Mad Hedge Technology Letter
July 25, 2018
Fiat Lux
Featured Trade:
(PICHAI YOURSELF, EARNINGS ARE REALLY THAT GOOD),
(GOOGL), (MSFT), (AMZN), (AAPL), (TWTR), (DIS), (TGT)
Tag Archive for: (AAPL)
Google Translate, Alphabet's (GOOGL) free, multilingual machine, foreign language translation service, translates an unimaginable143 billion words per day.
These were one of the pearls divulged in the conference call from Google's CEO Sundar Pichai.
A bump in usage coincided with the 2018 World Cup in Russia, and in the age of low-cost airfare and overpopulation, it could be Alphabet's new cash cow.
Google Translate has the potential to morph into one of the premier foreign language applications used by anyone and everyone.
Forget about the Amazon effect, the Alphabet effect could be just as pungent, albeit away from the trenches of e-commerce.
Thank goodness the application is still ad-free.
No doubt it would be inconvenient to sit through a 15 second ad while interacting with a concierge at a bed and breakfast in the South of France.
Analysts did not sound out Pichai's plans for Google Translate, but he did mention there are some monetization opportunities on the horizon.
The latest earnings report is the most recent indication that the FANGs along with Microsoft are pulling away from the rest.
The equity price action in 2018 vindicates this fact with more than 80% of the gains spread around just a few high caliber tech names.
Is this fair? No. But life isn't fair.
The too slow too late regulation that was supposed to put a cap on the vaunted FANG group has had the opposite effect, squeezing the small guy out of the picture.
The runway is all clear for the FANGs, and the only way they will be stopped is if they stop themselves or an antitrust ruling.
This all adds up to why Alphabet has been a perennial recommendation for the Mad Hedge Technology Letter.
Duopolies are few and far between and monopolies even rarer.
They are great for earnings and as the global digital ad pie grows, it falls down to Google's bottom line.
On the news of stellar earnings, Facebook shares jumped higher in aftermarket trading and powered on to trade around 5% the following day.
Expect a great earnings report from Facebook with robust ad revenue growth.
Nothing less would be a failure of epic proportions.
The migration to mobile is real and investors need to understand analysts cannot keep up with the rising year-end targets in these shares.
Alphabet had a high bar over which to pole vault, and it still managed to beat it handily.
And the $5 billion fine for bundling its in-house apps on Android fell on deaf ears.
Alphabet has $102 billion in the coffers, and $5 billion will do nothing to materially affect the company.
The cash reserves are up from $34 billion in 2010.
The market trampled on any sniff of a risk-adverse sentiment and powered into the green with the Nasdaq reaching another all-time high.
Let's not get too carried away. Alphabet's bread and butter is still its digital ad business with Alphabet CFO Ruth Porat confirming this fact saying, "One of the biggest opportunities for investment continues to be in our ads business."
Alphabet still breaks off 86% of revenue from its distinguished ad business.
"Other" is a category commingling Google Cloud, Google Play, and hardware that only comprised 13 percent of total revenue.
"Other Bets" brings up the rear with 1% of total revenue comprising Waymo, Alphabet's self-driving unit, which is an industry leader putting Tesla and Uber in their place.
Waymo plans to shortly roll out a massive commercial operation. Along with Google Translate, it could carve out a nice position in Alphabet's portfolio going forward.
The most important metric was Alphabet's total ad revenue, which it locked in at $28.1 billion, a 23.9% YOY improvement.
Aggregate paid clicks, a model in which the advertiser pays Google for a user to click an ad, has been steadily rising to 58%, up from 52% from the same time last year.
The masterful efficiency circles back to Google's ad tech team, which is by far the best in the business and has outstanding management.
The Cloud is an area that Alphabet highlights as a place for improvement.
Alphabet's cash war chest allows the company to throw hoards of cash at a problem. When mixed with brilliant management it usually works out kindly.
CFO Porat mentioned that costs were particularly higher in the quarterly head count because of large investments in cloud talent.
