Apple becomes first U.S. company to reach a $2T market cap
cnbc.com
cnbc.com
Apple managed to create a luxury product - the iPhone (differentiation) at mass-market scale (low cost base) which has driven the majority of their profitability since it's launch.
The first iPhone had 128MB of RAM and ran at 412 MHz, underclocked from 620 MHz (https://en.wikipedia.org/wiki/IPhone_(1st_generation) ), and there was disbelief that what they showed could be built at all at the time with the advertised battery life.
They likely also didn’t want to commit yet to an API for third-party apps, as they didn’t know what was reasonable there.
Meh. make was genius. Makefiles were genius. pkg_install and pkg_add were genius. PMS was genius. RPM was genius. FreeBSD's ports tree is genius. pkgsrc is genius. Like nearly everything Apple ever did, AppStore is not at all original, not remotely the first, not by over a decade. It is really no different from any other binary package manager. It is Brew for iOS.
Like most Apple things, they weren't the first. Their genius isnt being first, it was spit polishing things to be simple for the masses. Over the years, they have lost a bit of that vision and turned googly with new products not quite replacing old products (how many times has photo sharing and backup been redesigned) but comparing the whole suite to components is a bit unfair.
if Apple had launched the app store with the iPhone, it would have had no where near as big of an impact as it did by waiting just a year. they created the demand first.
and no, Cydia was launched 5 months before the app store.
My only point is that the AppStore is not the Second Coming. It is and it only is a package manager. Just like all the others that came before it. And nothing more. It is not some searing example of genius. It is one package manager among countless. That it includes a payment system is an irrelevant detail.
What Apple did that is amazing is creating a community of developers out of nothing and gave them excellent tools to create software for their platform. It seemed overnight that the ocean of Windows applications, mostly due to obsession with backward compatibility, was no longer all that special.
I had a 2015 MacBook Pro that had died recently and like you Apple Care had expired. This is my work laptop and was not be able to earn anymore income until it was operational again. I did all the basic troubleshooting myself resetting PRAM, etc and nothing helped. I contacted Apple support and they had me do the same tests and some additional ones without success. This all happened two weeks ago and due to Covid-19 the area I’m in has no in person support available. The only solution offered was to wait until Apple stores open or buy a new one.
I tried to find third party to help with no luck. I decided to take a crack at repairing myself by buying individual parts from Amazon. I soon realized this isn’t as simple as it should be. I had to buy Apple specific tools to open the MacBook case and then realized even the SSD on a 2015 MacBook Pro is a proprietary version so I had to buy a specific over priced version to replace the drive. I felt like the last thing they wanted was for the customer to try and repair the laptop.
Nothing ended up working. So, I had to buy a new one. I thought I could at least use this current MacBook Pro to get some trade in discount. Nope, they offered zero trade in since it didn’t turn on even though it was in excellent physical condition. I ended up buying a new one from Amazon and restored data from a previous timeline backup.
IMO, The least a company this wealthy could have done is offer a small discount considering the times we are in. I was very disheartened with my experience.
I hope you upgraded to a 16 inch one! Sounds like a good update anyway.
I did, and it hurts looking at my previous one I loved right across from me considering the price I paid for the new one. "Well, at least I have Touch ID now" is what I keep telling myself.
Now that I think about it, I could probably get away with a Hakintosh setup. I didn't consider it with everything going on.
But it is. The customer isn't you, the tech literate professional; their target customer is the average person on the street.
Apple doesn't want their device ecosystem to be inclusive to the things that confuse, defraud, or frustrate non-savvy users: unethical or unqualified repair, advanced (mis)configuration, side-loading apps, etc.
Back when I worked as an IT tech, upwards of 80% of issues I dealt with were caused by one of those confusions that are completely solved by a walled-garden approach. It might not be your preference, or my preference, but there's no denying the utility it has for others.
I think only Google probably had the image of superior products(Search, Maps, Mail) which rivalled/beat Apple but that has been kind of tarnished now.
[1] http://damniwish.com/wp-content/uploads/2012/08/car-sticker-...
[1] https://www.statista.com/statistics/272698/global-market-sha...
The biggest qualm with Google was their incoherent product strategy like what happened with Gtalk, Reader etc.
If anyone had the brand value to push a smartphone OS, it was Google. Once Android started going mainstream, they could have chosen a different strategy for the high end models.
Look at the messaging space now. Messenger, WhatsApp, iMessage. Google should have led this space with evolution of Gtalk.
Even for users, as it used XMPP we would have had an open platform where we could have just plugged in our own favorite messaging apps with it.
That's my point though - the features that HN users find valuable (XMPP standard) are not the same as what most consumers do.
XMPP I consider as an advantage personally as with lock in to platforms like Messenger/WhatsApp we complain about the total control these companies have. In an XMPP world, at least you could have had more control over clients and the ability to talk to a different Jabber server from the same client app.
I agree though that the XMPP bit, no normal user cares about.
I singlehandedly moved my entire extended family into the iOS space because I got tired of dealing with Google's bullshit messaging apps. I'm not going to waste my life teaching non computer literate people how Hangouts/Meets/Talk/Duo/Allo work.
WhatsApp came along and took the messaging space, while Skype and Hangouts and Talk or whatever couldn't figure it out. And Facetime was the only decent video calling option that didn't need to be troubleshooted.
It was ridiculous that I couldn't easily send a contact to anyone in the world until WhatsApp came around. Then I didn't have to worry about who had what phone, I sent them a contact in WhatsApp, they got it for free and it worked.
After all, ads earn them revenue. You can have product differentiation where your devices don't have to necessarily earn by ads. A very good example of this is Amazon. They have two versions of Kindle, with the ad free version costing more.
GP is claiming that Apple is doing better in the phone space, because Z>X. But the appropriate comparison is not Z vs. X, but (Z+0) vs. (X+Y).
For high end devices, maybe some of the services could have been considered paid off for before and could have skipped ads. That way, even Google gets 'Z' from phones.
