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War On Sell Side Wall Street – Apple Edition: To $1,000 & Beyond!

This is a video follow-up to the post I did a couple of weeks ago after the Apple earnings announcement titled “Again, The Sell Side Analysts (Even The Rock Star Analysts) Don’t Seem To Understand The Mobile Computing Wars“.

Initially, I was going to go the PC (as in politically correct) route and treat Mr. Munster with kids gloves, but we’re all adults here and I want everyone to realize that this is not a form of character assassination, a personal or professional attack, libel, slander or even my just being rude. Gene Munster is a professional, and a seemingly intelligent one at that. It’s just that he is wrong, dead wrong, and has been wrong for some time. Despite his extreme inaccuracies regarding Apple and its share price, he is the go to guy for the financial press and mainstream media, not to mention the Apple-centric blogosphere for all things Apple investment related – despite his being wrong as hell.

First reference this quick 3 minute video…

Now reference the following graphic illustrating a search on Mr. Munster’s Apple price targets…

Munster in the media Apple 1000 and beyond

Click here to subscribe or purchase this update. Paid subscribers click here: File Icon Apple 4Q2013 preliminary update. As we wait for my elfin magicians and presdigitation analysts to finsih up on the updated valuation numbers, I’m quite comfortable in recommending subscribers adhere to the latest set of valuation numbers proffered in the last Apple update.

Subscribers, download the Q3 2013 valuation reports (click here to subscribe).

The update from two months ago is also of value for those who haven’t read it. It turns out that it was quite prescienct!

When the Press Perceives a Crime Trend, Turn On Your B.S. Detector

I've seen people blaming this SNL sketch for the "new" "trend." No, really. In his 1999 book
Random Violence, which I recommend highly, the
sociologist Joel Best points out that “criminologists usually doubt
claims about crime waves. Crime waves, they say, are really waves
in media attention: they occur because the media, for whatever
reason, fix upon some sort of crime, and publicize it.” Genuine
spikes in crime do occur, of course, but the press has a habit of
spotting patterns that aren’t there.

I recycled that last paragraph from a
blog post I wrote in January. Back then the alleged crime wave
involved mass shootings. Now the press is focused on “Knockout,”
which my colleague Jacob Sullum
wrote about here yesterday. This time the alleged crime wave
does not involve guns and is being blamed on black people, so the

skeptics tend to be on the left and the
hysterics tend to be on the right. (I like to think of
Reason as a place where we’re skeptical about all
the bullshit crime-trend stories.) But the statistical support for
the idea that there has been a surge in random attacks on
bystanders, whether or not those assaults are a “game,” is absent.
The only thing that is spiking for sure is media attention, and
that has less to do with the number of crimes than the presence of
a storyline that the press can plug those crimes into.

Fun fact: In 1989, many reporters became convinced that
there was a crime trend called “wilding,” which (naturally)
involved random assaults on strangers. This was a byproduct of the

Central Park jogger case: A police officer apparently misheard
a reference to the Tone Loc song “Wild Thing” as
“wilding” and the media ran with it, without bothering to say to
themselves, “You know, ‘wilding’ is kind of a dorky word. Are a
bunch of hardened thugs really going to use it?”

from Hit & Run http://reason.com/blog/2013/11/26/when-the-press-perceives-a-crime-trend-t
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Orlando Generously Allows Residents to Slightly Control Their Own Yards

"Marijuana? No, no, that's mint." Last week, Zenon Evans
passed along the story of Hermine Ricketts and Tom Carroll, who
are fighting the city of Miami Shores, Fla., for the right to grow
vegetables in their front yard. They are suing with the help of the
Institute for Justice.

Head north, though, and the City of Orlando has magnanimously
decided to allow homeowners their home-grown vegetables, though
they’ve packaged it within a whole host of other regulations
controlling what people do with their yards. From the
Orlando Sentinel:

On Monday, the City Council gave preliminary approval to rules
that would allow veggie gardens to cover as much as 60 percent of a
home’s front yard. But they could not be planted in the public
right-of-way along the street, and would have to be screened with
fencing or shrubs, and set back at least three feet from the
property line.

It’s more garden-friendly than city planners’ first attempt,
which restricted gardens to no more than 25 percent of the front
yard, required 10-foot setbacks and sought height limits on
tomatoes and other plantings.

As in Miami Shores, the fight started when the city demanded a
couple, Jason and Jennifer Helvenston, remove their vegetable
garden or face fines. The city’s efforts were short-circuited when
it was discovered the city didn’t actually have any rules about
vegetable gardens.

So really, the new rules aren’t giving residents more freedom to
decide what to do with their yards. It’s actually taking it away.
The new rules require a shade tree on every lot of every new home
construction – and for anybody attempting to add to their property.
It also has a list of “approved” shrubs and trees and regulations
for irrigation timers.