Google is tired of playing third fiddle to Amazon (AMZN) and Microsoft (MSFT), and views enhancing the enterprise business as imperative.
This explains Alphabet's head count surge to more than 89,000 employees, sharply higher than the 75,600 employed a year earlier.
Every FANG and high-tier tech company is spending its brains out to compete with each other.
Expanding data centers is not cheap. Neither are the people to deploy it.
Alphabet has the cash to compete with the Amazons and Apples (AAPL) of the world.
They do not have to borrow.
The potential trip wire in Alphabet's earnings report was Google's traffic acquisition cost (TAC).
Alphabet's (TAC) is described as money paid to other companies to direct user traffic to its suite of Google products.
(TAC) went up to $6.4 billion, which is 23% of Google's ad revenue but down on a relative percentage basis of 24%.
This was enough to keep investors from sounding the alarm and was welcomed by analysts.
Alphabet pulled out all the stops this quarter and the momentum is palpable.
Top-line growth from its core ad business shows no sign of slowing.
Acceptable (TAC) was the cherry on the sundae for the quarter at a time when many industry insiders thought it would be around 25% or higher.
Hardware offered less punch than before, which is what all high-quality tech companies desire.
There were no obvious weaknesses and the 34 straight quarters of 23% YOY growth is hard to top.
Google pulls in 10% of all global digital ad dollars in one business.
Other highlights were Waymo eclipsing the 8-million-mile mark of self-driving on public roads as it is the next business to come to the fore.
Google cloud is at an inflection point attempting to win over corporate management.
It has already won contracts with heavy hitters such as Twitter (TWTR) and Disney (DIS).
Pichai mentioned Target (TGT) as a key new cloud client that just signed on with Google last quarter.
More importantly, Alphabet's brilliant quarter bolsters the macroeconomic picture heavily reliant on tech earnings to usher the market through the gauntlet.
Regulation has proved irrelevant. Whatever fine they are slapped with does not change that Google reaps the benefits from its market position as one of the duopolies in the global ad business.
Alphabet has been trading from the bottom left to the upper right via a consistent channel.
Do not chase the new all-time high of $1,270. Use any weakness around the $1,100 level to initiate new positions.
Owning a company this dominant has little downside. The regulatory burden was a myth and Pichai has handled this operation beautifully.
I am bullish on Alphabet and its partner in crime Facebook.
________________________________________________________________________________________________
Quote of the Day
"Man is still the most extraordinary computer of all," said the 35th President of the United States John F. Kennedy.
Mad Hedge Technology Letter
July 23, 2018
Fiat Lux
Featured Trade:
(THE SKY IS THE LIMIT),
(NFLX), (FB), (AAPL), (MSFT), (GOOGL)
After Netflix (NFLX) laid an egg, the tech sector badly needed a cure to calm the fierce, open waters.
Netflix missed expectations by about a million subscribers and weak guidance shredded the stock almost 15% in aftermarket trading.
The FANG boat started to rock and large cap tech needed a savior to quell the increasingly downside risk to the best performing sector in the market this year.
You can rock the boat all you want, but when Microsoft (MSFT) shows up, the seas turn tranquil and placid.
Microsoft delivered a dominant quarter.
I expected nothing less from one of the best CEOs in America, Satya Nadella, and his magic touch is the main wisdom behind the loquaciousness when the Mad Hedge Technology Letter delves into the Microsoft business.
I rate Microsoft as a top three technology stock, and it should be a pillar of any sensible equity portfolio, unless you believe throwing away money in the bin is rational.
Born in Hyderabad, India, Nadella has worked wonders inheriting the reins from Steve Ballmer who was more concerned about buying an NBA team than running one of the biggest American companies.
Ballmer had Microsoft barreling unceremoniously toward irrelevancy.
It got so bad for Microsoft, the "L word" started to pop up.
