Uh Oh, Apple (AAPL) May Be In Trouble

I think every American was heartened at the speed that the U.S., and the free world, levied sanctions on the totalitarian regime of Russia.

A few weeks ago, many said we couldn’t turn off Russia’s access to Swift, that would be the equivalent of an economic nuclear strike.

Then BAM! The EU said, “we’re doing this NOW, please join us.”

Many said we couldn’t stop buying Russian oil, because that would hurt the world, including the EU, way too much.

Then BAM! We stopped buying Russian oil.

Just a few weeks ago, who would have thought so many company would join the battle? Google. Facebook. Twitter. Visa. MasterCard. American Express. PayPal. Nike. Adidas. McDonald’s. Starbucks. Coke. Pepsi. Hundreds and hundreds more… all flipping the middle finger to Putin. In fact, if you haven’t stop doing business with Russia yet, something is wrong with you.

China’s reaction to all of this? Silence in the beginning. A lot of folks say that’s just their way, “to observe.”

I think it’s something different. That they originally thought what Putin thought: “No way the U.S. and the EU can ever get their stuff together to act in concert… and certainly whatever they do won’t have teeth.”

But both Putin and China were oh so wrong. The outpouring of support for Ukraine? STUNNING. BLINDING.

UNANIMOUS.

So China went from quiet cockiness to silent terror… now knowing that the free world has a NEW weapon against oppressors: We’ll just turn you off.

It couldn’t have happened 20 years ago… maybe not even 10… but now the world is really so interconnected, that it really is possible to, say, strangle Russia-the-dictatorship-that-oppresses-people to economic death.

With all this momentum, China realized it had to do something.

Of course they didn’t do what would have been truly helpful to peace… and that is whisper in Putin’s ear, “wtf, it didn’t work, stop acting like a madman!”

Instead it’s s-l-o-w-l-y been rolling out support for Russia over the last week or so. Essentially “reminding” everyone we need to de-escalate because it will further mess up global supply chains and such.

Boy, did Xi miscalculate on that one, too.

Talk turned today of “secondary sanctions” against China. If they’re still doing business with a murderous dictator that wants to take away others’ freedom, then maybe we’ll just turn China off, too.

My reaction?

YES! LET’S DO THAT! NOW!!

Then I got to thinking, why wouldn’t we do this? China is mostly a one-way relationship: They economically abuse us. And every time we ask them to play fair, they cry about it.

Then I got to thinking some more: Which American companies would get hurt by this?

And then it hit me: Apple. The world’s most valuable company. The company that derives 19% of its revenue from China. The company that makes almost HALF of their iPhones in China.

This would be an economic disaster of epic proportions for Apple stock.

And since virtually EVERY person on the planet either has money directly in Apple… or their mutual fund does… or their 401K does… or their bank does where they save their money… and so on…

… hurting Apple stock is akin to hurting every person on the planet.

I kid you not.

Remember the dotcom crash? It started (imho) because Microsoft and Intel, the two companies that used to financially represent everyone in the world, missed earnings numbers and sent shock waves through the financial markets. A history-making crash.

So it’s happened before.

We survived… but remember it was awfully rough for a while… and Microsoft stock price, literally, flat-lined for about the next decade.

If sanctions move to China — whether it’s for their support of Russia — or they start moving on Taiwan — I know every American will feel the way I do: YES! LET’S DO THAT! F*ck China. You sell to your oppressed people… and we’ll sell to the FREE world.

If that happens, I’m not sure Apple wouldn’t get caught in an awfully bloody crossfire.

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If I Were President: Here’s The Solution To Gas Prices (And Inflation And Pollution)… Stop Driving For A Month

I’m not suggesting we go into lock down, but there certainly were a few unintended yet welcomed consequences from the early days of Covid.

We learned that we could work remotely, at least those in corporate America.

We learned that we could hold meetings — work or personal — quite reasonably on Zoom.

We learned that even a month of reduced driving made a big impact on our environment. CO2 levels started coming down. You could see fish in the Venetian waters again. And all kinds of other miraculous things, too.

Most importantly, we learned that even a month of reduced driving made a big impact on oil supplies and gas prices…

… and since the price of a unit of energy affects the price of everything else in our world, we were reminded that the price of everything in the world comes down as oil prices come down.

