I used to think it's a good idea to ditch cars and use public transport and bikes, but now I don't think I want to ever use public transport again. The personal car is a protection shield against infection, and for that reason I think many people will turn back to them.
I don't disagree with your assessment re: infection, but I'd point out that transportation overall is dropping, possibly permanently; and that the long term economic damage from the pandemic and the debt loads that we're taking on will likely hurt auto sales for a long, long time. I'm not sure that whatever shift away from mass transit to private vehicles will make up for the overall loss of transportation, and you have to have a job to go _to_ in order to need a car to get there.
Just to be clear, those numbers aren't directly comparable. The market cap is the total value of the company, whereas the yearly budget is the cost for a single year.
The US military budget is an expenditure that occurs every year. Apple's market cap is the expected value of all of Apple's outstanding shares. These are really not comparable.
Yeah when you gain 59% in value in a single year during a pandemic that will do it.
Bezos net worth has also gone up 80B (to 190B, even after a divorce haha). Musk up 60B while Tesla has a what, 900 PE ratio? Zuck up 20+B. The pandemic has served our tech overlords well.
Even though it's not exactly new, in my mind this is still in sharp contrast to the recurring headlines I used to read about whether Apple will survive in the next year (mac user since 1990).
Comparing apple to Tesla is a bit rich, no? I don't know where Tesla will end up but I can't see them being the Apple of cars when the traditional manufacturers finish milking the ICE. It's not impossible but probabilistically I can't see how Tesla convert the share price into business. For example, Tesla's market cap is about 15x bigger than Ford's - but Ford's yearly revenue is about half that market cap.
Something similar was commented below. These figures are not comparable, as GDP is "collected" every year. Revenue for Apple sits at 260B$, which is closer to the GDP of Vietnam.
Apple’s dollars and Italy or Spain’s dollars per year aren’t the same units. All this means is that neither Italy nor Spain create the equivalent of one new Apple per year. I’m not even sure if that’s accurate, as valuation delta and production might have the same units but still probably aren’t the same thing.
I want to explain why you're being downvoted, why this happens in every HN thread like this (I've been observing it for more than a decade here), and why they're all wrong (every single time).
First, you did nothing wrong. You can very easily, very obviously, compare Apple's market cap to the total annual economic output of a nation, or the economic output of any thing over a given amount of time.
Apple's market cap of $2 trillion, is greater than the annual economic output of the nation of Italy's 60.3 million people ($1.98t 2019). You just got told that is impossible to do. I just did the impossible. Which do you think is more likely true? It's obvious.
It takes the 60.3 million people of Italy a year to produce enough total economic output to almost match the total value of all outstanding Apple shares. Oh shit, I did it again. A spontaneous blackhole may appear and we may all die. I just successfully compared two things everyone repeatedly says is impossible to compare.
You can obviously compare the two, and do so quite cleanly, have no fear.
I've been watching this herd action for a long time here. People don't seem able to stop and think about the context beyond a primitive twitch action, they just reflexively downvote, and parrot the same responses ad nauseam (it's always the same responses without exception).
Second, you have to understand, you're facing off against many people's favorite "gotcha" Smart Person(TM) response. It's an arrow they hold in their bag, for times like this, that helps them feel smarter than you (that's why you'll see so many of the same response, unnecessarily; if they were right, one would be enough). They may not know much about economics or the stock market, however they know this thing, they saw it somewhere else, it sounded true, and they can feel good by downvoting you and by drowning you in one line responses. You deserve better dear user5994461, for your four years of HN dedication and contribution. I want you to know that what you did is perfectly OK.
You are not going to produce a tear in the fabric of space-time by running a similar comparison, you'd simply be wrong, and life will go on as usual.
GDP is an aggregated annual "earning", a market capitalization is the value of all the outstanding shares of an entity, not a periodic earning.
A more meaningful comparison would be Apple's annual earnings ($260B, still quite a lot of money) vs a country's GDP, or Apple's market cap ($2T) vs the value of an entire country, rather than their latest GDP.
"They're worth $2T, but they didn't make $2T this year, they made $260B".
The answer is not convincing - with a comparable net income level, the world's largest bank ICBC only has 1/7 of apple's market cap. Vodafone had over 100 billion earnings back in 2014, that was like two years of apple earnings in 12 months, Vodafone never had a 24,000km high market cap built with $100 notes.
For ICBC, it's a state-owned institution. And a bank. The accounting is special for banks (and mostly beyond me). Some say, it's doubly "special" for companies like ICBC.
For Vodafone, that number was a special one time gain from the sale of Verizon Wireless. In 2014, they showed an operating loss of £3.9B (but a overall gain of £11B because of income tax credits -- hoorah for financial engineering?)
These types of ludicrous comparisons serve no purpose. The sum total of an arbitrarily chosen currency with an arbitrary size or weight has nothing to do with anything.
If "normal people" want to understand something, they should read the 10-K and search online for terms they don't understand. It is pretty simple to understand how much revenue and net income per customer has been and is expected in the future per some unit of time.
I don't think they did, but that's up to the buyers of AAPL shares to assess. I bought a house five years ago that is now valued $300k more. Did I (or anyone else) create $300k of value to "justify" the increased valuation? I don't think so. It's simply what people are willing to pay in the current market.
It's mind-boggling to really look at the size and power of colonial trading companies. I've been meaning to re-try reading the Baroque Cycle -- started once, but gave up a ways in.
Apple succeeded because they managed to do something that was previously unimaginable in business theory - create a mass-market luxury good. A well taught theory in business school is Porter's general theory, which was to create a sustainable competitive advantage you either competed on differentiation or cost, and if we did something in the middle, you would die.
Apple managed to create a luxury product - the iPhone (differentiation) at mass-market scale (low cost base) which has driven the majority of their profitability since it's launch.
This, exactly. The other thing is that everyone and their brother wants to create an app store to get 30% of revenue. The thing they miss is that you have a consumer driven device that users want even without the app store. That is what Apple nailed. They were also first. They will continue to ride this wave for a long time.
Yes, the app store was genius. We'll see how the 30% shakes out in the long term, with the recent revolt from Epic etc, but creating a platform on top of your software/hardware vertical integration is a decent monopoly play that creates sustainable revenues.
What's funny is how much friction and persuasion it took to get them to actually do the App Store. Steve was hellbent on WebApps and I hope the history books recognize how much influence jailbreakers had in shifting the discussion to native apps
That's super interesting, thanks for the video! Perhaps they understood that there might be resistance to native ("small market" at the start) and so looked for something that could help the transition?
More likely, they knew the hardware couldn’t really run much more.
The first iPhone had 128MB of RAM and ran at 412 MHz, underclocked from 620 MHz (https://en.wikipedia.org/wiki/IPhone_(1st_generation) ), and there was disbelief that what they showed could be built at all at the time with the advertised battery life.
They likely also didn’t want to commit yet to an API for third-party apps, as they didn’t know what was reasonable there.
I was under the impression Steve was (rather unhappily) forced into this position because of the state of native apps by launch. Can't remember where I read this or I'd gladly link it.
Meh.
make was genius. Makefiles were genius. pkg_install and pkg_add were genius. PMS was genius. RPM was genius. FreeBSD's ports tree is genius. pkgsrc is genius. Like nearly everything Apple ever did, AppStore is not at all original, not remotely the first, not by over a decade. It is really no different from any other binary package manager. It is Brew for iOS.
It's exclusive, with a gatekeeper, and no workaround. It just works. It has payment processing built in.
Like most Apple things, they weren't the first. Their genius isnt being first, it was spit polishing things to be simple for the masses. Over the years, they have lost a bit of that vision and turned googly with new products not quite replacing old products (how many times has photo sharing and backup been redesigned) but comparing the whole suite to components is a bit unfair.
As others have said, the genius of the app store isn't the technology (as you rightly point out, the technical problems have been solved for decades). The genius of the app store is in the business model: Make and market a device with unlimited demand, give third parties only one way to reach such a large market that they're willing to pay you 30% (while drastically lowering technical barriers to entry), and raise the barriers-to-exit so high for users that nobody ever leaves the ecosystem. Rinse, repeat, profit.
it amazes me that people still seem to think that the app store was some reactionary response to jail breaking and not a calculated move. the iPhone was launched in June 2007, the app store in July 2008. Apple did not build an entire developer SDK and software marketplace within 1 year as some afterthought. those wheels had been in motion before we knew what the iPhone was.
if Apple had launched the app store with the iPhone, it would have had no where near as big of an impact as it did by waiting just a year. they created the demand first.
and no, Cydia was launched 5 months before the app store.
I was suggesting nothing of the kind. But certainly it wasn't the other way around, either.
My only point is that the AppStore is not the Second Coming. It is and it only is a package manager. Just like all the others that came before it. And nothing more. It is not some searing example of genius. It is one package manager among countless. That it includes a payment system is an irrelevant detail.
What Apple did that is amazing is creating a community of developers out of nothing and gave them excellent tools to create software for their platform. It seemed overnight that the ocean of Windows applications, mostly due to obsession with backward compatibility, was no longer all that special.
A clean and simple product UX != treating the customer well. Gouging their customers for repairs and being outright hostile to anyone other than themselves managing the device is not being customer-centered.
I once brought my old 17 inch MacBook Pro into an Apple Store because it had died. Apple Care had expired. They fixed it anyway (exchanged the motherboard in the process), at no cost. That's pretty customer centric.
I think that varies by customer. I wouldn’t call my experience customer centric or even close.
I had a 2015 MacBook Pro that had died recently and like you Apple Care had expired. This is my work laptop and was not be able to earn anymore income until it was operational again. I did all the basic troubleshooting myself resetting PRAM, etc and nothing helped. I contacted Apple support and they had me do the same tests and some additional ones without success. This all happened two weeks ago and due to Covid-19 the area I’m in has no in person support available. The only solution offered was to wait until Apple stores open or buy a new one.
I tried to find third party to help with no luck. I decided to take a crack at repairing myself by buying individual parts from Amazon. I soon realized this isn’t as simple as it should be. I had to buy Apple specific tools to open the MacBook case and then realized even the SSD on a 2015 MacBook Pro is a proprietary version so I had to buy a specific over priced version to replace the drive. I felt like the last thing they wanted was for the customer to try and repair the laptop.
Nothing ended up working. So, I had to buy a new one. I thought I could at least use this current MacBook Pro to get some trade in discount. Nope, they offered zero trade in since it didn’t turn on even though it was in excellent physical condition. I ended up buying a new one from Amazon and restored data from a previous timeline backup.
IMO, The least a company this wealthy could have done is offer a small discount considering the times we are in. I was very disheartened with my experience.
