% of their R&D in California, production is all in China, why should the sales office in Ireland and Luxembourg get 30% of the profits?

The value created is all in California and that's where its profits should be taxed.

Ghost of Igloi wrote:

There was an interesting interview with an Apple analyst on CNBC this morning. He has a $115 price target on the stock. The analyst did highlight the challenges in China where Huwei smartphones are taking share from Apple and Samsung. He also mentioned how Chinese demand was a tailwind to earnings last year but not this quarter.

Right. Last year was the first time, China was in wave 1 of the rollout. In the previous years, they were always delayed. In reality, Q1 would have been a lot worse already but they had China included so that helped. Now everyone has their 6S/6S Plus (size does matter in China) and the Sky is falling.

The iPhone SE won't help much in China either, because, again: size does matter in China.

The would help pay for all the underwater CALPERS pensions: "The value created is all in California and that's where its profits should be taxed."

Read more:

http://www.letsrun.com/forum/flat_read.php?thread=5369837&page=563#ixzz477wLflaX

I was speaking loosely - I obviously am not predicting the demise of Apple, but it could happen. Dell and AOL were kings of the world, where are they now? Not out of business, but near irrelevant. Here's one downward track: Apple realized that revenue is declining and they have no product in the pipeline. They up R/D spending - from $6 billion to $15 billion, to match roughly Samsung R/D spending. Then they make a couple of big acquisitions - say netflix for its recurring revenue and a movie studio for its content. That's another $60 billion. But then a better mousetrap comes out and iphone sales tank and apple has to drop prices 40%. All of a sudden they are bleeding cash and their cash pile has shrunk by half or more. So they stop their stock buyback program to save cash, and BAM their stock tanks because that is a sign of weakness about the future. Engineers start leaving becasue their options are so far out of the money, and the company sinks back into a morass, like it did in the 2000s after its initial glory. I'm not predicting this, but it is not crazy either. Tech selling to individuals without a recurring revenue stream is a very very difficult biz to stay alive in.

agip wrote:

Then they make a couple of big acquisitions - say netflix for its recurring revenue and a movie studio for its content. That's another $60 billion.

Netflix original business model - unlimited shows and movie streaming - is extremely low margin.

Netflix realized this and now focuses on own productions.

I can see Apple doing the same - producing their own content. Distributing content doesn't make any money - see iTunes.

Also, big studies would immediately renegotiate the terms if Apple were to buy Netflix.

Not going to happen.

But then a better mousetrap comes out and iphone sales tank and apple has to drop prices 40%. All of a sudden they are bleeding cash and their cash pile has shrunk by half or more.

This will happen.

THe iPhone SE is already priced at ~20% margins (compared to 50% of the flagship iPhones.

Also, customers are sick of the "milking" storages tiers (16GB/64GB) and see it as what it is - greed.

today's econ:

the weirdness continues: a weak 1Q GDP print at +0.5% but jobless claims hit a new low for their 4wk average. reconcile that one.

Have you all read about the 1Q GDP effect? Apparently every year there is an actual drop in GDP from 4Q to 1Q. But it would be misleading to show the country's economy shrinking 1 quarter and then surging back every year. So they put in adjustments to smooth it out. Some feel they are messing up the seasonal adj in the 1Q - something like six consecutive 1Qs have been very light in GDP. Which certainly suggests there is some problem with the data.

Certainly the stock market doesn't care about the llight GDP.

I could see apple creating content I suppose...pixar is somewhere in the apple dna. That can indeed be very costly.

agip wrote:

Have you all read about the 1Q GDP effect? Apparently every year there is an actual drop in GDP from 4Q to 1Q. But it would be misleading to show the country's economy shrinking 1 quarter and then surging back every year. So they put in adjustments to smooth it out.

I'm surprised growth wasn't higher considering the very mild winter this year in most parts of the US compared with the harsh winter in the previous year.

"Certainly the stock market doesn't care about the llight GDP.'

Read more:

http://www.letsrun.com/forum/flat_read.php?thread=5369837&page=564#ixzz478JahyCo

The stock market in it's infinite wisdom is ignoring anything fundamental. Of course that same stock market is being driven by corporate buybacks and high frequency traders. Both entities will ignore the fundamentals until they bite back.

Igy

Random Dude Bro wrote:

agip wrote:

Have you all read about the 1Q GDP effect? Apparently every year there is an actual drop in GDP from 4Q to 1Q. But it would be misleading to show the country's economy shrinking 1 quarter and then surging back every year. So they put in adjustments to smooth it out.

I'm surprised growth wasn't higher considering the very mild winter this year in most parts of the US compared with the harsh winter in the previous year.

yeah - the tricky part is that we can't know if this weak 1Q was the result of poor seasonal adjustments or if there actually was a serious deceleration.

maybe the numbers are accurate...we can't know.

agip,

I think there is plenty of data that illustrates what is going on in the economy. The market is being driven by other factors that will prove fleeting. It is interesting how we are hanging out at 18k and 2100, it will break one way or the other.

Igy

Ghost of Igloi wrote:

agip,

I think there is plenty of data that illustrates what is going on in the economy. The market is being driven by other factors that will prove fleeting. It is interesting how we are hanging out at 18k and 2100, it will break one way or the other.

Igy

...or the stock market is looking down the road and seeing renewed strength. You can't know.

Certainly the market rarely reacts strongly to current data.

agip,

Of course you know I think it is no different to 2000 and 2007 when "the market" predicted nothing.

Igy

Apple outs the truth: growth is slowing everywhere.

http://www.alhambrapartners.com/2016/04/27/slowing/

Igy

Ghost of Igloi wrote:

agip,

I think there is plenty of data that illustrates what is going on in the economy. The market is being driven by other factors that will prove fleeting. It is interesting how we are hanging out at 18k and 2100, it will break one way or the other.

Igy

most econ data are blah, yes.

except labor - the hiring going on is tremendous and seems durable. It's been a strange dichotomy for a while now - why all the hiring if the economy is so anemic?

the dollar has been falling for a few months - that should help bounce things in the 2Q.

Well I don't know what THAT was all about, but...

agip and others, you crack me up. I re-iterate everything I have already said regarding GDP, employment, inflation, etc. It's all here, with references.

It's a bit strange that you're still spinning your wheels trying to figure this stuff out. What's funny is that it is totally irrelevant to you, whether you know it or not.

The only thing these indicators inform is whether or not to be in the market, or whether to pursue any particular alternative--NOT how to act within the market. Technicals are much more useful as intra-market indicators, even among sectors.

Look at me. I get in, and I get out. I have the flexibility and ability to do other things, which beat the markets by a large margin. Those things are no secret, as far as I'm concerned they are obvious. I did very well on art (and other things) for a while, as I have already stated. I am now doing very well on the one thing that many hold responsible for inflation and growth--RE, also as I have already stated. I have something else ramping up as well, to which to transition when RE cools.

These things are not secrets. Knowing the economic and fiscal landscape allows me to know when to be in, and when to be out. Understanding the published indicators and the motivations behind them, along with other inputs, allows me to know that economic landscape.

You OTOH don't seem to know it. You are still confused by what should by now be obvious to you. Worst of all, because you don't understand it, you don't understand that you cannot make use of it within the markets.

Good luck. I will be spending this afternoon supervising a paint crew and kitchen install crew, then spending time with a local bigshot developer who happens to like me. You will likely spend the afternoon...hoping.

What's that saying? Hope is not a strategy?