Gerard Dou A woman playing a clavichord 1665
As we use focusing on the dark side of the moon and the farthest reaches of the galaxy to evade reality, and Britain uses a few handfuls of migrants to not be forced to talk about Brexit, China uses Apple and Apple uses China to turn attention away from actual issues.
Apple cut its sales forecasts for its key end of year period on Wednesday, citing the unforeseen “magnitude” of the economic slowdown in China. Trading in the company’s shares was temporarily halted as Tim Cook, Apple’s chief executive, issued a letter to shareholders explaining the reason for the change. When selling started again, Apple shares fell by 7.45%, wiping $55bn (£44bn) off its value. “While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in greater China,” he said. He cited falling sales of iPhones, Mac computers and iPads. The news sparked a “flash crash” in currency markets as investors rushed to less risky assets, with the Japanese yen soaring against most major currencies in a matter of seconds.
US stock futures pointed to another rough start on Wall Street, with Nasdaq E-mini futures down 2.2% and S&P 500 E-mini futures off 1.3%. MSCI’s broadest gauge of Asia-Pacific shares outside Japan fell 0.4% after an early attempt at a bounce. Japanese markets were closed for holidays but Nikkei futures dropped 1.9%. Shares in China and Hong Kong see-sawed between gains and losses as investors waited for Beijing to roll out fresh support measures for the cooling Chinese economy. China’s central bank said late on Wednesday it was adjusting policy to benefit more small firms that are having trouble obtaining finance, in its latest move to ease strains on the private sector, a key job creator. Apple’s statement was its first profit warning since 2002 and its first of the smartphone age. It is also one that will further rattle investors already worried about the slowing Chinese economy.
Faster than expected? Maybe the numbers were just too good for too long.
On Wednesday after the market closed, Apple released a letter to shareholders in which it said that revenues are going to be a lot worse in the quarter ended December 29 than its guidance two months ago, that iPhone revenues have dropped year-over-year, that China’s economic problems are deeper than expected, and that iPhone revenues are hurting elsewhere too. This confirms a series of revenue warnings from Apple suppliers. Shares plunged 7.5% after hours to $146. If shares close at this level on Thursday, it would be the lowest close since November 7, 2017. Shares have plunged 38% in three months. Wow, this was quick:
In its “Letter from Tim Cook,” Apple slashed its revenue guidance by 6% to 10% from its prior guidance two months ago, to about $84 billion in the quarter, down from its previous guidance of $89 billion to $93 billion. Just to get this straight, this revenue guidance of $84 billion represents a 5% revenue decline from the quarter a year ago. The price increases of its new models aren’t exactly helping a lot, it seems. Here are some of the key points Apple made in its letter: While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.
China’s economy began to slow in the second half of 2018. The government-reported GDP growth during the September quarter was the second lowest in the last 25 years. We believe the economic environment in China has been further impacted by rising trade tensions with the United States. As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed. And market data has shown that the contraction in Greater China’s smartphone market has been particularly sharp. Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance…
Note how this is happening while Huawei is a news issue.
Apple shares plummeted after CEO Tim Cook revealed that the iPhone maker expects a drop of up to $9bn in revenue compared to its November report. More affordable battery replacements are to blame, among other things. Apple stated that it now expects a revenue of approximately $84 billion in the first quarter of 2019, down from its previous estimate of $89bn to $93bn. Markets have reacted swiftly to the news, sending Apple shares into a 7.5-percent nosedive. Explaining the causes behind the revision, Cook almost squarely blamed the expected drop in sales on the economic slowdown in mainland China, a key emerging market for Apple smartphones.
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Cook wrote, noting that “most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China.” By far the greatest hit was dealt by iPhone sales, which, per Cook’s admission, are responsible “for all our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline” In fact, non-iPhone product revenues actually contributed to 19-percent growth, except in China, where, according to Cook, a cooling-down economy hurt all kinds of Apple products (but still, the iPhone was the worst by far).
