"Apple is both of those things, innovative, whilst the design team that Steve Jobs was on has hardly changed too much (Sir Jony Ive has been leader of the design team since 1996), the ideas that they have and the technological innovation (hardware and software) has changed dramatically. Results are expected on the 27th of January, after the market closes. This year there is the Watch, that will be big, the company is still pretty much an iPhone business."
To market, to market to buy a fat pig. Jobs. Not the legendary Steve kind, rather the non-farm (spell checker always converts that word to conform) payrolls kind. You can sift through all of the information at the Employment Situation Summary. You can see that there were big revisions upwards from the three months prior (as much as 50 thousand jobs) and you can see that the labour market is still on track, This is of course the monthly US look at jobs, anyone who has been following markets for a period of time would know that this is the most hyped number of the month. There are octoboxes (eight boxes of shouting people on the business channels), there are predictions and guesses based on all the economic indicators and then the number itself comes. It is almost always the same as a child finishing a Lego box (mine love Lego), it is a "now what?"
Well, for one you could be lulled into thinking that just the headline number, the number of jobs is important. The truth is that nobody remembers that number from six or three months ago, or last year, you remember the big ones, when the number is close to consensus, it is acceptable to forget. You are more likely to remember the unemployment rate, this time in the US it was at 5.6 percent, lower than expected. The bad news for the average person out there was that average weekly wages dropped. That is not good.
The upshot of it all was a strong sell off, perhaps this is a case of "good news is bad news" in the form of higher interest rates as a result of an improving economy. Trying to predict what the Fed will do next is an international sport, one which whilst important, detracts a little from what we are trying to achieve here, to find and invest in great companies that make great products or have great services. You know what I mean. Anyhow, this is an interesting article, from the BusinessInsider: The Percentage Of Workers In Government Is At A 54-Year Low.
After all was said and done, the US markets sold off just shy of a percent on blue chips, 0.84 percent for the S&P 500 and the nerds of NASDAQ were down around two-thirds of a percent. The Euro continues to take a pounding, down again to the Dollar, seemingly one way traffic. One of my favourite (personality wise) currency commentators is a South African chap who works for HSBC in London, David Bloom. His LinkedIn profile says that he has been there since June of 1992. Wow, nearly 23 years he has been at a single employer. Is that rare? Anyhow, David Bloom (who is awesome and funny in his Joburg accent) said that the Euro was a one way bet, equally the Dollar is more compelling. Strong Dollar, weak Euro, the end for David.
The other story of course is the weaker oil price and the impact on producers and consumers, negative for one set, really positive for others. I saw a detailed report on the oil price fall and the impact on the producers, the smaller shale producers normally hedge quite far out and then also the impact on capex will only be felt in 18 months time. Perhaps the true impact will not be felt for months to come, and in the interim oil prices could actually creep higher. I have yet to read anyone who expects the oil price to bounce back quickly. Everyone has suddenly gotten themselves used to this idea of lower oil prices (so obvious when it happens) that prices for the next few years have been revised lower. The impact on all and sundry continues to evolve.
Company corner snippets
Still not much on the go here. There is however the small matter of earnings season starting today, Alcoa kicks off earnings season. The company used to be part of the Dow Jones Industrial average and was important from that point of view. Now, no longer in the Dow it is of interest to how the world is going round. For instance, just this morning the China Association of Automobile Manufacturers said they expect over 25 million vehicles to be sold this year in that country. The growth was around 6.9 percent last year, not exactly break neck speed. Inline with economic growth, our local motor vehicle growth was lower last year than the year prior, according to NAAMSA. Anyhow, Alcoa kicks off earnings season tonight, a smaller business by US standards, 19 billion Dollar market capitalisation. Bigger investment banks and Intel report this week too, those should be more interesting.
Apple, one of the most followed and written about companies that I know. If not the company that is written about the most, I get more Google alerts about Apple than any other company. I saw that someone had noticed that the App store revenue of Apple in 2014 was now worth more than their entire revenue from 2005. From this release App Store Rings in 2015 with New Records. There is a little more below, read that part about job creation and how it all has formed another set of jobs. I think that as investors you must pay attention on two fronts, one, discounting the ability of an innovative company like Apple or Facebook to change the way that we do business (personal business too) and secondly how mainstream jobs now become the jobs of yesterday whilst new jobs are created as a result of innovation.
Apple is both of those things, innovative, whilst the design team that Steve Jobs was on has hardly changed too much (Sir Jony Ive has been leader of the design team since 1996), the ideas that they have and the technological innovation (hardware and software) has changed dramatically. Results are expected on the 27th of January, after the market closes. This year there is the Watch, that will be big, the company is still pretty much an iPhone business. Morgan Stanley predict 70 million phones were sold by Apple in the last quarter, the biggest quarter ever for the business. No need to speculate and agonise what the number might, or might not be, it is a mere half a month away. At the same time the pricing of the apps in most developing countries as a result of a stronger Dollar have increased overnight. Sigh.
Things we are reading, we think that you should read them too
The Apple ecosystem is a powerful revenue generator - Apple's App Store sales jumped 50% in 2014, likely hitting $15 billion. Apple claim that they have created over 1 000 000 jobs from their ecosystem.
Over or under valued markets do not have to "correct" back to historical norms - Overvalued Market!?. The blogger is looking at historical norms to draw their conclusions but the main point made is that markets don't behave in the ways you think they will. "A guarantee of lower return does not mean that the market has to go down."
Deflation is set to be one of the big topics for 2015 - Rising deflationary risks in the United States. If deflation fears grow in the US there wont be an interest rate hike anytime soon, which will mean the dollar will weaken because money has been flowing into the US in anticipation of the increase interest rates.
Being able to control risk is an important aspect of modern society - New Clues on Google's Plans for Insurance. This will be a nice revenue stream for Google and without the fluctuations inherent in the insurance industry from the market.
Home again, home again, jiggety-jog. Markets are higher here today to begin with. Commodity prices are higher, apart from the oil price that continues to fall somewhat, locally we have the gold stocks on an absolute tear again. Up nearly 20 percent for the trading year to date. Astonishing, hopefully for the gold companies there is not repeat of last years hero to zero.
Sasha Naryshkine, Byron Lotter and Michael Treherne
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