2022-12-01

Wrap

Today was quite scary. There was a lot of economic news today, most of it bad. This included retail sales, industrial production, PPI (down) and capacity utilization (down). Bonds rallied, but particularly at the five-year maturity. Rather than the curve steepening across the full range of maturities, it did up to five years, and then reversed into an inversion further out. Nobody seems to believe that the Fed will not capitulate, and nobody believes that this will cause problems with persistent inflation in the longer term. A 10Y-2Y steepener trade did not do well today.

Heavily shorted names, which have been propelled upwards over the last week or so slumped back today. Equity markets paused but are up a lot on the week, suggesting that the markets do not think that we’re heading into a deep recession.

For full details see Zerohedge/Marketear.

Apple

Sometimes, the FT does some very high quality reporting. This is one such piece. It explains how Tim Cook, Apple’s supply chain boss, subsequently CEO, has embedded nearly all of Apple’s production knowhow and equipment in China, a deeply authoritarian autocratic and genocidal country.

I refuse to own any Apple products. The company behaves with craven cowardice towards the Xi Jinping regime, for example removing software from its app store that might help democracy protestors in Hong Kong. (As well as removing VPN apps that would help iPhone users tunnel through the Great Firewall of China.)

I don’t believe in corporate karma, but I’d like Apple’s hubris to be met with a suitable nemesis. Currently Apple has YoY earnings growth of 0.8%, a price-to-book ratio of 42, and a forward P/E of 22. It’s true that it has huge operating margins (>30%), but just ask Tesla investors whether margins can hold up in the face of stiffening competition.

My understanding is that Apple makes use of a lot of open source code, but gives almost nothing back to the community. I may be wrong about this, and it’s quite a while ago that I read an article alleging this. Certainly, recent reports suggest that Apple is embracing the Open Source movement (e.g. this) so this part of my argument may have been overtaken by a change of policy at Apple, or even may never have been accurate.