So as I wrote yesterday about the Trump Administration’s hard-line on tariffs with China and its muted effect on US firms.
Well Apple CEO Tim Cook gave the company’s first earnings warnings for the this quarter. Cook cited the slowing Chinese economy, the strong dollar and other economic headwinds. Cook neglected to mention directly that the company is having big troubles trying to sell iPhone models retailing for more than $1,400.
Apple makes good products, but the product line is limited. If you keep bolting new gear onto an older product and jacking up the price, then you will see consumers uninterested in these upgrades.
As my son — soon to be a finance graduate — cited Wednesday night when we were discussing this said: “Apple walks the fine line between utility and luxury,
Well clearly the luxury aspect is suffering since the high-end models are not selling and consumers are keeping their older phones much longer — cracked screens or not.
As the Chinese economy repositions itself an equal trading partner without all the beneficial pricing power it enjoyed from lopsided trade agreements over the last 30 years there will be some pain. But that certainly is better — in the long run — than continuing the status quo.
Maybe the Chinese economy has taken a step back in its progress and many can’t afford $1,400 iPhones or even a $1,000 model. That’s on Apple to come up with a different plan or product for the market.
While I see this as an Apple problem, the stock market will sell off roughly 300 Dow points again on the open Thursday morning on the earnings warning.
I recall something about a butterfly flapping its wings over the Yangtze River and Wall Street feels the storm. It should be short-lived however.