This just cuts into privacy as a marketing point for iPhone.
By giving it out almost-free to OEMs, Google solidified the majority marketshare as the cost leader. That is much more strategic than dumping capex into manufacturing against an already established quality brand.
The other half of the story is low interest rates/high asset prices. A year ago federal funds rate was ~2%; today it's ~0%.
It's just more in favor now than it was a year ago in investor sentiment
A better question would be whether the expected value of all future cash flows has doubled. Evidently, a lot of people seem to think so. (Whether these people are rational is whole another question)
It's rather than all other investments are worse, not that this one is real.
If there is a finite limit of "investable assets", then the relationship between those assets prices is not necessarily driven solely by sentiment in favor of Apple.
It could be that almost all other assets have seen their expected future cash flows fall while Apple's has slightly risen.
It could be that people's decision is not driven by future cash flows, but some other metric or feeling.
Have Tesla's expected future cash flows increased by 8.6X in the past 12 months? It's stock has gone from $220/share to $1,900/share.
That said said, if Apple bought them for accelerating their self-driving car development, the historical profit margins are irrelevant. The the valuation would still be all about the future opportunities and future cash flows. This relative to other opportunities in the market, as other commenters rightly point out.
In real dollars, or nominal dollars?
Yep! S&P 500 reaches pre-COVID level record high again recently all thanks to U.S. Fed's UNLIMITED Quantitative easing (QE) policy. The aftermath and the side effects[1] are going to be serious concerns now.
[1]: https://en.wikipedia.org/wiki/Quantitative_easing#Risks_and_...
So much of the US economic engine after WW2 up to 2000 was driven by the fact that people were having lots of kids, and the taxpayers back then were borrowing from future taxpayers. That works if you continue to have lots of kids, but now that that has slowed down, plus the increase in labor supply via women in workforce, and outsourcing to other up and coming countries, plus decrease in demand of labor due to automation, makes for a bleak future outlook for many (as opposed to a growth outlook in the decades after WW2).
This is ignoring climate change and its effects. Which can only be remediated with reduced consumption. Which would also cause a reduction in demand for labor.
I am quite tired of economic crashes, but I’ve failed to convince enough others to vote and advocate for changes. Those who do care about change are focused on matters other than economics, which I believe to be a mistake.
Even those with "some college" millennials are slightly worse off, but within 5%.
It's those with only a high school degree that have seen a significant hit.
[1]https://www.pewsocialtrends.org/essay/millennial-life-how-yo...
Unless you're an average citizen of the USA. I swear, I've never seen so many gleaming white and healthy sets of choppers as I have in the USA (particularly compared to, say the UK or Eastern Europe)
Very close to unlimited amount if it gets out of control. See e.g. Venezuela, Zimbabwe, or Russia in early 90s, among other countries.
> can’t work or earn money
They will be able to soon if they still can't. You can't keep the economy shut down forever. So it'll be shut down selectively until Nov 3 and opened completely shortly thereafter. /s
On a more serious note, having lived through hyperinflation myself, people who can work will have their salaries adjusted upward enough to keep them working (and therefore putting some semblance of food on the table), but not enough to keep up with inflation. At least that's how it worked in Russia in the 90s. In Russia, though, the situation was relieved somewhat by the availability of the almighty dollar. You could temporarily protect your rubles from hyperinflation by buying dollars, and then selling them for rubles when you need money. With dollar (and really, all currencies) collapsing, I'm not sure what people are going to do, worldwide. Seems to me that a global inflationary spiral could de-facto reduce everyone's debt obligations to each other. So whoever is owed debts of any kind would take a massive haircut. In the 90s that was the Russian Government. The beneficiaries were people now known as "oligarchs". They borrowed unimaginable amounts of money (with kickbacks to government officials of course), bought up the Soviet factories, mines, and oil production that didn't yet collapse, and then paid back with hyperinflated money, fractions of a kopeck on the ruble.
You could temporarily hold bonds, stock, etc. Many other equity classes out there with high liquidity, which can be converted to cash whenever you like.
Don't get me wrong, I think Venezuela-style hyperinflation is unlikely (unless we get a communist government or something in which case hyperinflation will be the least of our problems, and the economy would be fucked for a hundred years). But higher than normal inflation is very, very likely indeed, and you need to start thinking in terms of what that means for you. The old things like "buying bonds" might cease to work to increase, or even maintain wealth, irrespective of yield, if this gets even remotely out of control.
Inflation to a first approximation is wage rises. "Too much money chasing too few goods" is the traditional formulaion.
Western economies have split. For the majority wages are not rising. For the affluent minority incomes are rising sharply. So we see little inflation in the goods and services bought by poor people, but steep price rises in goods bought by rich people.
The latter are mainly collectibles: stocks and bonds, real estate, artworks, gold and jewels, cryptocurrencies, etc.
We won't see Zimbabwe-style hyperinflation unless there is massive redistribution.
Wage rises are always sub-inflation during hyperinflation. Goods, by the way, and especially complex goods with long supply chains, will also become scarce in all this as inflation makes it difficult to maintain stock necessary to manufacture or distribute goods. That is, that widget you bought today might cost more than you're charging for it when you need to replenish the stock. So you raise the price accordingly, using your best guess as to how much money you will need to still turn at least some profit. And _everyone_ throughout the entire supply chain does the same thing.
You haven't lived through a hyperinflation and I have. So you'd be wise to listen right about now, and if you're wealthy, you'd be wise to also read up on hyperinflation.
It's not the kind of "managed" inflation you're used to. It is, by definition, out of control completely, and very hard to get out of.
With the current state of the economy, I'm not expecting anything better after a bust.
As someone who has another couple decades until retirement, a drop in asset prices would be great for me personally (though I'm sure it would be painful for many Baby Boomers).
For better or worse I wasn't very liquid when the stock market indexes tanked in March. Another lessons learned: invest in bonds at least a bit, not only to reduce volatility, but also because you'll have some 'dry powder' available to be able to rebalance when you equities take a hit.
