Stock market is a "fully-fledged epic bubble" and will burst
Discussion
bmwmike said:
Where do you guys see Apple on the oscilloscope of trash people don't need to trash people don't need but have to buy?
I see apple as a kodak.One day the go to for everyone (well 50% ish of the market) the next day the a slow decline to nothing.
Yes they have brand power for now but its not a consumer staple it will have its peak at some point and then down forever.
Frankly im surprised at the ammount people are willing to pay for Apple products. Especially those who can ill afford it.
vulture1 said:
bmwmike said:
Where do you guys see Apple on the oscilloscope of trash people don't need to trash people don't need but have to buy?
I see apple as a kodak.One day the go to for everyone (well 50% ish of the market) the next day the a slow decline to nothing.
Yes they have brand power for now but its not a consumer staple it will have its peak at some point and then down forever.
Frankly im surprised at the ammount people are willing to pay for Apple products. Especially those who can ill afford it.
Dunno. Truly. Not convinced either way but probably more bullish for them. They are doing a lot right and they have a lot of run way and a lot of brand.. plus expanding into services and cars and...
Edited by bmwmike on Friday 28th October 00:38
[quote=DonkeyApple]
If you're going to be in the business of selling stuff to people with no money then it's best to be selling stuff they have to buy.
Meta is a boring advertising company that specialises in the absolute bottom of the market and selling ad space to businesses that hawk tat no one needs. 25% off}
True. A borting ad company, that should Mr Zuckerberg choose to take action on the letter from his penpal Mr Gerstner, could easily produce $40Bn FCF...
If you're going to be in the business of selling stuff to people with no money then it's best to be selling stuff they have to buy.
Meta is a boring advertising company that specialises in the absolute bottom of the market and selling ad space to businesses that hawk tat no one needs. 25% off}
True. A borting ad company, that should Mr Zuckerberg choose to take action on the letter from his penpal Mr Gerstner, could easily produce $40Bn FCF...
bmwmike said:
vulture1 said:
bmwmike said:
Where do you guys see Apple on the oscilloscope of trash people don't need to trash people don't need but have to buy?
I see apple as a kodak.One day the go to for everyone (well 50% ish of the market) the next day the a slow decline to nothing.
Yes they have brand power for now but its not a consumer staple it will have its peak at some point and then down forever.
Frankly im surprised at the ammount people are willing to pay for Apple products. Especially those who can ill afford it.
Dunno. Truly. Not convinced either way but probably more bullish for them. They are doing a lot right and they have a lot of run way and a lot of brand.. plus expanding into services and cars and...
Edited by bmwmike on Friday 28th October 00:38
The Kodak comparison is perfect. iPhones generate 3x the profit of their next most profitable area, services. Which is fully reliant on people sticking with iPhones so they are tied in to the apple ecosystem.
If harder times mean people don't renew their phones as often or decide to go for a vastly cheaper android and realise they also "just work" then it won't be long before it's on the bones of its arse again.
bmwmike said:
Where do you guys see Apple on the oscilloscope of trash people don't need to trash people don't need but have to buy?
On the one hand you have the argument that the client demographic contains those who are mostly unaffected by price rises, there is absolutely no doubt that this 'return to reality' will show in their numbers. It's inconceivable that there won't be a slowdown in update rates on phones and a cut in the completely unnecessary products like earbuds. The biggest weakness may be laptops as the reality of a laptop is that one can actually last nearly ten years if needed. Many users of apple laptops have been reliant on charity donations from employers to bridge the gap. Those companies will all be investigating why they've been haemorrhaging hundreds of millions a year via the stationary and on/off dept and realising that not buying 1000 apple laptops every week to help get rid of investor capital as quickly as possible so as to get back to the important core business of fund raising has been insanely stupid. 
But I think the 'return to reality' is happening very logically. We've not had a panic crash but rather a sensible adjustment to expectations of quality businesses and a ditching of cash burning junk that's wholly reliant on lax spending among the poorest Westerners.
An area that does interest me in the 'return to reality' is that obviously cash starts to have a value again. Arguably that's the core driver to this. The business model of simply hurling as much worthless cash at subsidising hideously loss making enterprise in the random hope of attracting enough users to be self sufficient before the cash supply runs out has ground to a trickle. Firms that are both sitting on cash piles and generating positive cash flow are being favoured. But those firms split into two groups, those with a yield and those without.
