Many Planes Actually Made It Out Of Wuhan Yesterday And Today
Update (1300ET): The Toronto Sun reportsCoronavirus control at airports is pretty much a leap of faith.
Just like that, more than 1,000 people on three flights from China walked into Canada without medical screening.
If the coronavirus happens to be incubating in any one of those passengers who arrived at Pearson International Airport’s Terminal 3 on Monday, they are now mingling with Canadian residents.
“I was asked when we got to the Canada Custom’s inspection point if I had been in Wuhan in the past 14 days or if I had a fever,” said Jerry, who with his wife, travelled from Shanghai.
The huge problem with Flightstats is you have to click on every flight to see if it is scheduled, cancelled, unknown, landed, or in the air. There are thousands of flights per day from some Chinese cities.
I do not believe those SFO scheduled flight left or ever will. See Addendum.
This is confirmation that the US should have halted all planes from China long ago.
Addendum
This Tweet From SFO Airport Official
The flight tracking app you are looking at has not updated with the correct origin city. That flight came from Guangzhou (CAN) and not Wuhan (WUH). Flights originally were from CAN-WUH and then WUH-SFO. However flights are not stopping in WUH and going direct from CAN-SFO.
— San Francisco International Airport (SFO) ✈️ (@flySFO) January 28, 2020
“The flight tracking app you are looking at has not updated with the correct origin city. That flight came from Guangzhou (CAN) and not Wuhan (WUH). Flights originally were from CAN-WUH and then WUH-SFO. However flights are not stopping in WUH and going direct from CAN-SFO.”
So SFO landing was really from CAN. The rest of the departures do seem to be from WUH.
According to RentCafe’s year-end rent report for 2019, the national average rent capped off another year of strong growth by leveling off in December. But all evidence suggests that the average national rent will continue moving higher – despite all official gauges of inflation reflecting little or no inflation – as popular sun-belt cities like Phoenix and Las Vegas take over from Brooklyn and California as the biggest drivers of higher rents.
This comes as more Americans are leaving places like California and New York for the sun belt, where rents are relatively inexpensive, jobs are plentiful and the weather is far more temperate.
Nationally, the average apartment rent climbed to $1,474 in December, a 3% YoY increase (the slowest in 17 months). Dollar-for-dollar, renters are currently paying, on average, $43 a more per month than they were at the end of 2019. By comparison, the average rent increased by $45 between 2017 and 2018. After years of torrid growth, it’s no surprise the pace of rising rents has slowed: with wages still stagnant, many renters are reaching the upper bounds of what they can afford.
That rents are still climbing is remarkable, in part because developers building rental-focused buildings added 2.4 million apartments to the national inventory over the last decade. This, despite a shortage of single-family homes, as homeownership rates among millennials remain ten percentage points lower than Gen X, or even more.
As we mentioned above, rents in the sun belt saw the biggest gains last year, led by Phoenix ($1,123), where rents increased by 9.6%, or $98. Second was Las Vegas ($1,107), which notched a 6% gain. In third place came Austin ($1,436), where rents tacked on another 5%, or roughly $68.
Unsurprisingly, Manhattan remained the priciest rental market in the country in 2019, with an average rent at year end of $4,211. San Francisco came in second at $3,688 and Boston third at $3,438.
On the other end of the spectrum, Toledo, Ohio, displaced Brownsville, Texas, as the most affordable small city for renters. Average rent in Toledo is just $729 a month.
A plurality of renters last year searched for a 2-bedroom apartment, as many millennials remain unmarried and childless heading into their 30s.
The world is confronting the effects of the “coronavirus.” It likely originated in Wuhan, China, where it jumped from animals to humans at a local food market. It has since spread to other parts of China and beyond.
As we reported late yesterday, the death toll in China has soared past 100 while the number of confirmed cases doubled overnight. Health officials around the world have confirmed more than 4,500 cases, more than triple the number from Friday – cases have also been found in France, the U.S., Canada, Australia, Japan, South Korea and elsewhere. That list includes the world’s three largest economies (the U.S., China and Japan). All but a few of the deaths recorded so far have been in Wuhan or the surrounding Hubei province, per the SCMP.
For many, it recalls the SARS outbreak of 2003, which also originated in China. It ultimately killed 774 people and infected more than 8,000 in different parts of the world.
