The Apple Doesn’t Fall Far From the Global Resources Tree

Thursday, March 8th, 2012

After Apple reached $500 billion in market capitalization, it was inducted into a very elite club of businesses that have reached this size. Only Cisco, ExxonMobil, General Electric, Intel and Microsoft have made it to the $500 billion mark, says CNNMoney.

Apple’s rise in market cap has been driven by spectacular stock performance. Since October, the tech company’s stock has increased nearly 40 percent, making it the top driver of the S&P 500 rally. This increase caught the attention of many analysts, including Thomas Lee from J.P.Morgan, who declared that the moonshot rise of Apple’s stock has made the company a “sector unto itself.” At a market cap of just under $500 billion, Apple represents 3.7 percent of the S&P 500 Index. Lee says the “sheer magnitude” of the company’s weighting means that…

• Apple is the largest cyclical stock in the S&P 500
• Among 65 industries, Apple would be the 6th largest industry
• Among 10 sectors, Apple would be the 8th largest sector
• Apple’s size makes it larger than the Materials, Utilities and Telecom sectors

While it’s a significant driver of the S&P 500’s performance, the business doesn’t operate in a vacuum. Rather, Apple is a chip off the ol’ building blocks of global resources, namely, utilities, materials and energy companies.

In the U.S. alone, Apple relies on wireless networks AT&T, Sprint and Verizon to distribute millions of iPhones to their customers. After the exclusivity agreement between AT&T and Apple ended, Verizon’s market share exploded. Last fall, Sprint boldly agreed to purchase 30 million Apple phones over the next four years, which provides an indication of how optimistic the company is about its iPhone sales.

In China, China Unicom was formerly the country’s only official iPhone carrier, but an additional player has just entered the field. The third-largest telecommunications company in the country, China Telecom, just launched the iPhone, and by all reports, “enthusiasm is high and competition appears good for the market,” says Forbes.

The Wall Street Journal surmised this morning that the new iPad may boost Verizon if Apple’s latest product contains a wireless broadband technology that depends on a monthly subscription plan. The newspaper writes that in 2011, “70 percent of the tablets that were purchased around the world featured Wi-Fi-only connectivity.” This iPad may encourage consumers and businesses to fork over a monthly payment in exchange for a speedy wireless connection.

Beyond communications and wireless businesses, materials companies worldwide benefit from supplying the glass, batteries, wiring and metals for Apple’s products. The New York Times points out that 700,000 people outside the U.S. work for Apple’s contractors, engineering, building and assembling its products. Semiconductors in the iPhone 4 and 4S are manufactured in Austin, Texas; the iPhone’s glass is made in a Corning factory in Kentucky.

In addition, energy companies benefit from keeping millions of iPhones, iPads and iPods charged.

At its live event, Apple said that there are 550,000 mobile apps available now, with 25 billion downloads in over four years. Apps provide opportunity for hundreds of thousands of companies across all sectors. Our iPad and iPhone apps give our investors an interactive way to access and read this blog, our Investor Alert and slideshows.

With rising wealth among emerging markets, we expect millions of new customers will be lining up to purchase their first Apple products over the coming years, while consumers in the developed world seek to upgrade their iPhones, iPads and iPods. We believe this demand will fuel not only Apple, but also its building blocks.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

The following securities mentioned were held by one or more of U.S. Global Investors Fund as of 12/31/11: AT&T Inc, Apple, Exxon Mobil Corp, General Electric, Intel Corp, Verizon Communications.

Tags: China China, China Telecom, China Unicom, Cnnmoney, Country China, Elite Club, Energy Companies, Exclusivity Agreement, Exxonmobil, Global Resources, Iphone, Iphones, J P Morgan, Market Capitalization, S Market, Sheer Magnitude, Stock Performance, Telecom Sectors, Telecommunications Company, Thomas Lee
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Trash is Cash (and the Economic Madness that Proves it)

Wednesday, December 15th, 2010

The saying used to be “cash is trash”. Now, with 15 million unemployed willing to do anything for a buck, the correct wording is “trash is cash”.

