Apple's Rollercoaster Week - Market Update March 18-23, 2024
SO MUCH to cover this week lets get started
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Welcome back to the Rambling Mind Newsletter. This is your Market Update.
Summary of Topics:
Economic News
Jerome Powel Spoke & Your Portfolio Loved It
Big Change for Your Next Home Sale/Purchase
No Chocolate For Easter cause these prices are too damn high
Why Inflation Feels So Bad
Company News
Apple and Google Join Forces
DoJ Sues Apple
50-for-1 Chipotle Stock Split
Stats of the Week
$6 Billion Studen Loans Cancelled
$4 Million for a JPEG
$640 Million donation by MacKenzie Scott
23 out of 25 on Happiness
Looking Ahead
Markets Closed on Friday
Extras
Unilever No More Ice Cream
Ban on Gas Cars?
Markets
Another week, another all-time high for the Stock Market. The S&P 500 had its best week so far this year, after two weeks of negative returns. Unlike the beginning of the year, when tech stocks were the only game in town. Other parts of the stock market are beginning to carry their weight. Companies like FedEx, Chipotle, Clorox, and International Paper, are not high flyers but they represent a diversifying of stocks rallying in the S&P 500. This is great news to see more names go up which can keep things going for longer.
Tale of the Tape
Economy
Papa Powell Spoke Your Porfolio Loved It
🔎Details: Last week, the Fed hosted its two-day FOMC meeting to decide what to do with interest rates. They announced rates will remain the same for the foreseeable future. Everyone expected this. Powell emphasized the strong labor market and the fact that inflation has not moved lower giving the Fed no real reason to cut rates.
The Fed Statement added even more emphasis on this message indicating they believe rates need to remain higher for longer because they expect economic growth to be higher for the year.
💬In His Words: Jerome Powell told reports on Wednesday, "... we’re looking for data that confirm the low readings that we had last year. And give us a higher degree of confidence that what we saw was really inflation moving sustainably down to 2%.”
Regular man speak interpretation: I said what I said. Deal with it. Nothing has changed.
🔀Opposite Day?: This should have been bad news for the stock market. Investors either chose to hear what they wanted or the Fed no longer matters because the stock market immediately went up once Powell finished speaking.
The S&P 500 finished the day up nearly 1% (0.9%)
The Nasdaq finished the day up 1.25%.
Even the old man, The Dow Jones, ended the day up 1.03%.
⬆Takeaway: As much as we talk a lot about interest rates, they do not play as much of a role in stock returns as we would like to think. In the short run, they affect everything but in the long run, stocks will follow the path of their earnings. The Fed announcing they expect growth to be higher was the only signal investors paid attention to. I am sure interest rates will always be a topic of conversation but in the end, if the economy is doing well and companies are making money. The Stock Market will go up.
🐂🐻My Takeaway: There is a lot of excitement in the markets. The bulls are running STRONG! Everything is being taken as good news. The excitement around AI has removed any sense of danger in the markets. Greed has taken over and everyone is ready to make some money. I have no idea how long this ride will go for, but I am preparing for the opportunities presented if the ride stops suddenly.
If this sounds like the opposite of what I said above, TRUST YOUR INSTINTS. As an investor, you must have the ability to hold two opposing ideas in your head at the same time. This is why I invest passively in index funds and I pick stocks. Index because I have no idea what the market will do and I do not want to miss anything. Stocks (less than 20% of my portfolio) because it is a form of entertainment for me. When I pick stocks, I pay attention to the animal spirits of the markets. Right now, the spirit in control is the BULL. See NFTs selling for millions again (story below).
Last week, the National Association of Realtors (NAR) agreed to settle a lawsuit that will completely change the buying and selling of homes in the US.
🔎Details: The NAR has been in a class action lawsuit on the fees charged to home sellers.
Typically, a 6% commission is charged to sellers on the sale of a home. It is typically split between the seller's agent and the buyer's agent.
NAR REQUIRES sellers to advertise the buyer agent commission on the MLS.
The MLS is the primary location where homes are listed for sale, and it is only open to NAR-registered agents.
This commission is never shown to the buyer or the seller only to the agents.
This creates a direct conflict of interest for the seller and the buyer.
The fee incentivizes the buyer's agent to chase higher commission deals rather than the best home for the buyer.
Essentially buyer's agents work for the seller, not the buyer. Because they can collude to push prices as high as possible for a nice big fat commission check for both agents.
🤨Takeaway: There are two sides to this story.
Sellers Win
Expect commissions to fall HEAVILY!! Most experts expect commissions will land around 1-1.5% rather than 6% of today's world.