Not surprisingly, global markets are on edge over fears of the “coronavirus” contagion spreading. And the U.S. stock market sold off yesterday.
But let’s discuss the word “contagion,” because it applies to both human populations and financial markets — and in more ways than you may expect.
There’s a reason why financial experts and risk managers use the word “contagion” to describe a financial panic.
Obviously, the word contagion refers to an epidemic or pandemic. In the public health field, a disease can be transmitted from human to human through coughing, shared needles, shared food or contact involving bodily fluids.
An initial carrier of a disease (“patient zero”) may have many contacts before the disease even appears.
Some diseases have a latency period of weeks or longer, which means patient zero can infect hundreds before health professionals are even aware of the disease. Then those hundreds can infect thousands or even millions before they are identified as carriers.
In extreme cases, such as the “Spanish flu” pandemic of 1918–20 involving the H1N1 influenza virus, the number infected can reach 500 million and the death toll can run over 100 million.
A similar dynamic applies in financial panics.
It can begin with one bank or broker going bankrupt as the result of a market collapse (a “financial patient zero.”)
But the financial distress quickly spreads to banks that did business with the failed entity and then to stockholders and depositors of those other banks and so on until the entire world is in the grip of a financial panic as happened in 2008.
Still, the comparison between medical pandemics and financial panics is more than a metaphor.
Disease contagion and financial contagion both work the same way. The nonlinear mathematics and system dynamics are identical in the two cases even though the “virus” is financial distress rather than a biological virus.
But what happens when these two dynamic functions interact? What happens when a biological virus turns into a financial virus?
We’re seeing it happen in China.
It’s the time of the Lunar New Year holiday in China, China’s most important public holiday. It’s traditionally a time of widespread celebration.
But, for many Chinese cities, not this year.
Many major Chinese cities have been shut down, with no citizens allowed to leave, and their transportation systems have been closed.
Retails sales are also suffering as consumers remain home instead of risking contagion with trips to the store.
The disease is causing financial panic in China at a time when it can least afford it. GDP growth has hit a wall and investors have curtailed new investment.
Could it unleash a global financial panic that ultimately results in a lockdown of the banking system?
It’s possible, but it’s far too soon to say. This is the type of catalyst that could take a year to build.
GOP Doesn’t Have Votes To Block Witnesses: McConnell
Senate Republicans don’t have the votes to block impeachment witnesses, according to Majority Leader Mitch McConnell (R-KY), paving the way for testimony from former national security adviser John Bolton – as well as an argument over whether the Bidens should be called as witnesses in the Senate trial of President Trump.
Witness testimony pushed by Congressional Democrats was largely considered off the table until an 11th hour leak of Bolton’s manuscript in which the former Trump handler claims the president tied military aid to Ukraine to an investigation into allegations against the Bidens.
“If you don’t believe the newspaper report, call the witnesses,” said Senate Minority Leader Chuck Schumer (D-NY) of Bolton’s account, which was first reported in the New York Times on Sunday evening. Schumer added that the witnesses Democrats have wanted to call include Bolton and acting White House chief of staff Mick Mulvaney, who oversaw the pause in funds as head of the Office of Management and Budget.
Republicans have said this week that if the Senate votes for more testimony, they want to call witnesses including Mr. Biden and his son, Hunter.
Sens. Mitt Romney (R., Utah) and Susan Collins (R., Maine) indicated on Monday that they were likely to favor witnesses. Sens. Lisa Murkowski (R., Alaska) and Lamar Alexander (R., Tenn.) remained open to the idea.
“I think that John Bolton probably has something to offer us,” Ms. Murkowski said Tuesday. –WSJ
According to Rep. Mark Meadows, the leak of Bolton’s manuscript is a “desperate attempt to resuscitate” Democrats’ “dying political dreams.”
“This leak was designed for one purpose and one purpose only, and that was to try to manipulate the thinking of my Republican colleagues in the Senate to encourage them to open it up and provide for more witnesses….,” Meadows said at a press conference, adding “My hypothesis is that this is part of a coordinated leak in order to change the narrative.” (via PJ Media)
The question now is how the ‘establishment’ plans to handle the argument over whether the Bidens should testify after refusing for months to look at the underlying case.
