Month: April 2021

Apple analysts were impressed by the latest solid quarter as the company reported growing revenue and record Mac and iPhone demand, despite flagging semiconductor shortage concerns. Goldman upgraded the stock to neutral from sell, while others bumped up their price targets and said they expect that strength will continue, despite some supply constraint concerns. The shares gained 3% in U.S. premarket trading, while some global suppliers also rose.

Goldman Sachs says that its original view that the iPhone cycle would disappoint because of Covid-19 was wrong; revises its estimates to reflect the beat and moves June revenue projection closer to consensus

• Current revenue levels may be hard to sustain, although high-end consumers have been more resilient in the pandemic than expected, says analyst Rod Hall
• PT increased to $130 from $83

Raymond James (outperform) says that it was a “solid” report from Apple, and it raises its June quarter estimates off the higher March numbers

• Sees the next iPhone cycle delivering the unit growth that failed to materialize last year due to the pandemic and late launch, writes analyst Chris Caso
• Increases PT to $185 from $160

Piper Sandler (overweight) says Apple significantly beat Street expectations on the top and bottom lines and that it is “impressive” that the June quarter gross margin will only decline 50bps sequentially

• Expects the company’s gross margin to expand as software and services become a bigger percentage of the mix, says analyst Harsh Kumar

Cowen (outperform) says Apple reported “exceptional” margins, with hardware strength likely to extend into 2022 and paid subscriptions to accelerate

• Raises earnings-per-share >10% on the strong iPhone cycle, gross margins, and services growth, says analyst Kris Sankar
• Raises PT to $180 from $153

Deutsche Bank (buy) says Mac and iPad demand stood out, with growing revenue continuing to come from the work- and school-from-home trend, plus the introduction of M1 chips into Macs

• However, there are expectations of supply constraints for the Mac and iPad in the third-quarter, which could cause around $3b-$4b headwind to revenue, say analysts in a note to clients
• PT increased to $165 from $160

Evercore ISI (outperform) says the quarter highlighted the “trifecta” of accelerating iPhone demand with 5G, expansion of gross-margins, and better monetization of services

• Company had a “blow-out quarter” and all of the above implies around >$5 earning-per-share potential for the stock, says analyst Amit Daryanani

Morgan Stanley (overweight) says it expects consensus to move toward its Street 2021 and 2022 revenue and earnings- per-share estimates because of sustained revenue trends

• Results won’t fully negate estimate risk concerns, but the strength will help lessen the risk to consensus 2022 estimates, writes analyst Katy Huberty
• Raises PT to $161 from $158

Source: Bloomberg

Authored by Egon von Greyerz via GoldSwitzerland.com,

“Read my lips: No New Taxes” Bush Sr said in his acceptance speech for his nomination in 1988 when he promised no tax rises. As most politicians, he didn’t keep his word. In the 1992 campaign Clinton made a devastating attack on Bush’s pledge and the rest is history.

The simple rule is: Don’t listen to WHAT people say, but HOW they say it. Already 50 years ago the Mehrabian model concluded that words only convey 7% of a message, body language accounts for 55% and tone of voice delivers 38%. That is why you should never focus on the words of a speaker since they are the least important.

A WORLD OF QUANTS AND NEURAL SYSTEMS

Automation of investment decisions is a massive growth area. In early 2020 Goldman Sachs had 920 vacancies for engineers, including technologists, quants and data professionals. These vacancies were just under half of all jobs Goldman had on offer.

So gone are the days from over half a century ago, when in the City (financial district) in London stockbrokers drifted in around 10 in the morning, took a 2 hour lunch with gin and tonic and wine plus port with the cheese afterwards. I remember it all well since I spent some time in the City at that time.

A WORLD WITH NO COMPLIANCE AND NO REGULATION

Those were the days when business was done with a handshake rather than a 250 page agreement and 10 legal advisors. There was total trust and a broker’s word was his bond. There was virtually no compliance and insider trading was legal.