That second graph tells a very serious story. No dividends at all even..
Debt-funded stock buybacks have been one of the major drivers of the U.S. stock market boom since the Great Recession. Ironically, 2018 was the most active year on record for buyback activity, yet the stock market faltered and experienced its first annual loss since 2008. If the stock market performed as poorly as it did in 2018 with record amounts of buybacks to prop it up, just imagine how much worse it would be if buybacks were to slow down significantly or grind to a halt? Well, that is the risk that I’m going to address in this piece. From the bear market low in March 2009 until the recent peak, the S&P 500 surged by approximately 300%:
The chart below shows how stock buybacks have been rising steadily since 2009. As I explained several months ago, U.S. corporations have taken advantage of ultra-low bond yields to borrow heavily in the corporate bond market to fund buybacks (I believe that a corporate debt bubble formed as a result of this borrowing).
The LQD iShares Investment Grade Corporate Bond ETF is a good proxy for the U.S. corporate bond market. When the ETF falls in price, corporate bond yields are rising and vice versa. The 110 to 115 support zone is the key line in the sand to watch in the LQD ETF. If LQD closes below this zone in a convincing manner, it would likely foreshadow an even more powerful bond and stock market bust ahead.
Between now and March 29, it is very possible that a majority of Brits want to stay in the EU. But they have nobody to speak for them.
Jeremy Corbyn will defy calls to change course on the party’s Brexit policy ahead of parliament’s vote on the deal, insisting that the government should secure a new deal with the EU if MPs reject Theresa May’s agreement. Under increasing pressure from Labour members and MPs to reconsider his approach as preparations for the delayed “meaningful vote” ramp up over the next week, Corbyn said on Wednesday that the party’s policy remained “sequential” and that no decision could be made on a second referendum until parliament voted down the deal on offer. His remarks come as Westminster gears up for the end of recess and the return in earnest of the Brexit debate. MPs are expected to hold the delayed vote in the second week of January.
With Corbyn’s position coming under increasing scrutiny ahead of the crucial vote, it is understood that a number of high-profile leftwing Labour figures, including Ann Pettifor, a former adviser to the shadow chancellor, John McDonnell, as well as the economics commentator Paul Mason, and Manuel Cortes, the general secretary of the TSSA trade union, are in advanced discussions about forming a policy commission to make the left’s case for remaining in the EU. Their planned intervention follows the publication of a new study revealing that an overwhelming majority of party members want the Labour leader to back a second referendum, though most remain loyal to Corbyn’s leadership. Corbyn and several of his closest allies have been both publicly and privately sceptical of the policy, and the Labour leader has said in a previous interview with the Guardian that the party would pursue a negotiated Brexit deal even if it won a snap general election.
I thought they had no leaders?!
One of the leaders of the “yellow vest” anti-government demonstrations, Eric Drouet, was detained by French police and placed in custody on Wednesday for organising a central Paris protest without declaring it, according to a source at the prosecutors office. Drouet – who already faces a trial for carrying a weapon – was held while heading for the Champs-Elysees, according to a police source. A few dozen demonstrators had gathered outside a McDonalds near France’s famous Arc de Triomphe war monument and had been waiting for Drouet to arrive early Wednesday evening.
“Yellow vest” demonstrations — so-called after the high-visibility jackets they wear — began in rural France in November over fuel taxes and ballooned into a wider revolt against President Emmanuel Macron’s pro-business policies, which they view as skewed towards the rich. The protesters have repeatedly clashed with police in Paris and other big French cities, plunging Macron’s presidency into crisis. Drouet was first arrested last month. He face trial on June 5 for “carrying a prohibited category D weapon”, a judicial source told AFP. Radical leftist leader Jean-Luc Melenchon, a fierce critic of Macron, tweeted: “Again Eric Drouet arrested, why? Abuse of power. A politicised police targeting and harassing the leaders of the yellow vest movement.”
