HI Financial Services Commentary 11-27-2018
You Tube Link: https://youtu.be/Gvt7vkGR3EA
What I want to talk about today?
When you are in the process of weathering a financial markets “storm” what do you do?
You can buy an umbrella= Long puts
DO SOMETHING to make up the downward movement other than traditional dollar cost averaging
Something is NOT – going to cash, move to bonds, dollar cost average, get out to another broker and have them do the same thing
5K in a year 10 years you can mostly only affect your portfolio 5%
Umbrella= Make up some downward movement, pick up more shares, it is a un-timeable process
You DON’T know when the storm will stop
Where will our markets end this week?
lower
DJIA – Bearish 
SPX – Bearish –
COMP – Bearish 
Where Will the SPX end November 2018?
11-27-2018 -3.0%
11-20-2018 -5.0%
11-13-2018 +1.0%
11-04-2018 +2.5%
Earnings:
Tues: CRM, SDRL, CBRL
Wed: CHS, DKS, TIF, GES
Thur: ANF, DLTR, KIRK, GME, HPQ, PANW, PVH, VMW
Fri: MTN
Econ Reports:
Tues: Case-Shiller, FHFA Housing Price Index
Wed: MBA, GDP, GDP Deflator, New Home Sales, FOMC Minutes
Thur: Initial, Continuing, PCE Prices, Personal Income, Personal Spending. Pending Home Sales.
Fri: Chicago PMI,
Int’l:
Tues –
Wed –
Thursday – CH: CFLP Manufacturing PMI
Friday- G-20 Meeting
Sunday – JP: PMI Manu Index, CN: PMI Manu Index
How am I looking to trade?
Protect the Stock Positions through Dec
AOBC 12/06
MRVL 12/04
RHT 12/19
If possible I will be rolling protection up or down to take profits on Long Puts and to move them to ATM prices for most if not all of my equity positions
www.myhurleyinvestment.com = Blogsite
customerservice@hurleyinvestments.com = Email
Questions???
US-China trade war could go on until 2020 presidential elections
- Trade tensions between the U.S. and China could go into “a temporary hiatus” in the coming months, but would remain unresolved until the presidential elections in 2020, according to Standard Chartered Private Bank.
- That’s because Washington’s decision to resolve tensions with Beijing will likely be driven by politics, said Steve Brice, the bank’s chief investment
- Brice said he expects the U.S. central bank to raise ratesthree more times — once in December and twice in early 2019 — before taking a pause.
Published 2:41 AM ET Thu, 22 Nov 2018CNBC.com
Trade tensions between the U.S. and China could go into “a temporary hiatus” in the coming months, but would remain unresolved until the presidential elections in 2020, according to Standard Chartered Private Bank.
That’s because Washington’s decision to resolve tensions with Beijing will likely be driven by politics, said Steve Brice, chief investment strategist at Standard Chartered Private Bank. U.S. President Donald Trump will be seeking a second term in the White House during the 2020 presidential elections.
“I think it’s going to be a political decision: Does it actually bode well for the U.S. having solved, in Trump terminology, the China trade issue today? One could argue that actually, he’d be better doing that six months before the elections so he’s got the tailwind going into his re-election bid,” Brice told CNBC’s “Street Signs” on Thursday.
A tailwind refers to a situation that will push economic growth and company earnings higher.
Two recent polls in the U.S. found that Americans like the president’s handling of the economy, but that has failed to boost his overall approval rating. Those trends signal possible trouble for Trump’s re-election bid if the economy loses steam.
Trump and Chinese President Xi Jinping are expected to discuss trade at the G-20 summit in Argentina next week, but many experts have said they don’t see any major progress from that meeting.
“You might see a temporary hiatus … but then when you get closer to the presidential elections, then this flares back up and then we’ll see tensions rising again,” said Brice.
Worries about the U.S.-China tariff fight have contributed to heightened volatility in global markets, with investors adjusting their positions in anticipation of the projected slowdown in economic growth and company earnings next year.
“There are plenty of excuses to be a bit more cautious in the short term,” Brice said, adding that “we don’t see that extrapolating into 2019.”
He explained that growth in corporate earnings are expected to slow significantly next year, but would remain slightly above historical long-term average — which is “still relatively healthy.” Inflation in the U.S. is also not expected shoot up quickly and, coupled with slower economic growth, could see the Federal Reserve raising rates at a slower pace next year, he added.
This year, rising interest rates in the U.S. was a reason behind investors withdrawing their money from some emerging markets into U.S. dollar-denominated assets, which contributed to volatile movements in global markets.
The Fed slowing down its rate hike could calm those jitters. Brice said he expects the U.S. central bank to raise rates three more times — once in December and twice in early 2019 — before taking a pause.
Cramer: ‘I have tremendous contempt for this market’ — it’s a bear market not a correction
- People don’t want to call it a bear But what do they need?” CNBC’s Jim Cramer asks, rhetorically.
- “I have tremendous contempt for this market, because every time you try to make moneywith it, it cuts your heart out. That’s a bear market,” he argues.
- After tanking nearly 3.8 percent last week, the S&P 500 recovered nearly a third of that decline shortly after Monday’s open on Wall Street.
