David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Apple goes all-in on services, with new video, games and news subscription packages

    This article by David Neald for NewAtlas may be of interest to subscribers. Here is a section:

    Last and definitely not least, Apple unveiled a serious move into video content production, called Apple TV Plus. Dedicated to "the best stories ever told," the service will feature high-profile content from a variety of big names – Steven Spielberg, Jennifer Aniston, Reese Witherspoon and Jason Momoa were some of the stars who appeared on stage.

    Again, we don't know how much it's going to cost, but it will involve a monthly fee and it will work across all Apple devices. It's coming to more than 100 countries later this year, and will use downloads rather than streaming. You can think of it as Apple trying to be HBO as well as Apple.

    Apple is adding some improvements to the existing TV app as well as launching its own programs, including iTunes movie integration and easier navigation, and it's introducing a separate service called Apple TV Channels at the same time.

    The idea is you only pay for the channels you need, and access them all through the one TV app on your Apple devices. HBO, Showtime, and Starz are three of the channels that are going to be available, and live sports and movies get pulled in too (assuming you've subscribed to the necessary channels).

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    Beware Misreading Inverting Yield Curve

    This article by Mohamed A. El-Erian for Bloomberg may be of interest to subscribers. Here is a section:

    “The extraordinary abrupt end to central bank hiking cycle + Fed paranoia of credit event is uber-bullish credit & uber-bearish volatility,” strategists including Michael Hartnett wrote.

    While negative yields on paper suggest that investors lose money just by holding the obligations, bond buyers could also be looking at price gains if growth stalls and inflation stays low. But along the way, risk assets may be entering the danger zone.

    “We’ve never seen monetary easing so long, so broad, so big,” said Brian Singer, head of dynamic allocation strategies at William Blair, a Chicago-based fund manager that oversees $70 billion overall. “What’s happened after every significant period of accommodation is a reckoning. This time the bubble is lower-rated credit and illiquid private assets.”

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    Lyft Leading Wave of Startups Debuting With Giant Losses

    This article by Eliot Brown for the Wall Street Journal may be of interest to subscribers. Here is a section:

    “Many of their business models have not been tested fully,” Ilya Strebulaev, a Stanford University business professor who studies late-stage startups, said of the large private companies. “I would not be surprised if many of these companies would not be as successful as investors expect them to be.”

    Of the five companies with the largest losses before an IPO, four of them—discount marketplace Groupon Inc., biotech Moderna Inc., social-media company Snap Inc. and communications company Vonage Corp. —have performed poorly on the public markets. A fifth, Viasystems Group Inc., went private years ago at a fraction of its IPO value.

    For investors betting on the coming IPOs, the main appeal is rapid growth, which Lyft has made a centerpiece of its push to Wall Street. Its revenue doubled last year to $2.2 billion in what would be the third largest annual revenue of a U.S. startup pre-IPO, behind Facebook Inc. and Google, according to Capital IQ. Both Facebook and Google were profitable before their IPOs.

    Lyft hasn’t publicly outlined when it hopes to turn a profit, but company executives and bankers point out that spending on high-cost items like marketing is falling as a percentage of revenue. It is also pushing to reduce insurance costs.

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    Investment Strategy: 'Trading Sardines?'

    Thanks to a subscriber for this note from Jeffrey Saut who I had the pleasure of meeting at the American Association of Professional Technical Analysts's (AAPTA) conference on Friday. Here is a section:

    "When investors hear yield curve inversion, they automatically think 'recession.' That’s because every recession since 1962 has been preceded by an inversion. But, not every inversion has been followed by a recession, so keep that in mind."

    Myth number two is that we are into the late part of the business cycle. If that is true why are the late cycle stocks acting so poorly? I have argued that the economic downturn was so severe, and the recovery so muted, that what we have done is elongate the mid-cycle. This implies there is much more time until the mid-cycle ends and the late cycle begins.

    Myth number three has it that earnings are going to fall off a cliff. I do not believe it. Certainly earnings momentum has slowed, but earnings continue to look pretty good to me. And, if the earnings estimates for the S&P 500 are anywhere near the mark, the SPX is trading at 16.3x this year’s earnings and 15.5x the 2020 estimate. I think with 2Q19 earnings myth number three will evaporate.

    As for Friday’s stock market action, readers of these missives should have found last week’s action as no surprise. I have talked about the negative “polarity flip” that was due to arrive last week for a few weeks. How deep the pullback/pause will be is unknowable, but I have stated I do not think it will be much. It was not only the economic data, and PMIs, that sacked stocks, but as I have repeatedly stated it was also the Mueller Report. The result left the senior index lower by ~460 points and the S&P 500 (SPX/2800.71) resting at the lower end of my support zone of 2800 – 2830.

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    What Is the Future of Ecommerce? 10 Insights on the Evolution of an Industry

    This article by Aaron Orendorff for Shopify may be of interest to subscribers. Here is a section:

    For all its enduring hype — physical versus digital, offline versus on — the old war is over. In fact, it’s always been a lie. Choice, not location, is commerce’s greatest opportunity and its most-looming threat.

    In defense of retail’s “apocalypse,” brick-and-mortar losses are mounting; the four-year bankruptcy count now sits at 57 once-landmark chains. Manufacturing market share and in-store sales for consumer packaged goodsare flat or declining. Born-online “microbrands” have devoured the lion’s share of growth. And ecommerce’s gains continue to trounce retail as a whole.

    Here’s the uncomfortable twist: brick-and-mortar still dominates online sales by over $20 trillion. And the gap will widen. After a quarter century, ecommerce’s spread is slowing, 80% of 2018’s gains belonged to Amazon, and (in the U.S.) the top five online retailers own 64.7% of sales:

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