Brian Stelter at CNN covers BIll Arkin leaving NBC, and predictably tries to make it into something negative about Trump: “Reporter warns of Trump circus”. But if you read well, you see that Arkin depicts CNN as part of the Trump circus. The circus is the way the media covers the president: “I find myself completely out of synch with the network, being neither a day-to-day reporter nor interested in the Trump circus.” What Arkin says is he leaves NBC because they are too similar to CNN.
The one thing CNN did right was to post Arkin’s mail in its entirety. Here’s part of that.
In our day-to-day whirlwind and hostage status as prisoners of Donald Trump, I think – like everyone else does – that we miss so much. People who don’t understand the medium, or the pressures, loudly opine that it’s corporate control or even worse, that it’s partisan. Sometimes I quip in response to friends on the outside (and to government sources) that if they mean by the word partisan that it is New Yorkers and Washingtonians against the rest of the country then they are right. For me I realized how out of step I was when I looked at Trump’s various bumbling intuitions: his desire to improve relations with Russia, to denuclearize North Korea, to get out of the Middle East, to question why we are fighting in Africa, even in his attacks on the intelligence community and the FBI.
Of course he is an ignorant and incompetent impostor. And yet I’m alarmed at how quick NBC is to mechanically argue the contrary, to be in favor of policies that just spell more conflict and more war. Really? We shouldn’t get out Syria? We shouldn’t go for the bold move of denuclearizing the Korean peninsula? Even on Russia, though we should be concerned about the brittleness of our democracy that it is so vulnerable to manipulation, do we really yearn for the Cold War? And don’t even get me started with the FBI: What? We now lionize this historically destructive institution. Even without Trump, our biggest challenge as we move forward is that we have become exhausted parents of our infant (and infantile) social media children.
And because of the “cycle,” we at NBC (and all others in the field of journalism) suffer from a really bad case of not being able to ever take a breath. We are a long way from resolving the rules of the road in this age, whether it be with regard to our personal conduct or anything related to hard news. I also don’t think that we are on a straight line towards digital nirvana, that is, that all of this information will democratize and improve society. I sense that there is already smartphone and social media fatigue creeping across the land, and my guess is that nothing we currently see – nothing that is snappy or chatty – will solve our horrific challenges of information overload or the role (and nature) of journalism. AndI am sure that once Trump leaves center stage, society will have a gigantic media hangover.
Arkin understands what’s happening. There’s no way he’s the only one at the MSM. Time to call them out. Not just for war oor anti-war coverage, as Caitlin does here, but for the Trump circus they’ve created.
A journalist with NBC has resigned from the network with a statement which highlights the immense resistance that ostensibly liberal mass media outlets have to antiwar narratives, skepticism of US military agendas, and any movement in the opposite direction of endless military expansionism. “January 4 is my last day at NBC News and I’d like to say goodbye to my friends, hopefully not for good,” begins an email titled ‘My goodbye letter to NBC’ sent to various contacts by William M Arkin, an award-winning journalist who has been associated with the network for 30 years. “This isn’t the first time I’ve left NBC, but this time the parting is more bittersweet, the world and the state of journalism in tandem crisis,” the email continues. “My expertise, though seeming to be all the more central to the challenges and dangers we face, also seems to be less valued at the moment. And I find myself completely out of synch with the network, being neither a day-to-day reporter nor interested in the Trump circus.”
The lengthy email covers details about Arkin’s relationship with NBC and its staff, his opinions about the mainstream media’s refusal to adequately scrutinize and criticize the US war machine’s spectacular failures in the Middle East, how he “argued endlessly with MSNBC about all things national security for years”, the fact that his position as a civilian military analyst was unusual and “peculiar” in a media environment where that role is normally dominated by “THE GENERALS and former government officials,” and how he was “one of the few to report that there weren’t any WMD in Iraq” and remembers “fondly presenting that conclusion to an incredulous NBC editorial board.” “A scholar at heart, I also found myself an often lone voice that was anti-nuclear and even anti-military, anti-military for me meaning opinionated but also highly knowledgeable, somewhat akin to a movie critic, loving my subject but also not shy about making judgements regarding the flops and the losers,” he writes.
