The bullish $AAPL case is price increases.

The latest base iPhone still only costs $799, the latest MacBook $999. That’s the same price since pre-inflation 2020. And the hardware has greatly improved.

Meanwhile Netflix has hiked prices 64%+ since. For the exact same service. Apple’s products last for a very long time, get six years+ of OS updates & have high resale value, so the right way to see an iPhone has always been “per month”.

A $799 iPhone lasting six years is only $11.10/month. Same as in 2020.

Netflix Standard? $10.99 then, $17.99 now.

If the “Most Favoured Nation” proposal is enforced (meaning Americans will pay European prices for Ozempic and not 15x as much as the Germans), $NVO stock would fall 60-70%+ in one day. It’s an insane price premium if you think about it.

But US health would massively win. Now, what are the chances it happens? Hard to say.

But it would be significantly deflationary and create immense goodwill for the Administration. Out-of-pocket, real savings would be both large and immediate for Americans.

Thus it could get to the top of the agenda quickly.

$CELH joining the “Pump-And-Dump Hall-of-Fame”. Revenue DOWN -31%. 😳 WTF? A “growth” company? All profit wiped out! Distributor (Pepsi) de-stocking = don’t want it!🤮 Another pump & 💩 meant to f**k people’s brokerage accounts raw. 🩸 Stock at 40x ‘24 P/E (!) before revisions. Just remember that they recognise revenue when it goes to the distributor, not when the stuff actually sells. Plus there are rebates and consumer promotion shenanigans affecting margins. So unclear when growth will return, or what they’ll do here exactly. 🤷‍♂️

$META The good: After 6 flat/down Qs, we saw solid rev growth: +11%. Ad impressions +34% (more ad slots! 👏). Costs rose +10% so EBIT +12%. THE WHOPPER 😲: Q3 rev guide raised to $32-34.5bn vs $31bn cons = UP TO +24.5% Y/y! ‘23 cost guide ⬆️ but capex ⬇️ = EPS UP +6/9%+ ‘23/‘24. The bad: FCF was $11bn but a meagre $7bn post the simply yuuge $4.1bn SBC print this Q (and only $5.3bn post the stock withholding taxes, IRS gang gang!). On current $800bn cap, $7bn is 3.5% annualised FCF yield. If capex has moved to ‘24, how much FCF in ‘24? Key question!!! 🤔

$META While results were pretty sh*t (unless +2.6% growth & -15% EBIT makes you 💦), it’s ALL in the strong guidance: +13% Q2 growth at the high end, and further dramatic cut in ‘23 opex, at $86bn (low end). In October, they guided for up to $101bn, so up to a $15bn diff! 🍌 On the capex side they now guided to $30bn at the low end, vs up to $39bn in Q3, so up $9bn in less spend. Add that to $15bn, and you have UP TO $24bn in more FCF vs their guide in Q3 ‘22!

At midpoint, it’s $15.5bn. At 15x FCF, that’s $233bn in “value”, or $310bn at 20x.

If you hold spare cash in your brokerage account you’re just giving free profits to your broker, who invests it in T-Bills (6M now at ~4.8%) and keeps the profits.

Instead, it’s much smarter to either buy T-Bills yourself OR to put the cash in either a T-Bill ETF or T-Bill fund. A Treasury Bill is a U.S. government bond that has 1 year or less to maturity (3, 6, 12 months). T-Bills (and the find who hold them) are very liquid and as safe as they can be. Uncle Sam short term IOUs!

They also yield much more than even the best savings accounts available.

Some earnings charts and observations from Morgan Stanley:

Forward EPS Growth is now negative for just the 5th time since 2000 (and historically this has meant more downside)… … and we’re currently in the first negative EPS growth quarter since the COVID recession….

What do companies do with the cash they generate? Let’s see. In the US, companies will generate around $3.2 trillion in cash this year, and spend 50% of it on buybacks & dividends, while only re-investing 36% into capex & R&D. Good or bad? As you can see in the previous chart, US companies used to re-invest a LOT more into capex & R&D (>65% in the early 1980’s)! Something big happened post 2000: there was a huge drop in re-investment, which coincided with a shift of manufacturing to China & elsewhere. Good or bad?

Investment banks have one key thing in common with tech companies: People are paid a huge percentage of their compensation in stock. They also tend to dump most of all of that stock when it vests (as they constantly get more). So for the share prices in both tech and i-banks… …to go up, it requires that either (a) there are outside investors who constantly buy all the stock getting dumped by employees and insiders, or (b) that the companies or banks have buybacks that use cash & buy all that stock being dumped, all the time.

Now, what happens…

Way too many moving pieces in global economies & markets right now.

Rates & QE was all that mattered for over a decade. Now we also have inflation, energy, labour shortages, continued on/off supply chain disruptions & geopolitical instability… All last seen in the 1970’s. Even if you’re correct in predicting any single one of these, if another one moves against you, your case will get destroyed.

