"Luck helped me every day of my life. And I'd rather be lucky than smart 'cause a lot of smart people ain't eatin' regular," said wildcatting oil pioneer Sid Richardson about his success in business.
Global Market Comments
June 18, 2018
Fiat Lux
Featured Trade:
(TEN REASONS WHY APPLE IS STILL GOING TO $220),
(AAPL)
Here it is mid-June, and Apple is already closing in on my 2018 target of $200. Indeed, with a market capitalization today of $930 billion, Apple is on the verge of becoming the world's first $1 trillion publicly traded company.
And here's the really great thing about this year for Apple bulls. If you had the right cajones you had a chance to load the boat just above $150 only five weeks ago.
Now for the good news. The best is yet to come. In fact, there are 10 reasons why Apple shares should hit my lofty target sometime this year.
1) Share buybacks are first and foremost. With $280 billion worth of cash in the bank abroad, and two thirds of that committed to buy back Apple stock, shareholders essentially have a free put option.
Indeed, you could see the company's invisible hand in the marketplace during the recent correction, soaking up shares at every opportunity. We won't learn the true numbers until the next quarterly earnings report in August.
2) Valuation is still the overwhelming factor driving institutions into Apple stock. With a price earnings multiple of 18X and a dividend yield of 1.40%, Apple is trading not only at a discount to the main market, but a discount to most of tech as well. No one ever got fired for buying Apple, at least not recently.
3) Apple's sales are as good as ever. The expected draw down in between new phone launches is proving less than expected. All of the channel checks suggesting a bigger drop have proved unfounded.
4) The rest of technology is on fire. Even if Apple was stumbling now, which it isn't, it would get dragged up by the meteoric moves seen in the rest of the FANGs.
5) The administration's nixing of the Broadcom (AVGO) takeover of QUALCOMM (QCOM), protects the principal supply of propriety chips for Apple phones safe from foreign interference. Broadcom could have chopped the research budget or transferred crucial technology to foreign competitors.
6) Apple is broadening its product lines, shifting to a new business model that delivers multiple new phones at the same time. This will include low-priced models that will compete in new markets such as India, as well as go head to head with the market share leaders, Samsung. This will increase market share and profitability.
7) While Apple possesses only 8% of the global cell phone market, it accounts for a staggering 92% of cell phone profits. Apple effectively has a monopoly on cell phone profits.
8) Its new lease program promises to deliver a faster upgrade cycle that will allow higher premium prices for its products and demand more phones. That will bring larger profits.
9) Apple continues to inexorably move into new products and services. While the company was late with the HomePod to compete against Amazon's (AMZN) Alexa and Alphabet's (GOOGL) Google Home, integration with the rest of the Apple ecosystem will enable the company to have the last laugh. Watch out for Apple Pay. Health care is another big target area.
10) Standards of living are rising worldwide. And guess what the first thing a newly enriched middle class does around the planet? They dump their Samsung Galaxies and Google Androids and join the iPhone club for the enhanced status alone.
I Hear Apple is Diversifying
"U.S. stock performance will be good in 2017, but is set to be outperformed by Japan, Europe, and emerging markets," said a top manager at bond giant PIMCO.
Global Market Comments
June 15, 2018
Fiat Lux
Featured Trade:
(ONSHORING TAKES ANOTHER GREAT LEAP FORWARD),
(TSLA), (UMX), (EWW),
(KISS THAT UNION JOB GOODBYE),
(TESTIMONIAL)
Those of you counting on getting your old union assembly line job back in Detroit can forget it.
The eight-year forecast published by the Bureau of Labor Statistics shows that 4.19 million jobs will be gained in the U.S. in professional and business services, followed by 4 million health care and social assistance jobs, while 1.2 million will be lost in manufacturing.
This is great news for website designers, Internet entrepreneurs, registered nurses, and masseuses in California, but grim tidings for traditional metal bashers in the rust belt manufacturing states such as Michigan, Indiana, and Ohio.
I'm so old now that I am no longer asked for a driver's license to get into a nightclub. Instead, they ask for a carbon dating.
The real challenge for we aged career advisors is that probably half of these new service jobs haven't even been invented yet, and if they can be described, it is only in a cheesy science fiction paperback with a half-dressed blond on the front cover.
After all, who heard of a webmaster, a cell phone contract sales person, or a blogger 40 years ago?
Where are all these jobs going to? You guessed it, China, which by my calculation has imported 25 million jobs from the U.S. over the past decade.
You can also blame other lower waged, upstream manufacturing countries such as Vietnam, where the Middle Kingdom is increasingly subcontracting its own offshoring.
These forecasts may be optimistic because they assume that Americans can continue to claw their way up the value chain in the global economy, and not get stuck along the way, as the Japanese did in the 90s.