I agree. I wanted to share a bad experience. Otherwise, I have rarely needed any support from Apple in the last ten years.
I did, and it hurts looking at my previous one I loved right across from me considering the price I paid for the new one. "Well, at least I have Touch ID now" is what I keep telling myself.
I didn't want to and tried using a windows based laptop for time sensitive work as I was waiting for parts to arrive. I spent more time troubleshooting getting stuff to work on a windows machine. Some tools I use and App dev work I do requires a Mac OS. Luckily, I had some savings to use but others in the same situation may not be very fortunate or even have options.
Now that I think about it, I could probably get away with a Hakintosh setup. I didn't consider it with everything going on.
> being outright hostile to anyone other than themselves managing the device is not being customer-centered.
But it is. The customer isn't you, the tech literate professional; their target customer is the average person on the street.
Apple doesn't want their device ecosystem to be inclusive to the things that confuse, defraud, or frustrate non-savvy users: unethical or unqualified repair, advanced (mis)configuration, side-loading apps, etc.
Back when I worked as an IT tech, upwards of 80% of issues I dealt with were caused by one of those confusions that are completely solved by a walled-garden approach. It might not be your preference, or my preference, but there's no denying the utility it has for others.
I’m not sure the tech literate professional is the right group there. Plenty of us pick Apple products because we’d rather use our time and skills to make money instead of tinkering with gadgets.
Yes, I'm suggesting that their viewpoint might be biased by their expertise -- not that all with expertise share that same bias. I have some Apple devices for exactly that same reason.
and their value is the most defensible as well. Devs might see the pitfalls of Apple's walled garden restrictions but for general public their image still holds supreme. In developing world their products are seen as sort of status symbols. Imagine loving a brand so much that you put their stickers on your car. [1]
I think only Google probably had the image of superior products(Search, Maps, Mail) which rivalled/beat Apple but that has been kind of tarnished now.
Right, Google doesn't play in the "luxury" space, they decided that strategy early on, allowing any smartphone maker to ship the Android OS. This won them the market share for operating system - currently 75% to iOS's ~24% [1], but they are unable to capture a fraction of the value that Apple did with their luxury mass-market strategy.
I may be wrong, but for me it looks like it was their goal to begin with. Google analotics knew they have to chance to compete with Apple in that regard so they went with other profitable options.
At least from outside it looks like a sane decision.
I wouldn't be sure of this. Google at one time was a darling of the tech world. Sure, the data collection issue has been there from the start because of the business model. But their products, engineering, openness was looked upon. Add to this their principled approach to things like when they decided to pull out of China because of their values.
The biggest qualm with Google was their incoherent product strategy like what happened with Gtalk, Reader etc.
If anyone had the brand value to push a smartphone OS, it was Google. Once Android started going mainstream, they could have chosen a different strategy for the high end models.
HN loves to riff on cancelled Google products, but Google is essentially throwing products at the market to see what sticks profitably. It's worked in the past and most consumers (outside of HN) still don't care about the failed products.
I am not just talking about the cancellation, I am also talking about product strategy. Like the example of Gtalk. Gtalk was interoperable, worked well and yet missed the beat of messaging apps.
Look at the messaging space now. Messenger, WhatsApp, iMessage. Google should have led this space with evolution of Gtalk.
Even for users, as it used XMPP we would have had an open platform where we could have just plugged in our own favorite messaging apps with it.
Yeah, you are right about that. My main point was just about messaging in general where Google couldn't evolve Gtalk into a smartphone era messaging app.
XMPP I consider as an advantage personally as with lock in to platforms like Messenger/WhatsApp we complain about the total control these companies have. In an XMPP world, at least you could have had more control over clients and the ability to talk to a different Jabber server from the same client app.
I agree though that the XMPP bit, no normal user cares about.
>It's worked in the past and most consumers (outside of HN) still don't care about the failed products.
I singlehandedly moved my entire extended family into the iOS space because I got tired of dealing with Google's bullshit messaging apps. I'm not going to waste my life teaching non computer literate people how Hangouts/Meets/Talk/Duo/Allo work.
WhatsApp came along and took the messaging space, while Skype and Hangouts and Talk or whatever couldn't figure it out. And Facetime was the only decent video calling option that didn't need to be troubleshooted.
It was ridiculous that I couldn't easily send a contact to anyone in the world until WhatsApp came around. Then I didn't have to worry about who had what phone, I sent them a contact in WhatsApp, they got it for free and it worked.
It is not that simple. Ad industry has a lot of money and I personally find nothing wrong with ads as such. We can argue about targeting but that's a different topic. StackOverflow does ads and they seem to really go well with the page. Even Apple tried coming into the market with iAd.
After all, ads earn them revenue. You can have product differentiation where your devices don't have to necessarily earn by ads. A very good example of this is Amazon. They have two versions of Kindle, with the ad free version costing more.
Yeah, my point was that only. You can either charge the user upfront or you can earn money with ads as the user uses the platform.
For high end devices, maybe some of the services could have been considered paid off for before and could have skipped ads. That way, even Google gets 'Z' from phones.
How exactly would Google have done that as a software company and not a hardware company?
By giving it out almost-free to OEMs, Google solidified the majority marketshare as the cost leader. That is much more strategic than dumping capex into manufacturing against an already established quality brand.
Agreed, that's correct for public market prices in general. I'm not commenting on the valuation of the business, merely the business model that "succeeded" (one definition is valuation). I would have said the same 2 years ago when they hit 1T.
Right. They’re clearly not an income stock based on their dividend. They’re a heavily weighted future value stock. (Basically a tech stock but wonder whether there’s a more general term?)
That's not what's most relevant when talking about a company valuation though.
A better question would be whether the expected value of all future cash flows has doubled. Evidently, a lot of people seem to think so. (Whether these people are rational is whole another question)
> A better question would be whether the expected value of all future cash flows has doubled. Evidently, a lot of people seem to think so. (Whether these people are rational is whole another question)
It's rather than all other investments are worse, not that this one is real.
==A better question would be whether the expected value of all future cash flows has doubled. Evidently, a lot of people seem to think so.==
If there is a finite limit of "investable assets", then the relationship between those assets prices is not necessarily driven solely by sentiment in favor of Apple.
It could be that almost all other assets have seen their expected future cash flows fall while Apple's has slightly risen.
It could be that people's decision is not driven by future cash flows, but some other metric or feeling.
Have Tesla's expected future cash flows increased by 8.6X in the past 12 months? It's stock has gone from $220/share to $1,900/share.
Right. It’s clearly hard to brass tacks a valuation of a 2T company, but one had better be forthcoming of even questionable quality. If no one else then Apple has a vested interest in knowing how close this valuation is to their internal knowledge. If they’re under then they could consider growing to the new valuation with opportunities otherwise unavailable outside this valuation. They could issue even more debt or offerings and go on a buying spree. Nvidia has a valuation of 300B (though probably also high relative to fundamentals). They could buy nvidia and own the future of the ML/AI market as well as the gaming market they’ve typically been shut out from competing. Toyota’s more like 190B. They could buy Toyota and immediately be one of the top auto manufacturers. They could probably do this an embarrassingly large number of times for many industries at this valuation.
That said said, if Apple bought them for accelerating their self-driving car development, the historical profit margins are irrelevant. The the valuation would still be all about the future opportunities and future cash flows. This relative to other opportunities in the market, as other commenters rightly point out.
It's going to be extremely interesting to see how Apple will take advantage of their sky-high valuation. Not to mention the pile of cash they're sitting on.
Yup, the valuation doesn't have to be driven solely by what Apple is doing as a company. In fact, Apple doesn't need to do anything at all if all other stocks and asset classes suddenly become less attractive.
Not even that, with changes in interest rate the discount rate changes. Also, with increase in monetary base TINA but invest into a few yielding assets.
> The other half of the story is low interest rates/high asset prices. A year ago federal funds rate was ~2%; today it's ~0%.
Yep! S&P 500 reaches pre-COVID level record high again recently all thanks to U.S. Fed's UNLIMITED Quantitative easing (QE) policy. The aftermath and the side effects[1] are going to be serious concerns now.
In the short term, sure. But we have a more skilled, more educated population with more knowledge and better technology than ever before. We have challenges ahead of many sorts, but in terms of economics we’re pretty well equipped globally. You could argue the US is poorly equipped for manufacturing but that’s only one part of the economy.
Sorry but this is not the state of things if you are under 50 years old. If you are under 50, you are probably better educated but have much less wealth than your parents did at the same age. Your health suffers from years of having no health care. Your teeth are bad. Climate change is going to change your life imminently, and nobody in a position to do something about it cares. You are putting off having kids, or choosing not to. You’ve seen three economic crises in your lifetime and expect more. You’re not so much hoping for things to get better as much as you’re waiting for the other shoe to drop. There is just little reason to be optimistic right now.
I don't know why this comment is downvoted when the income/wealth data supports it.
So much of the US economic engine after WW2 up to 2000 was driven by the fact that people were having lots of kids, and the taxpayers back then were borrowing from future taxpayers. That works if you continue to have lots of kids, but now that that has slowed down, plus the increase in labor supply via women in workforce, and outsourcing to other up and coming countries, plus decrease in demand of labor due to automation, makes for a bleak future outlook for many (as opposed to a growth outlook in the decades after WW2).
This is ignoring climate change and its effects. Which can only be remediated with reduced consumption. Which would also cause a reduction in demand for labor.
Thank you, I don’t take it personally, you have to expect some flak when you tell people things they don’t want to hear. I think I’ll go back and edit where I said there was no reason to be optimistic about anything, because that’s not exactly true, and people on HN are very sensitive to hyperbole. If you are going to say something unpopular you have to be very careful to be accurate.
I mean, I guess you’re right. I’m the counterexample (grew up poor, have more than the zero of my one parent and my outlook looks good) but it took some time to get here. My college friends (all from wealthy families) are all well-off, but my friends from home are still poor and have poor economic prospects. But some of that is self-imposed because they haven’t put serious effort into economic pursuits.
I am quite tired of economic crashes, but I’ve failed to convince enough others to vote and advocate for changes. Those who do care about change are focused on matters other than economics, which I believe to be a mistake.
How so? Looking at this Pew data[1] on median household income in 2017 dollars, which appears pretty comprehensive, if you have a college degree, millennials are doing slightly worse than Gen X, but better than all generations before that looking at the same age range.
Even those with "some college" millennials are slightly worse off, but within 5%.
It's those with only a high school degree that have seen a significant hit.