Matthew J. Belvedere | @Matt_Belvedere
Published 10:34 AM ET Mon, 26 Nov 2018 Updated 12:55 PM ET Mon, 26 Nov 2018CNBC.com
U.S. stocks are in a “bear market” not a correction, CNBC’s Jim Cramer argued on Monday.
Cramer said on “Squawk Box” he’s not using the traditional measures of a bear market and a correction to make his case. “Who cares about the S&P? It’s individual stocks that are down 40 or 50 percent.”
A bear market is generally defined as an asset or index decline of 20 percent or more from recent highs. The threshold for a correction is measured as a drop of 10 percent or more from recent highs.
“I have tremendous contempt for this market, because every time you try to make money with it, it cuts your heart out. That’s a bear market. People don’t want to call it a bear market. But what do they need?” Cramer asked, rhetorically.
“It’s a bear market rally,” he said. “You go down really hard last week. And then you come in on Monday and it’s up a lot. People come in. They buy it and lose money.”
After tanking nearly 3.8 percent last week, the S&P 500 recovered nearly a third of that decline shortly after Monday’s open on Wall Street, lifting the index out of correction territory. The Dow Jones Industrial Average bounced more than 300 points, or nearly 1.5 percent, distancing blue-chips further away from a correction. The Nasdaq, despite similar gains, remained in a correction by a few percent.
“People come in at 250 [points higher] and get their heads cut off. I just feel ashamed,” said Cramer. “It’s very hard to be very positive about the market unless you’re an idiot. Let it go up for three or four days and then sell some.”
Cramer reiterated that he’s been bearish on stocks since Federal Reserve Chairman Jerome Powell said early last month that interest rates were a long way from neutral. Powell’s remarks touched off a market rout on concerns that central bankers will increase rates aggressively next year. Cramer has been calling on Powell to pause rate hikes, arguing the economy is weakening and inflation is not a problem.
In fact, Cramer warned last week that investors should sell their stocks if they think the Fed, as expected, will raise rates in December. The Fed already increased rates three times this year. After its most recent hike, in September, the Fed projected three rate increases in 2019.
https://seekingalpha.com/article/4224471-apple-analysts-behind-curve
Apple: Analysts Are Behind The Curve
Nov. 26, 2018 10:36 AM ET
Summary
Analysts are behind the curve when rating Apple stock.
Goldman Sachs has downgraded Apple stock three times in this month alone.
Investors should question the US-centric approach taken by most of these analysts.
Apple’s headwinds in international markets are much greater than those assumed by the market.
The bearish sentiment in this stock can continue for several quarters as the company builds its next growth engine.
Apple (AAPL) stock has once again been downgraded by Goldman Sachs. This is the third time that the stock has been downgraded in as many weeks. The first downgrade was from $240 to $222, second was from $222 to $209, and finally, we saw a downgrade to $182. The consensus is priced in and investors make money by betting on the future direction of the stock. However, most of the analysts have been behind the curve when estimating the headwinds facing Apple’s stock.
I have reiterated my underperform rating for the stock in several articles. My article stating the big red flags for Apple in late June attracted over 150 comments of which 90% were negative. Another article on reasons for future underperformance also received strong pushback in comments. One of the reasons is a strong confirmation bias with Apple. Apple receives only 42% revenue from the Americas region. Its ecosystem and market share is much smaller in international locations which reduce its pricing power in these regions. The challenges facing the company will increase in the next few quarters which should lead to a further correction in the stock.
Analysts remain behind the curve
Goldman Sachs has downgraded Apple’s stock by close to 25% in the last three weeks. There has been a downgrade from Goldman almost every week since the company released its earnings. It looks like most of these analysts change their ratings after the stock has decisively moved to the next level. Most of the analysts are woefully behind the curve. This would harm investors following their price target.
I have reiterated my underperform rating for Apple in several articles in the past few months. The main reason behind the underperform rating is the fact that Apple’s performance in international markets will remain subdued for the next few quarters. It is important that investors look beyond the confirmation bias while investing in Apple. It is difficult to not like the stock while liking the main products. I am writing this article on a Mac Air and believe it to be a great product but as far as the valuation of the stock on fundamentals is concerned, it still looks expensive due to future challenges.
Source: Apple filings
The percentage of total net sales from Americas region is only 42%. The net sales from the US would be less than two-fifths of the total revenue. This shows the dependence of Apple on international markets. A big difference between US market and international markets is the higher competition within smartphone segment outside the US. The three major Chinese OEMs – Huawei, Xiaomi (XI), and Oppo – do not have a deal with network providers in the US. There are also warnings by the US government against using the products of Huawei. This restricts the ability to gain market share.
On the other hand, most of the international regions do not have any restrictions on the Chinese OEMs. In Western Europe, Huawei is rapidly gaining market share.
Fig: Huawei has increased its market share by 10 percentage points while Apple’s share has declined. Source: IDC
In emerging markets like India, Xiaomi has been able to gain market leadership and dethrone Samsung (OTC:SSNLF). These companies have not only improved their overall technology but have also shown significant improvement in marketing and brand building abilities. Most of the analysts focus on the US market which can give a lopsided view of the future growth potential within Apple.