So if I were the President of the United States, here’s what I’d do:

(1) I’d gather the top 50 employers in the country to an emergency meeting at the White House… hey, I can do that, I’m POTUS! :) I’d remind everyone that we’re in a time of extraordinary crisis… whether it’s Ukraine, Russia, China, inflation, deficits, interest rates, supply shortages, pandemics, whatever. I’d ask the CEO’s of all of these companies if they would consider voluntarily having their workforces work at home, just like they did during the early days of Covid. I’d suggest 90 days, to correspond during the spring, where temperatures would not be too cold nor too hot, so easy on home heating and/or cooling needs.

(2) I’d address the nation… and remind all Americans that we’re in facing multiple, life-changing crises… and just like great Americans have done through difficult times, we all can make a contribution. Nothing is locked down. But walk to a local restaurant or shop. Ride your bike to school. Take public transportation. If you have multiple cars and have to drive, take the one that gets the best gas mileage. Plan trips better, do all your errands in one trip rather than three. Get together with your friends and neighbors and carpool when possible. Want to show solidarity with the Ukrainians? Want to stop run-away inflation and pay less money for everything? Want to put a lid on pollution? Want to sock it to Russia (and the Middle East while we’re at it) where it hurts, in their oil pocketbook? For the next 90 days, let’s make a wartime-effort to reduce or eliminate driving if we can.

(3) I’d met with the leaders of other countries, talk about what we’re doing in the United States, and ask each and every country if they would join the battle.

Here’s what I love about this plan: It literally has a huge impact ON DAY ONE.

And it shows that we control our situation… our situation does NOT control us.

If You Don’t Understand Why People Backed Trump, You Don’t Understand What’s Wrong With Our Government

Nobody likes Trump. He acts like an idiot. He’s divisive and an awful communicator. He doesn’t inspire trust. He’s arrogant, bombastic, and narcissistic. About as un-presidential as you can get. He’s embarrassing.

I, literally, can’t stand the guy.

He, literally, chased me out of the republican party.

However, here’s what I’ve learned from the last four years: No matter how bad Trump was — and he was awful — he still ran circles around all the other politicians.

Why? Because he got things done. As opposed to politicians, who are too busy, well, being political… i.e., doing and saying whatever they need to to get elected. Because that’s their profession… running for office.

And, once elected, politicians don’t do anything… they just work on getting elected to their next post. Or re-elected to their current post. Because they’re not trained to do anything but run for office.

Those are — in general — the folks we have running the biggest country in the world.

It turns my stomach that career politicians — democrat or republican — are the best we can do.

Trump was different, though (queue the giant “understatement” look). He wasn’t a politician. In fact, he was a political idiot. But he got things done. China has been ABUSING us for decades. Clear as day. Yet there wasn’t a single politician — like ever — that did what Trump did: Call them out on their bullshit. Because, if you’ll recall, that was really politically unpopular when he first started pushing. “Oh, a trade war will cause the stock market to crash! Oh, everything will be more expensive! Oh, how can we be so insensitive to a developing nation?” Bullshit.

And he called a spade-a-spade with China and Covid… and about WHO bias… both resulting in an unbelievable outcry… but both positions proving to have merit. As did closing the airports to China travelers… hugely unpopular… until the whole world followed suit weeks later. Ironically, after getting blasted for being “jingoistic,” Trump then got blasted for “not doing enough soon enough.”

I hated that he trashed the Paris Accord… and I still do… but Trump was right to point out that the agreement was unfair, that everyone else had to start their hard work, but China and India — the two TOP emitters in the world — could actually increase emissions under the agreement?

Huh? That only isn’t fair, it’s dangerous.

But that’s what most politicians do — head-scratching things — because they’ve never really run anything… because all they know how to do is run for office.

Trump was the first president in modern memory to propose that government employees not get automatic raises, but rather, get compensated based on performance. That was really unpopular, too. But smart, when is rewarding mediocrity a good thing?

Trump bypassed normal and ineffective bureaucracy and directly tweeted to China and Russia that military spending was “crazy!”… something that a politician would never do… but in one bold stroke, moved the reduction of military spending to the top of the agenda. Because military spending is insane.

And speaking of military spending, what about NATO? Trump was the first president to have the audacity to hold every nation accountable for the commitments they made… to pay their fair share.

