$AAPL crumble

By Christmas, my iPhone SE had less battery life than a Mayfly and needed a replacement. I headed to the Apple store to take a look at the latest iPhone X.

I was wholly uninspired by the design, and wondered who it was that Apple was relying on to regularly spend £1,000 or more on a new phone that isn’t much different from its last model. Alas, I downgraded and am now the proud owner of a custard yellow iPhone 5C.

But it seems I am not alone in my scepticism. Apple cut its revenue expectations last night due to poor iPhone demand, especially from China. The shares dropped 8% almost immediately, ripping a mighty $56 billion off Apple’s market cap.

There is more at play here than Apple’s lacklustre product however. We are currently in the world’s first ever smartphone recession, with global sales peaking at 1.55 billion in the third quarter of 2017 and declining ever since.

This is indicative that the global economy is slowing down. There are over 4 billion people out there that still don’t own a smartphone – and although Apple may charge £1,000+ per phone, other brands are far cheaper. People just aren’t buying them as much.

Interestingly after Apple’s announcement, the Japanese yen had a flash rally, while the Aussie dollar had a flash crash. Both events similarly do not bode well for the global economy. The yen is a safe haven currency (alongside the Swiss franc and the USD), and demand for it increases in times of stress. The Aussie dollar is almost the opposite – a “commodity currency”, strengthening with demand for Aussie commodities during global economic expansion.

(My colleague Nick Hubble sees much more trouble awaiting the Aussie dollar, but for that you’ll need to read the latest issue of Zero Hour Alert.)

The rise of a safe haven the decline of a commodity currency in the face of Apple’s woes is further confirmation that the global economy has run out of gas, and everything that has been levered to that expansion (like $AAPL) is in deep water.

Meanwhile, amidst the chaos, our old friend gold has caught a bid. It’s hit a six-month high in US dollars, but in pounds it’s the highest it’s been in more than a year.

Our own Charlie Morris declared that gold had entered a bull market in December, and weighted The Fleet Street Letter portfolios accordingly. He was right on time; the metal is looking mighty bright these days, and if you’re drawn in by its lustre keep an eye out – we’ve something special in the works.

Until next time,

Boaz Shoshan
Editor, Capital & Conflict

Category: Market updates

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