Why Apple (Nasdaq: AAPL) Is Still on Our Blacklist
It was an earnings surprise, for sure.
Apple Inc. (Nasdaq: AAPL) split its stock 4-to-1 and hit all-time highs. (Oops, we accidentally said 6-to-1 in the video, but the correct split is 4-to-1. Sorry about that!)
You know AAPL has been on our Blacklist for some time, and today we’ll show you why it remains firmly in place.
Hint: Just look at these two companies:
America 1.0 Apple — no innovation since Steve Jobs led the charge, and it’s only concerned about share buyback.
America 2.0 Facebook — full of innovation and embracing mega trends like virtual reality to create new products like the Oculus that will change the world.
Paul and I will tell you everything you need to know about how to position your portfolio for America 2.0 and the resulting Dow 100K in today’s IanCast.
And HUGE updates on crypto and cannabis that you won’t want to miss. Watch it all here:
Apple’s Buyback Strategy Manipulates Market
The Nasdaq being up pre-market is more trustworthy than the Dow because the Dow is like a price-based index. It’s super easy to manipulate. Anyone who is looking to shift the market mood with not much capital can move the Dow futures around.
Apple reported good earnings. They reported good earnings and the stock is up 6% in the pre-market. Important for the Dow and not so much for the Nasdaq, they are going to split the stock.
That was a big announcement and not expected. This announcement is going to impact the Dow because that’s a price-weighted index. So, the higher the stock price, the higher it affects the Dow. Obviously 30 stocks are in there and Apple was one of the highest, if not the highest, priced stock in there.
It was the number one driver of the Dow Jones. Now that it’s going to be split six for one, it’s going to have way less of an impact on the kind of moves that the Dow Jones has.
As everyone knows, I’ve been wrong about Apple stock for some time. Nonetheless, it doesn’t change the stock making all-time highs. I get it on some level. If you have the kind of buy back firepower that they have, spending $300 billion over the last four years during a period of historic opportunity.
You could spend money to change the world. You could spend money to dominate history and they are focused on the stock price. Their decision to split the stock does tell you that this is a company and a management that is focused on the stock price.
It’s an interesting strategy. No company has done anywhere near the amount of stock buybacks that Apple is doing. They are not showing any signs of slowing it down or putting that cash to better use. It’s not going to be long before they run out of options.
They must put the cash to some other use. They are down to 10 years before there will be no shares left. The time is running out for them at this point. Softbank was just trying to sell them part of this company called Arm, which is an advanced chip company.
They didn’t want any part of it. Now Nvidia is trying to buy it. They are getting bid out for these innovative companies they could be putting cash into and growing their business. They aren’t putting any attempt into that at all.
America 2.0 Stock Innovations Are Improving Lives
So many ways where Apple could put, forget $300 billion, even $50 billion toward this would matter. However, their focus is clearly on the stock price. In addition to that, they are borrowing money. They are taking advantage of low interest rates to pay out a dividend and to fund the stock buyback program.
I have no idea when, but it will end badly. We have never seen one end well. Ultimately their business is about innovation. This is a period of historic innovation. Compare this to some of the other heavyweights that reported today — Amazon, Facebook — think how much open-ended innovation is still going on in these already very large companies.
They are trying to expand into as many areas as they can because they see that innovation. Apple is mostly just focused on keeping up what they’ve done in the past and not adding anything on.
My guess is that Amazon’s drone delivery can’t be far away. Implementation of AI for shopping and additional purposes beyond that is definitively coming soon. Their AWS platform just dominates the internet. There are other businesses percolating under there that act as a growth stimulant and innovation stimulant.
Facebook’s app, Oculus Quest, has seen sales rocketing up during this pandemic. If people are stuck at home right now, the coolest kind of game you can have is VR. That doesn’t surprise me one bit. That’s a big part of their business that they bought before anyone knew what VR was going to become.
I think it was back in 2014 or maybe a couple years after that. It was a while back and it turned out to be a good investment for them.
It’s a great way of framing America 1.0 versus America 2.0. America 1.0 is Apple taking money and buying back stock, paying dividends. America 2.0 is seeing incredible opportunity out there and taking that money and investing it into all these things that can improve life, make things more accessible and cheaper.
That’s the essence of innovation. Facebook and Amazon reflect the growth elements of it. Apple stock continues to get bid up. If Warren Buffet has cornered $120 billion of it and people are willing to follow him, it’s a huge part of the index and it’s going to continue to get bid up.
From our perspective, we understand what is going on there. Apple going up still represents a stability point to the indices and gives people confidence to buy other things. What will happen over time is other stocks will rise in value and Apple’s stock will slowly shrink out.
Then it will start to become of less importance to these indices. Then it will be irrelevant as to what it does. In terms of the overall market, while many people focus on the Dow Jones, this is a very America 1.0 index. We expect over time it will be transformed as it has been over its entire life.
The Dow Jones 100 years ago is very different from the Dow of today. The Dow, if it exists, 100 years out will be very different than it is today. We expect all these America 1.0 companies like ExxonMobil, Wells Fargo, and Travelers Insurance to go out.
Scarcity Drives Value
The other day when we saw Bitcoin pop from $9,500 to $11,000, a lot of miner stocks were up 30%. It was Hut 8, Argo Blockchain and Hive Blockchain. They are some of the only miners left. They are some of the biggest in the world and they are publicly traded.
We can see in real time how the sentiment around miners is going from the stock market. These stocks are starting to make a move higher because, with Bitcoin going up, they can sell the Bitcoin they mine for more. The price of Bitcoin is directly correlated to their sales and the fees are a big part too.