Legacy tech is the lousiest label a tech company can be pinned with, because it takes years and gobs of cash to turn around investor sentiment, the business, and the share price.
Under Nadella's tutelage, Microsoft has burst through to another all-time high, which is becoming a regular occurrence in 2018 for Microsoft's shares that languished in purgatory for years.
If the macro picture holds up and if the administration can keep quiet for a few news cycles, investors can expect a minimum of 15% appreciation per year in this name.
And that is a conservative estimate.
Microsoft is already up over 20% in 2018.
Queue the applause.
Nadella has orchestrated a 300% jump in valuation during his four and half years at the helm.
Microsoft is now valued at more than $800 billion and climbing.
The only other tech members of the prestigious $800 billion club are Apple (AAPL), Amazon (AMZN), and Alphabet (GOOGL).
Apple leads the charge to claim the prize as the first trillion-dollar company, and it is within striking distance valued at $951 billion.
Nadella bet the farm on software subscriptions and migration to the cloud.
It was the perfect strategy at the ideal time.
Shares cracked the $108 mark at the market open even as the administration kept up its pugnacious rhetoric threatening to topple the overall market.
Tech has held up through these testy times confirming the fluid migration by the scared investor souls into big cap tech.
How can you blame them?
Amazon prime day saw record numbers visit its platform to the point it crashed from overloading the servers.
Coresight Research predicted users would fork over $3.4 billion on Prime Day in 2018, an increase of 40% YOY.
More than 100 million products were sold in the 36 hours.
The staggering Prime Day sales came on the heels of Alphabet being fined $5 billion for being too dominant in Europe.
The market shrugged it off as the fine does nothing to change Alphabet's dominance in Europe.
Android has harvested 80% of the smartphone market and was slapped on the wrist for bundling Google apps out of the cellophane packaging is a cheap trick by the European regulators.
Imagine frequenting a restaurant that cannot serve its own food.
Alphabet even allows users to download whatever bundle of apps through the Google Play app store. It should be enough.
Alphabet is another solid Mad Hedge Technology Letter pick, albeit it is the weaker tier of the vaunted FANG group and just celebrated all-time highs.
Amazon and Netflix (NFLX) still lead the charge at the top tier of the FANG group, and Facebook's risky business model has it grouped with Alphabet in the lower tier.
At the end of the day, a member of the FANG group is a member of the FANG group.
Microsoft should be part of the FANGs, but the acronyms start becoming too pedantic.
The breadth of the tech sector means many winners.
Microsoft is one of the biggest winners.
Microsoft's total revenue levitated 17% YOY to $30.1 billion.
The number every investor was patiently waiting for were insights into the cloud business.
Microsoft Azure was up 89% YOY and cemented together with strong guidance, ensured Microsoft's shares would continue on its merry way upward.
Gross margins for the commercial cloud offerings, grouped as Azure, Office 365, accelerated to 58% YOY from 52%.
Microsoft's intelligent cloud described by Nadella as "Microsoft's drive to build artificial intelligence into all its apps and services" rose 23% YOY to $9.6 billion.
Management said that it expects Cloud margins to ameliorate through the rest of 2018.
Even the hardware side of the operations caught an updraft with Microsoft Surface, a series of touchscreen Windows personal computers, pole vaulted by 25% YOY.
Simply put, Microsoft is a lean, mean cash-making machine. Last quarter's profit of $8.87 billion coincided with the first time the company eclipsed $100 billion in annual sales.
Microsoft Azure's 16 percent share of the global cloud infrastructure market, according to data by research firm Canalys in April, is rapidly approaching Amazon's Amazon Web Services (AWS) business.
A Morgan Stanley poll of 100 U.S. and European CIOs gleaned insight into the broad-based acceptance of Microsoft's products.
The poll saw 34% planned to upgrade to a higher and more expensive tier of Office 365 software in the next two years, and more than 70% plan to deploy Microsoft Azure and its collection of hybrid cloud solutions.