Trump was an idiot on the whole wall thing, but he was right that we have a problem with illegal immigration.

In fact, that was so much of Trump’s problem… that he simply acted like an idiot… that his behavior simply got in the way. I absolutely stopped reading – – caring — about anything he said or wrote unless it was a topic of substance… because about 98% of what he said was narcissistic, immature gibberish.

But… he wasn’t a politician… and, for me, it was eye-opening what a non-politician could do in government.

You would think we could find a few candidates with both real management AND diplomacy skills — and the desire for public service — among 330 million Americans. Instead we’re stuck choosing between embarrassing or ineffective. Unfortunately, as difficult as it is to stomach — AND IT IS — embarrassing trumps ineffective.

So, on this inauguration day where two more politicians will get sworn into office, I fear, yet again, that we’re going to be led by people who are non-doers.

And that’s what’s wrong with government… electing officials that know how to kiss babies… but don’t have the skill set to manage big things.

And one other thing: We knew exactly what Trump was when he got elected… warts and all. That’s why seemingly reasonable and rational people backed a political idiot… because they knew what they were getting… as opposed to yet another politician simply telling them what they wanted to hear.

Anything to get elected, right?

“China Ready To Put Apple, Other U.S. Companies In ‘Unreliable Entity List’ ” — Reuters

This is not a Reuters headline you want to wake up to… being put on a Chinese “unreliable entity list.”

Looks like we’re heading for a showdown between everyone’s favorite American president and everyone’s favorite Chinese Communist Party.

And, unfortunately, Apple (AAPL) may be caught in the middle.

Ouch.

China Is Now Picking On Little Guys

Apparently China has punitively banned 35% of beef imports from Australia… because the Australians haven’t backed down on their questions to China about the origins of Covid-19.

And this just days after China floated plans to do an 80% tariff on Australian barley… which apparently completely derailed the trade.

China must be so proud of its Communist Party.

This is the kind of thing that could — should — blow up in their faces.

All I can say is:  GO AUSSIES!

China Really Doesn’t Get It

I’m fascinated by the events unfolding between China and the NBA.

Yesterday CNBC ran this headline:

… and then inside the article this quote:

Ha!  China really doesn’t get it:  THAT’S WHAT FREEDOM OF SPEECH IS ALL ABOUT!

My respect for the NBA — and Mark Cuban who has also been chiming in — just went through the roof.

Letting Some Air Out Of The Balloon

There’s a lot of noise in the market.

But there’s usually a lot of noise.

By definition — at any point in time — 50% of people think there’s enough bad in the market to sell their shares to the other 50% who thinks there’s good.

Can’t have a market otherwise.  That’s why I always scoff when someone refers to “easy” trading periods.  It’s never easy.

What helps guide you through the noise is whether your fundamental investment thesis is still intact.

Is mine?  I think the two biggest drivers of corporate profits — which drive the market — are the price of oil and interest rates.  Let’s see where they stand:

* While oil took a little run to the upside, I wouldn’t call it misbehaving.  In fact, it’s shed much of its 2018 gain

* Interest rates are spooking everyone… but 10-year is sneaking back down… and Trump’s on fire about the Fed messing things up — so much so that a few Fed governors have had to reiterate that they won’t, uhm, mess things up (i.e., “will still be accommodative for quite a while”)

* Sentiment is negative.  While that’s not comfortable, as a contrarian I prefer this

So, for me, at least right now, the noise is… just noise… and what we’re seeing is some healthy “letting some air out of the balloon”… which we like… so it doesn’t pop.

 

P.S.  A great example of “noise” was Caterpillar earnings.  They beat top & bottom line.  But everyone was fretting about China and tariffs… and the stock got pounded… even though if you read their commentary, you find CAT itself wasn’t so worried about the effect of China or tariffs on its business.  Here’s some commentary from their 10/23/18 earnings call:

* CATERPILLAR SAYS FEEL GOOD ABOUT EQUIPMENT DEMAND IN CHINA NEXT YEAR

* CATERPILLAR SAYS EXPECT BUSINESS TO CONTINUE TO IMPROVE IN 2019 VERSUS 2018

* CATERPILLAR SAYS CONTINUE TO EXPECT INDUSTRY SALES IN CHINA FOR 10-TON-AND-ABOVE EXCAVATORS TO BE UP ABOUT 40 PERCENT FOR THE FULL YEAR

* CATERPILLAR SAYS EXPECT IMPACT OF 25 PERCENT IMPORT TARIFF ON ADDITIONAL $200 BILLION CHINESE GOODS TO BE ‘QUITE MINOR’

These are all good things, right?!