With cash becoming more valuable, one wonders if non dividend paying behemoths (including those that pay a pittance) will be looking at whether they need to change that to attract the dominant investors? Not paying a yield is fine when the cash market is dominated by investors who want stock growth because cash has no value but today many of those investors are out and the people who own the cash are saying they want a yield for the troubles as well.
I wonder if over the next couple of years we may see the solid tech companies admitting that they aren't start-ups any more but long standing, well established, vanilla, 21st century companies that pay a dividend that is large enough to bring in capital to stop the share price falling?
Philvrs said:
AMZN showing -12% after hours for me.
Is this the start of the next dot com burst?
There looks to have been some fat finger action over night. Is this the start of the next dot com burst?
When you say the 'start of the next dot com crash' what exactly do you mean? We've been in the bursting bubble since the end of lockdown. Arguably, the bubble was set to burst before the whole Covid event, the smell was around the market from the middle of 2018 and VC capital flows in we're slowing and investors were cashing out. Covid then disrupted this by pumping vast amounts of new shopping tokens into the hands of the credit addicted consumer zombie army but today we're back to the reality that was appearing back in 2018.
We are very much in the middle of a massive crash but it is one that is happening slowly, steadily and with precision which I suspect many younger investors haven't witnessed before. While I'm assuming there will be a 'black Monday' type event it's possible that this may not be in the stock market as it does appear to be unwinding itself in quite an orderly manner, removing unjustifiable premiums. I wonder, instead, if the more overt capitulation event may take place in another market such as property?
It seems rather obvious to me that the equity markets have been adjusting to the new global economics but property hasn't yet and the longer a market holds itself up the bigger the reaction when it finally needs to rebase?
rossub said:
vulture1 said:
Frankly im surprised at the ammount people are willing to pay for Apple products. Especially those who can ill afford it.
I think beyond hardware, Apple makes huge money on its app store. The usual headlines "Games" but they do get a massive cut from "online gambling apps".
https://www.wsj.com/articles/apple-doesnt-make-vid...
(Not a specialist on this particular industry though, just my observation from basic metrics)
https://www.wsj.com/articles/apple-doesnt-make-vid...
(Not a specialist on this particular industry though, just my observation from basic metrics)
DonkeyApple said:
There looks to have been some fat finger action over night.
When you say the 'start of the next dot com crash' what exactly do you mean? We've been in the bursting bubble since the end of lockdown. Arguably, the bubble was set to burst before the whole Covid event, the smell was around the market from the middle of 2018 and VC capital flows in we're slowing and investors were cashing out. Covid then disrupted this by pumping vast amounts of new shopping tokens into the hands of the credit addicted consumer zombie army but today we're back to the reality that was appearing back in 2018.
We are very much in the middle of a massive crash but it is one that is happening slowly, steadily and with precision which I suspect many younger investors haven't witnessed before. While I'm assuming there will be a 'black Monday' type event it's possible that this may not be in the stock market as it does appear to be unwinding itself in quite an orderly manner, removing unjustifiable premiums. I wonder, instead, if the more overt capitulation event may take place in another market such as property?
It seems rather obvious to me that the equity markets have been adjusting to the new global economics but property hasn't yet and the longer a market holds itself up the bigger the reaction when it finally needs to rebase?
There isn’t generally overleverage in commercial real estate, so not a GFC level event. A lot of private capital deployed through debt funds and CRE PE will be lost, and values may well come down by 20%, driven by higher gilt yields (although those are moderating).When you say the 'start of the next dot com crash' what exactly do you mean? We've been in the bursting bubble since the end of lockdown. Arguably, the bubble was set to burst before the whole Covid event, the smell was around the market from the middle of 2018 and VC capital flows in we're slowing and investors were cashing out. Covid then disrupted this by pumping vast amounts of new shopping tokens into the hands of the credit addicted consumer zombie army but today we're back to the reality that was appearing back in 2018.
We are very much in the middle of a massive crash but it is one that is happening slowly, steadily and with precision which I suspect many younger investors haven't witnessed before. While I'm assuming there will be a 'black Monday' type event it's possible that this may not be in the stock market as it does appear to be unwinding itself in quite an orderly manner, removing unjustifiable premiums. I wonder, instead, if the more overt capitulation event may take place in another market such as property?
It seems rather obvious to me that the equity markets have been adjusting to the new global economics but property hasn't yet and the longer a market holds itself up the bigger the reaction when it finally needs to rebase?