Israel Will Vote Sunday To Annex West Bank Lands Delineated In Trump’s ‘Peace Plan’
Immediately following Trump’s unveiling details of his ‘deal of the century’ Mideast peace plan alongside Israeli PM Netanyahu at the White House, Netanyahu announced that Israel will move forward to vote Sunday to annex some 30% of all West Bank territory.
Netanyahu said that “Israel will apply its laws to the Jordan Valley and to the Jewish communities in Judea and Samaria.” This means a million or so Palestinian residents could come under Israeli rule, which sparked a fierce backlash both internationally and among some members of US Congress.
“This is not a peace plan. It is theft. It is erasure,” Left-wing congresswoman Ilhan Omar tweeted following Trump and Netanyahu’s midday remarks.
It was immediately seen by many pundits as setting up Israeli hardliners for a big land grab which concedes all to Israel without even consulting the Palestinian side on the ‘deal’, per The Washington Post:
The package is expected to propose a redrawn border between Israel and the West Bank that would formalize Israeli control over large Jewish settlements. It would give U.S. blessing to some forms of Israeli security control over the territory Israel seized in 1967 and has occupied since, according to two people familiar with the plan who spoke on the condition of anonymity before the plan’s release.
Another Democrat, Michigan representative Andy Levin, slammed the plan for not in reality being a “two-state solution” – instead he noted it’s “in name only”.
This is what a future State of Palestine can look like, with a capital in parts of East Jerusalem. pic.twitter.com/39vw3pPrAL
“Don’t be fooled,” Rep. Levin wrote on Twitter. The proposed plan not is not promising “a lasting peace that will protect Israel’s future as a democratic homeland for the Jewish people or fulfill Palestinians’ aspirations for self-determination,” he said.
Aside from Hamas and the Palestinian Authority under Abbas immediately rejecting the plan to which they were not privy, nor had any negotiating role (after already declaring it would be dead on arrival), Turkey was among the first internationally to condemn it.
The Turkish Foreign Ministry called it “still-born” and further described it as“an annexation plan aiming to destroy the two-state solution and seize Palestinian territories.”
A quick thread summarizing the basic aspects of the Trump anti-peace plan:
1) Palestinians get the trappings of statehood but no state whatsoever
2) Israel will maintain all security control, including over coastal waters, airspace, electromagnetic spectrum and everything.
It also appears there won’t be much support at the UN for the new plan: “U.N. Secretary-General Antonio Guterres says the United Nations remains committed to supporting Palestinians and Israelis in resolving their conflict on the basis of U.N. resolutions, international law and bilateral agreements,” the AP reports.
Referencing the the pre-1967 borders, UN spokesman Stephane Dujarric said, “The position of the United Nations on the two-State solution has been defined, throughout the years, by relevant Security Council and General Assembly resolutions by which the Secretariat is bound.”
Late last year, the investment management giant Morningstar published a report concluding that most people can either save money for retirement, or save money for their kids’ education… but NOT both.
They make the economic realities very clear: parents have to choose between their own future, or their children’s future.
And one of the report’s lead authors went on to say that the RIGHT choice – the ONLY choice – is to choose your retirement over your kids:
“If you sacrifice your retirement savings to send your child to college, you’re making a huge mistake.”
That’s a pretty sad statement. But it’s unfortunately true for most people.
University education is already -very- expensive, and tuition fees are rising much faster than wages and income.
According to Federal Reserve data, university tuition has risen an average of 4.5% per year since 2000 (meaning that university is twice as expensive as it was at the turn of the century).
This ‘inflation rate’ in tuition is more than TWICE as much as the growth in median household income (which has averaged just 2.2% annual growth since 2000).
This means that, for the past two decades, university education has become more and more out of reach. And it’s no surprise that student debt levels are at a record high as a result.
But on the other side of the coin, retirement is also incredibly expensive. And uncertain.
People are living longer than ever before… and they want to ensure that they have enough money to last.
You used to be able to save money for your retirement in easy, low-risk investments like government savings bonds that paid a healthy rate of return.
In 1986, for example, the inflation rate in the United States was just 1.86%. But a 10-year government bond paid as much as 9%.
This was a wonderful investment for retirees who could safely earn a strong return without having to take any significant risk. And this was the case throughout the 1980s and 1990s.
But for most of the last 10-12 years, interest rates have hovered near their lowest levels in 5,000 years of human history.
US government statistics show that the overall rate of inflation in 2019 was 2.3%. Yet a 10-year government bond now only pays 1.7%.