Microsoft Earnings Are Back To Being Incredibly Relevant

I have to hurry this post because Microsoft is about to announce earnings.

For the first time in many years, Microsoft’s earnings are incredibly relevant again.

As many know, MSFT is in the process of successfully reinventing itself… to be a big-time cloud competitor.

Their earnings after the market closes today are important because the market is in desperate need of some kind of clear signal… either that things are still ok in tech land… or they’re not.

It just so happens MSFT is announcing before Apple, Amazon, Google, and Facebook… which means all eyes will be on their report.

Now, Microsoft has a reasonable stage set.  Adobe reaffirmed guidance last week… which I believe single-handled stopped the market from another 5-10% slide… since everyone was/is feeling like we’ve driven off a cliff… given tariffs… and global tensions… and interest rate hikes… and Trump acting decidedly unpresidential most of the time.

And Netflix killed their earnings, too, which even though it doesn’t seem like it, also helped provide some footing in this decidedly negative market.

But some disturbing things are still happening.  iRobot (IRBT), makers of my favorite electronic device in the world (Roomba!), killed their numbers, too… and the stock was still hammered today… simply because they cited some potential tariff impact… even though they still raised guidance.

What the market wants — craves — now is more assurance… that the consumer is still spending… that interest rates, while increasing, will increase in a slow and measured pace… that oil isn’t going to spike… that tariffs are having a positive effect somewhere in the food chain…

… essentially that the foundation for investment is still sound.

A good report from the once most dominate and influential tech company in the world… that has clawed its way back into relevance… could turn everything on a dime.  Stay tuned!

UPDATE:  Earnings were solid.  Beat on both top and bottom lines.  Stock was up almost 5% at one point in the after-hours market.  (BTW, Tesla TSLA also reported and nailed it… it’s up over 10% in after hours… and ironically they mentioned tariffs and it doesn’t seem to be impacting the pop.)

Don’t Back Down On Your Tariff Fight, President Trump! But If You Want To Win, You Must…

Dear President Trump–

I may be the only guy in American that loves what you are doing with tariffs.  (Please see here and here and here.)

And I love that you’re turning up the heat.

But, if you want to win this in our lifetimes OR until another president takes office (whichever comes first), you need to enlist the support of the rest of the commercialized world.

This might be difficult since you’re trying to create a level playing field with them, too…

… or, said another way, you’re hammering the rest of the world into submission as well.

But maybe you can pitch a win here.  Something like, “look at what we’re doing to China… so you know we can easily do that to you, too.  Net-net is you’re going to lose a little to us, it’s inevitable.  But opening up China isn’t… unless we go to China together… and if we do go together, we’ll both really, truly gain a huge new market, second largest in the world!”

To make this work, though, it has to be China vs. THE ENTIRE WORLD.

That’s because China is too proud to be “defeated” by just the U.S… and going it alone only forces them to act more defiantly… which includes them dragging things out in hopes of a political regime change… regardless of how long that takes.

So the only way to get this done in a reasonable time frame is to turn up the heat on the rest of the world… THEN, as a group, approach China.  This will allow China to compromise with dignity… because it won’t be perceived as a fight, rather, that “everyone” came together and “mutually” agreed to change, uhm, all the rules.

No loss of face for the Chinese.  100% victory for the world (and the U.S.).  Wrapped up before the next presidential election.

Tough timing but that’s what you have to do to bring this home.

Break a leg–

–Royal.

Who Would Have Thunk? Trade War With China Could Be Great For Facebook Stock

Facebook has a lot going for it.  But one of its glaring weakness over the years is ZERO penetration into China.

Turns out dictatorships don’t like things like free speech.

Ironically, as much as FB gets slammed for privacy concerns, Facebook defiantly stood up to the Chinese government in 2009 when the Chinese demanded the release of private information from the company.