Read the whole story
here.

from Hit & Run http://reason.com/blog/2013/11/26/orlando-generously-allows-residents-to-s
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That Mega “Black Friday” Sale? It’s Just The End Of The Mega”Pre-Black Friday” Mark Up

“The silliness of it all is that the original price from which the discount is computed is often specious to begin with,” sums up the seemingly obvious “retail theater” that plays out every Black Friday in mall after mall across America. As the WSJ reports, the common assumption is that retailers stock up on goods and then mark down the ones that don’t sell, taking a hit to their profits. But that isn’t typically how it plays out. Instead, big retailers work backward with their suppliers to set starting prices that, after all the markdowns, will yield the profit margins they want. Buyers don’t seem to mind. What they are after, especially in such a lackluster economy, is the feeling they got a deal, “I don’t even get excited unless its 40% off.” The manufactured nature of most discounts raises questions about the wisdom of standing in line for the promotional frenzy that kicks off the holiday shopping season. It also explains how retailers have been able to ramp up the bargains without giving away the store – until now.

Because no one needs a thing this bad…

Via WSJ,

“A lot of the discount is already priced into the product. That’s why you see much more stable margins,” said Liz Dunn, an analyst with Macquarie Equities Research.

…

The number of deals offered by 31 major department store and apparel retailers increased 63% between 2009 to 2012, and the average discount jumped to 36% from 25%, according to Savings.com, a website that tracks online coupons.

…

Stores also field loss leaders, true bargains that pinch profits but are aimed at getting customers into their stores. Most deals, however, are planned to be profitable by setting list prices well above where goods are actually expected to sell.

Retailers could run into legal trouble if they never try to sell goods at their starting price. Otherwise, there’s nothing wrong with the practice.

…

Penney, which made a disastrous attempt to move away from discounts… But first it has to adjust its prices.

“We must and will compete to win,” Mr. Ullman said last week on a conference call with analysts. “That means initially marking up our goods to sufficient levels to protect our margins when the discount or sale is applied.”

…

Here’s how it works, according to one industry consultant describing an actual sweater sold at a major retailer. A supplier sells the sweater to a retailer for roughly $14.50. The suggested retail price is $50, which gives the retailer a roughly 70% markup. A few sweaters sell at that price, but more sell at the first markdown of $44.99, and the bulk sell at the final discount price of $21.99. That produces an average unit retail price of $28 and gives the store about a 45% gross margin on the product.

Retailers didn’t always price this way. It used to be that most items were sold at full price, with a limited number of sales to clear unsold inventory. That began to change in the 1970s and 1980s, when a rash of store openings intensified competition and forced retailers to look for new ways to stand out.

…

Another tactic involves raising selling prices ahead of the holidays before the discounts kick in. In an analysis for The Wall Street Journal, price-tracking firm Market Track LLC looked at the online price fluctuations of 1,743 products in November 2012. Prices climbed an average of 8% in the weeks leading up to Thanksgiving for 366, or about a fifth, of the products; the items were then discounted on Black Friday. Toys and tools had the biggest pre-Black Friday price increases—about 23%.

…

Retailers are supposed to offer items at regular prices “for a reasonably substantial period of time” before marking them down, according to the Federal Trade Commission.

…

Retailers, having trained customers to shop for deals, are stuck with the strategy for now. Macy’s tried to cut back on coupons in 2007.

“Customers stopped shopping,” said Chief Executive Terry Lundgren, “so we knew that was a bad idea.”

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/QHh4huYCPZw/story01.htm Tyler Durden

That Mega "Black Friday" Sale? It's Just The End Of The Mega"Pre-Black Friday" Mark Up

Because no one needs a thing this bad…

Via WSJ,

“A lot of the discount is already priced into the product. That’s why you see much more stable margins,” said Liz Dunn, an analyst with Macquarie Equities Research.

…

The number of deals offered by 31 major department store and apparel retailers increased 63% between 2009 to 2012, and the average discount jumped to 36% from 25%, according to Savings.com, a website that tracks online coupons.

…

Stores also field loss leaders, true bargains that pinch profits but are aimed at getting customers into their stores. Most deals, however, are planned to be profitable by setting list prices well above where goods are actually expected to sell.

Retailers could run into legal trouble if they never try to sell goods at their starting price. Otherwise, there’s nothing wrong with the practice.

…

Penney, which made a disastrous attempt to move away from discounts… But first it has to adjust its prices.

“We must and will compete to win,” Mr. Ullman said last week on a conference call with analysts. “That means initially marking up our goods to sufficient levels to protect our margins when the discount or sale is applied.”