This will save sellers a lot of money and keep more of the proceeds of their home sales.
It could help in this tight housing market. However, it will not happen overnight. Steve Brobeck of the Consumer Federation of America, an organization pushing for this change for decades, told Axios, "It'll take a long time for a truly competitive marketplace to emerge. The industry will resist this."
Buyers Might Take An L
When I bought my house, I had to cover my agent's fee. But for most people, their agents are basically free (at least on the surface).
Buyers will have to begin paying buying agents out of pocket. This will mean more people will need more money upfront to buy a house.
My Takeaway: This is WAY BETTER. Any time you think you are getting a benefit in a capitalist market. Read the fine print. As someone once said, "If something appears to be free, you are not the customer, you are the product." Both sellers and buyers in the housing market have for decades been pimped out by real estate agents. Now real estate agents have to prove why they deserve a high commission.
Especially buyers, you may be crying about the higher up-front cost. You have to remember that now you are getting a better deal on the price of the house. Because your agent is now battling it out on your behalf rather than colluding with the seller for higher prices.
This is a BIG WIN! But knowing how capitalism tends to work. There will always be other downstream consequences we cannot imagine. I may end up eating my words.
Easter is gonna be a whole lot more expensive for the Easter Bunny this year and years to come.
🔎Details: Due to bad weather, bean disease, and lack of investment in trees. The cocoa supply has been decimated over the last two years.
🔢By The Numbers: 75% of all cocoa comes from the Ivory Coast, Ghana, Cameroon, and Nigeria. Ivory Coast accounts for 50% of the world's cocoa.
This area has been decimated by climate change leading to a massive shortfall in supply.
According to Reuters, the market needs 374,000 more tons of cocoa to meet customer demand for chocolate.
This shortfall in production has driven up the price of cocoa exponentially.
Prices of cocoa are up 215%.
Takeaway: Expect to pay a lot more for your bar of Twix or cup of Reese's. Actually, prices have already increased more than 10% and will continue increasing this year. Maybe this is the year we give carrots for Easter rather than chocolate.
Why Inflation FEELS so bad
This picture tells us everything we need to know about why we still feel so bad about inflation. These three things: food, gas, and rent are the things that we have no choice but to buy. These prices were much higher than the general inflation numbers that I focused on so much. Although prices are no longer rising rapidly they also are not going backwards. Which is painful.
Company News
Apple* and Google* Join Forces
As the saying goes, the enemy of my enemy is my friend. According to Bloomberg, Google is in talks with Apple to build Google's AI, Gemini, directly into all future iPhones.
🔎Details: Apple would license Gemini similar to the current deal Google has to be the default search for all Apple devices. The deal will be a win-win for both companies:
Apple will finally have an AI win that could help with demand for its future devices.
Google will gain access to Apple's over 2 billion devices. Helping Google position itself in a better standing against OpenAI and Microsoft.
Investors agreed with the win-win proposal with both stocks popping on the news.
📈Stock Move: Google was up more than 6% on the news. Apple was up 2%.
🤝🏾Takeaway: Both companies need each other right now. Google has continuously fumbled its AI launch leading to market share loss while Microsoft and OpenAI have been the shining stars. Apple's stock has been declining all year because demand has declined for the iPhone. Both companies need a WIN to demonstrate to investors that they have paths to future growth and profitability.
However, this deal could come under DOJ and FTC scrutiny. The DOJ already has a lawsuit against Google for the deal to make Google Search the default on Apple devices. Google pays Apple $18 Billion per year.
👀What to Watch: Apple holds its developer conference in June, where it announces new versions of iOS. If this agreement is real, we will hear more from Tim Apple in June.
What a week it has been for Tim Apple. The highs of announcing a partnership to now the super low of a brand-new antitrust lawsuit against the company.
🔎Details: The Department of Justice with 16 State Attorney Generals sued Apple for an iPhone monopoly. The suit alleges three things:
Apple blocks rivals from accessing hardware and software features on its popular devices.
Apple uses its power over app distribution to thwart innovation that would have made switching phones easier.
Apple refuses to support cross-platform messaging apps.
💬In Their Words: U.S. Attorney General Merrick Garland said, “As set out in our complaint, Apple has that power in the smartphone market. If left unchallenged. Apple will only continue to strengthen its smartphone monopoly. Today’s lawsuit seeks to hold Apple accountable and ensure it cannot deploy the same, unlawful playbook in other vital markets.”
Normal Man Speak: We ain't playing around. We coming for they necks.