This was no small act:  For their privacy stance, the Chinese government blocked Facebook into the world’s most populous country… essentially halving their business opportunity.

THAT’S putting your money where your mouth is.

But, in a weird twist of fate, when many companies are getting slammed for the earnings impact of a US-China trade war, this isn’t an investment risk for Facebook… because they have no Chinese exposure.

And — it gets better — one of the expected outcomes of the trade war is a more level playing field, which (you guessed it) may mean Facebook becomes unblocked. 

If that happens, that could be a massive growth driver for FB earnings over the next few years.

Yet another reason why this trade war isn’t all bad.

The Great Trade War Begins… And It’s About Time Since China Is Competitively Rotten To The Core

Yesterday was proverbial d-day for the start of the great Trade War between China and America.

It’s about time… China is aggressively and overtly protectionist… and has been for decades.

I learned this first hand in the CAD business.  It was absolutely impossible for us to sell our product in China… even though we were successfully selling our product in other areas of Asia.

Why?  Because China mandated that Chinese businesses and consumers could only buy Chinese CAD…

… even though Chinese companies were happily selling their CAD — and we were competing against their CAD — unencumbered in the U.S.

But we were a small player, so maybe you can chalk up our failure to penetrate China on our size.

But what about Autodesk, makers of AutoCAD, the #1 CAD product in the world?

Nope, they’ve been shut out for years, too.

To make matters worse, Autodesk found out a Chinese CAD company had stolen their intellectual property.  The Chinese Company vehemently denied the allegations.  Autodesk had no choice but to sue the Chinese Company in the World Court where the Chinese Company continued to vehemently deny the charges… until, facing irrefutable evidence, they finally had to admit their wrong-doing.

But it gets even worse. 

While Autodesk could have collected major damages, they realized if they did, the Chinese government would have been EXTRA punitive… so Autodesk had to voluntarily give up any settlement value in the hopes of helping the Chinese “save face” so they could have any shot at selling in the country.

That is unfair governmental manipulation at its worse.

But that is the China I know about first hand:  Competitively rotten to the core.

So I don’t care about any short-term tariff pain.  When it comes to true capitalism, China is like a big but immature bully and I am so looking forward to a much more experienced fighter punching these guys in the face.  It is well deserved and long overdue.

 

It’s Telling That Even Though Europe Hates Trump, They Hate China Even More

China is trying to do an end-around and create some kind of “united partnership with Europe against the U.S.”

Despite a raging battle with the Trump administration, Europe flat out turned down the Chinese overture.

From ZeroHedge:

But why does Europe – which has so staunchly publicized its disagreement with Trump’s policies – refuse to align with China?  Simple: behind closed doors it admits that Trump’s complaints about Beijing are, drumroll, spot on.

And:

… perhaps because China’s veneer of the leader of the free trade world is so laughably shallow – China was and remains a pure mercantilist power, whose grand total of protectionist policies put both the US and Europe to shame – the European Union has outright rejected any idea of allying with Beijing against Washington ahead of a Sino-European summit in Beijing on July 16-17.

And:

Europe has absolutely no belief that Beijing will ever follow through with its promises.

China is so bad that not even the, “enemy of my enemy is my friend” maxim can hold water.

Trump And Tariffs: 3/4th Brilliant… 1/4th Questionable… But Contrary To Popular Belief Will Be Kick-Ass For The Stock Market

Everyone seems to HATE the fact that Trump is pulling the world into a tariff war.

I think it’s great… and long overdue.

The current tariff infrastructure has its roots after WWII when the U.S., the dominant economic might in the world, was magnanimous enough to give the war-torn countries in Europe and around the world economic advantages as a way to help them get back on their feet.

Similarly, the U.S. was magnanimous enough to give developing nations — like China — an economic leg-up in their quest to transform from rural to modern economies.

But come on people, all of that was decades ago!

Trump is absolutely correct:  It’s time to have a level playing field.  Why do we impose a skinny 2.5% tariff on cars imported from China, only to see China impose a stiff 25% tariff — 10 times larger! — on cars they import from the United States?

And why can Chinese companies own 100% of a factory in the U.S., but American companies can’t even own 50% of their factories in China?

And on and on!