Microsoft still has its cash cow business injecting healthy profits into its business with Microsoft's productivity and business processes unit, including Office 365, rising 13.1% YOY to $9.67 billion.
The tech sector needs the mega cloud stocks to stand up and be accountable at a precarious time when the macro picture is doing its best to suppress the robust tech sector.
Amazon and Alphabet are in the limelight next week, and Amazon will divulge frighteningly strong cloud numbers along with the braggadocio numbers about its record-breaking Prime Day.
The more I look at Microsoft's last quarter performance, it becomes harder and harder to identify any chink's in Microsoft's armor.
This is not your father's Microsoft.
This is the flashy, innovative Microsoft on top of the most influential trend in the technology sector - the migration to the cloud.
Sticking to this stock could be the rich new uncle of which you've always dreamed. But in this case, it's Satya Nadella providing the free flow of funds.
The spike in the shares is well deserved and any remnant of a retracement should be bought with two hands.
Saying that I am bullish about Microsoft's prospects is an understatement.
________________________________________________________________________________________________
Quote of the Day
"Your margin is my opportunity," said founder and CEO of Amazon Jeff Bezos.
Mad Hedge Technology Letter
July 17, 2018
Fiat Lux
Featured Trade:
(THE PATH AHEAD),
(IBM), (AMZN), (FB), (MSFT), (NFLX), (QQQ), (AAPL), (DBX), (BLK)
The Red Sea has parted, and the path has opened up.
Technology has been a beacon of light providing comfort to the equity market, when a trade war could have purged the living daylights out of bullish investor sentiment.
If an increasingly hostile, tit-for-tat trade skirmish threatening overseas revenue can't bring tech equities to its knees, what can?
It seems the more bellicose the administration becomes, the higher technology stocks balloon.
Does this all add up?
The Nasdaq (QQQ) continues its processional march skyward. If you were a portfolio manager at the beginning of the year without technology exposure, then polish off the resume before it picks up too much dust.
The Nasdaq has set all-time highs even after a brutal 700-point sell-off at the end of January.
Apple (AAPL), Microsoft (MSFT), Netflix (NFLX), and Amazon (AMZN) can take credit for 83% of the S&P 500's gains in 2018.
And that fearsome four does not even include Facebook (FB), which has left the shorts in the dust.
Each momentous sell-off has proved to be a golden buying opportunity, propelling tech stocks to higher highs and retracing to higher lows.
And now the path to tech profits is gaping wide, luring in the marginal investor after two highly bullish events for the tech world boding well for the rest of fiscal year 2018.
Xiaomi, one of China's precious unicorns, which sells upmarket smartphones, went public on the Hong Kong Hang Seng market last week.
The timing couldn't be poorer.
The rhetoric between the two global leaders reached fever pitch with the administration proposing $200 billion worth of tariffs levied on Chinese imports.
China reiterated its entrenched stance of not backing down, triggering a tense war of words between the two global powers.
The beginning of March saw the Shanghai stock market nosedive through any remnants of support levels.
The 50-day moving average, 100-day, and 200-day were smashed to bits and Shanghai kept trending lower.
The trade skirmish has had the reverse effect on Chinese equities compared to the Nasdaq's brilliance, and combined with the strong dollar, has seen emerging markets hammered like the Croatian soccer team in Moscow.
Xiaomi's IPO was priced in the range of HK$17 to $22, and when it opened up on the first day at HK$16.60, investors were holding their breath.
Take the recent IPO triumph of cloud company Dropbox (DBX), whose IPO was priced in the expected range of US$18 to $20. The first day of trading showed how much appetite there is for to- quality cloud companies, with Dropbox starting its trading day at US$29, 40% higher than the expected range.
Dropbox finished its first day at a lofty US$28.48, a nice 35% return in one trading day.
No doubt Xiaomi's shares were not expected to perform like Dropbox, but it held its own.
Astonishingly, this company did not even exist nine years ago and is now the fourth-largest smartphone manufacturer in the world, grossing $18 billion in revenue in 2017.