So if you’re a retiree today and you put money into that same ‘safe’ government bond investment, you’re guaranteed to lose money when adjusted for inflation.
This is why the CEO of Blackrock (the world’s largest money management firm), has said that people today have to set aside THREE TIMES AS MUCH money to save for retirement as their parents and grandparents did. It’s precisely because of these low interest rates.
Social Security is no comfort, either. We’ve discussed this frequently in previous articles: Social Security is massively and terminally underfunded.
And this isn’t some wild conspiracy theory.
The Social Security’s Board of Trustees publishes a report on the financial health of Social Security every single year.
And those trustees include some of the most senior people in the federal government, including the Secretary of the Treasury, Secretary of Labor, Secretary of Health and Human Services, etc.
In the 2019 report they forecast that Social Security’s primary trust fund will be fully depleted by 2034— just 14 years from now.
And in that same report, the Trustees show that Social Security would need a $50 TRILLION bailout in order to have sufficient funding for its long-term obligations.
That amount is over TWICE the national debt, and nearly THREE times the size of the entire US economy.
That’s an impossible bailout… which means Social Security is no longer a tax or political issue; it’s a simple arithmetic problem, and one that cannot be solved.
These same conditions broadly exist across most of the developed world, especially in Europe and Japan where interest rates are actually NEGATIVE and national pension funds are woefully short of cash.
Now, I really don’t intend to be gloomy. But it’s important to tell the truth about these important issues:
It is mathematically impossible for Social Security (and other national pension funds) to honor the promises they’ve been making for the past several decades.
With record low interest rates, you have to set aside more money than ever before in order to secure your retirement.
But simultaneously, with university tuition rising so much faster than household income, parents have to set aside more money than ever before to pay for their children’s education.
And the government has few options to do anything about it.
The old rules simply do not apply any longer. You can’t keep money parked in a savings account for 20 years and expect to have a comfortable retirement or a college fund for your kids… let alone BOTH.
Conventional options no longer produce the same results that they used to.
But the good news is that there is an entire universe of options out there that can still generate superior returns without having to take on substantial risk– as long as you are willing to look outside of the mainstream.
For example, you can set up a SEP IRA or Solo 401(k) that can help you put away an extra tens of thousands of dollars every year for retirement – tax free.
And instead of investing into conventional investments that simply don’t work anymore, these structures allows you more flexibility to invest your retirement savings in alternatives like cash-producing real estate, secured loans, royalties, and even venture capital and crypto.
Point is, there are plenty of options. You just have to be willing to open your mind to look beyond the mainstream.
Bernie Bros Furious (Again) At “Hostile” DNC Appointments After Sanders Soars Into Dem Lead
It’s like deja vu all over again…
It would appear the Democratic Party elites are in full panic mode as despite all their (and their liberal media mates) efforts to bad-mouth Bernie Sanders, the Vermont Senator is soaring in the polls, overtaking ‘sleepy’ Joe both in surveys and at the bookies.
Today, The Hill reports that a new poll finds Sen. Bernie Sanders (I-Vt.) leading the field of Democratic contenders in California, where about 40 percent of all the convention delegates will be allocated on Super Tuesday.
Sanders also leads in Iowa…
And Sanders lead in New Hampshire…
And on the national level, is rapidly catching Biden…
And finally, where it really matters – putting your money where your mouth is – Bernie is exploding higher, surging past Biden to lead the Democratic Party nomination odds…
Source: Bloomberg
And it is not likely to slow down anytime soon, as the Sanders campaign announced Tuesday it would launch its first ads in Super Tuesday states, spending $2.5 million between California and Texas.
All of which is probably why – after failing with accusations of sexism and verbal attacks from Hilary and Obama – The DNC has stepped up to the plate (again) to disavow Democratic voters in America that they believe in any sort of democracy.
‘Bernie Bros’ are venting frustration at DNC Chairman Tom Perez over his initial appointments to the committees that will oversee the rules and party platform at the nominating convention in Milwaukee later this year.
Specifically, as The Hill reports,Sanders’ allies are incensed by two names in particular:
Former Rep. Barney Frank (D-Mass.), who will co-chair the rules committee, and
Hillary Clinton’s former campaign chairman John Podesta, who will have a seat on that committee.