Unless you're an average citizen of the USA. I swear, I've never seen so many gleaming white and healthy sets of choppers as I have in the USA (particularly compared to, say the UK or Eastern Europe)
I think this speaks mostly to the kinds of people you have interacted with in the USA. White teeth are very much a status symbol since you have to be at least upper middle class to have them, so people go out of their way to have teeth whitening procedures done as sign of high social status. But if you went on a tour through an amazon packing plant you’d see a lot of people with missing or crooked or yellow teeth. Our working class is almost invisible; if you’re well off you might not interact with them much at all, but they exist.
Sadly education is not historically a factor, as highly educated people are among the first to flee a doomed economy while government 'economists' keep assuring everything will be fine.
"Flee" _where_ this time? All economies are fucked, if not now then a month from now when it gets colder and all of this starts anew where they managed to subdue the first wave. I think these insane valuations are just pricing in the upcoming global wave of inflation at this point. FWIW, I'm betting on it. I'm taking on a ton of debt by buying another house.
How much inflation could we have? The only people getting more money right now are the super-rich and the most poor. Lots of middle class / working class can’t work or earn money and those are the people that drive costs of anything we care about.
Very close to unlimited amount if it gets out of control. See e.g. Venezuela, Zimbabwe, or Russia in early 90s, among other countries.
> can’t work or earn money
They will be able to soon if they still can't. You can't keep the economy shut down forever. So it'll be shut down selectively until Nov 3 and opened completely shortly thereafter. /s
On a more serious note, having lived through hyperinflation myself, people who can work will have their salaries adjusted upward enough to keep them working (and therefore putting some semblance of food on the table), but not enough to keep up with inflation. At least that's how it worked in Russia in the 90s. In Russia, though, the situation was relieved somewhat by the availability of the almighty dollar. You could temporarily protect your rubles from hyperinflation by buying dollars, and then selling them for rubles when you need money. With dollar (and really, all currencies) collapsing, I'm not sure what people are going to do, worldwide. Seems to me that a global inflationary spiral could de-facto reduce everyone's debt obligations to each other. So whoever is owed debts of any kind would take a massive haircut. In the 90s that was the Russian Government. The beneficiaries were people now known as "oligarchs". They borrowed unimaginable amounts of money (with kickbacks to government officials of course), bought up the Soviet factories, mines, and oil production that didn't yet collapse, and then paid back with hyperinflated money, fractions of a kopeck on the ruble.
> You could temporarily protect your rubles from hyperinflation by buying dollars, and then selling them for rubles when you need money. With dollar (and really, all currencies) collapsing, I'm not sure what people are going to do, worldwide.
You could temporarily hold bonds, stock, etc. Many other equity classes out there with high liquidity, which can be converted to cash whenever you like.
No, you don't understand. For one thing you'd need to be completely brain dead to hold _bonds_ in this scenario specifically. You're basically lending money to whoever is issuing bonds and they'll be paying you pennies on the dollar in devalued currency. You should be _issuing_ bonds, if you're a company, and hoping you find enough fools to buy them up. For another, US stocks are necessarily tied to the US economy, which will be completely fucked for a decade if hyperinflation were to occur. I think you can deduce for yourself what will happen to stocks in this case.
Don't get me wrong, I think Venezuela-style hyperinflation is unlikely (unless we get a communist government or something in which case hyperinflation will be the least of our problems, and the economy would be fucked for a hundred years). But higher than normal inflation is very, very likely indeed, and you need to start thinking in terms of what that means for you. The old things like "buying bonds" might cease to work to increase, or even maintain wealth, irrespective of yield, if this gets even remotely out of control.
If there's going to be hyperinflation in the US, there's going to be hyperinflation elsewhere. The US sets the baseline for global macroeconomic health. You mention why bonds are bad, I'll concede that, but you could have enumerated other asset classes in more detail. US Stocks are bad, because the US is doing bad... what about foreign stocks? What about gold? You don't have to hold cash.
You're conflating two things, currency exchange rate changes and inflation.
Inflation to a first approximation is wage rises. "Too much money chasing too few goods" is the traditional formulaion.
Western economies have split. For the majority wages are not rising. For the affluent minority incomes are rising sharply. So we see little inflation in the goods and services bought by poor people, but steep price rises in goods bought by rich people.
The latter are mainly collectibles: stocks and bonds, real estate, artworks, gold and jewels, cryptocurrencies, etc.
We won't see Zimbabwe-style hyperinflation unless there is massive redistribution.
Would we consider tech workers affluent? Tech wages have been high for sometime, but I am not too privy to how much they're increasing, if they've plateaued (but are still high), etc.
> Inflation to a first approximation is wage rises.
Wage rises are always sub-inflation during hyperinflation. Goods, by the way, and especially complex goods with long supply chains, will also become scarce in all this as inflation makes it difficult to maintain stock necessary to manufacture or distribute goods. That is, that widget you bought today might cost more than you're charging for it when you need to replenish the stock. So you raise the price accordingly, using your best guess as to how much money you will need to still turn at least some profit. And _everyone_ throughout the entire supply chain does the same thing.
You haven't lived through a hyperinflation and I have. So you'd be wise to listen right about now, and if you're wealthy, you'd be wise to also read up on hyperinflation.
It's not the kind of "managed" inflation you're used to. It is, by definition, out of control completely, and very hard to get out of.
> With the current state of the economy, I'm not expecting anything better after a bust.
As someone who has another couple decades until retirement, a drop in asset prices would be great for me personally (though I'm sure it would be painful for many Baby Boomers).
For better or worse I wasn't very liquid when the stock market indexes tanked in March. Another lessons learned: invest in bonds at least a bit, not only to reduce volatility, but also because you'll have some 'dry powder' available to be able to rebalance when you equities take a hit.
Though total returns on bonds isn't too bad:
> The Nasdaq 100 ETF (QQQ) is up an astonishing 25.5% this year during a pandemic and that’s including a 29% peak-to-trough drawdown. But the long-term treasury ETF (TLT) is up 27.3%.
One other thing that makes comparison hard is the changes in the tax code. PE ratios in the past were based on certain corporate tax rates, which have been reduced significantly. Something like after tax PE ratio might level the field when comparing PE ratios across time.
If you want to look at individual companies, there were lots of publicly-traded companies in 1999 that not only had negative earnings, but didn't even have revenue.
Technically it benefits those with share of productivity be it income or assets or in enough debt that the diminishment of existing value helps them more than it hurts.
The people that applies to may be largely rich in any given instance in practice but this bit of pedantry is important as "rich" are not homogenous in their interests.
It's mostly "policy shocks" / surprises that cause changes in bond rates, which may have knock-on effects to other asset classes.
Indexes have gone up and up and hit all-time highs regularly over the decades on their own: there's no need to throw QE magic pixie dust as a cause.
Further, in the past, a much smaller percentage of the population probably had equity ownership: as pensions have given way to private retirement funds (401(k) in the US), and so you have people buying the S&P 500 in their Vanguard accounts.
On the flip side, you have a large population cohort (Baby Boomers) entering retirement age, and they want safer asset classes so are going after bonds, driving down yields. With yields getting lower, anyone who wants returns is stuck with equities.
So you have one group of people bidding up equities for growth towards retirement, and another group bidding down bonds for safety in retirement.
I'm not confident about the 2008-present effects of QE, but I think it's more likely to affect stock and bond prices than Baby Boomers retiring.
The announcement of the most recent round of QE is one of the "policy shocks" of the kind referred to by the 2014 Fed paper. Prior to the announcement, Apple, S&P 500, and bond funds were at 1-year lows. This month they are at all time highs.
And these days MSFT, FB, AAPL, AMZN and GOOG have about 20% of capitalization of SP500. I'm sure there are a lot of mega funds who have exposure to these stocks and they do not want them to fall (until they can dump on someone else I guess).
Valuation is a result of demand for Apple stock. There is no direct link between increase in earnings and increase of demand for stock. Increase of demand might be result of external factors, for example, people flocking to Apple safe harbor, without necessarily inherently increasing trust in Apple as business.
A relatively small increase in earnings might also cause outsize increase in valuation, if that increase was not expected or if it signals to the market the company is strong regardless of tumultuous market situation.
Rod Holt helped Woz build the Apple ][, and was then responsible for its design and manufacture,
he was one of three VPs when Apple incorporated (Jobs and Woz were the other two) and he was in charge of the Macintosh group when it launched.
An old engineer friend of his asked Holt about several topics, and I think his answers were interesting, including what was baked into early Apple that made it succeed at what it was trying to do over the years.
The iPhone is a great product but the way it's financed is brilliant. I suspect not many people buy their new phone with a $1000 charge on their debit card and that new phones are always financed. I use a 6s, available used for $70 all in, and it gets the job done.
Carriers finance the new model at a seemingly low rate ($15/mo.) then charge more on the wireless service. I can get the $15/mo phone, but only at the $60/month plan not the $35/month plan. If I don't pay, the product is worthless (no service).
You can calculate the amount of housing or auto debt that is out there, but have always wondered how much 'iPhone debt' is outstanding w the wireless carriers?
Phone costs/profits are baked into most plan pricing. If you have such a plan and are paying for your phone outright, you're paying twice for a large chunk of it.
That's a bit misleading. What actually happened is Apple first created said smartphone market, and then used their advantage to create a walled garden to keep people in, and also indirectly force others to enter the garden (iMessage, FaceTime, etc).
The only reason their luxury good is sustainable is exactly because people have to join it to be able to communicate with their friends, and can't leave.
A very strange comment, which is far from the experience of anyone I’ve ever heard of.
I have an iPhone, but I communicate with my friends using WhatsApp,
Facebook Messenger, Signal, and Skype as well as iMessage.
Some of them have android phones, and some of them have iPhones. And some of the iPhone users use Facebook messenger,
Signal, and WhatsApp, to communicate with me
I only use FaceTime to communicate with certain in-laws, and the some of my extended family and some local friends use Amazon Echos for video.
Wrong. Apple succeeded because they managed to tap directly into the newly printed fiat money by borrowing vast amounts of money to avoid tax all over the world and benefiting directly from international currency inflation and doing stock buybacks.
I'd add that a huge factor behind their luxury good becoming mass market is the finance/payment plans that Apple and the cell carriers offer.
I'm willing to bet the adoption of smartphones and regular upgrades wouldn't be happening at nearly this scale if all customers had to pay $600+ up front.
"they managed to do something that was previously unimaginable in business theory - create a mass-market luxury good."
Is not about that. It is about the (perceived) impossibility of a mass-market luxury good.
But "mass-market" is a term for broad appeal/sales (dictionary: "the market for goods that are produced in large quantities"), not for over-the-top revenues.
