Namaste Apple

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US markets drifted around yesterday in lacklustre trade, eventually edging lower. This was the third day in a row of softer prices, which is annoying. Energy stocks were once again higher with Exxon Mobil (NYSE: XOM ) and Chevron (NYSE: CVX ) up 4.2% and 3.2%, respectively.

In corporate news, Intuit (NASDAQ: INTU ) rallied 6% in late trade after the accounting services company reported earnings that came ahead of expectations. This morning Richemont (JO: CFRJ ) announced that they would sell 50.7% of their YOOX NET-A-PORTER division to FARFETCH and Alabbar to create a neutral online sales platform for luxury goods, with no controlling shareholder. For some reason, both companies spell their names in uppercase letters. Richemont will be taking a EUR2.7 billion write-down, but long term, we think this is a good move.

In short, the JSE All-share was up 0.83%, the S&P 500 fell 0.22%, and the Nasdaq was unchanged.

One Thing, From Paul

Apple (NASDAQ: AAPL ) is moving some of its hardware manufacturing away from China. More than 90% of Apple products such as iPhones, iPads, and MacBook laptops are currently made in China by contractors. That seems risky, because the communists in Beijing have shown themselves to be generally unsupportive of private businesses, hostile towards Taiwan and anti-US.

Bloomberg reported this week that Apple plans to begin manufacturing the iPhone 14 in India about two months after the product's initial release out of China. That lag used to be 9 months. By the time the iPhone 15 is launched, they will be coming from both countries, simultaneously.

Taiwan-based Foxconn Technology Group is the primary manufacturer of iPhones, and they also own a big plant in the southern Indian city of Chennai. They've been churning out handsets there since 2017. Of course, the Indian market of 1.4 billion people is also very attractive. Apple's India market share in 2018 stood at a pathetic 1%. That should rise to 4% by the end of this year.

This is how global capitalism works, seeking out opportunities and mitigating risk. Apple is a first-tier operator. Just what you'd expect from a leading multinational corporation.

Byron's Beats

Online advertising is a huge money spinner, but the competition is heating up. Social media, search and e-commerce companies all make a lot of money from advertising. Google (NASDAQ: GOOGL ), Facebook (NASDAQ: META ), and Amazon (NASDAQ: AMZN ) have a large chunk of the market. Streamers like Netflix (NASDAQ: NFLX ) and Disney (NYSE: DIS ) want some of that pie too.

What about the big dog in town, Apple? As Bright mentioned a few days back, they are pushing ads on some of their platforms, including the app store, in-house apps like Maps and Music, and Apple TV+.

The irony here is that Apple made advertising very difficult for social media sites by changing the privacy settings for their users. iPhone owners can now choose whether they want Facebook to track their data. Meta claims this lost them $10 billion in the first quarter this year. Apple might seem like the hero here but it also feels a little anti-competitive if they decide to target advertising as a big revenue driver.

We own shares in both Apple and Meta. However, the aggregate value of our client investments in Apple is six times that of the investments in Meta. It will be interesting to see how Apple manages this relatively new venture.

Michael's Musings

I can't believe I'm seeing this headline in 2022 - Polio virus reappears in rich economies. Disinformation about the side effects of vaccinations has been widely shared for decades, resulting in gullible people not allowing their children to get their anti-polio shots. This must be one of the few cases where having more information results in worse decision-making.

In 2019, humanity was on the verge of eradicating polio, with only 175 reported cases. Those were in hard-to-reach, war-torn areas of Pakistan and Afghanistan. Now traces of the virus are being found in the sewers of highly affluent cities like New York and London.

Unfortunately, all the Covid anti-vax rhetoric has spilled over into child immunisation. Last month the WHO and Unicef released data for 2021 showing the largest decline in childhood vaccinations in three decades. Let's hope that polio's reappearance is short-lived.

Bright's Banter

The recent strength of the US Dollar has caused some collateral damage. It may sound like a good thing for the greenback to be "strong like bull" as it hit a 20-year high in August. However, companies with significant sales outside of the US take a hit when those sales are translated back into Dollars for reporting purposes.

From January 2022 to July, US stocks with large overseas footprints tumbled by roughly 20%. In comparison, companies with revenues generated in the US only declined at an average of around 9%. However, in the long run, being international and diversified is a good thing.

There are always winners and losers and there's no free lunch. The Dollar will probably weaken again in time. For now, American travellers are enjoying cheaper travel around the world.

Signing Off

Asian markets are in the dwang this morning. Hong Kong is lower and markets in mainland China have been rattled by a 48% fall of property developer Logan Group. The Chinese real estate sector is a mess right now. South Korea bucked the trend and rose for the day.

US equity futures are basically flat in early trade. Let's see where we end up tonight, but for now risk aversion dominates markets. The Rand is trading at R17.03 to the USD.

We will box on.

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