Investing

Apple Stock and Changing Times

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apple stock outlook logo

Apple Stock has gotten a bit of a beat down lately after finally experiencing what everyone knew would have to happen someday. It seems that Apple has finally saturated every market on earth, and there will be no matter automatic increases in number of devices sold in ever category. Of particular concern to most investors is the drop in iPhone sales. It turns out there are two major issues. First, is that in China, iPhones are no longer the must have item they once were. The other is the maturation of markets. Apple No New Products When you make a brand new product, or in Apple’s case, when you create a new product category, you get a sales trajectory that includes people buying it because it is new and different, and surely there is something that you can do with it. Of course, over time, this free pass sort of evaporates as people learn what they can and can’t do, and whether or not those things matter to them.   Recently, Apple enjoyed great success with the iPhone 6, in large part because Apple finally offered a big phone. Naturally, Apple users ran out and bought the bigger phone. However, …

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April Market Update

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fed uncertainty

Well, after a mostly sunny looking April, last week and this week look like speed bumps ahead. The trick is the interlacing of several economic events pulling on the markets. First, oil prices are still causing havoc after a meeting of OPEC oil producers produced no plan or reduction in oil supply. That’s bad news for producers in the U.S. that increasingly depend on more expensive extraction techniques such as fracking to produce oil. Of course, the add-on difficulty spreads to other companies that provide equipment or assistance to oil production businesses, as well as the potential problem for banks financing such oil related companies. Second up are company’s reporting earnings, most of them coming in below expectations, or with warnings of expected future declines in business trends. Third, is potential action from the Fed, and other central banks around the world. The trick is navigating the concept that being “hawkish” on inflation is better, and the fact the the economy may be teetering on a point between growth and decline. In other words, no matter what the Federal Reserve ends up doing after their meeting Wednesday, someone isn’t going to like it. If they make it clear that economic …

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Stock Market Back Up Over 18,000

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I spend a lot of time telling people not to read too much into the short-term moves of the stock market, no matter how compelling the narrative is at the time. In the past 12 months, there have been two pretty significant meltdowns attributable mainly to investors worried about China or Europe, or whatever. I plan to develop a system that takes a screenshot each day of Marketwatch and CNN Money, or others just so that you can scroll through the comings and goings of each day. I can clearly remember numerous articles as the markets were falling in January and February about how this was only the beginning of a massive collapse, and others like that. Now, just a few months later, the same website is publishing articles about the market being back up above 18,000 for the first time since July last year. The point I’m making is that with the value of a little hindsight, or just a longer term view, it is clear that a lot of the recent volatility is a result of a market that went too high, too fast, for too long without any sort of correction. A couple of correcting down blips …

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Are Oil Loans the New Subprime Mortgages

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oil drilling rig

Remember when banks got too greedy with subprime mortgages? Remember when banks (and their executives) just couldn’t say no to the massive earnings (and by extension massive bonuses) that came from building bigger and riskier portfolios of subprime loans? Well, get ready for oil loans. Oil Loans and Bank Risk If you think Wall Street and the big banks learned their lesson from the subprime loan driven banking crisis, you really don’t understand how compensation works in the financial industry. You see, bonuses are paid based on big gains. This encourages risk taking. However, there is no downside for being wrong on those big risks, not even losing some of the bonus you earned earlier in the year. As a result, risk is the name of the game at Wall Street’s big banks. This time, banks rushed to lend money to companies in the oil industry when prices where high. In addition, they extended very generous lines of credit to those same companies on pretty sweet terms. Just like with the subprime mortgage crisis, as long as oil prices didn’t fall too far, too fast, everything would be fine. Deja vu. With oil prices at low levels, and any oil …

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Model 3 Pre-Orders and Tesla Stock

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tesla stock chart model 3

Tesla has had a big weekend. At last count, according to Elon Musk’s Twitter account, there were 276,000 pre-orders for the new Tesla Model 3. An earlier tweet referenced an average order price, with options, of $42,000. Musk is Tesla’s CEO, so this counts a public disclosure of material facts of a publicly traded company. As you can imagine, there is a lot of jabbering about what this does or does not mean for Tesla. Let’s look at the facts to get an idea of just how much good news there is, or is not, going on here. First, as some have pointed out, multiplying $42,000 times 276K pre-orders comes out to over $11 billion in Model 3 pre-orders. That would be by far the biggest income Tesla has ever had. However, that is nothing more than a paper calculation. How much of that money Tesla actually sees depends upon a lot factors, including how many people decide to cancel their fully refundable pre-order. That being said, pre-ordering a Model 3 Tesla requires registering, and a $1,000 deposit. While the deposit is fully refundable, it is money paid. In other words, this isn’t a bunch of internet kids running bots to …