Apple issued a statement that said, “This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets. If successful, it would hinder our ability to create the kind of technology people expect from Apple—where hardware, software, and services intersect. It would also set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology.”
Normal Man Speak: We are a monopoly but not that bad of a monopoly. If you do this, you will make things horrible for everyone.
📉Stock Move: Apple stock fell more than 4%. Removing all the excitement about the deal with Google for Gemini.
😅Takeaway: Everything the DOJ said in its suit is spot on. However, proving that this adversely affects consumers will be a very difficult thing to do. Most people love Apple products primarily because of its High Walled Garden and how seamlessly everything works together.
👀What to Watch: The case. I doubt anything will come of this lawsuit. Apple will be slapped with a fine that will be pocket change to them and then they will move on. These cases have yet to cause any big changes like it did when Microsoft had to separate Windows Explorer from everything else.
I will say, the DOJ really feeling themselves over the last two years. They have thrown a case against every single Big Tech company.
Although, they have mostly taken Ls. But hey it's all about the effort.
Chipotle, my favorite healthy eating spot, announced a 50-for-1 stock split on Wednesday. It is the largest stock split in the history of the stock market. This will take Chipotle's stock from costing about $3000 per share to $60 per share. This does not change the dollar value of Chipotle. It just splits the pie into smaller pieces.
Why?: It does three things for Chipotle:
More accessible for retail investors who might be intimidated by a $3000 share price (although you can buy fractional shares on most platforms).
Makes the stock accessible to various indices. For example, Chipotle could not be added to the Dow Jones Industrial Average because it is a priced-based index and Chipotle would have had a heavy impact on the index. Similar to Amazon and Google not being added until they had their respective stock splits.
It makes options trading with Chipotle stock a lot easier. 100 shares at $3000 is $300,000 not a lot of people have that kind of capital. But 100 shares at $60 is $6,000, much more manageable.
If you are a Chipotle investor, this changes nothing about the business itself. Think of it as a cosmetic change rather than a fundamental change.
Stats of the Week
Biden Administration canceled another $6 Billion of Student Loan Debt. This time for 78,000 public service workers. This brings the total of public service workers with loans forgiven to more than 870,000. Before this administration, only 7,000 public workers had their loans forgiven. President Biden has offered loan forgiveness to over 4 million borrowers.
In Their Words: The White House said in a statement, "These public service workers have dedicated their careers to serving their communities, but because of past administrative failures, never got the relief they were entitled to under the law."
An NFT of a dog wearing a hat sold for $4 million last week.
😔🤯, the meme craze is back
MacKenzie Scott, the ex-wife of Jeff Bezos, continues putting her husband to shame. While he galavants around the world with his newly done-up wife on an island-sized yacht. MacKenzie donated more than $640 million to many small nonprofits. More than doubling the amount she had pledged to donate.
US happiness hits an all-time low. If you ever wondered how money can't buy happiness this is a perfect chart. The US is by far the richest country in the world and the most miserable. One simple reason is the gap between the wealthiest Americans and the Poorest Americans.
As long as there are people seemingly doing much better than we can even imagine living, our happiness level will remain low. It is not the money itself; it is the comparison of how you are doing to your peers. As long as Instagram, TikTok, and all other platforms show us how everyone is doing or at least faking how they are doing. We will remain in a place of unhappiness.
Looking Ahead
Greatest Day in the History of Mankind is Sunday!
Extras
Unilever owner of basically every product in your fridge, freezer, pantry, and in your hands. Decided they are giving up on ice-cream. After 100 years of selling the frozen milk, Unilever is watching their weight and giving up ice cream. Unilever announced last Tuesday, it will be spinning off its ice-cream division and cutting 7,500 jobs to refocus the company and wait for it, produce efficiencies. Unilever says the move will save the company $870 million over the next 3 years.
Unilever is owner of Ben & Jerry's, Klondike, Popsicle, Breyers, and Talenti. Just a reminder that whenever you think you are shopping a brand for its special message. Don't lie to yourself, that brand is more than likely owned by a company you hate.
Unilever is not the only massive CPG (consumer packaged goods) company that is doing away with its legendary business. Kellog's, the company synonymous with the word cereal, spun off its cereal business last year to, wait for it, create efficiencies.
The Environmental Protection Agency released new regulations that limit pollution permitted from tailpipes. Experts say although these rules are a defacto ban on gas powered cars. The regulations are the stringiest in the history of the EPA. Experts say it will force manufacturers to push towards EVs and Hybrids to comply with the new rules. EPA hopes this will bring down the cost of EVs, making them more accessible for the public.
The regulations will not go into effect until 2027.
*I am a tiny shareholder in this company.