In what appears to be the first big American reinvestment on the back of the new US tax package, Apple has announced that it will invest $30 bn in the US and pay its $38 bn tax bill. It will expand US operations and add 20,000 new jobs. The company will also give all of its more than 120,000 employees a $2,500 stock bonus. President Trump commented on the news that “I promised that my policies would allow companies like Apple to bring massive amounts of money back to the United States”.
FINSUM: This is why we thought the lowering of corporate taxes was a good idea, and we are very happy to hear that Apple will pay its bill and invest more in the US. As an aside, we do sort of feel like Apple is using this investment as PR fodder to combat against the battery/performance scandal.
A few weeks ago bitcoin was trading at over $20,000 on some exchanges. No it is trading below $9,500. Critics of the cryptocurrency are taking the big fall as vindication of their view, while others are sticking to bitcoin. Other cryptocurrencies slid big too, with ethereum and litecoin both falling around 30%. “The crypto craze is morphing into a crypto crash, from Bitcoin mania to Bitcoin bust”, says a trading analyst, continuing that “that there is no level at which value players step in” when a bubble is bursting.
FINSUM: One of the big problems with bitcoin, as opposed to say the cotton bubbles of American history, is that there is no fundamental underlying economic value of the currency, so there is no potential bottom other than zero.
The fallout from the revelation that Apple’s operating systems drain the batteries of older model phones appears to be hammering the company. The company admitted they deliberately slowed down the performance of older phones to keep them from crashing. The admission has led to widespread criticism and lawsuits are headed the company’s way. Apple has tried to mitigate the issue by cutting prices for replacement batteries and offering free software to check battery health.
FINSUM: We have this fear that this battery and performance scandal might be the beginning of the end of the golden age of Apple.
Stock investors may be in for some big upside surprises while bond investors’ hearts may sink. The new tax regime may have a major unintended consequence for bond markets. With the new lower corporate tax rate, many multinationals are likely to repatriate hundreds of billions of Dollars. For the last several years, much of that money has been parked in Treasuries and other bonds. But with the ability and likelihood of reshoring, companies are likely to pull huge amounts of capital out of bonds and put it into stock buybacks and dividends. This could be a big plus for equities, but bond markets could sink as massive amounts of capital are withdrawn.
FINSUM: This is the first convincing argument we have heard for why any fundamental force, outside of the Fed, could bring about a bond bear market.
The end of the exciting but short-lived Bitcoin era may be upon us. As everyone will know, the cryptocurrency surged this year by around 2000%, from $1,000 up to $20,000. However, after worries and threats of regulation, bitcoin has fallen back steeply and is now trading at around $10,000 or just half what it was a few weeks ago. One prominent fund manager commented on bitcoin that “Having no clear fundamental value and largely unregulated markets, coupled with a storyline conducive to delusions of grandeur, makes this more than anything we can find in the history books the very essence of a bubble”.
FINSUM: It is next to impossible to forecast what bitcoin will do, but it should be noted that the cryptocurrency has bounced back from 50% drops before in this big rally.