I’m calling B.S. along with Trump and I have no clue why EVERYONE isn’t doing the same.  China is no longer a developing nation… it has the second largest economy in the world.  It’s time China stopped taking advantage of our good will.

While not as bad as the Chinese, there certainly can be more parity with the rest of the world, too.

Similarly, Trump is absolutely correct about stolen intellectual property… because in the modern world, economic might is not just measured in current service or manufacturing ability… but in the ability to use innovation and technology to dramatically improve old industries — or completely invent new ones — and reap the rewards that go along with that.

So who cares if China can manufacture complicated devices like iPhones better than the U.S. today?  Maybe the U.S. will invent a new way to build an iPhone that doesn’t require any manufacturing?

After all, that’s what we Americans do… we innovate… that’s our strength.

Eliminating the complicated manufacturing process for iPhones would be unbelievable… and the rewards would be immense… unless, of course, China simply STEALS the new technology to do this.

And THAT’S the situation we have today… China forcing intellectual property transfer as a condition to setting up shop in their country… or, worse, flat-out stealing our IP… and the Chinese government — literally — encouraging all of this.

Fuck that.  I’m all for taking our ball and going home if other countries won’t play fairly… because at the end of the day, WE’RE the world’s biggest market…

… and I think it’s awesome that Trump is reminding the world of this.

With that said, Trump may have one thing wrong about trade:  Who cares if there are trade deficits?

To me, a trade deficit benefits us… it means our costs are lower than they would have been… which means our profits will be higher… and our stocks will perform better… and that will enrich every American that does any investing or has a 401K plan or that even gets a paycheck.

That’s pretty much the vast majority of the country.

Trump, you’re a business person, you know artificially forcing a higher cost structure on businesses and consumers is exactly the opposite of how a free market should work.  Anything artificial always ends in disaster.

I know the counter-argument that Trump loves to tout:  If we “export” all of industries overseas, we can hurt ourselves strategically… maybe even get held over a barrel in the future.  Case in point, the decline of our steel industry.  If we can’t produce our own steel, we’ll be at the mercy of foreigners for such a strategic commodity.

Poppycock.

If the U.S. steel industry can’t compete with foreign competition, then go invent a new way to make steel 10x faster and cheaper.  Don’t tell me this can’t be done, Britain did it with glass.  Stop crying and get inventing — go create new jobs in new and re-invented industries where the United States can once again be the de facto leader.

There is one exception to this “pro deficit” position, however:  While we don’t want the U.S. government to force us to buy local stuff at artificially higher prices, we also don’t want the Chinese government to force their businesses to buy from their local suppliers at higher prices, either.

Which is what the Chinese do today… things that should get bought from U.S. companies aren’t… which artificially increases our deficit because we’re not getting business we should.  That part of Trump’s deficit thinking is right on the money.

So, in summary…

… I WELCOME a trade war — short term pain and all — if the end result is a fair global playing field (especially with China!)… and a kick-in-the-butt for our industries at risk to GO RE-INVENT THEMSELVES.

That can only be good for U.S. workers and companies.  And, ultimately, for the stock market, too.

 

Ha! Who Said This?

I just read something that had this quote in it:

But the government quickly mounted a propaganda push, blocking some articles and publishing pieces praising the party.

Is this a quote about the Trump Administration?

Nah, it’s just about, oh, CHINA TAKING A MASSIVE STEP BACKWARD AND ELIMINATING TERM LIMITS FOR THEIR DICTATOR, ER, I MEAN PRESIDENT.

But it’s telling — SCARY — that it’s exactly what the Trump Administration does.  EXACTLY.

 

P.S.  It’s also scary that Trump’s response was:

I think it’s great. Maybe we’ll give that a shot some day.”

People aren’t sure whether he was joking or not… it doesn’t matter… that’s something The President Of The United States — defender of the U.S. Constitution — doesn’t joke about in public… unless he wants to invite comparisons with a Chinese dictator!

And I Thought There Was Only One Party-Sinking Political Issue… Trump Single-Handedly Created Another

We have a LOT of problems in the United States.  All of them are important… but, realistically, if we can’t PRIORITIZE correctly, we’re shooting ourselves in the foot… and maybe the head.

It’s this prioritization that has strangled the Republican party… or should I say “hijacked.”

