WASHINGTON, May 30, 2013 – Markets are a bit wobbly this morning, which is the final trading day of not-so-merry “sell in May.” Except for one thing. Even as the Maven was doing precisely that for much of the month, all averages continued to crank relentlessly upward, albeit on low, low volume. And then there’s Apple.
The computer-turned-entertainment-turned-smartphone company has been soaring recently (up another $8 and change this morning), largely on two or maybe three pieces of news plus ample speculation on the product front. In the first place, there’s that 7 for 1 stock split set to become effective next Monday. That has traders jazzed because, wow, we’ll now have seven shares where before we only had one. Except that, in a technical sense, you’ll still have the same dollar value, so what’s the big deal?
That said, the stock is skyrocketing more than we thought it would at this point, although a letdown may loom ahead when giddy investors do the price-per-share math. Of course, there’s also that side bet that the stock’s lower price per share will get it placed into the S&P 500 or 100 or the DJI or all of the above, which could then make it a mandatory holding for many. But we’ll cross that bridge when we come to it.
That said, the stock is also getting majorly goosed for a variety of even better if speculative reasons. First of all, there’s been that relentless and stupid badmouthing by the financial press of a tech company that consistently out-earns its peers with alarming regularity.
It’s all linked, of course, to the death of Steve Jobs and his legendary reality distortion zone. True, very few people in history have possessed the kind of magic that actually enables them to will never-before-heard-of products and features into must-have purchases for every person on the planet in possession of an income. True, Jobs’ successor as CEO, Tim Cook, seems to have somewhat less than zero charisma.
But all things considered, Cook remains perhaps the best supply chain wizard in the word at the moment. Added to the product roadmap Jobs allegedly left behind and blended with Cook’s insights into the music and entertainment industry—no doubt with a spiritual assist from Jobs—Cook has been working behind the scenes to forge some kind of harmonic convergence between and among computers, TV, smartphones, tablets, and anything you can get to them via the cloud.
Obviously, whatever eventually transpires, product- and/or subscription-wise, will be as seriously disruptive for current players as the iPhone and the iTunes and App Stores were when they were introduced. Ergo, negotiations in this tricky realm have been lengthy and frustrating, as current dominant forces ranging from Comcast to Samsung to traditional music and movie tycoons don’t want their massive cash flows jeopardized.
Yet likely very soon, Apple will be muscling into the entertainment venue in a bigger way, whether by a massively enhanced Apple TV, a new iWatch, the upcoming iPhone 6, or something else in addition that the Maven hasn’t figured out yet.
So, stock-split mania aside, there are a lot of perfectly good if speculative reasons why Cook’s Apple may yet confound the smart-ass analysts and TV blow dries who routinely like to appear brilliant and clever by predicting Apple’s doom. It’s like a re-run of an old 1990s TV series, and you saw how this one turned out before.
Two things are known for sure at this point. Apple is acquiring Beats—and more importantly, the services of hip-hopper Dr. Dre who may help bring to Apple the mass of black music fanatics who thus far have flocked to Android-based smartphones while pretty much avoiding iPhones en masse.
(Here’s an R verging on X-rated video of an exuberant Dr. Dre as he breaks news of this deal’s closing to his homies, obviously relishing what this will do for his own investment portfolio. Look out, Wall Street, here he comes!)
Equally importantly, if not moreso, Apple also acquires the impossible-to-overestimate services of Beats’ business heart and soul Jimmy Iovine, impresario extraordinaire when it comes to his expertise in the entertainment and specifically the music business complete with his massive virtual Rolodex of friends and contacts there.
Here’s how Micah Singleton describes him at the Daily.dot:
Jimmy Iovine may be the most connected man in Hollywood, with an accomplished history as a music executive and producer, who has worked with Bruce Springsteen, Lady Gaga, U2, Tom Petty, and John Lennon. Iovine has also produced films, documentaries, and TV shows, giving him rare insight into all phases of the entertainment industry.
These deep friendships and contacts mean future $$$s for Apple in some way, shape, or form, as contacts and friendships are pretty much the only way business gets done in this line of work.
Of course it doesn’t hurt either that Beats also runs a new and well-received streaming service, unlike Apple’s current also-ran attempt. This could help give the company a much-needed leg-up on the competition like Pandora and Spotify which are combining to gradually eat Apple’s lunch with regard to waning enthusiasm for iTunes’ pay-per-CD-or- track model, which is losing eardrums to the subscription-streaming product.
In any event, Apple’s doom is far from imminent, and we’d guess that the blow-dries will have to search for another Apple meme soon.
They’d better look quickly, too. Apple also launches its annual June developer’s conference next week, and any exciting news that floats out of that event is likely to put even more pep in those 7 for 1 shares’ step.
Today’s trading tips
Let’s not have any and let’s wait for Monday. Today’s trading is anemic, with most pros having done their handy work earlier this week in a fit of window dressing, bond buying, and market manipulation with an eye toward achieving new record highs where they could.
Monday is another month. And if the “sell-in-May” mantra still has any teeth, we’ll find out Monday or Tuesday via a very bad trading day.
If not, we’ll need to yield to the bulls and start trading more actively again.
In the meantime, our beloved REITs, utilities, and preferreds are falling out of favor at least for now as their prices top out and effective yields drop. But aside from nearly zero-yielding treasurys, where the heck else is an income-seeking investor to go.
It’s all very confusing. Plus, the light trading volume lately makes all rallies very much suspect.
Monday may gain us some clarity, so why don’t we wait for that and see what happens before we get aggressive one way or the other.
Have a great weekend!