The metals & commodity bulls who in March predicted a massive war driven bull market, is a good example. China + economic bearishness destroyed them.

$DIS Disney is massively increasing prices for its streaming services, including 38% for Disney+ to $10.99. Seems like bad timing, and a strategic misstep. Reason is, of course, that they have zero cost & efficiency control, and lost $1bn on streaming last quarter alone. While bait & switch works short term because it’s what “smart money 🥴” wants (just look at $DIS share price today), long term it it undermines product. Customers get less value, not more. And while parents may keep paying, they won’t feel good about it.

Why are money flows to equities increasing while bearishness is at a maximum? This is something we haven’t seen before, and intuitively doesn’t make much sense. If investors are super-bearish on market direction, why and how is money being added to equities? A few reasons:🧵 👇 1. Passive pension flows happen every day, whether we like it or not. People don’t often change their pension allocation, and thus money coming keeps coming in to stocks. The 401k (or equivalent), as long as people get a salary, the employer contributions keep flowing in.

Goldman’s latest Hedge Fund Tracker has some good charts. Like this one: While Equity flows have reversed ($53bn outflows since April) they’re still tiny compared to all the inflows we saw post “2021 Vaccine Day”. Selling of funds has been limited. You wouldn’t know it, right? 🤷‍♂️ Despite the tech selloff, the weight of high multiple stocks (>10 EV/Sales) in both the indices and hedge fund portfolios is still extremely high compared to recent history, although HF’s are now inline with the index. Still >22% weight, vs ~3% for a few years post the GFC.

Will $SNAP get body-slammed by a double tag-team of Apple privacy settings & TikTok taking all their users’ social media time today? It still trades at 9x 22E revenues and 57x EBITDA… COVID lows were $7.8 and it’s far above that today. Consensus revenue growth is 37% for ‘22.😬 Oops. Miss on revenues and miss on EPS. Guidance 😱🚨🚨🚨.

Large hedge funds: “Noone could have seen this coming, no matter how much resources we spent analysing it”.

Just a reminder that pretty much the only thing that would make the large US indices fall hard is that large tech tanks. For many other sectors (banks, energy, commodities etc), the rate drivers are not so obvious; they normally benefit from higher rates. And don’t forget the passive buying from automatic pension saving. As wages have increased, monthly pensions buying into passive ETFs continues and is rising. We’d need falling wages or a very large increase in unemployment for this to reverse. Or massive active selling.

Some copper charts from MS: Copper is the largest component of electrification across EVs (by far) and also generation, grid infrastructure and charging... …although copper demand from EV’s themselves is a small portion of total copper demand, it’s very fast growing and large as an absolute amount.

Several European miners have strong EV metal exposure (incl copper). (Boliden + KGHM are my favs).

Goldman published some charts on the topic of reshoring. So far, despite the talk, there has been no evidence of an actual reshoring trend in the US. In fact, manufacturing imports reached a new high in 2021. US companies still continue to move manufacturing abroad. During the pandemic, US companies with supplier exposure to locked down markets experienced the largest pandemic related revenue declines. Quite obvious that this would happen. Suppliers can’t supply you quickly if they’re far away and locked down.

We haven’t seen inflation of this magnitude for so long that pretty much noone knows how to think about it. Both in equity or credit. There’s just a lack of experience for how to mentally process it. Naturally so, as people who are 65yo today were <20yo last time we saw this. How does it impact nominal rates, valuations, growth rates, cost of capital, risk? Pretty much noone currently active knows any of the available available frameworks.

Inflation was so low for so long, it was just ignored (even though over time, even 1-3% inflation compounds).

It’s a bit sad, but there are some people on FinTwit that should definitely not be investing. They’re exceptionally good at tweeting and storytelling, but their stock pics are truly terrible, because they simply don’t understand what business is and how value is generated. Telling fantasy stories worked for a year or two because nothing else mattered. But that’s not the norm. In the money world, price, returns, value and cash flows matter as a rule, except in some insane bubble we get once every decade. But the exception is not the rule.

Many public investors are bad at understanding a company’s cost & expenses, because they’ve never run business or employed someone.

Almost all investing “write ups” spend practically zero time analysing the cost base. Revenue drivers can be observed, while costs are much harder. At most, people use some type of margin assumption. But that means little. Costs are actual line items, like staff, materials, input costs (like development) etc. All things investors don’t spend much or any time on.

This is especially an oversight in growth businesses.

I went through quite a few newspapers and financial magazines this weekend and one thing is clear: They were filled with negative articles about China stocks. I don’t think this is a contra indicator. It may mean that generalist money who held some China shares like $BABA … … will only now start to sell, as you can’t really ignore all this negativity if you’re not an expert. The barrage of negativity from “experts” is relentless. If every single source tells you what a bad market that is, if you’re a generalist or retail, are you going to be brave?