The Sanders campaign unsuccessfully sought to have Frank removed from the rules committee in 2016, describing him as an “aggressive attack surrogate for the Clinton campaign.”
And, as The Hill details, Podesta, a longtime Washington political consultant and Clinton confidant, is viewed with contempt by some on the left. One of Podesta’s hacked emails from 2016 showed him asking a Democratic strategist where to “stick the knife in” Sanders, who lost the nomination to Clinton that year after a divisive primary contest.
“The appointments also include individuals that are outright hostile to Bernie Sanders and his supporters,” Yasmine Taeb, a DNC member from Virginia, exclaimed.
“It’s not the message the DNC should be sending to the grassroots right now when we’re all working aggressively to defeat the racist in the White House.”
“If the DNC believes it’s going to get away in 2020 with what it did in 2016, it has another thing coming,” Sanders’ campaign co-chair Nina Turner blasted.
Even the neocons are panicking…
“For the socialist left…Bernie is too big to fail. The question is whether the Democratic Party, the only political force standing between Donald Trump and his authoritarian ambitions, will risk failing with him.” https://t.co/RncDSEzrIL
How will the military-industrial-complex survive under a socialist president?
As The Hill concludes, Perez and his team had nothing to do with the party’s disastrous 2016 convention, which took place under the cloud of WikiLeaks releasing hacked DNC emails that showed political bias in favor of Clinton over Sanders.
But Clinton’s recent return to the spotlight to bash Sanders and relitigate both her 2016 primary victory and general election loss has reignited tensions between establishment Democrats and grassroots liberals.
With Sanders rising in the polls, there are new fears among his supporters that the national party will stack the deck against him, particularly if there is a contested convention.
Everyone expecting a quick resolution to the epidemic and a rapid return to pre-epidemic conditions would be well-served by looking beyond first-order effects.
While the media naturally focuses on the immediate effects of the coronavirus epidemic, the possible second-order effects receive little attention:first order, every action has a consequence. Second order, every consequence has its own consequence.
So the media’s focus is the first-order consequences: the number of infected people and fatalities, government responses such as quarantines, and so on. The general expectation is these first-order consequences will dissipate shortly and life will return to its pre-epidemic status with virtually no significant changes.
Second-order effects caution: not so fast. Second-order consequences may play out for months or even years even if the epidemic ends as quickly as the consensus expects.
The under-appreciated dynamic here is the tipping point, the imprecise point at which a decision to make fundamental changes tips from “maybe” to “yes.”
These tipping points are often influenced by exhaustion or frustration. Take a small business that’s been hit with tax increases, additional fees, more regulatory compliance requirements, etc. When the next fee increase arrives, the onlooker might declare that the sum is relatively modest and the business owner can afford to pay it, but the onlooker is only considering first-order effects: the size of the fee and and the owner’s ability to pay it.
To the surprise of the onlooker focusing only on first-order effects, the second-order effect is the owner closes the business and moves away. Invisible to everyone focusing solely on first-order effects, the owner’s sense of powerlessness and weakening resolve to continue despite soaring costs and declining profits has slowly been moving up to a tipping point.
Beneath the surface, every new fee, every tax increase and every new regulation has pushed the owner closer to “I’ve had it, I’m out.”
When the owner shuts the business, onlookers can’t understand how one little extra fee could trigger such a fundamental change. The observer is only looking at the new fee as a single cause with a single consequence. In the real world, each new fee, tax increase and regulation was another link in a causal chain of consequences generating consequences.
Turning to the possible second-order effects of the epidemic in China, let’s start with the decision to keep supply chains in China. The reasons to keep supply chains in China have been dwindling for years: wages and other costs have been rising, the central government has increased demands for technology sharing, the general sense that foreigners and foreign companies are no longer needed or wanted, and the trade war, which is more or less in a truce phase rather than over.
One common belief is that it’s “impossible” to move supply chains out of China. This is a classic first-order effect analysis. When the supply chain gets disrupted for one reason or another and alternatives must be found, alternatives are found. What becomes “impossible” isn’t moving the supply chain from China but keeping it in China.
The mistake made by those only considering first-order effects is that a modest effect “should” only generate modest consequences. For the observer focused solely on first-order effects, if the coronavirus epidemic blows over as expected, then supply chains “should” be unaffected because the effect is quantitatively modest.