The unimaginable pace of development highlights the speed at which the Chinese economy and consumer zigs and zags.
Chinese retail sales were up a staggering 9% YOY for the month of June 2018. Its overall economy met its 6.7% target for the second quarter of 2018.
The price range settled for the IPO gave Xiaomi a valuation of $54 billion.
Instead of getting roiled, Xiaomi came through with flying colors posting a 26% gain after the first week of trading.
Poor price action could have given Beijing ammunition to cry foul, laying blame for the underperformance on the U.S. tariffs.
The healthy price action underscores there is still room for Chinese and American companies to flourish in 2018, albeit through a highly politicized environment.
Specifically, Apple comes through unscathed as a disastrous Xiaomi IPO could have resulted in negative local press stoking higher operational risks in greater China.
Apple is in the eye of the storm, but untouchable because it employs more than 4 million local Chinese employees throughout its expansive ecosystem and has been praised by Beijing as the model foreign company.
Apple earned $13 billion in revenue from China in Q2 2018, a 21% YOY increase.
Hounding Apple out of China will be the inflection point when tech investors know there is a serious problem going on and need to hit the eject button.
If this ever happens, The Mad Hedge Technology Letter will be the first to resort to risk off strategies.
BlackRock's (BLK) CEO Larry Fink let everyone know his piece saying, "the lack of breadth in the equity markets is troubling."
Investors cannot blame tech companies for executing their way to the top behind the tailwind of the biggest technological transformation in mankind.
And even in the tech industry, winners can turn into losers in a blink of an eye, such as legacy tech company IBM (IBM).
Someone better tell Fink that this is the beginning.
Amazon recorded 44% of total U.S. e-commerce sales in 2017, equaling 4% of total retail sales in the U.S.
This number is expected to breach 50% by the end of 2018.
The second piece of bullish tech news was lifting the ban on Chinese telecommunications company ZTE.
It is open for business again.
From a national security front, this is an unequivocal loss. However, it saved 75,000 Chinese jobs and gave a small victory to American regulators attempting to patrol the mischievous behemoth.
The U.S. Department of Commerce lifted the seven-year ban even after ZTE sold telecommunication products to North Korea and Iran.
ZTE was fined $1 billion, changed the senior management team, and put into place an American compliance team that will monitor its business for the next 10 years.
Diluting the penalty lowers the operational risk for American tech companies because it shows the administration is willing to reach compromises even if the compromise isn't perfect.
China is a lot less willing to ransack Micron and Intel's China revenues, if America allows China to save face and 75,000 local jobs.
This is a big deal for them and their employees.
America has a strong hand to play with against China because China still requires Uncle Sam's semiconductor components to build its future.
This hand is only effective if Chinese still thirst for American technology. As of today, America is higher on the technological food chain than China.
The move is also a model of what the U.S. Department of Commerce will do if Chinese companies run amok, which Chinese tech companies often do because of the lack of corporate governance and transparency.
These two recent China events empower the overall American tech sector, and the market will need a berserk shock to the tech ecosphere foundations to make it crumble.
As it stands, the tech sector is handling the trade war fine, and with expected blowout tech earnings right around the corner, short tech stocks at your own peril.
________________________________________________________________________________________________
Quote of the Day
"All of the biggest technological inventions created by man - the airplane, the automobile, the computer - says little about his intelligence, but speaks volumes about his laziness," - said author Mark Kennedy.
Mad Hedge Technology Letter
July 6, 2018
Fiat Lux
Featured Trade:
(HOW THE COBALT SHORTAGE WILL LEAD TO THE $2,000 IPHONE),
(AAPL), (SSNLF), (CMCLF), (FCX), (VALE), (GLNCY), (VLKAY), (BMWYY)
Hello $2,000 iPhone.
Flabbergasted consumers reacted last holiday season when Apple dared offer a $1,000 smartphone.
How confident this company has become!
Well, this is just the beginning.