And as for that, more people have Nike shoes than have an iPhone. But even if 1/15 as many had, it would still a mass-market good, with luxury price / appeal.
The exclusive nature is part of what supports the luxury brand. One case study: how ray ban managed to recover their "luxury" status by removing low cost, high volume items from their catalogs.
Well the iPhone is their only mass market luxury good, and that's simply because people don't pay the whole cost at once. The get it on credit, under contract, from their mobile provider.
I don't know the history of mobile phone contracts before the iPhone but i feel like that was Apples innovation (or they made the best use of it), rather than the product being so good that everyone had to spend ~$800-$1000 up front for one. Not that it isn't a good product, just without a phone contract it would have sold far less at the premium price point.
In fact iPhone phone contracts seemed to spawn a trend in getting many other products on credit (and over paying for them).
Also, I seem to remember Apple pushing mobile network providers hard to almost subsidise the cost of the handset around the 2012s, when they were still competing at market share with Android phones.
Apple got lucky because it entered an industry where the sellers (carriers) are more than willing to subsidize the cost of the phone or bundle it with service to make the cost of the phone seem irrelevant.
Over 24 months, the difference between a $650 phone and a $250 phone is minor.
As a consequence, I wonder if there's measurable harm being done on a mass scale, persuading so many people to give more money than they should be comfortable with to one company. I've seen kids in subsidized housing and no jobs with iPhone 11 pros. Clearly not as many can afford them as there are who own them. Being car or house broke is perhaps a parallel that is more concerning
A large contributor to this would be the increase in investors pumping money in "safe" and easy ETFs. Instead of taking the time to investigate the market and looking into novel ventures, people want to ride the market into wealth.
If there ever was any social responsibility in investing, it would have been providing fluidity into new ventures and making markets efficient by making educated investments. I find this trend worrisome and I think it might be sending incorrect market signals.
The more people buy it, the more value there is in active or truly risky investing. Let them have fake safety, I'll take real antifragility and abundant capital flowing to my business any day.
> If there ever was any social responsibility in investing, it would have been providing fluidity into new ventures and making markets efficient by making educated investments. I
If investing in ETFs/index funds is morally blameworthy, which is already questionable, the blame surely lies with active fund managers and their outrageous costs driving people into the arms of low-cost instruments that, net of fees, have had better performance.
The largest driver of asset inflation in the large caps is 401k's and other retirement/pension plans managed by large entities. I have no choice but to invest my money in my 401k into the stock market or equally risky and lower return corporate bond market.
Individuals investing in ETFs doesn't move the needle. Fund managers seem to be part of some cartel, pumping various asset groups at various times. We're just along for the ride.
>> The largest driver of asset inflation in the large caps is 401k's and other retirement/pension plans managed by large entities.
Yep. If covid had put 40 million US white collar people on unemployment instead of hourly folks, the market would have crashed hard as the monthly influx of money dropped and some people started pulling money out early to get by.
I know I am an outlier in terms of a high savings ratio due to a lack of things to want that would be worth it in my situation but I still find it funny how it 401ks are the big ones when the contributions are so limited.
Is ETF investing driving the current inflated prices? I wouldn't doubt it, but hadn't seen data.
It's also important to note that different sectors are getting hit in different ways. Renewables up, oil majors down. Tech way up. So if total-market ETFs are pumping in money, they are just inflating overall valuations, and investors are the ones deciding which sectors and companies are winning or losing. Or if it's market segment ETFs, that would also be an interesting story.
This is me 100%. Especially with covid making big swaths of the economy (ie travel) unviable in the near to mid term. What does still make sense is tech, and drilling into that deeper, AAPL.
I don't really understand how this train of thought seems viable. Even the most profitable company in the world might be overvalued and then this investment isn't safe but risky, especially if the profit is primarily from rising prices and not dividends. So, how can one think there is no alternative and it's "safe"?
It's as the parent says: TINA. It's not that Apple isn't risky, but that everything else feels more risky.
Casino stocks, more risky. Cruiselines, more risky.
The money has to flow somewhere.
I mean it's not just tech that's not risky. There's some other equities out there too which seem to be concensus safe havens by investors. Eg. Lululemon, Home Depot.
This is why we're seeing big interest in some sectors of real estate too. money is cheap and big chunks of the economy seem risky. Why not invest in something else. Also risky, but TINA!
This isn't actually true. Alternatives include bonds, commodities, credit, real estate, etc. At least some of these are less overvalued (look at Hertz bonds vs stock for example). What does seem to be true is that a lot of people aren't considering anything other than equities.
It's good news as the USD has been very overvalued for awhile. Was under valued 8-10 years ago but would be nice to see it lose some more value, increase USA export competitiveness, and also USA listed companies that report in USD and make a lot of business overseas will see a nice bump in revenues by virtue of exchanging more valuable EUR/GBP/etc into more USD than they have been able to recently.
EUR is up against USD for the last 5 years or so, by a fairly small amount (~10% max). It is down against the USD over the last 10 years, by a larger amount (~20%).
10-20% is not much when it comes to currency fluctuations. When we were in the US in the 80s, USD/DEM went from around 1.70 to 3.50, so 2x fluctuation.
Inflation is a tricky topic because it all depends on what you measure. Multiple government measures of inflation are almost disingenuous because they don't measure some key items.
Inflation is fairly low when it comes to sustenance foods, cars, telecom, and technology -- however, that is not the story for things like: fish, fresh produce, textbooks, healthcare, rent, home prices, executive MBAs, some imported goods.
It gets even more complicated. Some things cost one for some people and another for others -- e.g., college tuition has skyrocketed if you don't get a scholarship/aid but is flat or down if you do get scholarship/aid
have you looked at real estate prices, healthcare, education - inflation and money supply changes do not impact every asset at the same time and by the same amount
Since the cost of making that cup is all domestic (labor, rent, marketing etc. the beans are maybe 1% of the cost), it will not change. Imported products may become more expensive though.
Inflation is the term you may be more familiar with. As availability of currency expands and becomes less valuable, the price of things goes up to maintain value parity. In particular, right now money is being printed to ease the effects of COVID-19 issues, which is causing a large spike in prices as a form of inflation.
To complicate matters, though, inflation is normally thought of as CPI; a measure of what people are spending on consumable items. Things like stocks, housing, and other assets that are jumping in price are not consumable goods and services. As such we try to avoid using the term inflation for this phenomena, but the principle is the same.
Modern monetary policy seeks to try and keep that added money off of "Main Street", so that your groceries and gasoline aren't skyrocketing in price, but ultimately the money has to go somewhere, and that somewhere is "Wall Street".
> Things like stocks, housing, and other assets that are jumping in price are not consumable goods and services. As such we try to avoid using the term inflation for this phenomena, but the principle is the same.
I believe the term for this is "asset inflation", which is just a different form of inflation.
You are quite right, but the use of inflation carries some emotional baggage being associated with CPI, and thus I would suggest that the term "asset inflation" is avoided in general conversation.
The US dollar is just a type of asset (i.e. of the cash asset class). I'm proposing that it's become less valuable compared to other types of assets such as specific stocks like Apple's, gold, etc. I believe this is due the effects of the Federal Reserve's actions of injecting more US dollars into the economy recently (aka money printing). As more US dollars are created from thin air, other asset classes naturally increase in value, or the US dollar decreases in value, whichever angle you want to look at it from. This is simply called inflation.
Often times the Consumer Price Index is referenced as the source of truth on inflation, especially when the Fed makes its decisions on adding/removing money into the economy[0]. But the CPI doesn't track every type of asset such as stocks or gold, since these aren't things the Fed is trying keep the US dollar stable with as part of its dual mandate[1].
Price fluctuations haven't happened evenly across asset classes just because of the way COVID-19 has had effects on various parts of the economy. Not all stocks have increased due to negative effects of COVID-19 on certain types of businesses, not all real estate has climbed due to people moving around during COVID-19, etc.
Are the market caps of Apple and other tech giants growing as exponents, or sigmoids? This, to me, is the big question. Can multi-trillion dollar market caps continue to grow at this rate, or will they taper off?
Naively, one expects to get returns as a percentage of investment. In this multiplicative sense, Jeff Bezos at a 188B net worth is much closer to being a trillionaire than a one-billionaire (a factor of 5 vs a factor of 188). But can Amazon's market cap continue to grow in such a fashion? What bounds it (and that of other tech companies)?
One might assume that they have to be bound by world GDP (80T). But if they're truly creating value, can't they expand world GDP along with themselves?
GDP is value created per year. Market cap is (a proxy for) value created over the whole future existence of the corporation, at some discount rate. The obvious cap on market cap of a company is total world wealth, which is on the order of few hundred trillion.
You're basically asking how to convert assets (market cap) to income (GDP). But there isn't a fixed conversion: it depends on your discount rate (how valuable is future money compared to current money) which itself you can loosely think of as related to interest rates, which themselves change over time. Alternatively, think of the P/E ratio, which also changes over time. There's no bound. If you think humanity will exist forever, and you're willing to wait forever, and you think Apple will continue selling iPhones at a large profit forever, its value is effectively infinite.
This statement seems to assume wealth is a fixed constant, which it isn’t. Theoretically if it was believed a company will create a thousand trillion in wealth it could be valued against that.
To be a bit pedantic, GDP is not "value created per year". GDP is a measure of economic activity. That's it.
GDP = private consumption + gov expenditures + total investments + net imports/exports. IOW, it's a measure of the $ value of things bought/sold. IOW, economic activity.
That said, over short time horizons, GDP can be used as a rough proxy for many other economic metrics. But only because the structure of an economy doesn't change drastically in just a few years. As you increase time horizons, the structure of an economy changes and GDP becomes a poorer proxy for other economic metrics. If this is so, why do so many people use GDP? Because it's easy to measure fairly accurately.
In the long term exponential growth is physically impossible because it would imply infinite GDP. Even if apple's value is currently growing exponentially it will eventually stop.
Yes, in the long term, the universe will succumb to heat death and all value will go to zero. But on any time scale we might like to talk about (our lives, the life of the Earth), it seems plausible that exponential growth could continue (or at least, the long term argument doesn't apply).
This is a good moment for black swan thinking. Any time you get somebody arguing earnestly 'exponential growth will of course continue because it will continue, barring heat death of the universe' it's probably a crash indicator :)
If, as it has done so far, exponential GDP growth means exponential energy growth, then in a century or a bit less we will generate more heat as a byproduct of energy consumption as the earth is able to dissipate at livable temperatures.
In this framework growth has to end, on earth at least, much sooner than later.
This, or at least the breakout that led to this, has been achieved on the strength of product and user experience.