Though total returns on bonds isn't too bad:
> The Nasdaq 100 ETF (QQQ) is up an astonishing 25.5% this year during a pandemic and that’s including a 29% peak-to-trough drawdown. But the long-term treasury ETF (TLT) is up 27.3%.
* https://awealthofcommonsense.com/2020/08/why-would-anyone-ow...
Edit - It seems like adjusting for whatever the fed funds rate is might provide a more accurate comparison.
> PE Ratio (TTM) 984.55
We could stand to do better about wealth inequality...
Expect more angry people electing even angrier people into important posts. There is some incredible short-termism in all this policy.
The people that applies to may be largely rich in any given instance in practice but this bit of pedantry is important as "rich" are not homogenous in their interests.
I question the validity of this hypothesis, at least in so far that it has a predominant or even major effect:
* https://www.youtube.com/watch?v=K3lP3BhvnSo&t=8m50s
The video cites an US Fed paper on the subject (see Section 3):
* https://www.federalreserve.gov/PUBS/ifdp/2014/1101/ifdp1101....
It's mostly "policy shocks" / surprises that cause changes in bond rates, which may have knock-on effects to other asset classes.
Indexes have gone up and up and hit all-time highs regularly over the decades on their own: there's no need to throw QE magic pixie dust as a cause.
Further, in the past, a much smaller percentage of the population probably had equity ownership: as pensions have given way to private retirement funds (401(k) in the US), and so you have people buying the S&P 500 in their Vanguard accounts.
On the flip side, you have a large population cohort (Baby Boomers) entering retirement age, and they want safer asset classes so are going after bonds, driving down yields. With yields getting lower, anyone who wants returns is stuck with equities.
So you have one group of people bidding up equities for growth towards retirement, and another group bidding down bonds for safety in retirement.
The announcement of the most recent round of QE is one of the "policy shocks" of the kind referred to by the 2014 Fed paper. Prior to the announcement, Apple, S&P 500, and bond funds were at 1-year lows. This month they are at all time highs.
A relatively small increase in earnings might also cause outsize increase in valuation, if that increase was not expected or if it signals to the market the company is strong regardless of tumultuous market situation.
Less so with the cars, the vast majority of cars sold are with relatively thin margins.
And houses aren't sold by a single business, it's just the law of supply and demand.
I would add Nespresso as an example: They've definitely managed to mass-market a luxury good (outrageously expensive coffee pods)
An old engineer friend of his asked Holt about several topics, and I think his answers were interesting, including what was baked into early Apple that made it succeed at what it was trying to do over the years.
https://louisproyect.org/2015/08/28/steve-jobs/
(The beginning of the blog post are comments by the old friend about the Jobs movies, followed by Holt's two replies).
One thing that is pervasive in the US, is financing of expensive things (relatively speaking) through "easy" monthly payments.
Carriers finance the new model at a seemingly low rate ($15/mo.) then charge more on the wireless service. I can get the $15/mo phone, but only at the $60/month plan not the $35/month plan. If I don't pay, the product is worthless (no service).
You can calculate the amount of housing or auto debt that is out there, but have always wondered how much 'iPhone debt' is outstanding w the wireless carriers?
The only reason their luxury good is sustainable is exactly because people have to join it to be able to communicate with their friends, and can't leave.
I have an iPhone, but I communicate with my friends using WhatsApp, Facebook Messenger, Signal, and Skype as well as iMessage.
Some of them have android phones, and some of them have iPhones. And some of the iPhone users use Facebook messenger, Signal, and WhatsApp, to communicate with me
I only use FaceTime to communicate with certain in-laws, and the some of my extended family and some local friends use Amazon Echos for video.
The majority of people are comfortable with Facebook and WhatsApp now.
"just works and doesn't waste hours of my time" != "luxury"
I'm willing to bet the adoption of smartphones and regular upgrades wouldn't be happening at nearly this scale if all customers had to pay $600+ up front.
How's that different from all kinds of clothing brands?
I'm not talking exclusive to rich people Armani's here, I'm talking all the mass market luxury brands. Heck, even Nike's $200+ sneakers...
"they managed to do something that was previously unimaginable in business theory - create a mass-market luxury good."
Is not about that. It is about the (perceived) impossibility of a mass-market luxury good.
But "mass-market" is a term for broad appeal/sales (dictionary: "the market for goods that are produced in large quantities"), not for over-the-top revenues.
And as for that, more people have Nike shoes than have an iPhone. But even if 1/15 as many had, it would still a mass-market good, with luxury price / appeal.
The exclusive nature is part of what supports the luxury brand. One case study: how ray ban managed to recover their "luxury" status by removing low cost, high volume items from their catalogs.
I don't know the history of mobile phone contracts before the iPhone but i feel like that was Apples innovation (or they made the best use of it), rather than the product being so good that everyone had to spend ~$800-$1000 up front for one. Not that it isn't a good product, just without a phone contract it would have sold far less at the premium price point.
In fact iPhone phone contracts seemed to spawn a trend in getting many other products on credit (and over paying for them).
Also, I seem to remember Apple pushing mobile network providers hard to almost subsidise the cost of the handset around the 2012s, when they were still competing at market share with Android phones.
Over 24 months, the difference between a $650 phone and a $250 phone is minor.
If there ever was any social responsibility in investing, it would have been providing fluidity into new ventures and making markets efficient by making educated investments. I find this trend worrisome and I think it might be sending incorrect market signals.
If investing in ETFs/index funds is morally blameworthy, which is already questionable, the blame surely lies with active fund managers and their outrageous costs driving people into the arms of low-cost instruments that, net of fees, have had better performance.
Individuals investing in ETFs doesn't move the needle. Fund managers seem to be part of some cartel, pumping various asset groups at various times. We're just along for the ride.
Yep. If covid had put 40 million US white collar people on unemployment instead of hourly folks, the market would have crashed hard as the monthly influx of money dropped and some people started pulling money out early to get by.