Interestingly, demand is holding up fairly well, even in things that I was bearish on like City offices, so that should help avoid extreme distress.
loafer123 said:
rossub said:
vulture1 said:
Frankly im surprised at the ammount people are willing to pay for Apple products. Especially those who can ill afford it.
I use Apple because it's pretty much idiot proof and everyone I know is on Apple so it's easy to get stuff sorted. I tried Android but it was just too 'microsofty' for me, I didn't like it at all.
When it comes to Apple's ancillary products I simply don't see any purpose at all in them. I don't wear a watch, nor need one or desire the hassle of a man bangle that has no essential need. Nor do I need EarPods, I'm sure they're very good but I view headphones as disposable items so just buy cheap.
However, I think we can appreciate that this may not be normal consumer behaviour?
. I suspect that the majority of tech users of all brands have been slapping everything in finance and rolling over debt and products while paying huge premiums. For years people have wondered just how much money someone must have been earning to be driving around in a brand new £100k car, living in a home jammed full of the latest tech from home cinemas, instant hot water taps, battery packs in the hall and going on multiple holidays a year all while always having the latest Apple products. What those people are about to see is the answer to their question, which is that these apex consumers weren't earning any more than them they were just using every penny to rent someone else's lifestyle for a while.
However, we need to note that Apple aren't alone in renting £1k phones. Companies like Samsung are in that space also now and in comparative terms, one might assume that their Western customers are more exposed to the current market?
I'm one of the dim witted that paid £1K for my iPhone XS.
I've had four years out of it and unless I succumb to wanting a new shiny toy I should get another two years out of it before Apple stop releasing software updates.
I'd hazard a guess that it's cost me less per month than someone with a cheaper and worse phone on a contract but I appreciate it depends on being fortunate enough to pay for it upfront and having enough willpower not to replace it just because they released a new one.
I've had four years out of it and unless I succumb to wanting a new shiny toy I should get another two years out of it before Apple stop releasing software updates.
I'd hazard a guess that it's cost me less per month than someone with a cheaper and worse phone on a contract but I appreciate it depends on being fortunate enough to pay for it upfront and having enough willpower not to replace it just because they released a new one.
regarding Apple - I can totally see a slow down in hardware growth over this next downturn. That's inevitable. But where I think Apple (as a company) have got such superior dominance is with sectors like their subscription services. I'm not sure users will easily be able to give up renting cloud space etc. The other sector Apple will continue (IMO) to grow is their integration into almost everything we own - cars, music systems, TV's, etc etc etc. Of course, there's always the chance a new big player will come onto the market and steal Apple's crown, but I think we're a long away that happening.
b
hstewie said:
hstewie said: I'm one of the dim witted that paid £1K for my iPhone XS.
I've had four years out of it and unless I succumb to wanting a new shiny toy I should get another two years out of it before Apple stop releasing software updates.
I'd hazard a guess that it's cost me less per month than someone with a cheaper and worse phone on a contract but I appreciate it depends on being fortunate enough to pay for it upfront and having enough willpower not to replace it just because they released a new one.
My 8 plus runs the new iOS just fine so I’ll run it into the ground or until it can’t cope with the latest software update. As noted above iPhone 6s are still getting updates. When it finally does die I’ll just buy an iPhone SE which will suit my needs just fine. And they are pretty competitively priced…I've had four years out of it and unless I succumb to wanting a new shiny toy I should get another two years out of it before Apple stop releasing software updates.
I'd hazard a guess that it's cost me less per month than someone with a cheaper and worse phone on a contract but I appreciate it depends on being fortunate enough to pay for it upfront and having enough willpower not to replace it just because they released a new one.
That plus the fact that Apple will change your iPhone battery for a reasonable fee means that for me a £1000 iPhone is better “value” than a £200 Android. You can be confident it will be supported and usable for years.
This may be also why residuals are so strong. For those who like to change their iPhones every few years it’s easy to hand the handset on to a less demanding family member or flog it for a decent amount.
Then there’s things like keychain password management and iCloud backup that are reassuring to have.
DonkeyApple said:
I'd switch to a Mac as I cannot stand Microsoft but I'm not going to spend £3k when Microsoft laptops can be had for ten times less.
3k? Treat yourself. You can grab a Macbook Air (M1) from John Lewis for £900.