But once we start considering cumulative second-order effects and potential tipping points, then the disruption of supply chains caused by the epidemic, no matter how modest, could be “the last straw” to those who had beneath the surface already shifted from “never leave China” to “maybe leave China.” The epidemic could tip the decision process into “must leave China.”
Consider two executives, one who looked at the longer term consequences of being dependent on production in China and began establishing alternative suppliers at the start of the trade war 18 months ago, and another exec who looked at the first-order hassles and expenses of moving out of China and stayed put to minimize short-term expenses.
Individual decisions add up to trend changes, and these charts reflect a trend change in globalization and China’s share of global exports. Globalization and China’s share of global exports have both plateaued and are now entering the stagnation / decline phase of the S-Curve.
Everyone expecting a quick resolution to the epidemic and a rapid return to pre-epidemic conditions would be well-served by looking beyond first-order effects and easy assumptions that the consequences of the epidemic will be near-zero.
Here are some informative science-based links on the coronavirus, courtesy of longtime correspondent Cheryl A.:
Apple Surges After Smashing Expectations, Record Revenue And Stellar Guidance Despite Coronavirus Concerns, Service Revenue Slowdown
Five quarters ago, Apple stunned investors when it said it would no longer disclose the number of iPhones it was selling – a clear signal that selling had slowed dramatically. Investors sold off the stock… then bought the dip with gusto sending AAPL sharply higher with the narrative changing that Apple was pivoting from a product to a service company.
Then four quarters ago, on January 3 2019, Apple once again shocked the market when it slashed its revenue guidance by 8% for only the first time since this century (naturally, blaming China). As AAPL stock tumbled, it reveberated across all capital markets, and even prompted a flash crash cascade in various currency pairs, especially the pound, lira and yen. However, just like a quarter earlier, Apple’s “shock” was quickly overcome, and the after hours plunge actually marked the max pain for longs, with the stock surging 130% since then as its PE multiple rose from 13x to 23X. And to think all it had to do was slash guidance.
Three quarter ago, as largely expected, Apple reported that iPhone sales had indeed slumped, but the reason why the market kept bidding up the stock, was the company’s effervescent outlook, which while declining on a year over year basis, was well above sellside consensus, dispelling fears of a growth slump and boosting hopes that Apple is successfully transitioning to a services company. Of course, Apple’s then brand new $75 billion stock buyback repurchase authorization only helped with the agressive multiple expansion
Then two quarters agi, Apple stock surged once again, when not even the company’s disappointing iPhone sales and service revenue miss was enough to impact its solid earnings and stellar guidance. As a result, quickly regained its status as the world’s most valuable company amid expectations that not only service revenues (especially with the company’s $4.99 Apple TV launch on deck) continued to rise, but amid renewed optimism for higher unit sales after the iPhone 11’s launch in September, despite the phone’s not having major upgrades beyond an additional camera on the back.
Finally, last quarter, the stock now on autopilot, accelerated higher as the company beat both top and bottom line expectations, and more importantly, indicated that it sees no adverse consequences from the ongoing trade war, projecting stellar holiday quarter revenues despite yet another decline in iPhone sales. The catalyst: continued growth to the company’s service offering and rising expectations for an upcoming 5G supercycle.
So with AAPL having hit a record $1.4 trillion market cap just last week making it the most important stock for not only the S&P but virtually every ETF that holds the name, and US declaring a trade war truce with China, everyone’s attention was glued to the Apple earnings report at 430pm ET to see if all the optimism over the past 5 quarters would be justified. The answer appears to be yes, because moments ago, Apple reported that in fiscal Q1, it smashed both revenue and EPS earnings
Q1 EPS: $4.99, Exp. $4.56
Q1 Revenue: $91.8BN, Exp. $88.38BN, and above the high end of the company’s own $89.5BN forecast
Q1 Operating Income $15.625BN
Q1 Product revenue: $79.1BN, above the $75.21BN estimate
This was the highest revenue quarter in Apple history, boosted by the second highest quarterly iPhone revenue ever.
Looking at the product and geographic breakdown, Apple confirmed that speculation for stronger iPhone 11 sales were indeed accurate even if Service revenues missed modestly:
Q1 iPhone revenue $55.96 billion, up 7.6% y/y from $52BN a year ago, and above the exp. $51.50 billion
Q1 service revenue $12.72 billion, up 17% y/y, below the exp. $12.98 billion
Q1 Greater China rev. $13.58 billion, up 3.1% y/y
Apple also reported a solid beat on accessories, including AirPods, Apple Watch and Apple TV.