Morgan Stanley’s Katy Huberty has increased her price target for Apple to a whopping $253. The price target is 40% higher than the current trading level. Despite the recent downturn, none of the analysts have moved their rating to underperform.
Source: WSJ
Future direction for the stock
Apple faces a number of challenges in the next few quarters. Samsung is preparing to launch its 10th-anniversary smartphone which will boast of 5G network. We should see a marketing blitz from Samsung for the next cycle. Other smartphone manufacturers have also given a tentative date for launching their 5G phones in mid-2019. On the other hand, Apple is sticking with Intel (INTC) for 5G modem. Apple’s 5G phone is unlikely to arrive before 2020 cycle.
Apple’s user base might not move to another platform, but they can certainly delay the purchase of their new iPhone in the 2019 cycle. Apple has already squeezed as much as possible out of its pricing power. If there is a further increase in iPhone prices in 2019, while Apple does not have a 5G capability, it would have a catastrophic impact on unit sales.
The importance of the Services segment is overstated as it contributes only 14% of the total revenue. There are some very good opportunities within verticals like ad business and streaming, but it will take several quarters before they will make a meaningful impact on the bottom line or top line.
Apple’s brand equity is still very strong, but it is also facing headwinds which are difficult to ignore. A big difficulty in estimating the future direction of the stock is the massive buyback program. If the management accelerates its buyback program, it will provide a floor to the stock price. However, even if that happens, it is unlikely that the overall sentiment towards the stock will become bullish anytime soon.
Investors looking for value investing should wait for the current correction in Apple stock to run its course.
Investor Takeaway
Most of the analysts covering Apple stock have been behind the curve in estimating the stock’s performance. Just a few weeks back, Goldman Sachs had a price target of $240 which has now been reduced to only $182 after three downward revisions. There is still no underperform rating on the stock by major analysts covering the stock. Apple has a decent moat and growth potential within the domestic US market, but its prospects are not that great in international locations.
Apple faces currency headwinds, greater competition from Chinese OEMs, and lower market share in international regions. The company gets over three-fifths of its revenue from outside US which makes it very vulnerable to trade issues or downturn in the economy within major international markets. Apple stock will face further correction and it will be some time before it finds a stable trading range. Investors looking to make a value investment should wait for a better valuation multiple in the stock. I have underperform rating for the stock.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
https://seekingalpha.com/article/4223567-apple
What Apple Isn’t Doing
Nov. 20, 2018 11:56 AM ET
Summary
After this last earnings call Apple has slid by over 17% from its all-time high even as it is making more money.
The decline is based on the renewed fear of “Peak iPhone,” and it’s not a fear without substance.
Rather than rehash Apple’s financials or talk about their supposed inevitable demise, in this article we will list 5 things that Apple could be doing, but to our knowledge isn’t.
We will end the article by talking about what we, as shareholders, could do about guiding Apple to a more favorable outcome.
At Zynath, we love Apple. We think overall Apple (AAPL) has a bright future, but every once in a while it is important to stop and look carefully at companies you love. And having looked carefully at Apple we do not think everything is hunky dory in Cupertino. While Apple is still innovating and still growing by leaps and bounds, there is just a little less magic in the post Jobs Apple.
The strategy of concentrating on just a few products, the famous square before emphasis on concentration that Steve Jobs introduced after he came back as the CEO of Apple, may have worked back when Apple was a smaller company. However, now that they are a trillion-dollar company they do need a few more pokers in the fire.
(Areas of concentration from Apple Keynote circa 1997)
In this article we will take a look at 5 markets Apple can enter today and is uniquely positioned to dominate. We believe that Apple is uniquely positioned to dominate the consumer gaming market through AppleTV, the personal server market through the reintroduction of the AirPort Router, the corporate server market through an introduction of a MacOS powered server, and the public cloud market through creation of a Swift-powered Apple cloud ecosystem. Finally, we believe that Apple can revolutionize the corporate and government agency custom software contracting through creation of a marketplace that brings together talented developers and large entities while providing an element of security to said large entities.
This is not a bear article about Apple failing to spot these opportunities, it is a bull article showing just how strongly Apple is positioned if it decides to enter these markets. Of course, daydreaming about what Apple could do isn’t very helpful. To wit, at the end of the article we will talk about what we can do as shareholders to steer Apple in this direction.
Gaming
The gaming market is huge and growing by leaps and bounds every year. PC gaming is back in vogue, enormous gaming competitions are now commonplace, and gaming streamers are able to attract audiences of 500,000 people plus to their streaming sessions. Gaming is no longer about fun and games, it’s big business now and Apple needs to take a bite of that business.
At the end of October Apple introduced a new set of iPad Pros. While many reviewers have discussed the new looks of the iPads, the lack of the headphones port, the new USB-C connection, what many have overlooked is the iPad Pros’ gaming prowess. Now, unlike some others on Seeking Alpha [Apple’s $180 Billion iPad Gamble], we are not going to make an argument that the iPad Pro is the ultimate gaming machine, far from it. However, the A12X chip inside the new iPad Pro is simply amazing.