Where there are less Bitcoin being mined, meaning they have less to sell, the fees are making up for that. They are jumping like crazy.
The scarcity drives the value. Post-Halving, people only get half the reward. That runs a bunch of people out of business. Then the Bitcoin price has to rise to make it worthwhile to go mine the Bitcoin.
Not everything that’s scarce has value, but the vast majority of things that have value have some scarcity element to it. Bitcoin is one of them.
Ethereum fees are also up 1,300% since April. There is now more and more activity on the Ethereum network or blockchain — either way you want to call it, it’s the same. The fact that Ethereum fees are up this big causes people to want to search out other networks.
And there are plenty of them out there. Ethereum is in the process of scaling. They are going to be able to handle it at some point. But for right not with the fees so high, it’s going to be great for the whole blockchain ecosystem because these other projects that are just starting up don’t want to pay these crazy fees.
They are going to look for some other alternatives to Ethereum, which is going to help the crypto market in general because competition always drives markets.
And competition drives innovation, cheaper prices — many aspects. If you are thinking about all the world’s data, which will end up on various blockchains, some of it requires a different level of nodes, a different level of mining. People will find the right blockchain that will be appropriate for their data.
If your data is dense you might need a slightly different blockchain. If you want a very fast blockchain you might need a different network. Nonetheless, it does look like the crypto market is seeing a significant amount of money pushing in.
Especially into the smaller coins. Some of them are up 1,000% over the past few months.
Bitcoin is now over $11,000 — a new high for 2020. Not a 52-week high, but a new high. It’s gone up past the crash moment in March when it was about $10,500. Now it’s — when I last checked — about $11,200. I think Ethereum is close to making a 52-week high, if it hasn’t already.
Crypto world is finally starting to emerge. There’s already an Ethereum-based platform for international trade. People can get loans for trade and finance their trade through the Ethereum blockchain. It’s unbelievable. Their company is now handling millions and millions of dollars’ worth of loans through that. It’s already starting to happen.
There’s so many different players and trust is an important thing. Trust relates to not having the same information at the same time or the lag between money flows between one place and another.
It causes people to then ask for deposits and this enormous amount of paperwork and bureaucracy. Crypto can largely eliminate it by having simultaneous transactions and transparency. Extraordinary things can happen. Truthfully, I cannot wait for mortgages to go onto it.
To refinance a mortgage today is brutal. You can’t wait for new innovations to come and wipe out these old ones.
Cannabis Stocks Will Surge Higher in Coming Months
Benzinga recently published an article that says cannabis sales for 2020 surpasses 2019 on average. You can see there is a big spike in March as people aren’t going to leave their houses, so they go buy up for that. But then it continues from there.
It’s constantly expanding. I’m always seeing new headlines about big companies opening new dispensaries in new places. During the lockdowns it was deemed an essential service, so the stores stayed open. Their sales continued to be strong. A lot of them started delivery services or expanded their delivery services.
A lot of the U.S. companies are now making 52-week highs, which is a great sign. I think the Canadian pot stocks are going to follow suit very soon. This earnings season should be good. During this time when stocks have struggled so much for so long, the volatility is going to be big.
The buying is going to come in big waves. We’re going to see big jumps in the stocks and big, but not as big, corrections or dips in them. The volatility is going to be high. That’s how it is when a company is first starting to recover from a big crash. Overall, these stocks are going to surge up higher over the coming months.
The demand for all cannabis products is very strong — stronger than it’s ever been. And it’s still not even legal, at least recreationally, in a lot of states. There is so much more room for this to grow. Cannabis sales overall are expected to grow 20% this year over last year. It’s a good outlook.
It’s clear to us that this is a young market. We compare it to the early days of alcohol. The growth will be bumpy, but it’s a large and growing market that you want to participate in it. If you have a day trader view, it’s going to be a struggle.
Two Less Understood Aspects of Tesla
There are always surges in demand for a stock that will lift prices up. When you get that kind of jump in a short period of time, it’s also going to draw sellers. Yes, Tesla’s stock has a higher price in the future, but this will not happen in a day or a week.
It can be easy to lose sight of that when it goes up 700% in a year. The company is still on fire. I just saw something about them planning a new energy storage project in California. They are continuing to grow their energy storage business.
Everyone who thinks, “But hey, the Model Y is coming.” When you consider any company, understand that everyone else is also reading the news. Anyone who is buying the stock also understands everything you understand.
If you are waiting and saying, “Model Y sales.” That’s understood by the market and already priced in. It has to be something that is undiscounted or unappreciated about the stock that’s going to bring in the next big buyer to bid up the stock. When I think about that I think the part of the Tesla story that is least understood, I think about the energy and battery part of it.
They are starting to push solar roofs in a big way. When I go to check on where my Cybertruck order is, I see they are starting to push it. Their batteries are an industrial scale business that compete with utilities. That too they are pushing out in a big way.
The other one I think is underappreciated is their potential robotaxi or AI mobility unit.
They have one of the most advanced self-driving platforms in the world. In no other car can you do anything remotely close. You can summon your car from a parking lot to pick you up. It’s impressive. I do see that transferring to robotaxis, which are going to be a big part of transportation in the future.
Those are the two parts of Tesla that are less understood. The car opportunity is understood. At this point they have Model S, Model S, Model 3, Model Y, Cybertruck and then the Semi out there. It’s now on top of that. Now it’s about what they can layer on top of that.
Given that it’s an electronic platform, everything that Facebook or Amazon can do, they can do. They can integrate with software. No other transportation or mobility company can do that yet. The idea of comparing it to Ford or GM, is ridiculous. No one else can do it.
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