…

Here’s how it works, according to one industry consultant describing an actual sweater sold at a major retailer. A supplier sells the sweater to a retailer for roughly $14.50. The suggested retail price is $50, which gives the retailer a roughly 70% markup. A few sweaters sell at that price, but more sell at the first markdown of $44.99, and the bulk sell at the final discount price of $21.99. That produces an average unit retail price of $28 and gives the store about a 45% gross margin on the product.

Retailers didn’t always price this way. It used to be that most items were sold at full price, with a limited number of sales to clear unsold inventory. That began to change in the 1970s and 1980s, when a rash of store openings intensified competition and forced retailers to look for new ways to stand out.

…

Another tactic involves raising selling prices ahead of the holidays before the discounts kick in. In an analysis for The Wall Street Journal, price-tracking firm Market Track LLC looked at the online price fluctuations of 1,743 products in November 2012. Prices climbed an average of 8% in the weeks leading up to Thanksgiving for 366, or about a fifth, of the products; the items were then discounted on Black Friday. Toys and tools had the biggest pre-Black Friday price increases—about 23%.

…

Retailers are supposed to offer items at regular prices “for a reasonably substantial period of time” before marking them down, according to the Federal Trade Commission.

…

Retailers, having trained customers to shop for deals, are stuck with the strategy for now. Macy’s tried to cut back on coupons in 2007.

“Customers stopped shopping,” said Chief Executive Terry Lundgren, “so we knew that was a bad idea.”

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/QHh4huYCPZw/story01.htm Tyler Durden

Senators Call for Halting Unconstitutional NSA Spying on Americans

NSA spying In their cogent op-ed,
“End
the NSA Dragnet, Now” in the New York Times today,
Senators Ron Wyden (D-Ore), Mark Udall (D-Colo), and Martin
Heinrich (D-N.M.) argue in opposition to an authoritarian bill
proposed by the Senate Intelligence Committee that would
actually ratify the power of the National Security Agency to
spy on Americans. To their great credit, the three senators have

proposed legislation that would go a long way toward restoring
American’s Fourth Amendment privacy protections against NSA
surveillance. From the op-ed:

THE framers of the Constitution declared that government
officials had no power to seize the records of individual Americans
without evidence of wrongdoing, and they embedded this principle in
the Fourth Amendment. The bulk collection of Americans’ telephone
records — so-called metadata — by the National
Security Agency is, in our view, a clear case of a general
warrant that violates the spirit of the framers’ intentions. This
intrusive program was authorized under a secret legal process by
the Foreign Intelligence Surveillance Court, so for years American
citizens did not have the knowledge needed to challenge the
infringement of their privacy rights.

Our first priority is to keep Americans safe from the threat of
terrorism. If government agencies identify a suspected terrorist,
they should absolutely go to the relevant phone companies to get
that person’s phone records. But this can be done without
collecting the records of millions of law-abiding Americans. We
recall Benjamin Franklin’s famous admonition that those who would
give up essential liberty in the pursuit of temporary safety will
lose both and deserve neither.

The usefulness of the bulk collection program has been greatly
exaggerated. We have yet to see any proof that it provides real,
unique value in protecting national security. In spite of our
repeated requests, the N.S.A. has not provided evidence of any
instance when the agency used this program to review phone records
that could not have been obtained using a regular court order or
emergency authorization.

Despite this, the surveillance reform bill recently ratified by
the Senate Intelligence Committee would explicitly permit the
government to engage in dragnet collection as long as there were
rules about when officials could look at these phone records. It
would also give intelligence agencies wide latitude to conduct
warrantless searches for Americans’ phone calls and emails.

This is not the true reform that poll after poll has shown the
American people want. It is preserving business as usual. When the
Bill of Rights was adopted, it established that Americans’ papers
and effects should be seized only when there was specific evidence
of suspicious activity. It did not permit government agencies to
issue general warrants as long as records seized were reviewed with
the permission of senior officials.

Thanks
to Edward Snowden, Americans now know that the NSA and other
federal police and spy agencies were in the process of constructing
what could easily have evolved into what former NSA cryptanalyst
William Binney described as a “turnkey
totalitarian state.”

The time to stop it is now. Readers who are so moved can make
their concerns known by contacting their
members of Congress and the Senate.

The whole New York Times op-ed is well worth
reading.

See also reason.tv’s “What We Saw at the Anti-NSA ‘Stop Watching
Us’ Rally” in Washington, DC below:

from Hit & Run http://reason.com/blog/2013/11/26/senators-call-for-reining-in-unconstitut
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Cathy Young on Doris Lessing’s Impatience With Political Correctness

The
tributes to Doris Lessing, the novelist and Nobel Prize laureate
who died on November 17 at 94, have given scant attention to one
aspect of her remarkable career: this daughter of the left, an
ex-communist and onetime feminist icon, emerged as a harsh critic
of left-wing cultural ideology and of feminism in its current
incarnation. Her trenchant critiques, writes Cathy Young, which
some on the left would like to brush off as mere contrarian
“crankiness,” should be heeded by anyone truly concerned with
justice for all.