It's also important to note that different sectors are getting hit in different ways. Renewables up, oil majors down. Tech way up. So if total-market ETFs are pumping in money, they are just inflating overall valuations, and investors are the ones deciding which sectors and companies are winning or losing. Or if it's market segment ETFs, that would also be an interesting story.
Casino stocks, more risky. Cruiselines, more risky.
The money has to flow somewhere.
I mean it's not just tech that's not risky. There's some other equities out there too which seem to be concensus safe havens by investors. Eg. Lululemon, Home Depot.
This is why we're seeing big interest in some sectors of real estate too. money is cheap and big chunks of the economy seem risky. Why not invest in something else. Also risky, but TINA!
If that’s not the case, please explain.
None of that is true.
Stock price presents demand for the stock. Demand is emotional. The stock market represent (rich) people's feelings.
I want to own a piece of Apple, because a bunch of others want a piece of Apple.
Tesla's stock is exhibit A for this.
If there was a direct correlation between some metric and stock price, every trade would be automated.
It's a huge supply/demand problem. At what price will someone forego Apple shares? What happens when Apple is 10%, 15% etc of the S&P 500 index? Where will these shares to sell come from? At this point, why would anyone holding Apple shares outright sell?
This demand may only lead to a self reinforcing feedback loop where: a greater market cap (3T?) -> higher index weight (10+%) -> greater buying pressure -> more shares locked up in index funds (not available for sale) -> repeat
This is explains why there has been increasingly volatile movements in Apple shares. This lack of share liquidity works both directions: buying and selling. Not enough active investors are available to step in when passive investors (who now make up an enormous portion of capital markets) decide to start selling index tracking funds in bulk.
In reality, enormous swaths of shares are held by index tracking funds and everyday investors who don’t sell their shares into buybacks. In this case the market price based off supply/demand must rise in order to find someone who will let go of a share so Apple can buy it.
That is obviously not true and he's pointing out why - if the market isn't very liquid, in this case not a lot of sales, price can jump nonlinearly.
In theory if no one wants to sell shares of Apple during a buyback the share price will head towards infinity. There's always a price though that someone will let go of a share at.
80% of the stock market is controlled by automated trading machines: https://www.cnbc.com/2019/06/28/80percent-of-the-stock-marke...
> Tesla's stock is exhibit A for this.
It's probably not wise to extrapolate the behavior of the entire stock market (literally trillions of dollars in value) just off of one hype-driven anomalous outlier.
Who programmed the incentives of these machines? Humans.
What do they base their actions on? Other robots sure, but also humans
It’s one thing to argue that the stock market is purely driven by emotion and irrationality. It’s another thing entirely to argue that automation based on P/E, revenue, growth are tantamount to emotion and irrationality.
It seems as if the prices have become completely uncoupled from the actual businesses.
Apple's P/E ratio (35) is less than Amazon's and about the same as Google/FB. Apple's FY2020 revenue was nearly $300B, so $2T market cap represents a ~7x revenue multiple which is...not crazy at all.
TSLA market cap OTOH, is Bitcoin-level speculation. Its P/E ratio is like 985.
Apple's valuation is mostly in line with its business (modulo Fed monetary policy and S&P distortion).
Tesla's valuation is pure hype.
(Numbers pulled from Google Search)*
Facebook PE ratio: 32.50, Apple PE ratio: 35.48, Amazon PE ratio: 126.70, Netflix PE ratio: 82.61, Google PE ratio: 34.46
At least within FAANG, Apple's share valuation is still quite reasonable when compared to income.
A couple of others.
Microsoft PE ratio: 36.80, Tesla PE ratio: 984.47
*I've edited the post to source all numbers from Yahoo Finance.
Google's info cards. I'll have to just pull them all from Yahoo and edit the original, I guess.
Naively, one expects to get returns as a percentage of investment. In this multiplicative sense, Jeff Bezos at a 188B net worth is much closer to being a trillionaire than a one-billionaire (a factor of 5 vs a factor of 188). But can Amazon's market cap continue to grow in such a fashion? What bounds it (and that of other tech companies)?
One might assume that they have to be bound by world GDP (80T). But if they're truly creating value, can't they expand world GDP along with themselves?
GDP = private consumption + gov expenditures + total investments + net imports/exports. IOW, it's a measure of the $ value of things bought/sold. IOW, economic activity.
That said, over short time horizons, GDP can be used as a rough proxy for many other economic metrics. But only because the structure of an economy doesn't change drastically in just a few years. As you increase time horizons, the structure of an economy changes and GDP becomes a poorer proxy for other economic metrics. If this is so, why do so many people use GDP? Because it's easy to measure fairly accurately.
In this framework growth has to end, on earth at least, much sooner than later.
The American engine is producing awesome results, still a long way to go!
Saudi Aramco 2018 net income was $110 billion Saudi Aramco 2019 net income was $88 billion
Apple 2018 net income was $59 billion Apple 2019 net income was $55 billion
Then I will be really impressed! It is more likely to be an inflection point as incumbent oil producers fail to diversify and revenues go down. But I'll accept either result.
Why is this a good metric?
Aramco's value increases by convincing people to buy more of its product. Apple's value increases by selling more products, but also from its stock value going up. That second part is important because it could be hype or a bubble or something else. But with Aramco, you know it's all about a tangible product.
My wife has another measurement that she uses. She increased her Apple holdings when the pandemic started purely because of Apple's cash. Her logic is that with all that money to burn, it has a better chance than most of surviving this crisis.
Whereas net income shows what MANY people bought, and how the company is able to keep a bunch leftover.
And regarding "good", it's a good metric for value creation and the infrastructure for independence, as this has been unachievable before and always required a monopoly on power derived from the entire social contract of society and force. So it is merely interesting for it to occur in the absence of those things. It is not a comment on "good" in terms of society and whether the social contract should include a way to limit them, it doesn't factor that in at all.
