Chinese Apple news is hard to digest

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.


Apple pays dearly for staunch privacy stance

Apple’s CEO Tim Cook appears to be in trouble over his repeatedly stated opinion on technology and personal privacy.

Cook has been consistent in his stance on releasing private information of his customers from the San Bernardino shooters in 2015.

On Sunday Cook appeared on “60 Minutes” and his recent presentation backing the right to privacy at an European Union conference. No other US tech CEOs appeared live at this conference.

During his EU presentation, Cook said this: “Today [the private information] trade has exploded into a data industrial complex. Our own information, from the everyday to the deeply personal, is being weaponized against us with military efficiency,” Cook said at a conference in Brussels on data privacy last week.

Google, Facebook, Microsoft, Twitter and SnapChat among others declined to appear live.

So come Monday two iPhone component suppliers cut sales projections for the upcoming quarter. While neither company named Apple as the reason for the revenue shortfall, Wall Street took Rice to the woodshed taking 5% or roughly $50 billion out of investors pockets.

Apple has said recently it will not breakout individual product sales numbers anymore in it quarterly earnings reports in keeping with other manufacturers.

Now iPhone sales may be slowing as market saturation and the costs for replacement units continue to rise, but the timing of these two events — “60 Minutes” and stock collapse — appear to be a shot across the bow of Apple to tone down the privacy rhetoric.

Apple Capital Management releases investment letter, ehh earnings

Apple — still the favorite of the private investment — has now become a hedge fund itself. Return on Investment is not merely a line on its balance sheet, it’s a business line for the company’s products.

Apple is no longer the company of Steve Jobs that just makes great products that the world did not know it wanted prior to its introduction. No, Tim Cook’s vision is a cross between Apple Capital Management and IBM. Continue reading

Apple's Writ to be tied

Apple chief Tim Cook finds himself alone in the land of tech giants.

Cook has decided to fight the Feds on a ruling that the company has to provide the FBI with a new technology to crack an iPhone to retrieve data from one of the San Bernardino attackers.

The FBI is citing the All Writs Act of 1789 as the basis for this request. It’s an act dating back to Constitution-era and seems a strange tact by the government to use.

But much easier than getting Congress to consider writing and passing an encryption law.

This case will ultimately wind up at the Supreme Court before any real verdict is rendered, since both sides will need to appeal all lower court rulings.

Cook is taking the mantle, while the rest of Silicon Valley is hiding behind an industry consortium as their mouthpiece. Google, Facebook and others are not out front supporting Apple on the perceived government overreach.

As a sidebar (pun intended), there is a case in Brooklyn, NY, which is further along on this issue of the FBI requesting Apple crack an iPhone for information in a drug case.

Briefs have been filed on the Writ motion, but the case was dropped when the defendant pled guilty to a reduce charge in a plea deal.

Both Apple and the Justice Department want the court to rule on the motion on the basis that the statute will be used again. And sure enough it has in the San Bernardino case.

Let’s hope by the time the High Court gets the case we will have the full nine jurists sitting so the case can be decided there and not have a split decision.

The most heavily shorted stocks in the US have had the largest run up in price over the last week. This tells me that large investors are covering the dogs in the belief that the Fed may change policy at the March meeting.

On the S&P the most-hated stocks were up 5% Wednesday while the rest of the index was up 2.25%. Similar upticks happen on Nasdaq.

The shorts did not become the darlings overnight, no these investors were caught in a short squeeze, where everyone was trying to cover at the same time causing the run up in price.

Northern Oil & Gas was up nearly 7% after being down 21% YTD prior, with 30% of the float shorted. Globalstar up 2% after being down 22% YTD with 12% of the float shorted. Lastly as an example Nobilis Health was down 71% since Feb. 10, on Wed. it rose 8.7%.

So why cover now. The stampede seems to be building on the backs of energy shares and healthcare wannabes. Profit taking or the need for cash. That’s the two options for the widespread covering.

In any event, it’s now a basis to build a thesis that stocks are coming back.


Wall St. can't stand to watch Apple's numbers

So Apple disappointed Wall Street with record quarterly revenues of $49.61 billion a 32.5 percent rise from a year earlier, beating Wall Street’s expectations of $49.43 billion.

And yet investors shaved $60 billion off Apple’s market capitalization in early morning futures trading, which had the Dow down 70 points in pre-open.

Apple sold a staggering 47.5 million iPhones, up 35 percent from a year ago quarter in a quarter that is usually no that strong.

I’m going to go out on a limb here and say Apple’s stock should be a buy today, although I am not a financial adviser.

The numbers Apple put up are monster compared to any other S&P 100 firm, and the Street is foolishly beating up the company for not giving up numbers or guidance on the Apple Watch.

In this environment top and bottom line growth especially on the top where less accounting magic occurs, should be looked at as bonus and Apple blew them away.

Some disturbing data coming out of the Treasury department.

It appears with very little interpretation that China in the most recent report is a net seller of Uncle Sam’s debt.

Big selling outright and through some proxies should have Fed chief Janet Yellen a bit concerned this morning. Wall Street reports have pegged the sale of all US debt at over $0.5 trillion.

Now we know why the Fed is pushing for rate rise in Sept. Not because the US economy is humming along — it’s not — but because yield hungry Chinese are looking elsewhere to deploy their cash.

We’ll need to keep tabs on this.