Mint – Blain’s Morning Porridge
“I tried to get to my taxi, the man in the tracksuit attacks me..”
Hang-on.. aside from the iPad decline – and one suspects a new fabulous bright-new-shiny-thing successor is somewhere around the corner – Apple’s result are stellar in the face of dollar strength. It’s just that the market says they aren’t. And all the recent negative briefing on iWatch sales probably hasn’t helped. Suddenly yesterday’s golden stock looks to have feet of clay..
The question is simple – has Apple’s stellar run of recent years finally run out of juice? More broadly, has the era of gravity-defying stocks passed? In the current (and going to get worse) bond bear market, stocks should be roaring. But they feel lacklustre.
Apple is not going to become the first trillion dollar company. Mint’s tech sector stockpicker Piers Buckworth reminded me he’d written months ago on Apple: “the easy money in this stock has been made”. He expects they will take hits on guidance and light iPhone numbers, but adds: “They are still as cheap as chips!”
I hope he is right, but Apple is about sales which are vulnerable to fashion and a reliance on new products, innovation and persuading folk they desperately don’t need their old iPad, but this bright new iPad 3, or establish a completely new desire for wearable tech like their mega-overpriced watch. Perhaps the whole US stock market depends on Apple maintaining the illusion there are yet more bright-shiny-new-things we desperately want to buy queued into eternity? There aren’t..
Piers’ current view on the US tech sector is concern on social media and ecommerce, but upside from software and Cloud. Microsoft numbers yesterday were good aside from the US$8.4 billion Nokia writedown. What’s also interesting is how dollar strength is now a two-quarter phenomenon. Does that presage an outbreak of reality in investor expectations from US stocks – rather than sudden bubble bursting moves? Perhaps what we’re seeing is a re-establishment of basic common sense on upside potential?
Another factor in stocks is doubt. Again, another of my stockpickers here at Mint, Steve Previs, got me thinking about US recovery – which is so necessary to sustain and drive stock prices. He comments on the number of US firms cutting jobs – and is scathing about the latest business jargon about “workforce rebalancing”.
He asks: “If, as the Fed (US Federal Reserve) keeps saying the US economy is near “lift off”, why should companies be laying off staff?” He adds: “more redundancies are coming due to weaker than anticipated sales due to the stronger dollar – which is because the forex market thinks the Fed is going to raise rates….”
All of which gets me worried. For the last years we’ve been a bit confused because in normal markets you should not get a situation where both stock prices and bond prices have been rising together. We’ve put that down to the distorting effects of QE on all asset prices. However, what are we going to think when the bond bear market takes hold – bond prices further slide – and stock markets slide as well as recovery remains solely in the minds of overenthusiastic macro commentators? Falling bonds and falling stocks. Ouch. That will be scary.. and since there is nothing left in the traditional central bank armouries.. what are we going to do if it happens? Crashing minor, major chords…
Right.. sorry for that aside into the murky world of the stock sector. As we all know the only truths are to be found in bond prices. And what are they telling us? Er… not much aside from hints and shadows the bond bear market will deepen and not to believe anything.
Going back to Apple – it’s time for a confession: I freely admit that after three years of bearishness and being generally grumpy with Apple, I am perhaps open for a reconciliation. In a sulk with the crap customer experience at Apple Stores and fury at annoying new operating systems that make it more difficult rather than simpler, I dumped my I-phone and bot a cheap tablet a year ago.
I quickly found-out I still needed my old iPad to run apps, and I’ve recently bot a new one. And now I’ve come to realise the iPhone may enslave my very soul to Apple, but at least it’s functional. I freely confess buying a Sony phone last year has proved an even less successful affair than if I’d tried Ashley Madison…
Funnily enough, the only thing I did like about my dalliance with Sony was their Sony Smartwatch – which was damn useful and not a gimmick.
Quote of the morning so far: “S&P Upgrades Greece…. What are they smoking..?”
Bill Blain
Mint Partners
44 207 786 3877
44 7770 881033