“I thought that the mission was to break through the machine of perpetual war acceptance and conventional wisdom to challenge Hillary Clinton’s hawkishness. It was also an interesting moment at NBC because everyone was looking over their shoulder at Vice and other upstarts creeping up on the mainstream. But then Trump got elected and Investigations got sucked into the tweeting vortex, increasingly lost in a directionless adrenaline rush, the national security and political version of leading the broadcast with every snow storm. And I would assert that in many ways NBC just began emulating the national security state itself – busy and profitable. No wars won but the ball is kept in play.
In the US, consumption is some 70% of GDP. Quite high. In Greece it has become 90%. This simply means that almost all money goes towards basic needs. But you wouldn’t know that from this piece by one Bob Traa in Kathimerini. He gets completely lost in -shaky- economic theory.
In this Note, we look at the Hellenic Statistical Authority’s (ELSTAT) report of the quarterly national accounts from the demand side. We are interested in the structure of aggregate demand and how government policy connects to this structure. In the next Note, we will look at the income side of GDP – who earns what. Figure 1 shows us the four-quarter moving average of the share of final consumption (by the private sector and the government combined) out of GDP. We will show for each component how Greece compares to the eurozone overall. All data are from ELSTAT and Eurostat from Q1 1995 through Q3 2018. These figures are interesting and generate lots of ideas and hypotheses.
For instance, note that consumption in Greece (around 90 percent of GDP) is much higher than in the eurozone as a whole (around 75 percent of GDP). This means that the flip side of consumption, saving, is much lower in Greece than in the eurozone as a whole. If you enjoy spending, but you are not a good saver, guess where the difference must come from: debt. But why is saving so much lower in Greece than in the eurozone? One possible candidate is an overvalued real exchange rate. When the real exchange rate is overvalued, this provides incentives to pull in consumption from the future into the present, because consumption today is relatively cheap, compared to consumption tomorrow when the real exchange rate resets to equilibrium – i.e. falls. Another way to put this is that Greece is not quite competitive yet.
There is no solution for nuclear waste. But the call for more plants is everywhere. Again. Look up the status of Yucca Mountain to see where the legal positions are. People are going to tell you nuclear energy is clean. It is the opposite.
Towns and villages are being offered millions of pounds as an incentive to become Britain’s ‘nuclear dustbin’. Hundreds of tons of radioactive nuclear power station waste needs to be stored a kilometre – roughly 3,000ft – deep in the ground. The facility will need to hold 750,000 cubic metres of waste – enough to fill three quarters of Wembley stadium – and will cost an estimated £8billion to build. To provide an incentive to hosting the dumping ground, the selected area will be given between £1million and £2.5million a year for community projects, the Government said. The sweetener comes after the last attempt to find a nuclear burial ground flopped in 2013 – following five years of consultations – when Cumbria county council rejected the plan. It is expected the process to find a site will take 20 years, and it will take ten years to build. It will then need to remain safe for up to 200,000 years.
In the new scheme, rather than a council deciding, a final decision will rest on a local referendum. Waste is currently stored at 30 sites, mostly at Sellafield in Cumbria. It includes around 112 tonnes – the world’s biggest stockpile – of plutonium, the most poisonous substance ever created. In 2016 the House of Commons Office of Science and Technology warned that plutonium is so dangerous it can even ‘self-sustain a nuclear chain reaction under certain conditions’. Other radioactive materials include uranium. A Government document on how it find a site said the dump would need 600 skilled staff and was ‘likely to have a positive effect on the local economy’ and ‘will provide jobs and benefits to the economy for more than 100 years’.