The new A12X chip scores higher on the Geekbench scores than some of the productivity laptops available currently in the market, including Apple’s own 13in MacBook Pro from 2017. It further delivers amazing graphics performance. During the keynote address Apple stated that Assassin’s Creed: Odyssey runs on the new iPads at 120 frames per second, as they emphasize “something no console can deliver.”
Now, imagine a pair of the same chips, unrestricted by thermal and battery concerns integrated into Apple TV. Apple TV can be the game console of the future. It could be Apple’s Answer to Sony’s (SNE) Playstation or Microsoft’s (MSFT) XBox. And, in a completely un-Apple-like manner it could be sold for less money and Apple can still make cash hand over fist on the back end.
Now, I know this sounds insane, ‘Apple, the budget brand’, but stick with me for a second. Because Apple designs their own A12 chips and their future iterations, and because Apple is now a “services company” they can afford to sell the hardware at cost. It used to be that Apple was a software company that monetized their software through beautiful hardware. Now, we believe Apple needs to be both, a software and a hardware company, that monetizes its products through services and experiences, that’s how we are going to get to 2 trillion valuation.
With Apple TV, probably renamed to better reflect its new capabilities, Apple can take the gaming world by storm. Imagine a $200 – $300 game console that is capable of running all of the latest game titles in 4K resolution with support for remotes, controllers, and mice and keyboard as input devices and VR capability. Apple can deliver that if they sell the product at cost, and make the money on the backend through the App store.
But why sell the device at cost? Simple, to drag more people kicking and screaming into the Apple ecosystem. Remember, the iPod, was just that for Apple in the early 2000s. My Dad, a die-hard Windows user, had an iPod and then got an iPhone, and now he continues to be dragged into the ecosystem. Steve Jobs even mentioned this at some point during a presentation, there is something about that $200 mark, maybe $300 now with inflation, that is very special, people are just willing to give you a chance. With a $300 gaming device Apple can introduce people into their ecosystem. Just like a good drug dealer, the first time is always free, or in this case affordable.
Apple can differentiate itself from other game consoles by offering mouse and keyboard support integral for proper game play for certain titles and by having convenient streaming tools built right in. The difficult part of course will be recruiting game development companies to support the new device. However, there Apple has two very powerful tools at their disposal. The App store and the iOS ecosystem. Because any game designed for the new and powerful Apple TV (to be renamed) would be easily compilable to also run on the multitude of iPhones already in the market place, many game developers may take a chance on the new device. Further, the App store is notoriously profitable for game developers. Finally, of course, Apple has quite a bit of clout in the entertainment industry and with a little pushing and prodding they more than likely will be able to secure some impressive game titles at launch.
But there is more! It is no longer a significant secret that Apple is considering replacing Intel as a supplier of its processors for its Mac computers. And why not? Their own chip designs are getting more and more powerful, and they have done the switch before. Only ten years ago, in 2008, Apple made the switch to the Intel architecture from PowerPC architecture by IBM. They’ve done the switch before and we are confident that they can do so again.
This could have huge implications for this particular market, gaming. Once a developer designs a game to run on Apple TV, it will also automatically run on all the latest Macs as well! Finally, Macs can be about gaming as much as they are about video editing and productivity. Mind you, it is not strictly necessary for Apple to switch processor architectures, as with the latest version of MacOS, iOS code can be easily ported to MacOS, but the architecture switch will make the whole process even easier for developers.
The business argument behind this move is obvious, make money from sales of games and games subscriptions, through the App store and if successful it will be a ton of money.
Personal Server
Apple is all about privacy, as they have told us many times. The world is all about cloud. What if there was a solution that could accommodate both? And what if that solution could also be a home router? But let me back up a little. Let me paint for you the problem first.
The internet is like a water pipe. It carries information to all of our individual houses. If all of us use the internet all at the same time the metaphorical pipe has to be very wide to carry all the data. And that’s actually exactly what happens nowadays.
Have you ever noticed how right around 7 or 8 at night, your internet slows down to a crawl? Have you ever wondered why? Netflix, Amazon, and YouTube are the answer. When everybody starts streaming, the overall internet bandwidth requirement in the United States quadruples. Just like peak hours for electricity use, there are peak hours for internet use. With electricity, we can use batteries, or hydroelectric energy accumulators, or more recently even enormously heavy flywheels to store energy. But what about with internet? Well, let’s get back to the solution to this problem in a moment. For now, let’s look at another problem, sharing and synching between computers on your network.
The other day we ran into this problem personally. At our office, we have an extremely high latency internet connection. We wanted to use Apple Pages’ collaborative mode to have several people work on the same document. Sadly, it didn’t go so well because all the changes performed on one computer have to travel to Apple servers and then come back from Apple servers to be distributed to all the collaborative participants in our office so the changes took forever to update.
Eventually, we ditched the Apple Pages solution in favor of a self-hosted CryptPad application that we installed on our main file server. Thankfully some of our team members are technically gifted and this wasn’t a significant hassle, but it would be for many companies, or individuals.
Now, imagine if there was a solution that would allow you to host your own Dropbox, Apple Pages sync service, photo sharing service, etc. And, imagine if that same solution would buffer all your favorite YouTube channels and TV shows for you during off-peak hours, perhaps while you sleep, and play them for you in any device you own, well at least any Apple device, in beautiful 4K resolution. Finally, imagine if this solution also happened to be a top of the line, easy to configure, and incredibly safe home router. Yes, of course, we are talking about the rebirth of the Apple AirPort.