Apple's tech isn't really much better than its rivals, except in a few areas like inputs and haptics. Its high performance ARM cores are impressive but there are other impressive ARM cores and it's a very recent development anyway. Until a few years ago they were "good enough for a phone" but not rivals of Intel or AMD for anything serious. In fact I seem to remember Qualcomm Snapdragon chips being better on some metrics a couple years ago.
The thing that made Apple really stand out was the polish and attention to detail in its product. This has two parts. One is the product being good. The other is the striking absence of tacked-on crap features and shitware.
I recently switched to an iPhone from Android due to privacy issues and the thing that immediately struck me about the iPhone was the lack of shitware preloaded on the device. It did not come preloaded with Google Spy... err... Play Services or Facebook, let alone a bunch of Samsung and carrier apps that are surely encrusted with spyware. I can even uninstall most Apple apps that I don't want!
Same goes for the Mac. A new Mac does not show you ads. Its equivalent of the start menu isn't full of loot box games and other shitware of the sort found on Windows or Android tablet or "laplet" (or is it "tabtop?") devices. On the Mac I can uninstall pretty much anything except system apps (well you could but that might be problematic). You can even uninstall Safari and replace it wholly with Firefox or Chrome AFAIK.
Going way, way back, when I first tried an early 'oughts Mac I was struck by the lack of the worthless but prominent "Thinkvantage" button found on my Thinkpad or any other obvious committee tack-ons. The design was clean.
This same lack of shit is what made the original Google break out way back in the early 'oughts. Back then most search engine web sites looked like the home pages of online casinos. Google had a blank and a button that said "search." The instant I saw it, I never again returned to another search engine.
Apple has occasionally gone too far with "clean" or "thin and light," but if you are going to err I'd err on that side. Erring on the side of cruft and shitware is much worse.
My personal metric is seeing these publicly traded non-state enterprises catch up to Saudi Aramco!
The American engine is producing awesome results, still a long way to go!
Saudi Aramco 2018 net income was $110 billion
Saudi Aramco 2019 net income was $88 billion
Apple 2018 net income was $59 billion
Apple 2019 net income was $55 billion
Then I will be really impressed! It is more likely to be an inflection point as incumbent oil producers fail to diversify and revenues go down. But I'll accept either result.
Not the OP, but I think it's an "Interesting" Metric (which is a more easily defensible/explainable term), rather than necessarily a "good metric" (which we'd get bogged down defining because it assumes a specific goal which people are less likely to share).
Maybe because it shows that people value the product more than they value the stock.
Aramco's value increases by convincing people to buy more of its product. Apple's value increases by selling more products, but also from its stock value going up. That second part is important because it could be hype or a bubble or something else. But with Aramco, you know it's all about a tangible product.
My wife has another measurement that she uses. She increased her Apple holdings when the pandemic started purely because of Apple's cash. Her logic is that with all that money to burn, it has a better chance than most of surviving this crisis.
Its a better metric than marketcap. Marketcap is just what a few people are willing to pay for shares, literally the one person at the auction house that bid higher than others and got SOLD to, except in the stock market everyone pretends to multiple that 1 share by the other 4.28billion and act like its an indicator of value.
Whereas net income shows what MANY people bought, and how the company is able to keep a bunch leftover.
And regarding "good", it's a good metric for value creation and the infrastructure for independence, as this has been unachievable before and always required a monopoly on power derived from the entire social contract of society and force. So it is merely interesting for it to occur in the absence of those things. It is not a comment on "good" in terms of society and whether the social contract should include a way to limit them, it doesn't factor that in at all.
It is an excellent indicator of value. Every single share holder could have been the person to have sold the share, but they choose not to. Yes, HOLD is different than BUY, but in terms of what a company is actually valued at market cap is an extremely good source of information. It values in information about future trends from a sea of market participants. There is a reason Amazon and Apple have very different price to earnings numbers.
If we are doing discounted cash flow analysis, apple made about 70 billion in free cash flow. From the balance sheet balance sheet they have about 100 billion in tangible assets. So if we take 1900/x=70 years which would imply a rate of 4% which is reasonable. However how many companies have been on top for 30 years?
The whole market seems insanely overvalued during a pandemic. The entire stock market cap is 1.6x gdp. which is greater than the .com crash. This is one of the things buffet talks about.
(2000B value - 100B assets) / (70B cashflow) = 27 years investment payback. At this point I think he did 100/27 years=4% interest rate per year. However, that would be for the simple interest case, i.e. not taking into account compounding.
However, for the cumulative interest rate, you would normally do ln(2)*100/27 years = 70/27 or a 2.7% YoY interest rate.
As a general trick: if you want to convert payback time to cumulative interest rate, use 70 instead of 100. There was a TED talk on the topic iirc.
You'll see a lot of responses across other threads claiming it's due to the low interest rate environment (the justification). That plays a role, sure. Interest rates have commonly been near zero for the better part of the past decade though. So why was Apple's PE ratio ~11-13 previously while interest rates were very low (0% or sub 1%) with a quasi normal economy, and now its PE ratio is more like 30-35 during a crushing pandemic recessionary environment while interest rates are zero? Apple's operating income for the past four quarters is not considerably higher than it was in fiscal 2016, so why is the stock three to four times higher? Surely their growth rate must be extreme right now, to justify that radical increase (answer: nope). What must the future growth expectations be to justify a 300% stock increase; that Apple's enormous profit will double soon? (nope, it's not gonna happen)
It has more to do with a stock market mania that has taken over, than it has to do with interest rates, at this point. The interest rate explanation maybe gets you to second base, the rest of it is mania. You see that represented in the ever expanding dotcom bubble style extreme valuations that are increasingly common (SHOP, TSLA, NVDA, AMD, DOCU, etc). NVDA's context for example will remind of CSCO in 1999-2000 (except NVDA is growing slower today than CSCO was then). You'll see it in the pop-celebrity status of people like Dave Portnoy (who suddenly decided to become a trader with little experience). Whereas such extreme valuations were not so common three to eight years ago (circa 2012-2017), while we had a quasi normal economic situation and 0% rates (or otherwise near 1% or lower) as well. All that said, nobody should ever doubt how far a mania can go in regards to pushing valuations toward the moon.
I think you're understating the impact of discount rates here. Long term interest rates are down ~70 bps from their previous all-time low in 2016 and something like 130 bps from their average over the period you're describing. That's a huge change, especially if you expect Apple's profits to come in over a long duration.
There's probably been a shift in investor preference in favor of equities too (which means decreases in interest rates are smaller than the decrease in discount rates used for investors' DCF valuation of equities), but I think "mania" is far too strong a word. I think of it more as a result of investors shifting to riskier assets as returns to capital decline in general, in part due to leverage aversion. I mean, how else are you supposed to deploy your capital? Buy the junk bonds that are currently being issued at yields below 3%?
The other big change is downward pressure on location based real estate values. Even a 10% reallocation of wealth from real estate to equities would have a huge impact.
their Q2 sales were better than a low expectation but in line with other non-holiday quarter, but bread and butter iPhone sales have been very flat for a long time.
investors are essentially thinking “if Apple can do the same in Q2 as other quarters pre-crisis then it must mean it will do incredibly once this is over”
If you want to invest at these levels you should probably find out what happened in Q2 - I wouldn’t be surprised if it was a mix of stimulus money and need for lower end macs and iPads for video conferencing in the immediate term due to stay at home that won’t necessarily translate to permanently accelerated growth in future quarters.
I don't think metrics like P/E ratio are as useful as before any longer when analyzing companies like this. The FED printing money and lack of other investments in this zero-interest rate economy has a significant role in raising stock/asset prices.
I think Apple sees one of its biggest moats as the App Store, and I believe rightly so. I really think that’s where a large portion of their stringent rules are coming from is protecting that moat.
I wouldn’t be surprised though if they actually experienced more growth overall by focusing more on the developer experience, loosening some of their restrictions on payments (to me it should be a blessed API for other payment processors. Sure require they accept Apple Pay. That’s fine. But I do think that’s the way forward) and allow app developers to sell upgrades rather than just subscriptions, one time purchases, and in app purchases.
I think it could really reignite the marketplace on their devices
Is the app store really valuable ? How often do we read about app store devs becoming millionaires (they don't). Users spend 97% of their time in the top 10 (free) apps from the usual suspects. App development is a dead end business.
Apple is a premium products company and software was (and will be) always cheap so there s no way they will make their usual profit margins on that. They need to keep selling premium stuff, which has to be physical. At best they can add some premium content , but that's it.
That's 15B for apple, but there's not a lot of room for growth. Plus it doesnt seem apple has a big moat there, all big publishers are looking for ways to bypass them or just sue them. It doesn't seem like apple has a healthy relationship with devs, hence their heavihanded practices.
Apple is doing great even if they’re not super friendly to developers. Why change?
I think that they could become better once they start losing some ground, kinda like Microsoft is all about Linux now that the desktop market isn’t improving for them.
Do you have any practical suggestions for how to accomplish that?
I'm not rich, but I'm thinking that anything a billionaire can do with $1 billion can also be done by ten thousand households who have $100k each. So the middle class could perhaps get richer if they only knew the secret?
The problem is really (1) having money lying around that you can afford to "play around" with without, say, putting your retirement or mortgage in jeopardy, and (2) having professional advice from people who know what the hell is going on (including borderline or overt insider info). A hedge fund, for example, isn't going to touch someone wanting to invest $100K.
As the saying goes, the first trillion is the hardest. This year proved to me beyond any doubts that I understand nothing about the markets, the fact the world's largest (publicly traded) company raised 125% in a single year boggles my mind (not even related to the COVID drop).
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[ 3.1 ms ] story [ 242 ms ] threadA budget and market cap are fundamentally two different things, and are incomparable.
Bezos net worth has also gone up 80B (to 190B, even after a divorce haha). Musk up 60B while Tesla has a what, 900 PE ratio? Zuck up 20+B. The pandemic has served our tech overlords well.
https://www.washingtonpost.com/business/economy/apple-is-the...
The first time some natural process hits the first digit = "1" is the hardest, then the next digits are just a power law of frequency from that.
Where are these headlines?
That seems like a patently ludicrous thing to claim that Apple will disappear within a year.
Italy, No
First, you did nothing wrong. You can very easily, very obviously, compare Apple's market cap to the total annual economic output of a nation, or the economic output of any thing over a given amount of time.
Apple's market cap of $2 trillion, is greater than the annual economic output of the nation of Italy's 60.3 million people ($1.98t 2019). You just got told that is impossible to do. I just did the impossible. Which do you think is more likely true? It's obvious.