USA is a failed state moving forward on momentum. You can expect the currency to crash after Trump refuses to leave office.
EUR is up against USD for the last 5 years or so, by a fairly small amount (~10% max). It is down against the USD over the last 10 years, by a larger amount (~20%).
10-20% is not much when it comes to currency fluctuations. When we were in the US in the 80s, USD/DEM went from around 1.70 to 3.50, so 2x fluctuation.
Inflation is fairly low when it comes to sustenance foods, cars, telecom, and technology -- however, that is not the story for things like: fish, fresh produce, textbooks, healthcare, rent, home prices, executive MBAs, some imported goods.
It gets even more complicated. Some things cost one for some people and another for others -- e.g., college tuition has skyrocketed if you don't get a scholarship/aid but is flat or down if you do get scholarship/aid
Asset prices go up, because you cannot create more asset, but more people want it.
Coffee is here to stay and will he THE truly anonymous and untraceable currency of the future.
So congrats on your local coffee place taking the hit, expect the price to change.
What do you mean by this and how does one follow the other? I genuinely want to know. I'm unfamiliar with this concept.
To complicate matters, though, inflation is normally thought of as CPI; a measure of what people are spending on consumable items. Things like stocks, housing, and other assets that are jumping in price are not consumable goods and services. As such we try to avoid using the term inflation for this phenomena, but the principle is the same.
Modern monetary policy seeks to try and keep that added money off of "Main Street", so that your groceries and gasoline aren't skyrocketing in price, but ultimately the money has to go somewhere, and that somewhere is "Wall Street".
I believe the term for this is "asset inflation", which is just a different form of inflation.
Often times the Consumer Price Index is referenced as the source of truth on inflation, especially when the Fed makes its decisions on adding/removing money into the economy[0]. But the CPI doesn't track every type of asset such as stocks or gold, since these aren't things the Fed is trying keep the US dollar stable with as part of its dual mandate[1].
Price fluctuations haven't happened evenly across asset classes just because of the way COVID-19 has had effects on various parts of the economy. Not all stocks have increased due to negative effects of COVID-19 on certain types of businesses, not all real estate has climbed due to people moving around during COVID-19, etc.
0. https://en.wikipedia.org/wiki/Core_inflation
1. https://www.investopedia.com/articles/investing/100715/break...
I wouldn’t be surprised though if they actually experienced more growth overall by focusing more on the developer experience, loosening some of their restrictions on payments (to me it should be a blessed API for other payment processors. Sure require they accept Apple Pay. That’s fine. But I do think that’s the way forward) and allow app developers to sell upgrades rather than just subscriptions, one time purchases, and in app purchases.
I think it could really reignite the marketplace on their devices
Apple is a premium products company and software was (and will be) always cheap so there s no way they will make their usual profit margins on that. They need to keep selling premium stuff, which has to be physical. At best they can add some premium content , but that's it.
https://techcrunch.com/2020/01/15/app-stores-saw-record-204-...
It's a huge market and Apple takes a 30% cut of that for not doing too much. The margins have to be bonkers.
I think that they could become better once they start losing some ground, kinda like Microsoft is all about Linux now that the desktop market isn’t improving for them.
Bezos net worth has also gone up 80B (to 190B, even after a divorce haha). Musk up 60B while Tesla has a what, 900 PE ratio? Zuck up 20+B. The pandemic has served our tech overlords well.
https://www.washingtonpost.com/business/economy/apple-is-the...
The first time some natural process hits the first digit = "1" is the hardest, then the next digits are just a power law of frequency from that.
The whole market seems insanely overvalued during a pandemic. The entire stock market cap is 1.6x gdp. which is greater than the .com crash. This is one of the things buffet talks about.
https://www.advisorperspectives.com/dshort/updates/2020/08/0...
How did you get to 4% from the above calculation?
However, for the cumulative interest rate, you would normally do ln(2)*100/27 years = 70/27 or a 2.7% YoY interest rate.
As a general trick: if you want to convert payback time to cumulative interest rate, use 70 instead of 100. There was a TED talk on the topic iirc.
Looks like General Motors and AT&T were top 2 from 1930 to 1960: https://taaginc.com/large-and-in-charge/
In a nutshell my belief is that Apple will have a few quarters of declining revenue and that is going to torpedo their market cap.
* Apple is 100% reliant on selling new hardware, whatever push into subscriptions they are trying to do is going to fail or take ages to catch on. The reason for this is that Apple sells primarily to consumers, so the subscription needs to be a consumer subscription. What could that be? $30 a month for Apple Music + Apple TV + Apple Fitness + Apple Photo Storage? I suppose this is possible but I don't see people switching away from Netflix, HBO, or Spotify so easily. Spotify is likely the most at risk. This strategy is possible but I think the timeframe is going to take longer than people expect.
* We are close to reaching the end of phone innovation. The things on the horizon that could possibly drive continued revenue are: smaller iPhones, folding iPhones, planned obsolescence, and from the software side a merge of iOS/iPad OS such that you can use your iPhone 15sMAX-SE with a USB-c monitor as your computer. This is possible but say in 2021 apple releases a 4" folding to 8" iPhone with USB-C out to an external monitor that would fly off the shelves. However that is basically the logical end-point of smartphones and after that Apple is going to have a hard time selling anything new until AR glasses arrive.
In a nutshell Apple needs a subscription model to sustain this valuation, and without obsolescence essentially being a forced subscription (you rent your 1000 iphone for 4 years and then chuck it as worthless) I'm not sure they will find success.
The planned obsolescence thing is a real revenue driver for Apple though and without some antitrust lawsuit maybe they can maintain that for a long time. My bet is that 2 quarters from now they miss earnings and the valuation blows up.
Imagine we're in '98 - you won't be right until '01. That's some super long dated puts. Easier to BTFD.
Good that Apple didn’t hire you then.
Where is Dell now?
Where are these headlines?
That seems like a patently ludicrous thing to claim that Apple will disappear within a year.