In 2018 Apple has exited the wireless router market and we think they made a big mistake. Of course, there is not much money to be made in wireless routers, if you try to monetize the hardware. But, what about monetizing services? Imagine a home router that has the same incredibly powerful A12X chip at its core, has 6 or more Terabytes of onboard storage in the form of fully redundant hybrid drives (a combination of SSD and spinning disks), and is sold at cost to the end consumers.
I know, I am killing you here with my suggestion that Apple should retail their hardware at cost, but again stick with me here. What if then, instead of just giving the access to the 6 Terabytes of storage inside the router, Apple rented that storage to both developers, large internet corporations like Google (GOOG) and Netflix (NFLX), and the end consumers alike?
Imagine having 2 Terabytes of iCloud storage that you pay for every month and that is available anywhere from Apple servers, but it is also available in your house instantaneously from your own router. When your wife/husband and your children share pictures with you those pictures load in a moment on all of your apple devices. When you click on a new YouTube video from your favorite creator it loads instantaneously rather than buffering for several seconds. And, of course, if you ever use Pages in collaborative mode with someone inside your house or small business the changes would propagate instantaneously.
Of course, there is only so much money that Apple can squeeze out of the end consumer, but what about corporations like Netflix or Google? With the recent demise of Net Neutrality, these companies are looking to pay more and more money to Internet Service Providers (ISPs) for their connection to the end consumer. As described above, the load in their system comes mainly during certain peak hours in North America. With Apple’s new router such companies would be able to offload some of that traffic onto the router itself. By using machine learning and predictive algorithms products such as YouTube and Netflix can preload all of the popular TV shows and movies the end consumer is likely to see onto the router during off-peak hours.
Of course, that is not the end. An entire ecosystem can be developed around the personal cloud router that allows end consumers to install apps on that router. Those apps can do things like monitor IP security cameras, run software such as CryptPad that we are using currently or any number of creative uses for what essentially will be an easy to use and maintain home-based general purpose server. And, of course, with every app sold or service installed Apple can make their 15-30% commission.
Being in a wireless router market for the few dollars that you might make on the hardware doesn’t make much sense. But being in that same market for the hundreds of dollars that you can rake in service fees over the lifetime of the product makes a lot more sense.
Corporate Server
We just talked about putting a server in everyone’s home but what about the businesses? Aren’t they all moving to the cloud? Well, yes and no. While many businesses are moving to a managed public cloud infrastructure, many others are choosing to adapt hybrid solutions. Hosting some of their business logic on the public cloud provided by companies like Amazon (AMZN), Microsoft (MSFT), or Google, and still maintaining some of their own servers at what they call the “edge” of the network.
The edge of the network is the computer that is closest to the end user. So, for instance, in your office your company’s website and online services can operate on a public cloud infrastructure of some kind, but if during your standard work week you interact with really large files and need to share them with your coworkers then your IT department may opt for an on premises file server that can handle those file sharing needs. Further, on premises infrastructure could be safer, if deployed correctly, and may even be required if you are working for certain types of high security organizations. Finally, on premises infrastructure is essential for real time machine learning applications.
Apple currently makes no servers whatsoever and yet the demand for such servers is in fact, skyrocketing. There is even a data center provider in Las Vegas that literally purchases iMac Pros, yes, the 27in iMac Pro all-in-one computers, and stacks them screen to screen on server racks because there is such a high demand for MacOS powered server infrastructure.
This would be a pretty simple area for Apple to go into and would work very well in combination with the idea we will discuss in the next section. All they have to do is subcontract with a server hardware manufacturer that already manufactures standard 48V rackable hardware, design a fancy faceplate for the server enclosure perhaps one with a nice glowing Apple logo, and sell these things by the truckload. Eventually, these could be powered by Apple’s own A-series of chips, but for now a standard Intel or AMD powered server running MacOS would do the job just fine.
Companies, both large corporations and small businesses, can use such servers on premises for tasks such as software development, video editing, and general purpose office applications. But this idea really tightly ties in with the next area of discussion so let’s move on and talk about the Apple cloud.
Apple Cloud
In the past I’ve written about the potential for an Apple Cloud here and here. However, let me quickly sum up the idea for you.
First, let’s talk about Swift. Swift is an excellent programming language that Apple has developed. It has near C level performance (the industry standard for fast code execution), is easy to learn, and easy to compile and deploy. Most recently, Google’s own Tensorflow project, the premier machine learning framework, has adopted Swift as its language of choice, and in some way is replacing Python with it. The Tensorflow team is now actively working to fully integrate the Tensorflow libraries with the Swift compiler. What this means is that for the first time ever you will be able to use code level logic inside Tensorflow’s calculational graphs. Basically, for machine learning applications this gives you much greater flexibility and ability to play with models which you simply couldn’t have built before.