View this article.

from Hit & Run http://reason.com/blog/2013/11/26/cathy-young-on-doris-lessings-impatience
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Cathy Young on Doris Lessing's Impatience With Political Correctness

View this article.

from Hit & Run http://reason.com/blog/2013/11/26/cathy-young-on-doris-lessings-impatience
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Consumer Confidence Misses (Again), Tumbles To Lowest In 7 Months

No matter what measure of confidence, sentiment, or animal spirits one uses, the consumer is not encouraged by the record-er and record-er highs in the US equity market. The Conference Board's consumer confidence data missed for the 2nd month in a row – its biggest miss in 8 months – as it seems in October consumers were un-confident due to the government shutdown… but in November they are un-confident-er due to its reopening. As we have noted in the past a 10 point drop in confidence has historically led to a 2x multiple compression in stocks (which suggests the Fed will need to un-Taper some more to keep the dream alive). Ironically, more respondents believe stocks will rise of stay the same over the next 12 months even as the 'expectations' sub-index collapsed to its lowest in 8 months.

Once again we remind that it's all about confidence and hope appears to be fading…

As we have noted previously – this move in confidence is key…

But, it's all about confidence… investors will not be willing to pay increasing multiples unless they are confident that the future streams of earnings are sustainable and forecastable… And simply put, the current levels of Consumer Sentiment need to almost double for the US equity market tp approach historical multiple valuation levels…

and the cycle appears to be shifting…

Via Citi,

Is consumer confidence set to turn?

Consumer Confidence is once again following a dynamic where we see it move higher for 4 years and 4 months before beginning to collapse

Moves higher from 1996-2000 with a smaller dip halfway through in October 1998
Moves higher from 2003-2007 with a smaller dip hallway through in October 2005
Moves higher and so far tops out in June 2013. Also sees a small dip halfway through in October 2011.

Higher yields do not help confidence…

A sharp rise in mortgage rates has a negative feedback loop to consumer confidence. For those families and individuals that were now looking/able to enter the housing market, the recent spike in rates acts as a headwind.

In addition to the economic backdrop, there is plenty of tail risk as we head into the end of the year. Oil prices have been rising since the summer began (and in reality since the Summer of 2012), partially due to geopolitical risks which are very much “top of mind.” A bigger spike due to a supply shock would choke the economic recovery.(In our view)

In the US, the appointment of a new Fed Chairman and the upcoming budget/debt ceiling debates are likely to bring added volatility. Tapering itself can also induce concern as the “Bernanke put” is being removed from markets.

In Europe, many of the structural problems related to the single currency union have not actually been addressed and the peripheral countries could still create turmoil going forward (see Fixed Income section focusing on Italy in particular for more on this). There has also been little concern with both the German elections and the German Court decision on the constitutionality of the OMT program. A surprise in either of these could be cause for concern.

Emerging Markets are still not out of the woods yet as growth has been weak relative to expectations and countries with current account deficits are beginning to feel pressure in their FX and Bond markets. This is an issue we believe is only starting to develop which we will continue to expand on at later dates.(We have also looked at this in our EM FX section this week)

Overall, the weak economic backdrop, poor housing recovery and potential for tail risk events over the next few months suggest that we have topped out in Consumer Confidence, a warning sign for equity markets.

The relationship between Consumer Confidence is clear, and IF June did mark the high and Confidence continues to decline, then we would expect to see that translate to weakness in the equity markets. The removal of the “Bernanke put” only adds to this concern.

A major turn has taken place in equity markets on average four months after Consumer Confidence turns, which would point to a decline beginning around September-October. As we have previously expressed, we remain of the bias that a correction in equity markets on the order of 20%+ is likely this year/ into 2014 and the current dynamics support such a move.

Should we see a decline of that magnitude, it is almost certain that yields would move lower in a rush to safe assets.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/NXXS92XIVCE/story01.htm Tyler Durden

Believe It Or Not: Japan To Reopen Soccer Facility In Fukushima For 2020 Olympics

Below we present a twitter exchange we had with a Japanese media outlet overnight on Twitter. It needs no commentary.

Plan in the works to decontaminate Fukushima’s J-Village in time to reopen it as soccer facility ahead of 2020 Olympics.

— SNA Japan (@ShingetsuNews) November 26, 2013

Is this a joke “@ShingetsuNews: Plan in the works to decontaminate Fukushima’s J-Village to reopen it as soccer facility ahead of Olympics.”

— zerohedge (@zerohedge) November 26, 2013

@zerohedge No joke. TEPCO, Fukushima Prefecture, and the Japan Football Association have begun talks on the plan.

— SNA Japan (@ShingetsuNews) November 26, 2013

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ckTNdbe3SFc/story01.htm Tyler Durden