Apple (AAPL) will be the first smartphone maker to offer a $2,000 phone, and I will tell you why!
The tech industry is going through a cumbersome wave of repricing after several high-profile debacles underscoring the true value of data.
The upward revision of data has seen more players pour into the game attempting to carve out a slice of the pie for themselves.
The reason why tech companies will start offering products at higher price points is because the inputs are rising at a rapid clip.
Apple's Development and Operations (DevOps) costs to design and maintain this outstanding product is going through the roof.
Apple's DevOps employees earn around $145,000 (before tax) per year and compensation is rising. Granted, the technology is developing and batteries are smaller, but salaries are rising at a quicker relative pace because of the dire shortage of DevOps talent in Silicon Valley.
It's possible that living in a shoebox at $4,200 per month in Mountain View, Calif., is off-putting for potential staff.
The most expensive part of an iPhone X is the OLED screen.
Apple estimated costs of $120 per screen manufacturing the Apple iPhone X. The cost doubled from LCD panels from $60 per screen.
Samsung (SSNLF) has been best of breed for screens for a while, and it is currently working on the next generation of Micro LED tech, which is the next gap up from the OLED displays of today.
Samsung has an inherent conflict of interest with Apple, creating tension between these tech stalwarts. Apple made the contentious decision to procure in-house screens at a secret manufacturing facility in Santa Clara, Calif., to avoid the constant friction.
It's common knowledge that the average price of technology shrinks over time, but the American smartphone industry has defied gravity with expected prices rising 6% to $324 in 2018.
The Apple iPhone X raw costs were around $400 per phone. There is zero chance that a next gen, enhanced Apple smartphone will cost this low ever again.
Confirming this trend are Chinese smartphones retail prices rising at 15% last year.
The cost of memory, DRAM and NAND chips, rose dramatically this past year too. As more memory is crowbarred into the design process, the costs keep trending higher.
Lithium-ion batteries only add up to 1% to 2% of OEM (Original Equipment Manufacturers) cost and probably only bumps up the cost of iPhones incrementally.
The more skittish situation is the EV (Electric Vehicles) snafu spiking total demand.
Volkswagen (VLKAY) announced its most wide-ranging electrification plans ever.
In order to achieve this lofty objective, Volkswagen has earmarked $25 billion for batteries from Samsung, LG, and Contemporary Amperex.
All told, the final investment in batteries will amount to $70 billion and another $25 billion in capital investment.
Volkswagen hopes to have 16 up and running (EV) factories by 2022, up from three today.
All told, this company will bring 80 new EV models to market by 2025.
The goal is unattainable because of a lack of in-house battery production.
CEO Matthias Muller said the reason for not manufacturing in-house batteries was, "Others can do it better than we can."
Muller will rue the decision down the line as a myriad of companies migrate toward in-house solutions, giving firms more control over the process and overhead.
More importantly, Muller will have to rely on the ebb and flow of rising cobalt prices.
A battery for an (EV) ranges between $8,000 to $20,000, comprising the largest input for the (EV) makers such as Tesla (TSLA) and Ford (F).
Making matters worse, companies cut from all cloth are hoarding cobalt reserves based on anticipating the potential demand.
This phenomenon will cause all big tech players to replenish any reserves of base materials immediately.
Apple has had chip shortage problems in the past. This year is even worse than 2017, with NAND and DRAM chip supply trailing demand by 30%.
Tech companies have been hastily locking down contracts in advance to ensure the necessary materials to produce their flashy gadgets on a highly pressurized deadline.
Lithium battery demand is expected to rise 45% between 2017 and 2020, and there has been no meaningful large-scale investment into this industry.
Battery production made up 51% of cobalt demand in 2016 and will hit around 62% by 2022.
Compounding the complexity is 60% of global cobalt production is found in one country - the Democratic Republic of the Congo (DRC).
DRC is a hotspot for geopolitical fallout and its history is littered with civil war, internal conflict, and poor infrastructure.