It’ll blitz the competition in the majority of use cases and have a lifecycle three times as long. Insane battery life with the proprietary silicon too. I just got one for the Mrs.
loafer123 said:
There isn’t generally overleverage in commercial real estate, so not a GFC level event. A lot of private capital deployed through debt funds and CRE PE will be lost, and values may well come down by 20%, driven by higher gilt yields (although those are moderating).
Interestingly, demand is holding up fairly well, even in things that I was bearish on like City offices, so that should help avoid extreme distress.
I suspect City office space is currently under reprieve due to the slump in Sterling. Interestingly, demand is holding up fairly well, even in things that I was bearish on like City offices, so that should help avoid extreme distress.
Funnily enough, I think as I mentioned on this thread, I've actually decided to sell the main house and have been talking quite frequently with my uni peers who are now senior level within the property market and what is being said behind closed doors doesn't align with what is being said in public reports.
Logically, as cash yields rise so property yields have to rise to compete and it doesn't strike me as the sort of market where rents can easily be banged up to fudge the gap? That suggests values have to fall so that yields can keep pace.
That's fine, one can rationalise a 10% drop next year and another sensible 10% the next and maybe even another. That's all logical and calm. But I think that is completely ignoring how markets actually work and I think values have been robust for so many years that there are very few people in the property market today who have actual experience of a true market so can't quite fathom what May befall them? How many U.K. property professionals under the age of 60 have any direct experience of holding a non grad position during a market correction? None?
The first warning to them will have been in the last month when the Bank had to step into the gilt market to pick up the forced sales of the pension funds. The only reason those funds were selling was because their investment mandate instructs them to.
Now, what we all know is that those same investment mandates for the last 20 years have been forcing pension funds to divest cash into property within key time frames which has led to multiple property assets being overbid by multiple teams who all knew they were paying more than the building was worth but they all had to get rid of their investor cash before month end. The whole of Southwark redevelopment exists because of that artificial demand created by these investment mandates.
So what are the investment mandate rules on when a pension fund must exist a property holding and become a forced seller? Or when it must stop investing in new assets due to a predefined fund re-weighting?
Personally, I think the professional property industry has overlooked some key tipping point risks due to a lack of experience blending into what is now wilful denial and hope that things stay calm.
The simple truth is that there are few property assets with current yields that can cover the next financing rollover and that while slow, steady devaluing will cover that issue, that is not the risk. The risk is those that default and trigger a rout.
It's a bit like the U.K. resi market. There are only 11m mortgages on 33m properties. A very large number of those 11m mortgages are over half way to being paid off and are at no risk of 6% mortgage rates going forward. When you consider that over 60% of U.K. properties are mortgage free, of the 30% with mortgages more than half are insensitive to mortgage rates and a chunk of the remainder easily have incomes and either real savings of consumption savings to handle much higher rates, the U.K. resi market looks really solid.
But the risk is there. It sits in the BTL market and the couple of million mortgage holders with 15% deposit margin or less.
We need to remember that zero rates didn't come about to save borrowers but to save lenders. Osborne's tax hikes on BTL were overtly done to remove the most toxic speculators so that the BTL market wasn't the lethal risk to the property market that it has become.
However, the unspoken reality of debt secured by a margin deposit is that when the value of the asset falls that decline is netted immediately against the client margin.
Put down a 10% deposit and the house price falls 10% and the entirety of that fall is covered by the deposit. If you then need to refinance the lender is going to want a new deposit, 10% of the new value, maybe now 15% to reflect the higher risk.
This is why the property lending market has moved all customers to short dated margin contracts. Precisely so that they can adjust those margin requirements every few years if needs be, as well as creating a huge fee stream.
It's only going to take a handful of defaults for the media to whip up the frenzy and for the market to fail. And while banks have a new code of conduct to be nice to people, if their balance sheets aren't at risk and they see value in putting a customer asset onto their balance sheet at a hefty discount then there are no telephone platitudes in the world strong enough to stop that.
I hope we see neither but I see the real risk to be in property rather than equities just at the moment, simply because equities have been in a pretty orderly rebasing for some time whereas property seems to have only just started and is far less liquid and exposed to total market breakdown.
loafer123 said:
rossub said:
vulture1 said:
Frankly im surprised at the ammount people are willing to pay for Apple products. Especially those who can ill afford it.
rossub said:
loafer123 said:
rossub said:
vulture1 said:
Frankly im surprised at the ammount people are willing to pay for Apple products. Especially those who can ill afford it.
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