But it was the company’s renewed solid guidance for the coming quarter that has sparked a new buying frenzy after the the company guided Q2 revenue between $63.0-$67.0BN, well above Wall Street’s estimate of $62.33BN. The company also guided to a Q2 gross margin between 38.0% and 39.0%, above the 38.1% estimate.
Q2 revenue between $63.0 billion and $67.0 billion
Q2 gross margin between 38.0 percent and 39.0 percent
Q2 operating expenses between $9.6 billion and $9.7 billion
Q2 tax rate of approximately 16.5 percent
In what was an otherwise stellar report, the main blemish was ironically some weakness in the company’s increasingly important Service revenue, which rose to $12.72BN, an all time record, up from $12.51BN last quarter, and up 17% from $10.875BN a year ago, if below the $12.98BN expected by Wall Street consensus.
Commenting on the service miss, Bloomberg’s Mark Gurman said that “the services miss isn’t totally surprising. None of their services have made any visible headway. Apple TV+ has very few shows and it seems likely not many people using it are paying for it, Apple Arcade is still early, Apple News+ has been a clear laggard of the bunch, and the Apple Card’s APR and transaction cost splits with Apple are likely still very low.”
Still, in the big picture, services continues to rise and in Q1 contributed 13.8% of total revenue, up from 12.9% a year ago.
Another blemish: despite reporting record wearables, home and accessories revenue of $10 billion up from $7.3 billion a year-ago, this category also posted a modest growth slowdown:
With focus purely on iPhones, sales of Macs predictably continued so slow: Apple said it sold $7.16 billion worth of Macs, compared with $7.4 billion last year, while iPads sales were only $5.98 billion down from $6.7 billion last year.
On a geographic basis, Apple got $13.58 billion of sales from its all important Greater China region, up 3.1% from a year ago. Americas, Europe, and rest of Asia Pacific were also up. Japan was down. The Americas is still by far its biggest region.
That said, with everyone looking for guidance on how the coronavirus may impact China sales, there was no mention of China other than in the regional breakdown. Investors will need to wait for the call to hear if they have anything to say about any impact from the coronavirus outbreak. The full breakdown by geography is as follows:
Commenting on the results, Tim Cook said that the company reported its “highest quarterly revenue ever, fueled by strong demand for our iPhone 11 and iPhone 11 Pro models, and all-time records for Services and Wearables,” adding that “during the holiday quarter our active installed base of devices grew in each of our geographic segments and has now reached over 1.5 billion. We see this as a powerful testament to the satisfaction, engagement and loyalty of our customers — and a great driver of our growth across the board.”
In response to what was solid Q1 earnings and even more solid Q2 guidance, the stock surged 3% to a new all time high, surpassing $1.4 trillion in market cap.
Oil prices rebounded markedly (snapping a 5-day losing streak) from mid-October lows today on no particular news out of China at all (except bad news).
There’s some short-covering “after the worst-case demand scenario got priced in,” said John Kilduff, a partner at Again Capital LLC in New York. Sentiment improved after the sell off captured the attention of Saudi Arabia and China ramped up efforts to contain the outbreak, he said.
“They’ve shown the market they’re not going to take this lying down.”
For now, let’s see what the initial impact of oil demand fears were on inventories.
API
Crude -4.27mm (+500k exp)
Cushing +1.02mm (-870k exp)
Gasoline +3.27mm (+1.3mm exp)
Distillates -141k (-1.1mm exp)
Despite expectations for a modest build, API reported a crude inventory drawdown of 4.27mm…
WTI was hovering around $53.50 ahead of the print, and jumped modestly higher on the API data…
Despite the gains on Tuesday, investors remain cautious of the pathogen’s potential to destabilize oil demand.
“There’s a wait-and-see attitude that seems to be driving markets right now,” said Steeves.
“The virus fears are really a question of how much demand destruction occurs and how long that lasts,” he said.
Finally, in the realm of hope, Ed Morse, head of commodities research at Citigroup, warned oil bears that OPEC+ could extend and deepen cuts at the next meeting in March to “take into account lower demand in the world” resulting from the coronavirus in China. Morse added that the latest oil price drop due to coronavirus is “overdone by about $5.”