These things are normal given actions from central banks. The market is rational. We're not rational for wanting things to be normal.
investors are essentially thinking “if Apple can do the same in Q2 as other quarters pre-crisis then it must mean it will do incredibly once this is over”
If you want to invest at these levels you should probably find out what happened in Q2 - I wouldn’t be surprised if it was a mix of stimulus money and need for lower end macs and iPads for video conferencing in the immediate term due to stay at home that won’t necessarily translate to permanently accelerated growth in future quarters.
It is apparent that Apple has been successful financially and has reached new heights but I don’t think this can continue for much longer.
We are hanging on longer and longer to the iPhone and the services (namely Apple Music when compared to Spotify) Apple offers are less exciting than their competition. AirPods have become and ubiquitous sign of the technological times where people buy on brand and not on quality or functionality (plus they’re ugly imo).
Where does Apple go from here? They can’t keep making iPhones and pissing developers off forever. They must either rise to a new zenith from a pure business standpoint (new products, cannibalize the old) or in several years time people will begin really thinking critically and realizing that while the Apple brand is “superior” that the technology is not.
I tell you all this typing on my iPhone X... I’ve owned iPhones since 2010. But they times are a changing.
People have been declaring the death of Apple since the mid 80s. I was around then with my Apple //e.
We are hanging on longer and longer to the iPhone and the services (namely Apple Music when compared to Spotify
Yet and still Apple Music is growing faster than Spotify, service revenue is growing like crazy, and Apple doesn’t have to spend a hundred millions of dollars to get one person on their platform (Joe Rogan)
Where does Apple go from here? They can’t keep making iPhones and pissing developers off forever.
Developers really overstate their role. Developers go where the money is. Most of the money from the App Store comes from loot boxes and whales buying virtual currency. Developers have been jumping through larger hoops for over 4 decades developing for consoles.
I’m sure people asked where does Apple go from here since they introduced the Apple // in 40 years. Apple has shown an ability to evolve.
AirPods have become and ubiquitous sign of the technological times where people buy on brand and not on quality or functionality (plus they’re ugly imo).
People have been accusing Apple to sell on brand for two decades. Now, but especially when iOS 14 comes out, the integration between AirPods, iPads, iPhones, Apple Watch and to a lesser extent the AppleTV is second to none. Yeah, I have all of them....
Maybe you don’t have the pulse on what the consumer wants? I’ve seen analysts who believe that the AirPods by themselves are larger in terms of revenue than the iPod was at its peak.
They must either rise to a new zenith from a pure business standpoint (new products, cannibalize the old)
Has Apple ever shown an unwillingness to cannibalize it’s own products? Microsoft for instance has been one of the five most valuable companies for 20 years. This is not rah rah Apple. The only one of the five big tech companies that have shown an ability to evolve and diversify over the past 10-15 years is Google.
Google has a diversified offering of products, but don't all of those products ultimately feed their advertising business?
Interesting that you say this. I don't own any myself, but my general impression from people that do is that the AirPods are the top of the class for wireless earphones.
As much as I wish this were true, I'd wager they'll be able to keep doing so.
> [...] or in several years time people will begin really thinking critically and realizing that while the Apple brand is “superior” that the technology is not.
...you must have more faith in people than I.
You don't understand the product. I bought it because:
* I don't think they're ugly.
* The functionality and convenience is unparalleled. They nailed the balance and it's one of my favorite products in the last decade - period. If I lost mine, I'd buy some again no questions asked.
The iPhone is a multi-decade product. We've only seen the first decade. It'll serve as the foundation of Apple for decades to come. It's obvious to me and I have real money behind it. I think you're missing the big picture and you'll probably pay for it in missed opportunity (I've been hearing something similar to your opinion every quarter since 2012 and have ignored it every time)
You should watch Verge review of oneplus buds where they compare Onplus buds and Airpods.
The receiver call quality is better than 1000MX3
What happened?
Keep in mind, in 2020 more than $6 trillion has been committed to economic stimulus (Congress + Federal Reserve). Along with 0% federal funds rate, you get liquidity that boosts the market overall.
Apple and HP were going back and forth as the largest seller of PCs back then. This was Apple’s first foray into the wide consumer market with Macs.
Then Windows 95, Apple’s bad decision when it came to clones, and the Performance line happened.
Apple wasn’t “beleaguered” when it made the PPC transition between 1994-1995.
Lastly, computers weren’t a big deal back then. When I was in college, most of the students didn’t have computers at home.
One could ask the questions:
Should any single (non-state?) entity be this large?
Is it overall better to have innovation and production concentrated like this or would society benefit from increased plurality?
I don’t know, but numbers like these sure makes me wonder
I interpreted this as “should any non-state entity” have more power than the state?
My initial thoughts are that if the particular state in question is a working, liberal democracy apparatus, then it is probably best that it has more power than a non-elected, non-representative entity (whether or not said entity is for-profit, like a corporation, or non-profit, such as a church).
So I didn’t try to relate companies to states, I just wanted to exclude the states from the discussion altogether.
Honest question.
https://www.businessinsider.de/international/how-todays-tech...
https://www.visualcapitalist.com/most-valuable-companies-all...
The Dutch East India Company and, as another commenter mentioned, colonialism give much food for thought.
It's mind-boggling to really look at the size and power of colonial trading companies. I've been meaning to re-try reading the Baroque Cycle -- started once, but gave up a ways in.