It takes the 60.3 million people of Italy a year to produce enough total economic output to almost match the total value of all outstanding Apple shares. Oh shit, I did it again. A spontaneous blackhole may appear and we may all die. I just successfully compared two things everyone repeatedly says is impossible to compare.
You can obviously compare the two, and do so quite cleanly, have no fear.
I've been watching this herd action for a long time here. People don't seem able to stop and think about the context beyond a primitive twitch action, they just reflexively downvote, and parrot the same responses ad nauseam (it's always the same responses without exception).
Second, you have to understand, you're facing off against many people's favorite "gotcha" Smart Person(TM) response. It's an arrow they hold in their bag, for times like this, that helps them feel smarter than you (that's why you'll see so many of the same response, unnecessarily; if they were right, one would be enough). They may not know much about economics or the stock market, however they know this thing, they saw it somewhere else, it sounded true, and they can feel good by downvoting you and by drowning you in one line responses. You deserve better dear user5994461, for your four years of HN dedication and contribution. I want you to know that what you did is perfectly OK.
If Apple bough Italy they wouldn't have enough money to make it work
Italy needs two trillions/year to go on, Apple only owns a fraction of that to spend.
That's why it is a worthless comparison.
A more apt comparison is
Apple is valued 2T at 260 billions of revenues in 2019
The total amount of Italian wealth is around 11T at ~2T year of output
GDP is an aggregated annual "earning", a market capitalization is the value of all the outstanding shares of an entity, not a periodic earning.
A more meaningful comparison would be Apple's annual earnings ($260B, still quite a lot of money) vs a country's GDP, or Apple's market cap ($2T) vs the value of an entire country, rather than their latest GDP.
"They're worth $2T, but they didn't make $2T this year, they made $260B".
In case you're wondering how much $115B is in terms normal people can understand... if that was in $100 paper notes...
- Stacked up on top of each other, it would reach 12,000 km high (the ISS orbits at about 400km)
- The notes would weigh around 1,150 tons
- To ship them, you'd need over 1000 4'x4' shipping pallets, each weighing a ton
$115 billion is an absurdly huge amount of profits
For Vodafone, that number was a special one time gain from the sale of Verizon Wireless. In 2014, they showed an operating loss of £3.9B (but a overall gain of £11B because of income tax credits -- hoorah for financial engineering?)
If "normal people" want to understand something, they should read the 10-K and search online for terms they don't understand. It is pretty simple to understand how much revenue and net income per customer has been and is expected in the future per some unit of time.
Market cap is opinion.
Hence, Apple.
Honest question.
https://www.businessinsider.de/international/how-todays-tech...
https://www.visualcapitalist.com/most-valuable-companies-all...
The Dutch East India Company and, as another commenter mentioned, colonialism give much food for thought.
It's mind-boggling to really look at the size and power of colonial trading companies. I've been meaning to re-try reading the Baroque Cycle -- started once, but gave up a ways in.
Apple managed to create a luxury product - the iPhone (differentiation) at mass-market scale (low cost base) which has driven the majority of their profitability since it's launch.
https://youtu.be/8Vq993Td6ys?t=32
The first iPhone had 128MB of RAM and ran at 412 MHz, underclocked from 620 MHz (https://en.wikipedia.org/wiki/IPhone_(1st_generation) ), and there was disbelief that what they showed could be built at all at the time with the advertised battery life.
They likely also didn’t want to commit yet to an API for third-party apps, as they didn’t know what was reasonable there.
Meh. make was genius. Makefiles were genius. pkg_install and pkg_add were genius. PMS was genius. RPM was genius. FreeBSD's ports tree is genius. pkgsrc is genius. Like nearly everything Apple ever did, AppStore is not at all original, not remotely the first, not by over a decade. It is really no different from any other binary package manager. It is Brew for iOS.
Like most Apple things, they weren't the first. Their genius isnt being first, it was spit polishing things to be simple for the masses. Over the years, they have lost a bit of that vision and turned googly with new products not quite replacing old products (how many times has photo sharing and backup been redesigned) but comparing the whole suite to components is a bit unfair.
if Apple had launched the app store with the iPhone, it would have had no where near as big of an impact as it did by waiting just a year. they created the demand first.
and no, Cydia was launched 5 months before the app store.
My only point is that the AppStore is not the Second Coming. It is and it only is a package manager. Just like all the others that came before it. And nothing more. It is not some searing example of genius. It is one package manager among countless. That it includes a payment system is an irrelevant detail.
What Apple did that is amazing is creating a community of developers out of nothing and gave them excellent tools to create software for their platform. It seemed overnight that the ocean of Windows applications, mostly due to obsession with backward compatibility, was no longer all that special.
I had a 2015 MacBook Pro that had died recently and like you Apple Care had expired. This is my work laptop and was not be able to earn anymore income until it was operational again. I did all the basic troubleshooting myself resetting PRAM, etc and nothing helped. I contacted Apple support and they had me do the same tests and some additional ones without success. This all happened two weeks ago and due to Covid-19 the area I’m in has no in person support available. The only solution offered was to wait until Apple stores open or buy a new one.
I tried to find third party to help with no luck. I decided to take a crack at repairing myself by buying individual parts from Amazon. I soon realized this isn’t as simple as it should be. I had to buy Apple specific tools to open the MacBook case and then realized even the SSD on a 2015 MacBook Pro is a proprietary version so I had to buy a specific over priced version to replace the drive. I felt like the last thing they wanted was for the customer to try and repair the laptop.
Nothing ended up working. So, I had to buy a new one. I thought I could at least use this current MacBook Pro to get some trade in discount. Nope, they offered zero trade in since it didn’t turn on even though it was in excellent physical condition. I ended up buying a new one from Amazon and restored data from a previous timeline backup.
IMO, The least a company this wealthy could have done is offer a small discount considering the times we are in. I was very disheartened with my experience.
I hope you upgraded to a 16 inch one! Sounds like a good update anyway.
I did, and it hurts looking at my previous one I loved right across from me considering the price I paid for the new one. "Well, at least I have Touch ID now" is what I keep telling myself.
Now that I think about it, I could probably get away with a Hakintosh setup. I didn't consider it with everything going on.
But it is. The customer isn't you, the tech literate professional; their target customer is the average person on the street.
Apple doesn't want their device ecosystem to be inclusive to the things that confuse, defraud, or frustrate non-savvy users: unethical or unqualified repair, advanced (mis)configuration, side-loading apps, etc.
Back when I worked as an IT tech, upwards of 80% of issues I dealt with were caused by one of those confusions that are completely solved by a walled-garden approach. It might not be your preference, or my preference, but there's no denying the utility it has for others.
I think only Google probably had the image of superior products(Search, Maps, Mail) which rivalled/beat Apple but that has been kind of tarnished now.
[1] http://damniwish.com/wp-content/uploads/2012/08/car-sticker-...
[1] https://www.statista.com/statistics/272698/global-market-sha...
The biggest qualm with Google was their incoherent product strategy like what happened with Gtalk, Reader etc.
If anyone had the brand value to push a smartphone OS, it was Google. Once Android started going mainstream, they could have chosen a different strategy for the high end models.
Look at the messaging space now. Messenger, WhatsApp, iMessage. Google should have led this space with evolution of Gtalk.
Even for users, as it used XMPP we would have had an open platform where we could have just plugged in our own favorite messaging apps with it.
That's my point though - the features that HN users find valuable (XMPP standard) are not the same as what most consumers do.
XMPP I consider as an advantage personally as with lock in to platforms like Messenger/WhatsApp we complain about the total control these companies have. In an XMPP world, at least you could have had more control over clients and the ability to talk to a different Jabber server from the same client app.
I agree though that the XMPP bit, no normal user cares about.
I singlehandedly moved my entire extended family into the iOS space because I got tired of dealing with Google's bullshit messaging apps. I'm not going to waste my life teaching non computer literate people how Hangouts/Meets/Talk/Duo/Allo work.
WhatsApp came along and took the messaging space, while Skype and Hangouts and Talk or whatever couldn't figure it out. And Facetime was the only decent video calling option that didn't need to be troubleshooted.
It was ridiculous that I couldn't easily send a contact to anyone in the world until WhatsApp came around. Then I didn't have to worry about who had what phone, I sent them a contact in WhatsApp, they got it for free and it worked.
After all, ads earn them revenue. You can have product differentiation where your devices don't have to necessarily earn by ads. A very good example of this is Amazon. They have two versions of Kindle, with the ad free version costing more.
GP is claiming that Apple is doing better in the phone space, because Z>X. But the appropriate comparison is not Z vs. X, but (Z+0) vs. (X+Y).
For high end devices, maybe some of the services could have been considered paid off for before and could have skipped ads. That way, even Google gets 'Z' from phones.
This just cuts into privacy as a marketing point for iPhone.
By giving it out almost-free to OEMs, Google solidified the majority marketshare as the cost leader. That is much more strategic than dumping capex into manufacturing against an already established quality brand.
The other half of the story is low interest rates/high asset prices. A year ago federal funds rate was ~2%; today it's ~0%.
It's just more in favor now than it was a year ago in investor sentiment
A better question would be whether the expected value of all future cash flows has doubled. Evidently, a lot of people seem to think so. (Whether these people are rational is whole another question)
It's rather than all other investments are worse, not that this one is real.
If there is a finite limit of "investable assets", then the relationship between those assets prices is not necessarily driven solely by sentiment in favor of Apple.
It could be that almost all other assets have seen their expected future cash flows fall while Apple's has slightly risen.
It could be that people's decision is not driven by future cash flows, but some other metric or feeling.
Have Tesla's expected future cash flows increased by 8.6X in the past 12 months? It's stock has gone from $220/share to $1,900/share.
That said said, if Apple bought them for accelerating their self-driving car development, the historical profit margins are irrelevant. The the valuation would still be all about the future opportunities and future cash flows. This relative to other opportunities in the market, as other commenters rightly point out.
In real dollars, or nominal dollars?
Yep! S&P 500 reaches pre-COVID level record high again recently all thanks to U.S. Fed's UNLIMITED Quantitative easing (QE) policy. The aftermath and the side effects[1] are going to be serious concerns now.
[1]: https://en.wikipedia.org/wiki/Quantitative_easing#Risks_and_...
https://www.multpl.com/shiller-pe
So much of the US economic engine after WW2 up to 2000 was driven by the fact that people were having lots of kids, and the taxpayers back then were borrowing from future taxpayers. That works if you continue to have lots of kids, but now that that has slowed down, plus the increase in labor supply via women in workforce, and outsourcing to other up and coming countries, plus decrease in demand of labor due to automation, makes for a bleak future outlook for many (as opposed to a growth outlook in the decades after WW2).