Ok, so Swift is awesome, but what is the point of the Apple Cloud? Well for this we need to take a look at the current state of the public cloud infrastructure space. Doubtlessly, you have heard of IBM (IBM) announcing that they will purchase RedHat (RHT) recently. But do you know why? It is almost entirely because RedHat is one of the main developers on the Kubernetes (often shortened to K8s) project. But what is K8s? K8s is a management and packaging solution that allows you to package various pieces of software, such as for instance, a web server, a version of Python interpreter, and maybe a bunch of different libraries, along with your code of course, into a single container. Then with K8s you can take several of these containers and package them together into a deployment solution that can be easily uploaded to any public cloud and deployed with ease.
While K8s is a great temporary solution it still basically a mess. What you are doing is taking a bunch of utterly unrelated tools and projects and bundling them together into a single deployable package in order to achieve scalability in a public cloud, wouldn’t it be easier if you can compile your application down to machine code and deploy it as a simple application folder to a server whose job it is to run such applications? This is exactly what Apple needs to do with Swift.
While Swift is an open source language, the libraries for it do not have to be. Apple can develop sophisticated libraries targeting web services, data base access, etc. and allow developers to compile their Swift source code into a single and easily deployable application. The application can run on an Apple on premises server (see above) or it can be deployed to the Apple cloud, where the application can be scaled up or down with demand.
This is a complex, multi-year project, but this would payoff greatly in the long run. It is not too late for Apple to jump into the public cloud arena because they can offer something that no one to date has offered yet. While other providers concentrate on being able to support as many technologies as possible, Apple can stick to its very Apple like nature and develop an infrastructure in which there is one and only one right way to code something, but if you code it that way it will work and scale flawlessly.
Please do read my other articles on the subject that I’ve linked above to gain a bit more insight of why this is an enormous opportunity for Apple.
Code Marketplace
Our final suggestion is another service. Something that we think is incredibly necessary and yet utterly unavailable at the moment. A code marketplace that can serve medium and large sized businesses and government agencies which have the budgets and the capabilities to hire outside developers to write custom software that will meet their needs, but often lack the expertise to choose a high quality provider.
Have you ever wondered why government agencies and large corporations have sometimes utterly atrocious websites, and internal software products? As one commenter who claimed to have worked for a large corporate custom software provider put it, “they would send the A Team to sell the product, the B Team to gather the requirements, and then finally, the C Team, a team of people who could barely turn on a computer, to actually write the code.” But this terrible business model works because of the “nobody has ever being fired for going with (insert large corporation here)” thinking. This needs to change and Apple can change it.
Apple desperately wants to break into the enterprise space, and this is the way they can do so. They already have an incredibly valuable resource, millions of skilled developers who contribute to the App store. They further have the insight of how well those developers perform based on automated crash reports and feedback from App store customers. They can leverage this information and create a code marketplace. The way it would work is that a large corporate client or a large government agency in collaboration with an Apple representative would create a requirements document and a project description and post it on the code marketplace. Various independent developers would be able to bid on the project. The end resulting software, that those developers would create, would only run on Apple devices and Apple servers, of course.
The client could select a developer of their choice from the bids provided with the security of knowing that the entire project is backed by Apple itself. If there is any problem or if the subcontractor fails to deliver Apple is on the hook to make everything right. While this is a risk, it is a risk that is easy to mitigate using all the data that Apple has at its disposal about its developers. However, in exchange, Apple gets to collect 30-50% of the overall contract value. And such contracts would be in the range from $100k to $1 million a pop.
Imagine having government websites that finally work, or the self-check-out counters at large grocery chains that do not take 10 seconds to respond to finger presses! In this market area, Apple would basically act as an intermediary, an insurance company that allows corporate project managers to feel confident about hiring a talented independent developer, rather than a greedy and often time inept government contracting firm. And, in exchange, Apple will be compensated handsomely for this service, up front, and will make a ton of money on the back end selling hardware to the same corporate clients to run their new shiny code on.
Investor Takeaway
We laid out for you a roadmap to the $2 trillion Apple corporation. Let’s recap them here:
- Gaming:We believe Apple needs to go into the gaming market with an Apple TV like device that is capable of running modern triple A class games. The device should be capable of using mouse, keyboard, and controllers in order to support all of the various game play styles. This is the new doorway into the Apple ecosystem. It will be the iPod of 2018. Inexpensive, and undeniably good at what it does.
- Personal Server:We believe there is an untapped market of people who wish they could set up their own personal server for various purposes but do not have the skills to do so. Apple should enter this market with a new AirPort Extreme Router that will allow App execution on the router and will have ample storage space that could be rented to end consumers and large corporations alike.
- Corporate Servers:This is an obvious and simple to enter market. It’s a market that Apple used to be in the past and should come back to again. It makes a lot more sense when considered in combination with the Apple cloud which we also proposed.
- Apple Cloud:The idea of a public cloud is taking the internet by storm. It is the central growth driver for both Alibaba and Amazon but the actual implementations are still lacking in elegance and simplicity. We believe that with Swift and precompiled containerized apps Apple can bring elegance and simplicity to this market, and make insane amounts of money in the process.
- Code Marketplace:This is one of those ideas that could make money and could also make the world a legitimately better place for both corporations and indie developers. By acting as a quality assurance agent and middleman Apple could partner up indie developers with organizations that have the budget for custom software development and make a ton of money in the process.