You'll see a lot of responses across other threads claiming it's due to the low interest rate environment (the justification). That plays a role, sure. Interest rates have commonly been near zero for the better part of the past decade though. So why was Apple's PE ratio ~11-13 previously while interest rates were very low (0% or sub 1%) with a quasi normal economy, and now its PE ratio is more like 30-35 during a crushing pandemic recessionary environment while interest rates are zero? Apple's operating income for the past four quarters is not considerably higher than it was in fiscal 2016, so why is the stock three to four times higher? Surely their growth rate must be extreme right now, to justify that radical increase (answer: nope). What must the future growth expectations be to justify a 300% stock increase; that Apple's enormous profit will double soon? (nope, it's not gonna happen)
It has more to do with a stock market mania that has taken over, than it has to do with interest rates, at this point. The interest rate explanation maybe gets you to second base, the rest of it is mania. You see that represented in the ever expanding dotcom bubble style extreme valuations that are increasingly common (SHOP, TSLA, NVDA, AMD, DOCU, etc). NVDA's context for example will remind of CSCO in 1999-2000 (except NVDA is growing slower today than CSCO was then). You'll see it in the pop-celebrity status of people like Dave Portnoy (who suddenly decided to become a trader with little experience). Whereas such extreme valuations were not so common three to eight years ago (circa 2012-2017), while we had a quasi normal economic situation and 0% rates (or otherwise near 1% or lower) as well. All that said, nobody should ever doubt how far a mania can go in regards to pushing valuations toward the moon.
There's probably been a shift in investor preference in favor of equities too (which means decreases in interest rates are smaller than the decrease in discount rates used for investors' DCF valuation of equities), but I think "mania" is far too strong a word. I think of it more as a result of investors shifting to riskier assets as returns to capital decline in general, in part due to leverage aversion. I mean, how else are you supposed to deploy your capital? Buy the junk bonds that are currently being issued at yields below 3%?
I'm not rich, but I'm thinking that anything a billionaire can do with $1 billion can also be done by ten thousand households who have $100k each. So the middle class could perhaps get richer if they only knew the secret?
Is that realistic?
Also, Apple Silicon might be the beginning of something.
They're still overpriced, but I wouldn't look at them as having exhausted their potential increase in revenue/profits.
My rationalizations:
Profits are ~$88B/yr. would take ~22 years to total $2T, sooner with growth. ...but shareholders don’t receive that whole profit, so why own?
Apple has room for growth, up to 2x in mobile and 5x in computers (assuming static market), making a cap of $8T look feasible.
Thoughts?
In case you're wondering how much $115B is in terms normal people can understand... if that was in $100 paper notes...
- Stacked up on top of each other, it would reach 12,000 km high (the ISS orbits at about 400km)
- The notes would weigh around 1,150 tons
- To ship them, you'd need over 1000 4'x4' shipping pallets, each weighing a ton
$115 billion is an absurdly huge amount of profits
For Vodafone, that number was a special one time gain from the sale of Verizon Wireless. In 2014, they showed an operating loss of £3.9B (but a overall gain of £11B because of income tax credits -- hoorah for financial engineering?)
If "normal people" want to understand something, they should read the 10-K and search online for terms they don't understand. It is pretty simple to understand how much revenue and net income per customer has been and is expected in the future per some unit of time.
Market cap is opinion.
Hence, Apple.
However, they would probably have to do even worse to get me to switch away from their laptops altogether.
First, because a few generations ago they were so good I still (irrationally?) hope they'll get back on track, especially with ARM.
Second, because I have a hard time believing anyone else's high-end laptops are, on balance, any better.
Third, because I'm all-in on iPhone/iPad and think I would miss the integration.
Fourth, because for work I need to use software that's only available on Windows or Mac, and I haven't seen anything to convince me that Windows would be better.
Finally, I plan to learn Xcode, which will lock me in permanently, but I realize that's my own fault. :-)
I don't know if these reasons are typical, but I suspect they are at least a subset of the ten or so most common motivations for us complainers to stick it out.
Can't wait to get rid of this 16" MBP though! Grumble...
The X1 carbon is pretty great, but I can't compare.
“[...]her position was alarmingly worse, the financial situation beyond her understanding. The krone, at 25 Swiss centimes the previous Christmas, was now quoted at one-twelfth of a centime. Her shares, however, were going up. Gambling on the stock exchange had become the fashion — the only way to avoid losing all one's money and perhaps to add to it. Many new bankers were giving people advice, the flight from the krone governing all transactions. 'Meanwhile,' Frau Eisenmenger wrote, the large numbers of unemployed, their passions fermented by the Communists, are seething with discontent … a mob has attempted to set the Parliament building on fire. Mounted policemen were torn from their horses, which were slaughtered in the Ringstrasse and the warm bleeding flesh dragged away by the crowd … the rioters clamoured for bread and work … Side by side with unprecedented want among the bulk of the population, there is a striking display of luxury among those who are benefitting from the inflation. New nightclubs are being opened.”
[...]
“Speculation on the stock exchange has spread to all ranks of the population and shares rise like air balloons to limitless heights … My banker congratulates me on every new rise, but he does not dispel the secret uneasiness which my growing wealth arouses in me … it already amounts to millions.”
[...]
“It was significant enough that union, demands were still for higher wages to meet rising prices rather than, before all else, stable prices and a stable currency. A few of the financially sophisticated could be heard blaming the government, and the Finance Minister in particular, but a typical view was that prices went up because the foreign exchange went up, that the exchange rate went up because of speculation on the Stock Exchange, and that this was obviously the fault of the Jews. Although the price of the dollar was a matter for almost universal discussion, it still appeared to most Germans that the dollar was going up, not that the mark was falling; that the price of food and clothing was being forcibly increased daily, not that the value of money was permanently sinking as the flood of paper marks diluted the purchasing power of the number already in circulation.”
[...]
“Erna von Pustau recalled the same trend in Hamburg, where 'stock exchange' and 'Jews' were ideas very much connected in the minds of the people, and where the circumstances of a situation which no one really understood made those who had lost their savings or their fortunes ready prey for anti-Semitic propaganda. Her father began to speak against the Jews more and more, asserting now that 'creative capital is the capital we Germans have: parasitical capital is the capital of the Jews.”