This is ignoring climate change and its effects. Which can only be remediated with reduced consumption. Which would also cause a reduction in demand for labor.
I am quite tired of economic crashes, but I’ve failed to convince enough others to vote and advocate for changes. Those who do care about change are focused on matters other than economics, which I believe to be a mistake.
Even those with "some college" millennials are slightly worse off, but within 5%.
It's those with only a high school degree that have seen a significant hit.
[1]https://www.pewsocialtrends.org/essay/millennial-life-how-yo...
Unless you're an average citizen of the USA. I swear, I've never seen so many gleaming white and healthy sets of choppers as I have in the USA (particularly compared to, say the UK or Eastern Europe)
Very close to unlimited amount if it gets out of control. See e.g. Venezuela, Zimbabwe, or Russia in early 90s, among other countries.
> can’t work or earn money
They will be able to soon if they still can't. You can't keep the economy shut down forever. So it'll be shut down selectively until Nov 3 and opened completely shortly thereafter. /s
On a more serious note, having lived through hyperinflation myself, people who can work will have their salaries adjusted upward enough to keep them working (and therefore putting some semblance of food on the table), but not enough to keep up with inflation. At least that's how it worked in Russia in the 90s. In Russia, though, the situation was relieved somewhat by the availability of the almighty dollar. You could temporarily protect your rubles from hyperinflation by buying dollars, and then selling them for rubles when you need money. With dollar (and really, all currencies) collapsing, I'm not sure what people are going to do, worldwide. Seems to me that a global inflationary spiral could de-facto reduce everyone's debt obligations to each other. So whoever is owed debts of any kind would take a massive haircut. In the 90s that was the Russian Government. The beneficiaries were people now known as "oligarchs". They borrowed unimaginable amounts of money (with kickbacks to government officials of course), bought up the Soviet factories, mines, and oil production that didn't yet collapse, and then paid back with hyperinflated money, fractions of a kopeck on the ruble.
You could temporarily hold bonds, stock, etc. Many other equity classes out there with high liquidity, which can be converted to cash whenever you like.
Don't get me wrong, I think Venezuela-style hyperinflation is unlikely (unless we get a communist government or something in which case hyperinflation will be the least of our problems, and the economy would be fucked for a hundred years). But higher than normal inflation is very, very likely indeed, and you need to start thinking in terms of what that means for you. The old things like "buying bonds" might cease to work to increase, or even maintain wealth, irrespective of yield, if this gets even remotely out of control.
Inflation to a first approximation is wage rises. "Too much money chasing too few goods" is the traditional formulaion.
Western economies have split. For the majority wages are not rising. For the affluent minority incomes are rising sharply. So we see little inflation in the goods and services bought by poor people, but steep price rises in goods bought by rich people.
The latter are mainly collectibles: stocks and bonds, real estate, artworks, gold and jewels, cryptocurrencies, etc.
We won't see Zimbabwe-style hyperinflation unless there is massive redistribution.
Wage rises are always sub-inflation during hyperinflation. Goods, by the way, and especially complex goods with long supply chains, will also become scarce in all this as inflation makes it difficult to maintain stock necessary to manufacture or distribute goods. That is, that widget you bought today might cost more than you're charging for it when you need to replenish the stock. So you raise the price accordingly, using your best guess as to how much money you will need to still turn at least some profit. And _everyone_ throughout the entire supply chain does the same thing.
You haven't lived through a hyperinflation and I have. So you'd be wise to listen right about now, and if you're wealthy, you'd be wise to also read up on hyperinflation.
It's not the kind of "managed" inflation you're used to. It is, by definition, out of control completely, and very hard to get out of.
With the current state of the economy, I'm not expecting anything better after a bust.
As someone who has another couple decades until retirement, a drop in asset prices would be great for me personally (though I'm sure it would be painful for many Baby Boomers).
For better or worse I wasn't very liquid when the stock market indexes tanked in March. Another lessons learned: invest in bonds at least a bit, not only to reduce volatility, but also because you'll have some 'dry powder' available to be able to rebalance when you equities take a hit.
Though total returns on bonds isn't too bad:
> The Nasdaq 100 ETF (QQQ) is up an astonishing 25.5% this year during a pandemic and that’s including a 29% peak-to-trough drawdown. But the long-term treasury ETF (TLT) is up 27.3%.
* https://awealthofcommonsense.com/2020/08/why-would-anyone-ow...
Edit - It seems like adjusting for whatever the fed funds rate is might provide a more accurate comparison.
https://www.suredividend.com/interest-rates-valuation/
> PE Ratio (TTM) 984.55
https://finance.yahoo.com/quote/TSLA
We could stand to do better about wealth inequality...
Expect more angry people electing even angrier people into important posts. There is some incredible short-termism in all this policy.
The people that applies to may be largely rich in any given instance in practice but this bit of pedantry is important as "rich" are not homogenous in their interests.
I question the validity of this hypothesis, at least in so far that it has a predominant or even major effect:
* https://www.youtube.com/watch?v=K3lP3BhvnSo&t=8m50s
The video cites an US Fed paper on the subject (see Section 3):
* https://www.federalreserve.gov/PUBS/ifdp/2014/1101/ifdp1101....
It's mostly "policy shocks" / surprises that cause changes in bond rates, which may have knock-on effects to other asset classes.
Indexes have gone up and up and hit all-time highs regularly over the decades on their own: there's no need to throw QE magic pixie dust as a cause.
Further, in the past, a much smaller percentage of the population probably had equity ownership: as pensions have given way to private retirement funds (401(k) in the US), and so you have people buying the S&P 500 in their Vanguard accounts.
On the flip side, you have a large population cohort (Baby Boomers) entering retirement age, and they want safer asset classes so are going after bonds, driving down yields. With yields getting lower, anyone who wants returns is stuck with equities.
So you have one group of people bidding up equities for growth towards retirement, and another group bidding down bonds for safety in retirement.
The announcement of the most recent round of QE is one of the "policy shocks" of the kind referred to by the 2014 Fed paper. Prior to the announcement, Apple, S&P 500, and bond funds were at 1-year lows. This month they are at all time highs.
A relatively small increase in earnings might also cause outsize increase in valuation, if that increase was not expected or if it signals to the market the company is strong regardless of tumultuous market situation.
Less so with the cars, the vast majority of cars sold are with relatively thin margins.
And houses aren't sold by a single business, it's just the law of supply and demand.
I would add Nespresso as an example: They've definitely managed to mass-market a luxury good (outrageously expensive coffee pods)
An old engineer friend of his asked Holt about several topics, and I think his answers were interesting, including what was baked into early Apple that made it succeed at what it was trying to do over the years.
https://louisproyect.org/2015/08/28/steve-jobs/
(The beginning of the blog post are comments by the old friend about the Jobs movies, followed by Holt's two replies).
One thing that is pervasive in the US, is financing of expensive things (relatively speaking) through "easy" monthly payments.
Carriers finance the new model at a seemingly low rate ($15/mo.) then charge more on the wireless service. I can get the $15/mo phone, but only at the $60/month plan not the $35/month plan. If I don't pay, the product is worthless (no service).
You can calculate the amount of housing or auto debt that is out there, but have always wondered how much 'iPhone debt' is outstanding w the wireless carriers?
https://www.apple.com/shop/iphone/iphone-upgrade-program
The only reason their luxury good is sustainable is exactly because people have to join it to be able to communicate with their friends, and can't leave.
I have an iPhone, but I communicate with my friends using WhatsApp, Facebook Messenger, Signal, and Skype as well as iMessage.
Some of them have android phones, and some of them have iPhones. And some of the iPhone users use Facebook messenger, Signal, and WhatsApp, to communicate with me
I only use FaceTime to communicate with certain in-laws, and the some of my extended family and some local friends use Amazon Echos for video.
The majority of people are comfortable with Facebook and WhatsApp now.
"just works and doesn't waste hours of my time" != "luxury"
I'm willing to bet the adoption of smartphones and regular upgrades wouldn't be happening at nearly this scale if all customers had to pay $600+ up front.
How's that different from all kinds of clothing brands?
I'm not talking exclusive to rich people Armani's here, I'm talking all the mass market luxury brands. Heck, even Nike's $200+ sneakers...
"they managed to do something that was previously unimaginable in business theory - create a mass-market luxury good."
Is not about that. It is about the (perceived) impossibility of a mass-market luxury good.
But "mass-market" is a term for broad appeal/sales (dictionary: "the market for goods that are produced in large quantities"), not for over-the-top revenues.
And as for that, more people have Nike shoes than have an iPhone. But even if 1/15 as many had, it would still a mass-market good, with luxury price / appeal.
The exclusive nature is part of what supports the luxury brand. One case study: how ray ban managed to recover their "luxury" status by removing low cost, high volume items from their catalogs.
https://fortune.com/2016/01/27/ray-ban-luxottica-retooled/
I don't know the history of mobile phone contracts before the iPhone but i feel like that was Apples innovation (or they made the best use of it), rather than the product being so good that everyone had to spend ~$800-$1000 up front for one. Not that it isn't a good product, just without a phone contract it would have sold far less at the premium price point.
In fact iPhone phone contracts seemed to spawn a trend in getting many other products on credit (and over paying for them).
Also, I seem to remember Apple pushing mobile network providers hard to almost subsidise the cost of the handset around the 2012s, when they were still competing at market share with Android phones.
Over 24 months, the difference between a $650 phone and a $250 phone is minor.
If there ever was any social responsibility in investing, it would have been providing fluidity into new ventures and making markets efficient by making educated investments. I find this trend worrisome and I think it might be sending incorrect market signals.
If investing in ETFs/index funds is morally blameworthy, which is already questionable, the blame surely lies with active fund managers and their outrageous costs driving people into the arms of low-cost instruments that, net of fees, have had better performance.
Individuals investing in ETFs doesn't move the needle. Fund managers seem to be part of some cartel, pumping various asset groups at various times. We're just along for the ride.
Yep. If covid had put 40 million US white collar people on unemployment instead of hourly folks, the market would have crashed hard as the monthly influx of money dropped and some people started pulling money out early to get by.
It's also important to note that different sectors are getting hit in different ways. Renewables up, oil majors down. Tech way up. So if total-market ETFs are pumping in money, they are just inflating overall valuations, and investors are the ones deciding which sectors and companies are winning or losing. Or if it's market segment ETFs, that would also be an interesting story.
Casino stocks, more risky. Cruiselines, more risky.
The money has to flow somewhere.