Today the world of finance is totally controlled by stringent laws and regulations, ridiculously complex compliance and 1000s of lawyers. Trust is gone and it is all driven by fear and covering your backside.

Still business probably ran more smoothly and definitely more pleasantly in the old days than in today’s ruthless business world.

INVESTMENT DECISIONS BASED ON FED HEADS TONE OF VOICE

Fifty years ago there were no neural networks and no quants. But today this area is developing so fast that soon no humans will be required. A new study by three individuals at the universities in Berkeley, Birmingham and Reading (both UK), has found that emotions in human speech by central bankers not just move stock markets but can be acted upon. They analysed the voices of Bernanke, Yellen and Powell in the press conferences after the FOMC meetings.

Their findings were that switching from negative to positive tone in the voices of Fed Chairs could raise the S&P by up to 200 basis points. For this they built a neural network to compare segments of each audio recording against a database. The database categorises how emotions are reflected in human speech using recordings of actors delivering the text in different ways.

Investment banks have been using similar type of models already but with nowhere near the sophistication of this model. But this will clearly be their next step. Analysing statements not just from central bankers but from finance ministers, corporate Ceo’s etc will become mainstream in coming years.

So let’s turn to the Fed speak in relation to gold. The neural system discussed above did not have the same accuracy for gold and forex as for stocks.

GREENSPAN ON GOLD

That politicians speak with forked tongues is a well-known axiom. The day they put the political cap on, it is impossible for them to tell the truth.

The same with the heads of the Federal Reserve. Whatever views the appointee previously had about sound money is completely blown out of the water, once he/she enters the Eccles building.

My colleague Matt Piepenburg wrote about the author of the “Everything Bubble” Alan Greenspan last week. And the “Maestro” is the epitome of someone who lost all his senses as he had to violate virtually every single principle he stood for when he became chairman of the Fed.

In 1966 Greenspan wrote his famous essay “Gold and Economic Freedom” in which he said:

“Thus, under the gold standard, a free banking system stands as the protector of an economy’s stability and balanced growth. When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade.”

In a 1978 Congress hearing, Greenspan stated:

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.”

But as my colleague wrote last week, all Greenspan’s noble principles of sound money were thrown out of the window once he became Fed chief in 1987. Instead he fathered the everything bubble which is now reaching a crescendo.

It is a brilliant scheme that has only been possible with the absence of a gold standard and by creating megatons of worthless fiat money out of thin air.

When Greenspan was Fed head, he had to conveniently suppress his fondness of gold so he developed his own gobbledygook Fedspeak.

He admitted it himself:

“Since becoming a central banker, I have learned to mumble with great incoherence. If I seem unduly clear to you, you must have misunderstood what I said.”

– Speaking to a Senate Committee in 1987.

At least he clearly had a good sense of humour!

In a testimony before the Committee on Banking and Financial Services, U.S. House of Representatives July 24, 1998, Greenspan dared to mention his fondness for gold:

“I am one of the rare people who have still some nostalgic view about the old gold standard, as you know, but I must tell you, I am in a very small minority among my colleagues on that issue.”

BERNANKE ON GOLD

The most classic exchange of the role of gold was when Bernanke delivered his report to the House Financial Services Committee in July 2011. At the time gold was $1,560.

When questioned by Ron Paul, Bernanke states that: “The reason people hold gold is to protect against tail risk, a really, really bad outcome”.

Paul goes on to ask: “Is gold money?”

“No” answers Bernanke after long hesitation…… “it is an asset”.

“So why do central banks hold gold” asks Paul – “Well it is a tradition” answers Bernanke”.

So according to Bernanke gold is not money, but a tradition.

Interesting that the Fed stores 8,000 tonnes of “traditions” in Fort Knox and other vaults.

Bernanke conveniently omitted to mention that people hold gold to protect against a precipitous collapse of the dollar. At the time, the dollar had lost 82% in real terms in the 21st century and 98% since 1971.

