Apple: Don’t fall for Wall Street’s head fake
Good morning! 👋
Technically, it’s “Ohayo-gozaimasu!” today. My bride, Noriko, is actually doing the typing this morning because I’ve got an old spinal injury that’s acting up and can’t seem to make my right hand dance on the keyboard.
It’s a very interesting “Aha!” moment for me because I’ve also realized just how advanced Microsoft and Google speech recognition technology has become. Admittedly, I don’t think that the AI models driving ‘em were trained to listen to my very distinct and muddled accent… but still—WOW!
Speaking of which…
The markets are up in early going, and I love seeing all that green on the screen, presumably just as much as you do. It’s proof positive that there is still plenty of money on the move!
Here’s my playbook.
No, Apple didn’t fall off the tree
CNBC is reporting that Apple “lacks a clear path to growth” into the holiday season and, naturally, the stock is down in early going. (Read)
The company beat analyst expectations, and CEO Tim Cook said explicitly that the iPhone 15 was performing better than the iPhone 14 did at this time of the year. (Read)
I am so tired of journalists making ____ up.
Do you really think that people who don’t work at Apple and who write this stuff understand the company better than the executives who do?!?!
CEO Tim Cook said, and I quote, “Today, Apple is pleased to report a September quarter revenue record for iPhone and an all-time revenue record in services.”
Then Apple’s CFO, Luca Maestri, piled on. He noted, “Our active installed base of devices has again reached a new all-time high across all products and all geographic segments, thanks to the strength of our ecosystem and unparalleled customer loyalty.”
Apple hasn’t provided official hard-number guidance since 2020, for specifically this reason... the company doesn’t want journalists reading into stories that aren’t there. Of course, they do anyway, but you get my drift.
So, what does this mean for you?
Almost everybody is focused on iPhones, Macs, and iPads when the real story remains services, subscriptions, and data. Apple could stop making all three of the former and still put billions on the top line because of the latter.
Remember: We’re talking about a company with more than 2 billion installed devices around the world, more than 1 billion subscription-paying customers around the world, and several billion people who don’t yet own an Apple product but who want to.
Apple has returned 37.25% YTD vs. 13.89% from the S&P 500 over the same time frame.
Keith’s Tip: If you just joined us, you may be wondering, “So why is the stock down after such great news?” There’s a perfectly logical explanation. Apple is one of the most widely traded stocks in the world, and Wall Street knows that individual investors crave a headline just as much as they crave good numbers. What these merry marauders do is, they run the stock up into earnings reports because they know the public can’t resist buying. Then, when the public does buy, they use that as an excuse to run for the exits. So the stock drops.
The way around this is very, very simple. You do what Wall Street does, not what Wall Street says. Looking ahead, that means continuing to buy into Apple, which I believe is exactly what the big institutional players are going to do with this drop, particularly if it accelerates over the next week or two.
Sam Bankman-Fried guilty on all 7 counts
Is anybody surprised?
To paraphrase Damian Williams, US attorney for the Southern District of New York, this kind of corruption is as old as time. SBF apparently thought he was all that and more—but as is usually the case in situations like this, the law caught up with him. (Read)
What I want to know is why there hasn’t been one headline about which of his high-flying partners or venture capital investors knew that the whole thing was a Ponzi scheme, and when they knew it.
Makes me wonder whether we’ll ever see that information because revealing it could crater the VC industry and, by implication, open a can of worms that the public simply wouldn’t be prepared to deal with. Or that the regulators would be completely unable to contend with. [facepalm]
As for what this means for crypto... probably not much.
Looks like business as usual for the cryptoratti.
Soft jobs report
And we’re off to the races...
Non-farm payrolls increased by 150,000 for the month, according to the Labor Department earlier this morning. That’s being interpreted as a “soft” jobs report by those who expected an increase of 170,000. (Read)
That’s really the important point... the interpretation.
As we’ve discussed many times, the actual number doesn’t matter as much as the perception of the number. Wall Street is all about psychology right now, and big traders are viewing this report as evidence that the Fed is going to pause, which would seem to build upon its remarks earlier this week.
I wouldn’t take that bet.
I would, however, continue to buy world-class companies and harness the volatility that others fear. History is very clear about why that’s a good idea and what happens next.
Tip your driver “or else”
DoorDash has apparently added a pop-up in its app warning customers that if you don’t tip, your order might take longer to get delivered. (Read)
I’m all for people making as much money as they can legally and ethically, but this is a new low.
Holding customers hostage is not cool.
I think this could backfire spectacularly given rising customer tip-flation.
UAW sets sights on Toyota
Smelling blood in the water, the UAW has reportedly set its sights on Toyota and other non-union carmakers. (Read)
This will not end well.
One of two things is going to happen.
First, carmakers that would otherwise provide jobs to hundreds of thousands of people are going to conclude that the United States is not a good place to do business, pack up their toys, and go home.
Second, if they’re successful, the UAW is going to get higher wages for all of its workers, but at the expense of consumers who will undoubtedly have to pay much higher prices in the future as carmakers are forced to contend with rising costs coming directly from more expensive labour.
The other thing I don’t think the UAW fully recognises (or is choosing to ignore because it’s an inconvenient truth) is that higher wages will give carmakers every incentive to increase the speed at which they embrace automation. In other words, the UAW could be very successful in the short term but find its members no longer have jobs longer term.
It’s always better to play offense.
Even if you have to think defensively to do it.
Let’s finish the week strong and, as always, MAKE it a great day!