But, these are just daydreams of a few passionate Apple investors here at Zynath. What good are they? As individual investors, we don’t have the power to affect change in the company. However, as a group, perhaps a large group of investors, with a large amount of shares to our names, we can pitch these ideas to Apple and they will listen. They may not implement everything we think is great, they may not even think these ideas are awesome, but they will, at the very least, listen.
We are still long Apple and we do believe in the long run they will do excellent. But we do believe that they need to take more chances, they need to do a little bit less financial engineering, and a little bit more actual engineering. They need new ideas and they need to go into new markets, and as fans of the company we want to pitch these ideas to them. If you like these ideas as well, and if you believe that Apple should consider these, and if you are an Apple shareholder please join our Facebook Group. Yes, I know, Facebook. But it is an easy platform to organize private groups, and get a shareholder action going. You can find our group on Facebook by searching for Apple Action Committee by Zynath Group.
We are not looking to change Apple, we love the people who run it right now, but we think there is a better path that they may be missing. Implementing some of these ideas will cause Apple to make more money, but perhaps even more important, it will cause Wall Street to assign Apple the higher P/E value they truly deserve. Let’s make Apple a $2 trillion dollar company together!
Disclosure: I am/we are long AAPL.
Sentiment Speaks: Are We Approaching A ‘Once-In-A-Century’ Type Event In The Stock Market?
Nov. 27, 2018 8:00 AM ET
Summary
Many base projections about the market based upon recent history.
Markets are not linear, so our analysis should not be.
The market is providing us with signs of strong storm clouds developing over the next few years.
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As many of you know, I will often read articles written by others – along with the comments – to gauge the overall sentiment of the market from an anecdotal perspective. During one of my recent perusals of articles, I noticed a quote of the following statement by Sir John Templeton:
For 100 years optimists have carried the day in U.S. stocks. Even in the dark 70’s, many professional money managers, and many individual investors too, made money in stocks, especially those of smaller companies.
There will, of course, be corrections, perhaps even crashes. But, over time, our studies indicate stocks do go up. As national economies become more integrated and interdependent, as communication becomes easier and cheaper, business is likely to boom. Trade and travel will grow. Wealth will increase. And stock prices should rise accordingly.
This is certainly an appropriate assessment of the last 100 years. But, what happens if we are now approaching an event that we only experience once in 100 years?
Most of you have read very bullish stock market articles from me for many years. And, I still think that we have a number of good years ahead of us. However, the same patterns that profitably guided us on the long side of the market are also showing us where the storm clouds will be rolling in. And, we have not seen storm clouds like this for approximately 100 years.
Those who have followed me for a number of years have seen some of the major calls we have made about various markets that did not make sense at the time, but which often came to fruition. Some of them include the top to the metals back in 2011 (when most of the market was certain of $2,000+ gold), the rally in the dollar from 73 to 103 (when most were certain that QE will cause the dollar to crash), the bottom in gold in 2015 (when most were certain of sub-$1000 gold), and the stock market rally to 3000 (yes, I was off by a few points on this one), just to name a few. I have outlined in prior articles the methodology I utilize to identify these major turning points, yet many still assume I use voodoo or analysis of goat entrails.
Source: Avi Gilburt using Tradestation platform
As you can see from the attached chart, I am looking for wave 3 off the 2009 lows to top out, and to then begin a 30% correction. But once that correction runs its course I think we will see several more years of rallying before this bull market, which began in 2009, will come to an end. And, worse yet, I think that we can enter a bear market that can last as long as 20 years, and which can rival that which was seen during the Great Depression.
You see, when we top out in wave V of (III) on my monthly chart, the ensuing wave (IV) is of the same degree as the Great Depression, as that was the wave (II) within this very long-term 5-wave Elliott Wave structure. And, while we know that history does repeat itself (maybe not exactly, but it certainly does rhyme), I think the probabilities of seeing a similar environment to that of the Great Depression will be quite elevated, especially as we approach the bottom of the c-wave of wave (IV).
What is most interesting is that while Sir John Templeton’s statement is true for the last 80 years, it is only viewing the markets in a long-term uptrend. That is especially true if you view it after the Great Depression. However, financial markets are not linear. So, assuming markets will continue in the same manner as they have for the last 80 years is not really the correct way to view our financial markets.
Back in 1940, Ralph Nelson Elliott provided many with what is likely the best market call of all time:
[1941] should mark the final correction of the 13 year pattern of defeatism. This termination will also mark the beginning of a new Supercylce wave (V), comparable in many respects with the long [advance] from 1857 to 1929. Supercycle (V) is not expected to culminate until about 2012.
While I think Elliott was off a bit on the timing, as I think we may not be completing this rally just yet, consider that his prediction for a massive multi-decade bull market was made when World War II was raging around him. Personally, I view this as the best market call of all time.
So, while standing on the shoulders of giants such as Ralph Nelson Elliott, my view is that the next major top we see in a few years from now may usher in a period to rival that of the Great Depression, but potentially over a more protracted period of time.
The main reason I think it will potentially last for more than 10 years is that the 4th wave of one lesser degree (outlined by the a-b-c structure in blue IV between 2000 and 2009) is a 4th wave of one lesser degree, and that lasted for nine years. A 4th wave of a greater degree will likely take much longer than one of a lesser degree.