The greatest example of this is pro-life and pro-choice.  Clearly this is a hugely important issue… but it’s a hugely important PERSONAL issue… and as such should actually stay out of politics. 

Practically speaking, the Republican party has alienated large numbers of Americans on this single issue… meaning, no matter how intelligent the rest of the republican agenda may be, regulating right-to-choose is a complete and utter deal-breaker for many voters.

I would hope the Republican party would have learned this lesson by now.

But — unbelievably — Trump just created a SECOND complete and utter deal-breaker:  Climate change.

From Business Insider this morning:

The US officially tells the UN it is quitting the Paris climate change deal

Are you kidding me?

Whether you agree there’s people-made climate change or not… whether you agree this is good for business or not… Trump has just created YET ANOTHER deal-breaking issue for a mass of voters.

How stupid.

P.S.  My take on climate change?  Go live in Beijing for a couple months — A COUPLE OF DAYS — and then give me your opinion.

Sound Familiar… ?

A report out from Drexel Hamilton this morning about AAPL… his rationale sounds familar!

===============================================

Drexel Hamilton analyst Brian White (formerly at Cantor Fitzgerald) initiates coverage on Apple (NASDAQ: AAPL) with a Buy rating and a price target of $200.00 (Street High)

White highlighted:

• The sharp correction in Apple’s stock this summer represents an attractive entry point as we believe fears surrounding China are overblown, concerns around difficult iPhone comparisons are short-sighted and the appreciation for the implications of this transformational super cycle is surprisingly muted.
• Trading at just 8.2x our CY:16 EPS projection (ex-cash) and well below the 14.7x for the S&P 500 Index, Apple remains one of the most undervalued technology stocks in the world.
• In our view, Apple’s successful transition to a larger form factor iPhone with the iPhone 6/6 Plus is the start of a sustainable upgrade cycle that has already catapulted the company to the #1 position in China’s smartphone market for the first time ever during 1Q:15 and we estimate the company will gain share in the global smartphone market in 2015.
• Despite a slowing economic backdrop, our recent trip to China further supports our view that Apple fever is alive and well across the country. For example, we believe Apple is planning a bigger push into Tier 3-5 cities (80-90% of China’s households) across Mainland China over the next 12-24 months and the country’s 4G network is only 12% penetrated.
• We expect the next big iPhone market that could open up for Apple is India and we view the country at a similar stage as China was for Apple in 2010. With a population of 1.25 billion, India is similar in size to China’s 1.36 billion and enjoys a wireless subscriber base of 980.8 million users as of the end of June (source: Telecom Regulatory Authority of India).
• For the first time in five years, Apple entered into a new product category this year with the launch of Apple Watch in April, marking company’s initial push into the wearable technology market. We believe Apple Watch will be a major hit this holiday season.
• In our view, Apple is innovating like never before with entry into the first new product category in five years with Apple Watch, the launch of new services such as Apple Pay, an expanded effort in the TV market with the all-new Apple TV and investment in big, new industries such as the auto market that we believe could eventually lead to an “Apple Car”.

Missed In The Rubble This Morning: Tim Cook May Have Single-Handedly Stabilized A Global Meltdown

Another oblivion morning… first five minutes were hell… I think the largest interday drop for the Dow ever.

To the point I was making in my, “Investing Is Easy, eh?” post this weekend… about it not being as bad for Chinese consumers as the headlines say… which means it’s not as bad for AAPL as the headlines infer:

Tim Cook made a rare statement about his business in China this morning.

“As you know, we don’t give mid-quarter updates and we rarely comment on moves in Apple stock,” Cook wrote. “But I know your question is on the minds of many investors.”

“I get updates on our performance in China every day, including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August. Growth in iPhone activations has actually accelerated over the past few weeks, and we have had the best performance of the year for the App Store in China during the last 2 weeks.”

“Obviously I can’t predict the future, but our performance so far this quarter is reassuring. Additionally, I continue to believe that China represents an unprecedented opportunity over the long term as LTE penetration is very low and most importantly the growth of the middle class over the next several years will be huge,” Cook added.

However, I think Tim Cook did more than put the China situation into perspective for AAPL investors…

… I believe he may have single-handedly stabilized a global meltdown.

Wow.

Investing Is Easy, Eh?

Right.

Not for the faint of heart.