I mean it's not just tech that's not risky. There's some other equities out there too which seem to be concensus safe havens by investors. Eg. Lululemon, Home Depot.
This is why we're seeing big interest in some sectors of real estate too. money is cheap and big chunks of the economy seem risky. Why not invest in something else. Also risky, but TINA!
If that’s not the case, please explain.
USA is a failed state moving forward on momentum. You can expect the currency to crash after Trump refuses to leave office.
EUR is up against USD for the last 5 years or so, by a fairly small amount (~10% max). It is down against the USD over the last 10 years, by a larger amount (~20%).
10-20% is not much when it comes to currency fluctuations. When we were in the US in the 80s, USD/DEM went from around 1.70 to 3.50, so 2x fluctuation.
Inflation is fairly low when it comes to sustenance foods, cars, telecom, and technology -- however, that is not the story for things like: fish, fresh produce, textbooks, healthcare, rent, home prices, executive MBAs, some imported goods.
It gets even more complicated. Some things cost one for some people and another for others -- e.g., college tuition has skyrocketed if you don't get a scholarship/aid but is flat or down if you do get scholarship/aid
Asset prices go up, because you cannot create more asset, but more people want it.
Coffee is here to stay and will he THE truly anonymous and untraceable currency of the future.
So congrats on your local coffee place taking the hit, expect the price to change.
What do you mean by this and how does one follow the other? I genuinely want to know. I'm unfamiliar with this concept.
To complicate matters, though, inflation is normally thought of as CPI; a measure of what people are spending on consumable items. Things like stocks, housing, and other assets that are jumping in price are not consumable goods and services. As such we try to avoid using the term inflation for this phenomena, but the principle is the same.
Modern monetary policy seeks to try and keep that added money off of "Main Street", so that your groceries and gasoline aren't skyrocketing in price, but ultimately the money has to go somewhere, and that somewhere is "Wall Street".
I believe the term for this is "asset inflation", which is just a different form of inflation.
Often times the Consumer Price Index is referenced as the source of truth on inflation, especially when the Fed makes its decisions on adding/removing money into the economy[0]. But the CPI doesn't track every type of asset such as stocks or gold, since these aren't things the Fed is trying keep the US dollar stable with as part of its dual mandate[1].
Price fluctuations haven't happened evenly across asset classes just because of the way COVID-19 has had effects on various parts of the economy. Not all stocks have increased due to negative effects of COVID-19 on certain types of businesses, not all real estate has climbed due to people moving around during COVID-19, etc.
0. https://en.wikipedia.org/wiki/Core_inflation
1. https://www.investopedia.com/articles/investing/100715/break...
Naively, one expects to get returns as a percentage of investment. In this multiplicative sense, Jeff Bezos at a 188B net worth is much closer to being a trillionaire than a one-billionaire (a factor of 5 vs a factor of 188). But can Amazon's market cap continue to grow in such a fashion? What bounds it (and that of other tech companies)?
One might assume that they have to be bound by world GDP (80T). But if they're truly creating value, can't they expand world GDP along with themselves?
http://www.paulgraham.com/wealth.html
GDP = private consumption + gov expenditures + total investments + net imports/exports. IOW, it's a measure of the $ value of things bought/sold. IOW, economic activity.
That said, over short time horizons, GDP can be used as a rough proxy for many other economic metrics. But only because the structure of an economy doesn't change drastically in just a few years. As you increase time horizons, the structure of an economy changes and GDP becomes a poorer proxy for other economic metrics. If this is so, why do so many people use GDP? Because it's easy to measure fairly accurately.
In this framework growth has to end, on earth at least, much sooner than later.
Apple's tech isn't really much better than its rivals, except in a few areas like inputs and haptics. Its high performance ARM cores are impressive but there are other impressive ARM cores and it's a very recent development anyway. Until a few years ago they were "good enough for a phone" but not rivals of Intel or AMD for anything serious. In fact I seem to remember Qualcomm Snapdragon chips being better on some metrics a couple years ago.
The thing that made Apple really stand out was the polish and attention to detail in its product. This has two parts. One is the product being good. The other is the striking absence of tacked-on crap features and shitware.
I recently switched to an iPhone from Android due to privacy issues and the thing that immediately struck me about the iPhone was the lack of shitware preloaded on the device. It did not come preloaded with Google Spy... err... Play Services or Facebook, let alone a bunch of Samsung and carrier apps that are surely encrusted with spyware. I can even uninstall most Apple apps that I don't want!
Same goes for the Mac. A new Mac does not show you ads. Its equivalent of the start menu isn't full of loot box games and other shitware of the sort found on Windows or Android tablet or "laplet" (or is it "tabtop?") devices. On the Mac I can uninstall pretty much anything except system apps (well you could but that might be problematic). You can even uninstall Safari and replace it wholly with Firefox or Chrome AFAIK.
Going way, way back, when I first tried an early 'oughts Mac I was struck by the lack of the worthless but prominent "Thinkvantage" button found on my Thinkpad or any other obvious committee tack-ons. The design was clean.
This same lack of shit is what made the original Google break out way back in the early 'oughts. Back then most search engine web sites looked like the home pages of online casinos. Google had a blank and a button that said "search." The instant I saw it, I never again returned to another search engine.
Apple has occasionally gone too far with "clean" or "thin and light," but if you are going to err I'd err on that side. Erring on the side of cruft and shitware is much worse.
Take note people.
The American engine is producing awesome results, still a long way to go!
Saudi Aramco 2018 net income was $110 billion Saudi Aramco 2019 net income was $88 billion
Apple 2018 net income was $59 billion Apple 2019 net income was $55 billion
Then I will be really impressed! It is more likely to be an inflection point as incumbent oil producers fail to diversify and revenues go down. But I'll accept either result.
Why is this a good metric?
Aramco's value increases by convincing people to buy more of its product. Apple's value increases by selling more products, but also from its stock value going up. That second part is important because it could be hype or a bubble or something else. But with Aramco, you know it's all about a tangible product.
My wife has another measurement that she uses. She increased her Apple holdings when the pandemic started purely because of Apple's cash. Her logic is that with all that money to burn, it has a better chance than most of surviving this crisis.
Whereas net income shows what MANY people bought, and how the company is able to keep a bunch leftover.
And regarding "good", it's a good metric for value creation and the infrastructure for independence, as this has been unachievable before and always required a monopoly on power derived from the entire social contract of society and force. So it is merely interesting for it to occur in the absence of those things. It is not a comment on "good" in terms of society and whether the social contract should include a way to limit them, it doesn't factor that in at all.
The whole market seems insanely overvalued during a pandemic. The entire stock market cap is 1.6x gdp. which is greater than the .com crash. This is one of the things buffet talks about.
https://www.advisorperspectives.com/dshort/updates/2020/08/0...
How did you get to 4% from the above calculation?
However, for the cumulative interest rate, you would normally do ln(2)*100/27 years = 70/27 or a 2.7% YoY interest rate.
As a general trick: if you want to convert payback time to cumulative interest rate, use 70 instead of 100. There was a TED talk on the topic iirc.
Looks like General Motors and AT&T were top 2 from 1930 to 1960: https://taaginc.com/large-and-in-charge/
You'll see a lot of responses across other threads claiming it's due to the low interest rate environment (the justification). That plays a role, sure. Interest rates have commonly been near zero for the better part of the past decade though. So why was Apple's PE ratio ~11-13 previously while interest rates were very low (0% or sub 1%) with a quasi normal economy, and now its PE ratio is more like 30-35 during a crushing pandemic recessionary environment while interest rates are zero? Apple's operating income for the past four quarters is not considerably higher than it was in fiscal 2016, so why is the stock three to four times higher? Surely their growth rate must be extreme right now, to justify that radical increase (answer: nope). What must the future growth expectations be to justify a 300% stock increase; that Apple's enormous profit will double soon? (nope, it's not gonna happen)
It has more to do with a stock market mania that has taken over, than it has to do with interest rates, at this point. The interest rate explanation maybe gets you to second base, the rest of it is mania. You see that represented in the ever expanding dotcom bubble style extreme valuations that are increasingly common (SHOP, TSLA, NVDA, AMD, DOCU, etc). NVDA's context for example will remind of CSCO in 1999-2000 (except NVDA is growing slower today than CSCO was then). You'll see it in the pop-celebrity status of people like Dave Portnoy (who suddenly decided to become a trader with little experience). Whereas such extreme valuations were not so common three to eight years ago (circa 2012-2017), while we had a quasi normal economic situation and 0% rates (or otherwise near 1% or lower) as well. All that said, nobody should ever doubt how far a mania can go in regards to pushing valuations toward the moon.
There's probably been a shift in investor preference in favor of equities too (which means decreases in interest rates are smaller than the decrease in discount rates used for investors' DCF valuation of equities), but I think "mania" is far too strong a word. I think of it more as a result of investors shifting to riskier assets as returns to capital decline in general, in part due to leverage aversion. I mean, how else are you supposed to deploy your capital? Buy the junk bonds that are currently being issued at yields below 3%?
Good that Apple didn’t hire you then.
Where is Dell now?
investors are essentially thinking “if Apple can do the same in Q2 as other quarters pre-crisis then it must mean it will do incredibly once this is over”
If you want to invest at these levels you should probably find out what happened in Q2 - I wouldn’t be surprised if it was a mix of stimulus money and need for lower end macs and iPads for video conferencing in the immediate term due to stay at home that won’t necessarily translate to permanently accelerated growth in future quarters.
Is that realistic?
Also, Apple Silicon might be the beginning of something.
They're still overpriced, but I wouldn't look at them as having exhausted their potential increase in revenue/profits.
I wouldn’t be surprised though if they actually experienced more growth overall by focusing more on the developer experience, loosening some of their restrictions on payments (to me it should be a blessed API for other payment processors. Sure require they accept Apple Pay. That’s fine. But I do think that’s the way forward) and allow app developers to sell upgrades rather than just subscriptions, one time purchases, and in app purchases.
I think it could really reignite the marketplace on their devices
Apple is a premium products company and software was (and will be) always cheap so there s no way they will make their usual profit margins on that. They need to keep selling premium stuff, which has to be physical. At best they can add some premium content , but that's it.
https://techcrunch.com/2020/01/15/app-stores-saw-record-204-...
It's a huge market and Apple takes a 30% cut of that for not doing too much. The margins have to be bonkers.
I think that they could become better once they start losing some ground, kinda like Microsoft is all about Linux now that the desktop market isn’t improving for them.
I'm not rich, but I'm thinking that anything a billionaire can do with $1 billion can also be done by ten thousand households who have $100k each. So the middle class could perhaps get richer if they only knew the secret?