Apple Raises a $1 Trillion Question

 In U.S.

Today’s Agenda

  • Apple is worth $1 trillion now …  or is it?
  • It’s the economy, stupid …  or is it?
  • What the Arab world needs is its own NATO …  or does it?
  • Tesla is all fixed now …  or is it?
  • Savers are enjoying higher interest rates …  or are they?
That’s a lot of digits.

Photographer: GABRIELLE LURIE/AFP/Getty Images

How Do You Like Them Apples?

Apple Inc. is now worth $1 trillion, or nearly seven Jeff Bezoses. That is an incredible number.

But we may one day look back on this moment and realize it was more a reward for past glories than an pinpoint-accurate gauge of Apple’s future profitability. Shira Ovide points out Apple has changed quite a bit on the road to being worth $1 trillion, or 47 Elon Musks. Its profit margins have shrunk, for one thing:

We should all have Apple’s problems, of course – in raw dollars, its profits dwarf everybody else’s. But its iPhone sales growth has slowed to a crawl, and the company now relies on selling a bunch of different stuff to keep the party going. “Those changes are giving Apple a fundamentally different financial look, and investors haven’t yet been forced to confront how much this altered Apple should be worth,” Shira writes.

Most notably, margins are shrinking because Apple is spending a ton on research and development. Maybe it will come up with the next iPhone because of it! But if it doesn’t, then investors may start questioning whether Apple really is worth $1 trillion, or 15 Mark Zuckerbergs, Shira suggests. Click here to read the whole thing.

Bonus giant tech-company reading:

It’s Not Always the Economy, Stupid

Thanks to James Carville, every man, woman and child in America has been forced, at least once every election season for the past 26 years, to utter the phrase “It’s the economy, stupid.” Bill Clinton’s 1992 election may well have been all about the money, but not all elections are. A Who’s Who of Bloomberg Opinion luminaries – Ramesh Ponnuru, Al Hunt, Virginia Postrel, Jonathan Bernstein, Noah Smith and Conor Sen (plus a special cameo by one Ragin’ Cajun) – recently got together to talk about how much they think the economy will affect the 2018 midterm elections. TLDR version: Not as much as you might think! Read their verdicts here.  

Bonus political/economic reading:

Arab NATO? No Thanks

President Donald Trump wants Arab allies to join what is being called an “Arab NATO” to fight Iran. Bloomberg’s editors suggest this is a bit much, particularly considering how Arab states are already busy fighting each other and how weak their militaries are. A more realistic goal would be to convince them to work together and put more of their unconventional weapons to use, the editors suggest.

Trump is right, though, to sanction Turkish government officials as punishment for President Recep Tayyip Erdogan’s refusal to release a U.S. pastor, Bloomberg’s editors write. It’s a risky thing to do to a NATO ally that has lately shown a worrisome predilection to drift into Russia’s orbit. But doing anything less would just encourage more bad behavior by Erdogan. Eli Lake argues what Trump should not do is give Erdogan concessions (or human beings) in exchange for the pastor or other hostages. We’ve been down that road before, Eli writes – with Iran. 

Tesla’s New Verse, Same as the First

Tesla Inc. reported quarterly results last night that were not as abysmally awful as Wall Street expected, and CEO Elon Musk did not curse or murder anyone on the earnings call. So naturally the stock price soared 15 percent today. Liam Denning suggests investors shouldn’t mistake the lack of drama in Tesla’s quarterly results for the resolution of Tesla’s central drama – namely, that it routinely sets mountains of cash on fire. All the while, Tesla keeps promising that, any day now, it will be able to fund itself – i.e., not be forced to hit up the stock or bond markets for more money. To buy Tesla stock, you need enough blind faith to buy what Elon Musk is selling there, Liam writes in a second column. 

Zero Rates, You Lose; Rising Rates, Somebody Else Wins

Raise interest rates to help poor suffering savers! people were always saying back when the Federal Reserve had interest rates near zero. Well, the Fed has been raising rates for a while now. Are savers finally feeling better? Not so much, writes Stephen Gandel. You’ll never guess who is actually benefiting from higher interest rates. You might want to sit down for – Oh, who am I kidding? Of course, you can guess: It’s the banks. 

Click here to read Stephen’s whole analysis.

Chart Attack

Bond guru Bill Gross’s performance is just embarrassing now, writes Brian Chappatta.  

Despite Uber, rental cars are still going strong-ish. – Justin Fox 

Speed Reading

Fidelity’s new no-fee mutual funds just dropped a bomb on the investing world. – Nir Kaissar

Trump doesn’t seem to understand what his job entails. – Jonathan Bernstein 

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