On days like Thursday and Friday — where the market was pounded into oblivion — it’s good to take a step back and test popular thinking.

There are two themes driving the market:  China and oil.

China

China is slowing down.  Which businesses are affected?  Certainly the infrastructure businesses.  The fall out?  The commodity free fall.  (Yet another thing pressuring oil downward.)  What about Chinese consumers?  Not so much, China is still growing at 6-7% — considered hypergrowth for just about everyone else — so obviously the Chinese working class is still benefiting.  Remembering that the ills in the Shanghai stock market only affects 1 in 10 Chinese consumers… which (I’m concluding something obvious for emphasis) leaves 9 of 10 unaffected by the volatility… and I suspect consumer spending in China probably feels like Silicon Valley restaurants during the last two stock market crashes:  Still packed.

Oil

Oil is going down, which some people think is bearish because they believe it’s an indication that the world has stopped growing.  I won’t say that’s a good thing…

… but cheaper energy prices means more money in everyone’s pocket… which means everyone can buy more things… like highly desirable iPhones and such… and that means higher corporate profits…

… which is a great thing.

So, weird to me that people are weirded out by falling oil prices… that’s something to celebrate.

BTW, falling oil prices are less a function of lessening demand and more a function of greater supply.  We’re producing more than the world needs right now, no wonder oil prices are coming down.

More Responsible At Home?

On top of all of this, U.S. consumers seem to be acting more responsibly… check a news item that seems to have slipped through the cracks on Friday:

The national average FICO score is now 695 — the highest it has been in at least a decade, according to the latest analysis from Fair Isaac Corporation, the score’s creator.

In Summary

I disagree with the major themes driving the market.

The Chinese consumer isn’t history.

Lower oil prices are good for everyone except for those in the oil business (sorry oil business!).

And, as painful as it is to say, blowing off steam isn’t the worst thing in a bull market that’s lasted as long as this one… in fact, it’s kinda healthy.

Is The High-End Leader Also Supposed To Be The Marketshare Leader?

People are weirded out because the iPhone “lost” its marketshare leadership position in China.  (Here.)

But are high-end products really supposed to be marketshare leaders?

I think not.

There’s not a business school prof or business textbook in the world that thinks so, either.

What investors should be focusing on is not that Apple “lost” their #1 marketshare ranking…

… but rather how utterly amazing it is that the high-end supplier in the market is anywhere close to the #1 ranking…

… especially during their OFF-CYCLE!

Now that speaks to the phenomenal momentum Apple has in China.

Could The Chinese Stock Market Bust Actually Be Good For AAPL?

I get there is a lot screwed up about the Chinese stock market… top of which is government intervention.

However, there’s just something extra weird about the Chinese stock market “bust.”

As in, it happened so fast, I wonder how people even noticed?

Most bubbles take years to inflate.  That is significant because the longer something is inflating, the more people get sucked into the action that eventually get hurt.

But the bubble portion of the Chinese Shanghai market rose & fell within a few months… that’s like the blink of an eye.

Sure, over the last year the Shanghai has about doubled… and it’s reasonably to call that frothy.  But how about over the last five years?  It’s only up about 30% — TOTAL — for an economy that has been growing in double digits.

In contrast, most of the U.S. indices have about doubled during that same five years… for an economy that has only had low single-digit growth.

With a longer-term perspective, can we really say China’s stock market didn’t deserve at least some kind of fractional growth?  

But what is the effect on Chinese consumers?

Even with the recent fall, the Shanghai is still up over about a third year-to-date… which should make a lot of investors (not traders) still feel pretty good.

And to further minimize damage to the investing public, apparently 90% of Chinese families do not even own stocks.

So you wonder how a spike & “crash” that happened that quickly… that affects only a minority of buyers… and for the most part probably affects them in a positive way… could really wreck that much consumer buying havoc?

Of course, the reason I bring this up is because of AAPL… analysts are worried that Apple’s big Chinese growth engine is going to come to a screeching halt.

I just don’t see it.

Note that after our last two stock market crashes in the U.S. — and despite unemployment — spending actually went up.  Cheap energy was the reason… which we have now again.

So while I don’t disagree that the Chinese stock market — and the Chinese economy for that matter — may be really screwed up, I wonder if those people bailing on AAPL aren’t looking at this all wrong?