The 21st century will be dependent on a chosen group of valuable materials. Cobalt is shaping up to be the leader of this pack and is needed in a plethora of business applications such as EVs, lithium-ion batteries, and PCs.
Cobalt is vital in metallurgical applications that include aerospace rotating parts, military and defense, thermal sprays, prosthetics, and much more.
The DRC recently proposed a revised mining law increasing taxes on cobalt and other precious metals. The legislation has yet to be written into stone and would certainly jack up the price of cobalt.
Everybody wants a cut of the cobalt game.
Glencore's (GLNCY) management has noted this mining tax is "challenging" at a time it is just completing its Katanga expansion.
Katanga has the potential to become the largest global copper and cobalt producer.
Copper is equally important to cobalt since cobalt production is a by-product of copper and nickel mining. Only 2% of cobalt results directly from cobalt mining, and 60% via copper mining, and 38% via nickel mining.
Last year, Freeport-McMoRan (FCX) was dangling its cobalt project to outside investors in the DRC but was unable to fetch a premium price.
In a blink of an eye, China Molybdenum Co. (CMCLF) swooped in and (FCX) accepted an offer of $2.65 billion. (FXC) used the sale to pay down debt while the price of cobalt has taken off to the moon.
It gets worse. China owns 80% of refined global cobalt production and 90% of its operations are in the DRC.
China is attempting to corner the cobalt market in the DRC, gaining a stranglehold on future technological devices, (EV)s, and big data.
The keys to future technological hegemony lie in the sparsely inhabited jungles of the DRC. China has the first mover advantage and backing of the communist party as (CMCLF) strives to be a global dominator in cobalt production.
China has smartly wriggled its way down to the bottom of the supply chain capturing cobalt resources. If a trade war ensues, China can simply cut off cobalt supply lines to whomever.
There is nothing CFIUS or Donald Trump can do about it.
America's 14% of global cobalt production will be insufficient to produce the new (EV)s, iPhone 11s, gizmos and gadgets that American consumers have grown to embrace.
Analysts expected Apple to acquire some supplementary companies aiding in expansion following the overseas repatriation.
A thriving software outfit or a company of cloud developers would have sufficed. However, reports streaming in that Apple has entered into negotiations to buy a five-year supply of cobalt directly from miners for the first-time underscores where Apple's priorities lie.
Cobalt demand expects to increase by 30% from 2016 to 2020.
Apple is scared it will be locked out of the cobalt market or forced to pay ludicrous prices for its cobalt needs.
Considering the price of cobalt has quadrupled since June 2016, and smartphones are 25% of the cobalt market, it's a strategically prudent move by Apple's CEO Tim Cook in light of BMW (BMWYY) announcing the need of 10X more cobalt by 2025.
Going forward anything comprised of cobalt-based technology will garner a higher premium resulting in higher prices for consumers including that $2,000 iPhone.
(FCX) is a must buy for those who believe precious metals are the foundation to all future technology. Other intriguing names include Brazilian company Vale S.A. (VALE), and Glencore, the largest Swiss company by revenue.
Or if you have the cash, plunk it down on a cobalt mine in the DRC. But only if you're insane.
_________________________________________________________________________________________________
Quote of the Day
"Heavier-than-air flying machines are impossible," - said Lord Kelvin, President of the Royal Society, in 1895.
Global Market Comments
July 2, 2018
Fiat Lux
Featured Trade:
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, OR THE FUTURE IS HAPPENING FAST),
(HOG), (TLT), (ROM), (MU), (NVDA), (LRCX),
(SPY), (AMZN), (NFLX), (EEM), (UUP), (WBA),
(THE WORST TRADE IN HISTORY), (AAPL)
Mad Hedge Technology Letter
July 2, 2018
Fiat Lux
Featured Trade:
(THE CLOUD FOR DUMMIES)
(AMZN), (MSFT), (GOOGL), (AAPL), (CRM), (ZS)