FERGUSSON, Adam - When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany (1975)
I've been following AAPL since it was about $12 (as I recall) after the dot bomb:
https://finance.yahoo.com/quote/AAPL/chart?p=AAPL
If I scroll way out, I can see that low corresponds to about 1.04 on 12/10/2000. It's current high as of 8/19/2020 is 466.60, so that's roughly a 450 times return on investment in the time I've been paying attention. Had I invested $1000, I'd have $450,000 today. I could have retired on a cool $4.5 million had I invested $10,000.
The problem is, I had no disposable income at that time, having just graduated with about $25,000 in student loans. I only paid them off at the age of 40, almost 20 years later. I spent 6 years of that working extremely hard moving furniture and working in a Mac repair shop for 3 years each. The other 14 years were divided between good high-paying jobs like 1 year at hp as a contractor, and many as an entrepreneur attending the school of hard knocks. I had to settle many debts along the way. I learned a bit, but for the most part consider the last 20 years to be 2 lost decades. I feel that applies to all of Gen X, Millennials and younger, but that's still up for debate.
Now, we hear that there is no money for UBI from the government. But that doesn't really sound right to me. My feeling is that we actually have 2 economies in the US now. One for the working poor (the bottom half of the US population, ~200 million people who have no net worth and no savings), and one for the capitalists who have any money at all to invest and ride the waves of prosperity.
The real heart of what I'm asking is whether other qualities in life like potential, enthusiasm, work ethic, etc should be equivalent/convertible to capital. What is it about me and my life choices that excluded me from enjoying the gains that many readers on here enjoy? Was it my choice to attend college? To be an entrepreneur? To choose computers instead of say, sales? What was it?
And when we answer that, we get to the $64,000 question, which is:
A) Is there any way to structure our economy so that the whole population could have $1000 to invest early on? Or B) is that a fallacy, would the $1000 just create inflation, a leveling out of everyone's wealth so that Apple's market cap of $2 trillion wouldn't represent anything especially high per capita?
If the answer is A), then why didn't we do that? Why don't we do it now? Why couldn't the returns of the stock market provide UBI?
If the answer is B), then why are we excited about this? How is this different from rubbing the bottom half of the country's faces in the elite's prosperity?
Italy, No
First, you did nothing wrong. You can very easily, very obviously, compare Apple's market cap to the total annual economic output of a nation, or the economic output of any thing over a given amount of time.
Apple's market cap of $2 trillion, is greater than the annual economic output of the nation of Italy's 60.3 million people ($1.98t 2019). You just got told that is impossible to do. I just did the impossible. Which do you think is more likely true? It's obvious.
It takes the 60.3 million people of Italy a year to produce enough total economic output to almost match the total value of all outstanding Apple shares. Oh shit, I did it again. A spontaneous blackhole may appear and we may all die. I just successfully compared two things everyone repeatedly says is impossible to compare.
You can obviously compare the two, and do so quite cleanly, have no fear.
I've been watching this herd action for a long time here. People don't seem able to stop and think about the context beyond a primitive twitch action, they just reflexively downvote, and parrot the same responses ad nauseam (it's always the same responses without exception).
Second, you have to understand, you're facing off against many people's favorite "gotcha" Smart Person(TM) response. It's an arrow they hold in their bag, for times like this, that helps them feel smarter than you (that's why you'll see so many of the same response, unnecessarily; if they were right, one would be enough). They may not know much about economics or the stock market, however they know this thing, they saw it somewhere else, it sounded true, and they can feel good by downvoting you and by drowning you in one line responses. You deserve better dear user5994461, for your four years of HN dedication and contribution. I want you to know that what you did is perfectly OK.
If Apple bough Italy they wouldn't have enough money to make it work
Italy needs two trillions/year to go on, Apple only owns a fraction of that to spend.
That's why it is a worthless comparison.
A more apt comparison is
Apple is valued 2T at 260 billions of revenues in 2019
The total amount of Italian wealth is around 11T at ~2T year of output
GDP is an aggregated annual "earning", a market capitalization is the value of all the outstanding shares of an entity, not a periodic earning.
A more meaningful comparison would be Apple's annual earnings ($260B, still quite a lot of money) vs a country's GDP, or Apple's market cap ($2T) vs the value of an entire country, rather than their latest GDP.
"They're worth $2T, but they didn't make $2T this year, they made $260B".
Apple's tech isn't really much better than its rivals, except in a few areas like inputs and haptics. Its high performance ARM cores are impressive but there are other impressive ARM cores and it's a very recent development anyway. Until a few years ago they were "good enough for a phone" but not rivals of Intel or AMD for anything serious. In fact I seem to remember Qualcomm Snapdragon chips being better on some metrics a couple years ago.
The thing that made Apple really stand out was the polish and attention to detail in its product. This has two parts. One is the product being good. The other is the striking absence of tacked-on crap features and shitware.
I recently switched to an iPhone from Android due to privacy issues and the thing that immediately struck me about the iPhone was the lack of shitware preloaded on the device. It did not come preloaded with Google Spy... err... Play Services or Facebook, let alone a bunch of Samsung and carrier apps that are surely encrusted with spyware. I can even uninstall most Apple apps that I don't want!
Same goes for the Mac. A new Mac does not show you ads. Its equivalent of the start menu isn't full of loot box games and other shitware of the sort found on Windows or Android tablet or "laplet" (or is it "tabtop?") devices. On the Mac I can uninstall pretty much anything except system apps (well you could but that might be problematic). You can even uninstall Safari and replace it wholly with Firefox or Chrome AFAIK.
Going way, way back, when I first tried an early 'oughts Mac I was struck by the lack of the worthless but prominent "Thinkvantage" button found on my Thinkpad or any other obvious committee tack-ons. The design was clean.
This same lack of shit is what made the original Google break out way back in the early 'oughts. Back then most search engine web sites looked like the home pages of online casinos. Google had a blank and a button that said "search." The instant I saw it, I never again returned to another search engine.
Apple has occasionally gone too far with "clean" or "thin and light," but if you are going to err I'd err on that side. Erring on the side of cruft and shitware is much worse.
Take note people.
A budget and market cap are fundamentally two different things, and are incomparable.