In fact, trash is so much cash that New York City is ticketing and impounding the vehicles of unauthorized persons hauling away discarded trash left in driveways.

Please consider Big Appliances Set Out as Trash Are Vanishing, Puzzling City

Over the last several months, 22,741 New Yorkers contacted the city’s Department of Sanitation and arranged for the pickup of refrigerators, air-conditioners and freezers. In more than 11,000 instances, the machines vanished before sanitation workers arrived in their white trucks to pick them up.

The sheer magnitude of the thefts — 11,528 appliances, to be precise — over a relatively brief period suggests to some in city government and the recycling industry that a more organized enterprise may be at work as well.

Deepening the mystery, these were neither the latest Sub Zero behemoths, sleek Bosch nor stylish retro Smeg refrigerators. They were garbage, quite literally — discarded appliances left at the curb for pickup by the Sanitation Department.

And while the value of one discarded appliance may seem marginal at best, in the scrap industry, the fluctuations of commodity prices and volume add up to real money.

Indeed, the big loser in what might be called New York’s Appliances Caper appears to be a multinational recycling conglomerate, a subsidiary of which has a large city contract to recycle the hundreds of thousands of tons of metal, glass and plastic generated each year by New Yorkers, including bulk metal, like appliances.

In response, the officers have stepped up their enforcement, Inspector D’Angelo said, and while the theft of curbside recyclables warrants only a summons, the sanitation officers impound the vehicles and their cargo — frequently a jumbled load of refrigerators, air-conditioners, Venetian blinds, office partitions and stoves.

This year through Dec. 1, the task force has seized more than 270 vehicles, according to records provided by the department. But the small force does not have the resources either to track the thieves to the scrapyards where they sell their haul or to determine whether there are connections among any of the people.

But on most nights, the officers move through the city neighborhoods in small teams, working in plain clothes and unmarked cars, circling block after block in the areas they know provide good hunting for their targets, lying in wait and then pouncing, with lights and sirens, when they see someone remove material from curbside, which under law belongs to the city.

Notice the insanity of it all. How much does it cost to keep teams of undercover police in plain clothes and unmarked cars working round the clock to prevent the “theft” of items people are throwing away?

The first thing to do is rework the trash collection contract so that the city is not responsible for protecting discarded trash. The second thing to do is fire a bunch of clearly unneeded trash protection police. The third thing to do is to put city garbage collection out for bid, and grant that contract to to the lowest qualified bidder.

The city’s response is economic madness.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Tags: Behemoths, Big Loser, City Contract, City Government, Commodity Prices, Conglomerate, D Angelo, Department Of Sanitation, Driveways, Enforcement Inspector, New Yorkers, Office Partitions, Refrigerators, Sanitation Department, Sanitation Workers, Scrap Industry, Sheer Magnitude, Unauthorized Persons, Venetian Blinds, White Trucks
Posted in Markets | 1 Comment »

What Could Trip Gold Up?

Thursday, November 18th, 2010

Submitted by David Galland of The Casey Report

What Could Trip Gold Up?

Can you visualize a possible scenario that could put a sudden end to the secular rise now underway in gold and silver?

In a recent conference call with the research team of The Casey Report, we once again collectively tried to imagine what situation… what scheme… what government manipulation… might finally put a stake through the heart of gold.

Setting the stage, I think it’s safe to assume that in order for the gold bull to decisively reverse direction, the following general conditions would have to be precedent in the economy:

1. The financial crisis will have to have ended. Which is to say that…

1. Unemployment would have to begin falling by significant numbers – with 300,000 jobs or more being added month after month, instead of being lost.

2. The housing markets will be stabilizing. Foreclosure rates would have to fall to more normal levels (and not because banks are forced to postpone the process for legal reasons, which is the case now), and sales would have to accelerate in the right direction.