This is what Bernanke calls tradition. What he doesn’t say is that it is the only money which has survived in history due to the total mismanagement of monetary policy by central banks.

POWELL ON GOLD

The current Fed head also has, not unexpectedly, very little understanding of gold. In a recent discussion at the Bank for International Settlement (BIS) Powell described Bitcoin as an asset that is not backed by anything.

So far I will clearly agree with him. 

“Crypto assets are highly volatile and therefore not useful as a store of value,” he said.

“It is a speculative asset that is essentially a substitute for gold rather than for the dollar”.

So yet another clueless Fed head!

The obvious question to ask Powell is:

Why the hell don’t you sell your 8,000 tonnes (allegedly) of gold and buy Bitcoin instead??

That is the obvious conclusion if Crypto assets are a substitute for gold. Also, imagine the costs you would save Mr Chairman as 8,000 tonnes of gold is $4.4 trillion and would fit on a small memory stick that you could keep in your pocket.

GREENSPAN WITHOUT THE FED GAG

Finally, let’s go back to Greenspan after he got rid of the Fed gag and returned to his sound money views. In a 2014 interview he stated:

“Gold is a currency. It is still, by all evidence, a premier currency, where no fiat currency, including the dollar, can match it.”

“Yet gold has special properties that no other currency, with the possible exception of silver, can claim. For more than two millennia, gold has had virtually unquestioned acceptance as payment. It has never required the credit guarantee of a third party. No questions are raised when gold or direct claims to gold are offered in payment of an obligation”.

So there we have it. The now 95 year old Greenspan, when allowed to speak freely, knows that in a world filled with quadrillions of debt, no fiat money can match gold.

COMMODITY INFLATION IS RAGING

As KWN has recently illustrated, commodity inflation is raging. Here is a chart of the Wisdom Tree Commodity Index which is up 50% since 2020.

GOLD – BULL MARKET RESUMES

Inflation is likely to run well ahead of interest rates, like in the 1970s. This means that negative real interest rates will continue which is very beneficial for gold and silver.

As the chart below shows, gold has now finished the correction since August 2020 and the next (temporary) stop should be around $3,000

However, investors should not worry about the gold price but instead hold gold as the ultimate protection against the biggest financial bubble in history.

South Flordia residents are angered this week as local government officials and a biotechnology company move ahead with their plan to release up to a billion gene-hacked mosquitoes over two years. 

Oxitec, a British biotech company, developed the ‘franken-squitoes’ and partnered with Florida Keys Mosquito Control District to release the first-ever genetically engineered (GE) Aedes aegypti mosquitoes this week.

The project aims to decrease the total population of Aedes aegypti, one of several mosquito species that can carry diseases including dengue, Zika, and yellow fever.

Oxitec Head of Regulator Affairs Dr. Nathan told Fox News that genetically altered non-biting male mosquitos would be released into the wild with the local biting female population, producing female offspring that die in the larval stage.

Rose said the project is critical as the US records more and more mosquito-borne diseases. He said these mosquitoes are moving farther and farther north from the Gulf Coast into more and more of the continental US. 

Rose continued: “So, the diseases are a big problem because these particular diseases don’t have any effective vaccines or medications to treat them [and] the only way to control them is actually to control the mosquitoes that spread them…”

Not everyone in the Florida Keys is overly enthusiastic about GE mosquito running amuck. 

Dana Perls, food and technology program manager at Friends of the Earth, said the Environmental Protection Agency (EPA) approved the plan last year. He told Common Dreams, “this is a dark moment in history. The release of genetically engineered mosquitoes puts Floridians, the environment, and endangered species at risk amid a pandemic. This release is about maximizing Oxitec’s profits, not about the pressing need to address mosquito-borne diseases.”

Oxitec claims there’s strong public support among residents though many in the community are against the project. 

“My family’s bodies, blood, and private property are being used in this trial without human safety studies or my consent,” Mara Daly, a resident and local business owner in Key Largo, Florida, said Monday. 