Now, we all know that we cannot clearly see the future. As Yogi Berra once said, “[i]t’s tough to make predictions, especially about the future.” So, we deal with markets from a probabilistic perspective. Therefore, I will also note my alternative perspective, presented in dark green on my attached monthly chart, which still would see a four- to-eight-year bear market (alt (2)), but can project this bull run off the 2009 lows to continue for much longer.
Unfortunately, we will not be able to make any assessments about this more bullish potential for probably at least 10 years. And those who have followed us over the long term know that we always view the market as it presents to us, and not as we assume it to be. But, I think it to be quite prudent to prepare for the worst, and hope for the best.
As we get closer to the major top I see in the markets, I will likely pen an article that will address my longer-term expectations on the markets. While I have discussed some of them with the members of my services, and have alluded to some of the issues I see in my public writings, I think we have strong potential to enter an environment unlike one we have experienced for 100 years. However, we have seen glimpses and warnings of it during the past decade. I hope to elaborate in the years to come.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Should you really do nothing amid market volatility? It depends on whether you’re 27 or 63
- As the longest bull market in history wanes, it can be helpful to turn your attention to your own timeline.
- Here’s how you should react and plan for volatility, depending on your age.
Published 9:01 AM ET Sat, 3 Nov 2018 Updated 10:14 AM ET Mon, 5 Nov 2018CNBC.com
Up and down. Down more. Up a little.
The stock market may be bringing you some motion sickness.
The S&P 500 shed more than 6 percent over the past month, and then rebounded almost 4 percent in the last few days.
Amid volatility, the default advice is often to do nothing. However, as the longest bull market in history possibly wanes, it can be helpful to turn your attention to your own timeline.
“If you have 40 years left to invest, a bear market right now is just noise and should be ignored; in fact, often celebrated,” said Doug Bellfy, a certified financial planner at Synergy Financial Planning in South Glastonbury, Connecticut.
On the other hand, Bellfy said, “A stock market crash that starts the day after you retire can cause a permanent lifestyle impact if all your money is invested there.”
Here’s how you should react and plan for volatility by age.
20s-30s:
If you’re a young investor, your rate of return typically matters less than your savings rate, said James Sweeney, a certified financial planner and founder of Switchpoint Financial Planning in Lehi, Utah.
He provided an example: If you’re 30 with $20,000 invested, whether you earn a 10 percent or a 5 percent return will only result in a difference of around $1,000.
But, Sweeney said, “If I can save aggressively, and put an extra $5,000 toward retirement, that has a much bigger effect on my portfolio value.”
People in their 20s and 30s who are investing for retirement really are best off doing nothing as the market rages, said Alex Doll, a certified financial planner and president of Anfield Wealth Management in Cleveland. When you put money into your 401(k) during a downturn, you’re actually taking advantage of a low-cost environment.
Although you don’t want the money you need for near-term expenses in the stock market, because it has a greater chance of losing value, said Nicholas Scheibner, a certified financial planner at Baron Financial Group in Fairlawn, New Jersey.
Keep the savings for, say, a home purchase within the year, in cash or CDs.
40s-50s:
The biggest mistake middle-aged investors can make is to sell at the bottom of a bear market, Sweeney said. “Most people still have 10 or more years until they retire, which is typically more than enough time to ride out a bear market,” he said.
A bear market is said to have begun when a major index such as the S&P 500 drops more than 20 percent.
The 2008 downturn, when the S&P 500 plunged 56 percent, took investment portfolios between one and three years to recover (for asset allocations ranging from half stocks and half bonds, to 100 percent stocks), according to Vanguard.
Do make sure you have enough cash reserves built up to cover your upcoming expenses, including school tuition and planned vacations, said Milo Benningfield, a certified financial planner and founding principal of Benningfield Financial Advisors in San Francisco.
“If not, consider raising cash from your portfolio now, rather than later after markets have fallen,” he said.
60s-70s:
As the stock market swings up and down, older investors should avoid complacency and tweak their portfolio to make sure they’re ready to exit the workforce, Bellfy said.
“I find that investors that are getting close to retirement do sometimes need to be coaxed to reduce risk and build cash reserves,” he said.
How much should you have in cash? At least two years’ worth of living expenses, Bellfy said. “But more can be better if one has the ability to save up more,” he said.
That way if the bear market hits just before you retire, you won’t need to dig into your portfolio at reduced prices.
“Avoid the temptation to cash out your investments completely,” Benningfield said. “You may have another two to four decades of spending to cover.”
If you’re already in retirement:
Investors who no longer receive a paycheck want to make sure they have enough of their money in cash and bonds to last them until the market heals, Sweeney said. They’ll also generally have Social Security and/or a pension to rely on.
He recommends building up between five and 10 years’ worth of these reserves. So if you estimate that you’ll need to withdraw $25,000 a year from your portfolio, you’d want to keep $125,000 to $250,000 in cash and bonds.
He said retired investors still need some growth assets such as stocks, particularly since people are living longer.
“In a bear market, pull from your bond portfolio to fund your lifestyle,” he said. “Leave your stocks alone.”
HI Financial Services Mid-Week 06-24-2014