3. Government deficits would have to be sharply curtailed and heading lower.

4. All quantitative easing will have ended.

5. GDP will have to be on sound footing and rise based on sustainable, private-sector growth – not based on the activities of government, which loom so large today in the calculation.

2. Real interest rates – the yields you earn over the actual rate of inflation (not the fabricated numbers ginned up by the government) – will have to be solidly positive. Which, of course, is a big problem given the sheer magnitude of the outstanding debt. Rising rates will only beget more debt.

3. The monetary base of the country will have to be contracting, not soaring as it has been in recent years. The following chart from The Casey Report a few months ago tells the story of runaway printing, and of why gold is so strong by comparison.

Inherent in the list just above are other conditions that will have to be precedent for gold’s run to end.

For example, politicians around the world will have to find the uncharacteristic courage to act in ways that are deeply unpopular with the very voters that brought them to office. Namely by slashing the scale and cost of government, with all the many cutbacks in subsidies and services that such a Great Downsizing must entail. And this rare new breed of politician would have to retain their jobs long enough to see through the reduction in government that must occur if stability is to be regained.

Tags: BRIC, BRICs, Casey, Conference Call, Financial Crisis, Foreclosure Rates, Galland, GDP, Gold And Silver, Government Deficits, Heart Of Gold, interest rates, Manipulation, Monetary Base, Private Sector Growth, Rate Of Inflation, Right Direction, Russia, Sheer Magnitude, Significant Numbers, Silver, Sound Footing, Stake, Unemployment
Posted in Emerging Markets, Energy & Natural Resources, Gold, Markets, Oil and Gas, Silver | Comments Off

Stock markets: reversal time?

Tuesday, May 12th, 2009

I indicated in Sunday’s “Words from the Wise” review that “the speed and sheer magnitude of the rally argue for markets to either consolidate or retrace some of the past nine weeks’ gains prior to moving higher”.

Is the rally about to be reigned in? While most major stock market indices are encountering resistance at their 200-day moving averages and/or at the early January highs, a few other indicators also warrant our attention.

Two sectors that have been leading the overall market higher during the rally that commenced on March 9 – small caps and technology – have reversed their outperformance, as seen from the turnaround in the relative performance. The first chart plots the Nasdaq Composite index relative to the NY Composite Index, while the second compares the performance of the Russell 2000 Small Cap Index with that of the S&P 100 Index (large caps). A rising relative strength line indicates outperformance and a declining line underperformance.

Source: StockCharts.com

Source: StockCharts.com

I will keep a close eye on these two charts as relative weakness of small caps and technology will not be a good sign for an overall market that is overbought and looking exhausted after its monumental rally over the past nine weeks.

Another interesting-looking chart is that of the S&P 500 Index’s Bollinger Bands. Although a close below the 20-day moving average (dotted blue line) is required to confirm a correction, the fact that the price is touching the upper band indicates a short-term overbought condition. Also, the black line in the bottom section of the chart – measuring the width of the Bollinger bands – has turned up and is signaling expanding bands. This usually points to rising volatility and lower prices, similar to those experienced at the January and February lows.

Source: StockCharts.com

For those who missed the item over the weekend on Adam Hewison’s (INO.com) technical analysis of the S&P 500’s most likely direction and important chart levels, click here to access the video presentation.

I still maintain that US and other mature stock markets are in the process of mapping out a base development formation which probably means toing and froing between policy tailwinds and economic headwinds. It is only natural (and necessary) that profit-taking should set in after the strong advance; a pullback should not be too much cause for concern, provided the levels from which the rally commenced on March 9 hold.

Tags: Bollinger Bands, Bottom Section, Cap Index, Chart Plots, Lows, Moving Averages, Nasdaq Composite Index, Nine Weeks, Outperformance, Relative Performance, Relative Strength, Relative Weakness, Russell 2000, Sheer Magnitude, Small Cap, Small Caps, Stock Market Indices, Stock Markets, Turnaround, Volatility
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