Authored by Dave DeCamp via AntiWar.com,

Secretary of State Antony cautioned Africa about China’s role in the continent in virtual talks with Nigeria and Kenya on Tuesday. Responding to questions, Blinken said he hoped African countries would keep their “eyes wide open” when approaching relationships with other nations.

“We’re not asking anyone to choose between the United States or China, but I would encourage you to ask those tough questions, to dig beneath the surface, to demand transparency, and to make informed choices about what is best for you and your countries,” he said.

Beijing is involved in infrastructure projects across Africa, which the US views as a threat to American influence. President Biden has floated the idea of the US and its allies starting a global infrastructure project to rival China’s, which is known as the Belt and Road Initiative.

“You should be looking hard at whether when other countries come in to build a big infrastructure project, are they bringing their own workers with them or are they giving jobs to people in the country where they’re making investments?” Blinken posed.

Biden has portrayed the US-China relationship as an ideological battle between “democracy” and “autocracy.” With this view in mind, it’s no wonder the US aims to compete with China in every theater it can.

China is also being used to justify domestic infrastructure projects. President Biden cited the need to compete with Beijing as the reason to pass his massive $2.3 trillion infrastructure plan.

The global shipping industry is facing one of its most significant spikes in lost containers in seven years. At least 3,000 containers were lost at sea last year, and year-to-date, more than 1,000 have fallen overboard, according to Bloomberg. 

Stretched global supply chains are forcing ship operators to stack truck-size intermodal containers to the brim in a technique called containerization. Some vessels, such as the notorious “Ever Given,” can carry upwards of 20,000 containers, while other large containerships can carry around 9,000 containers. 

“Shipping containers piled high on giant vessels are toppling over at an alarming rate, sending millions of dollars of cargo to the bottom of the ocean as pressure to speed deliveries raises the risk of safety errors. The situation has grown more dangerous because of extra stress on supply chains since the pandemic,” said Bloomberg. 

A combination of factors has been responsible for increasing lost containers, including overloading, unpredictable weather, and human error. 

“The increased movement of containers means that these very large containerships are much closer to full capacity than in the past,” said Clive Reed, founder of Reed Marine Maritime Casualty Management Consultancy. “There is commercial pressure on the ships to arrive on time and consequently make more voyages.”

There were a couple of notable incidents in the last six months where one containership lost more than 1,800 containers, and another lost 750 boxes due to “rough seas.” Both of these topplings occurred on busy shipping lanes between Asia and the US. China’s exports have been on a tear since the US government unleashed helicopter money, and the work from home movement pulls forward the demand for cheap electronics. 

Some shipping experts say besides the vessels stacked to full capacity, speed may also play a factor in topplings. It was reported by Insurance company Allianz Global Corporate & Specialty that human error contributes to at least three-quarters of shipping industry accidents and fatalities. 

Jacob Damgaard, associate director of loss prevention at Britannia P&I, was quoted by Bloomberg as saying the loss of 1,000 containers this year when compared to 226 million container boxes shipped yearly is a “tiny percentage lost,” adding that, “but it’s almost 60% of the monetary value of all container incidents.”

When the One Apus lost more than 1,800 containers in late November, each container was valued at around $50k on average, equating to a monetary loss of approximately $90 million, the highest in recent history, according to Jai Sharma, a partner at maritime law firm Clyde & Co. in London.

Bloomberg data shows year-to-date losses have totaled around $54.5 million. 

Jonathan Ranger, head of marine Asia Pacific at American International Group Inc., said when containerships approach rough seas, captains can steer around severe weather, but the attitude is “don’t go around the storm, go through.”

“When you combine that with potentially poor maintenance of twist locks and cabling required to secure these boxes, then it’s an accident waiting to happen,” Ranger said

An unintended consequence of central banks and governments goosing the global economy with monetary and fiscal stimuli during a period of supply chain disruptions caused by the virus pandemic has resulted in busy shipping lanes and vessels stacked to the brim become top-heavy and accident-prone in heavy seas.