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Oil Drillers and Oil Industry Outlook

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There was recently a fascinating presentation regarding the state of the oil industry. The presentation is from Schlumberger CEO Paal Kibsgaard. Schlumberger is one of the biggest oil drillers in the business, so he knows what he’s talking about. The surprising candor of this oil industry outlook presentation is what makes it so fascinating. In the presentation, Kibsgaard notes that unlike previous oil price implosions that were caused by what he calls “demand events,” this one is caused by OPEC’s decision to protect its market share rather than protecting the price per barrel. This creates a very different world for the oil industry. He goes on to describe what his particular company is looking at doing in the future. For our purpose though, what is interesting the confirmation that things really are different this time. Boom and Bust in Oil The oil industry is no stranger to the boom and bust cycle. The oil bust of the 1980s hammered the local Denver economy until the internet bubble managed to rescue the city. The resulting merger and consolidation turned one-word household name energy companies into combined energy companies such as ExxonMobil (formerly two separate companies Exxon and Mobil). In the end, however, …

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Market Still Crashing… Wait, No It Isn’t

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stock market back even

Still waiting for that market implosion everyone was certain was going to happen a few months ago? Looks like you’ll have to wait a little longer. I usually have to wait a little more to pull out the “I told you so,” on the stock market being a constant swirl of ups and downs that should be ignored by long-term investors. Long-term investors, of course, should be sticking to their long-term plans and only making adjustments to rebalance their portfolios. This is often easier said than done. Usually, in the middle of a down period, people start showing up or calling to tell me that they were, “right,” and that they pulled all of their money out of the stock market and now they weren’t losing anymore money and I am dumb for saying they would be better in the long run if they had just stayed put. They never call me to tell me they put their money back in right before things start going up, but that’s another matter *eyeroll*. This super, mega, down, recession is coming, batten down the hatches, plunge was too short for that to happen this time. Market Back To January 1 Levels Right …

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Stock Market Does What It Does

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stocks first part of 2016

Remember when the sky was falling, China was blowing up, and the stock market was going to go straight to zero and there was going to be another super recession? You should. It was only a couple of weeks ago. But, as some of the calmer bloggers, (ahem) and other financial publication that don’t rely on massive waves of panicked clicks, pointed out, the stock market was actually due for a little breather after running almost straight up for a very long time. In fact, in the long run, it was probably much better for everyone (as long as they didn’t panic) for the stock market to pause for a while. As an added bonus it made the Fed stop its blind, headlong rush into raising interest rates because that is what good hawks do, and caused them to look at the actual data instead, which suggested that while the U.S. economy is definitely moving up, the movement isn’t necessarily strong. Most importantly, there are still virtually no signs of inflation and instead, it looks like there are some weak spots hiding in the otherwise decent economy. Stick To Your Plan As always, the worst time to make investment decisions is during …

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What Happens When My Stock Goes Down?

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waterfall falling stock price

Yesterday I wrote about how Apple stock could be considered a dividend stock by some investors. Later that day, after the stock markets closed, Apple reported its first quarter results. (Apple, like many companies uses a fiscal year, instead of a calendar year. The first quarter for Apple runs from October to December.) The results were met with disappointment by the markets and the stock is down this morning. This triggered an email from someone asking if Apple was now a bad stock to own or buy, and that felt like the beginnings of an article I’ve been meaning to write for a while. Remember you should not be buying individual stocks until your retirement plan, college plans, and savings plans are fully funded and on track. What Happens When a Stock Price Falls? One of the most difficult things for non-professional finance people to grasp is the difference between actual losses and paper losses. An example can be helpful. Apple stock was trading at about $100 per share yesterday when I published the post about the dividend yield moving past the psychological 2 percent dividend yield mark. Although I didn’t buy any stock on that day, let’s pretend I did. …

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Buy Apple Stock for Dividends?

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Well, here’s an article I never thought I would write, but is Apple a dividend stock now? Apple’s stock price has been drifting down as of late while investors worry that the company doesn’t have any new amazing products up its sleeve. This worry is particularly curious considering the products the company does have are still market leaders in most categories. And, that those very same products, are almost religiously upgraded by a large number of users every time a new one comes out, especially the company’s most important product, the iPhone. This could be worrying to shareholders if the company was overvalued and priced to perfection, but with a P/E of 10.85, it’s not out of line with other successful technology companies by any stretch of the imagination. Of course, a lot of the concern is simply that the company has grown as much as it can and that there are no more world’s to conquer. This is always and odd fear to me, but I suppose to some it matters. In other words, maybe Apple isn’t a growth stock anymore. And, to a certain kind of investor, the only stocks worth investing in are growth stocks. Apple Dividend Here …

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