The U.S. desperately needs no less than 27 million new jobs to soak up natural population and immigration growth and get us back to a traditional 5% unemployment rate.
The only way that is going to happen is for America to invent something new and big, and fast.
Personal computers achieved this during the 80s, and the Internet did the trick in the 90s. The fact that we've done squat since 2000 but create a giant paper chase of subprime loans and derivatives explains why job growth since then has been zero, real wage growth has been negative, and American standards of living are falling.
While the current crop of politicians extol the virtues of education, the reality is that we are dumbing down our public education system. How do we invent the next "new" thing, while shrinking the University of California's budget by 25% two years in a row?
If my local high school can't afford new computers, how is it going to feed Silicon Valley with a computer literate workforce? The U.S. has a "Michael Jackson" economy. It's still living like a rock star but hasn't had a hit in 20 years.
China can have all the $20 a day jobs it wants. But if it accelerates its move up the value chain, as it clearly aspires to do, then America is in for even harder times.
I'll be hoping for the best but preparing for the worst. How do you say "unemployment check" in Mandarin?
Is This Your Future?
"We can lead, but we cannot carry," said Mike Ryan, chief investment strategist at UBS, about America's role in the global economy.
Global Market Comments
June 14, 2018
Fiat Lux
SPECIAL GOLD ISSUE
Featured Trade:
(GUESS WHO'S BEEN BUYING GOLD?),
(GLD), (GDX), (SLV), ($SSEC),
(WILL GOLD COINS SUFFER THE FATE OF THE $10,000 BILL?),
(GLD), (GDX),
(TESTIMONIAL)
Gold bugs, conspiracy theorists, and permabears had some unfamiliar company last year.
While traders, individuals, and ETFs have been unloading gold for the past five years, central banks have been steady buyers.
Who had the biggest appetite for the barbarous relic?
Russia, which has been accumulating the yellow metal to avoid economic sanctions imposed by the United States in the wake of its invasion of the Ukraine.
Hot on its heels was China, which has flipped to a large net importer of gold to meet insatiable demand from domestic investors. China appears to be buying about 20 metric tonnes a month of the barbarous relic.
It seems the Chinese stocks markets ($SSEC) were not the great trading opportunity that they were hyped to be, which plunged 30% during the first two months of 2016, and is now 60% off its all-time high.
That's a big deal in a country that has no social safety net.
Many Chinese now prefer to buy gold instead of stocks, which are now considered too risky for a personal nest egg.
They are facilitated by the ubiquitous precious metal coin stores, which have recently sprung up like mushrooms in every city.
Only a few years ago, private ownership of gold resulted in China having your organs harvested by the government.
Central bank sellers have been few and far between. Venezuela has dumped about half its reserve to head off a recurring liquidity crisis.
Middle Eastern sovereign wealth funds cashed in some chips to deal with the oil price crash.
Canada has also been selling for reasons unknown to us south of the border.
All of this poses a really interesting question. Gold fell for the four consecutive years that central banks were buying, and the rest of the world was selling.
What happens when the rest of the world flips to the buy side?
My guess is that it goes up, which is why I have issued long side Trade Alerts on gold this year.
The conspiracy theorists will love this one.
Buried deep in the bowels of the 2,000-page health care bill was a new requirement for gold dealers to file Form 1099s for all retail sales by individuals over $600.
Specifically, the measure can be found in section 9006 of the Patient Protection and Affordable Care Act of 2010.
For foreign readers unencumbered by such concerns, Internal Revenue Service Form 1099s are required to report miscellaneous income associated with services rendered by independent contractors and self-employed individuals.
The IRS has long despised the barbaric relic (GLD) as an ideal medium to make invisible large transactions. Don't you ever wonder what happened to $500, $1,000, $5,000, $10,000, and $100,000 bills of your youth?
The $100,000 bill was only used for reserve transfers among banks and was never seen by the public. The other high denomination bills were last printed in 1945 and withdrawn from circulation in 1969.
Although the Federal Reserve claims on its website that they were withdrawn because of lack of use, the word at the time was that they disappeared to clamp down on money laundering operations by the mafia.
IN FACT, THE GOAL WAS TO FLUSH OUT MONEY FROM THE REST OF US.
Dan Lungren, a republican from California's third congressional district, a rural gerrymander east of Sacramento that includes the gold bearing Sierras, has introduced legislation to repeal the requirement, claiming that it places an unaffordable burden on small business.
Even the IRS is doubtful that it can initially deal with the tidal wave of paper that the measure would create.
Currency trivia question of the day: Whose picture is engraved on the $10,000 bill? You guessed it, Salmon P. Chase, Abraham Lincoln's Secretary of the Treasury.
Ever Wonder Where The $10,000 Bill Went?