Apple Is Bankrupt
Apple Is Bankrupt (of Ideas)
From the “You Can’t Make This Stuff Up” File…
A little over three weeks after the colossal embarrassment surrounding Google’s Gemini AI platform — it was so “woke” that it couldn’t or wouldn’t generate images of white faces — Gemini might get the last laugh.
“Apple Inc. is in talks to build Google’s Gemini artificial intelligence engine into the iPhone,” says a Bloomberg story citing the usual “people familiar with the situation.”
If everything comes together, Gemini would power several AI-enabled features of Apple’s iOS 18 due for release this fall.
It’s not a done deal — OpenAI is also in the running — but Bloomberg Intelligence says Google has the inside track, given how Google is already the default search engine on the iPhone’s Safari web browser.
The news spotlights — once more — the fact that Apple is badly lagging other Big Tech mainstays like Google, Microsoft and Amazon when it comes to AI.
Still, Mr. Market likes the news: Apple is up 2.4% on the day. Meanwhile, Google parent Alphabet is up 6.6% this morning to $151.66 — less than four bucks off its all-time high notched last January.
The sound you hear in the distance is the rumble from Steve Jobs rolling over in his grave. Again.
There was another Bloomberg story over the weekend with the headline: “Apple Without AI Looks More Like Coca-Cola Than High-Growth Tech.”
It cited a Wall Street analyst who said AAPL has “become more of a value stock, a bit like Coca-Cola.”
That’s not exactly a cutting-edge insight: More than eight years ago, Paradigm’s own value-and-dividend maven Zach Scheidt pointed out that Apple was transitioning from a go-go growth company into a mature, dividend-paying stalwart.
“Apple’s best growth days are now squarely in the rearview mirror,” Zach said in this space in December 2015. “Apple’s sheer size makes it impossible to continue to grow at the same rate it has in the past.”
Jobs died in 2011. The following year, Apple started paying a dividend. The year after that, Apple started buying back shares.
Returning cash to shareholders in that fashion was anathema to Jobs.
He much preferred to plow Apple’s profits back into the company and develop fabulous new products. Time and again, Jobs said words to the effect of, “If we do buybacks and dividends, that means we’ve run out of ideas.”
It’s evident now that when it comes to AI, Apple is bankrupt of ideas — if it even had ideas in the first place.
Gone are the days that Jobs could wow an audience as he did in January 2007 with the launch of the iPhone — and take a product category’s annual sales from zero to $125 billion in five years.
So yes, when it comes to leadership in cutting-edge sectors like AI… Apple has passed the torch.
Back Near All-Time Highs, But…
The watchword for the markets this week is “unsettled.”
Checking our screens, the S&P 500 is up 1% on the day: At 5,170, the index is only five points below its record close last Tuesday.
But Paradigm trading pro Greg “Gunner” Guenthner says that overlooks the big picture. “SPY is beginning to feel like it’s running on fumes,” he says, referring to the big S&P 500 ETF.
“Yes, some of the biggest stocks on the market took a hit on Friday. But it’s also worth mentioning that SPY finished lower in all but one of last week’s trading days. The large-cap index has now gone nowhere in March. Is it finally time for some corrective action?”
Also concerning is that small-cap stocks continue to lag the major averages: “The Russell 2000 dropped almost 2% last Thursday and ended up posting its worst week since its New Year’s reset in early January. It’s now up just 1.5% year-to-day and clearly trailing the major averages again. Can this catch-up trade get legs?”
As far as Gunner is concerned, the place to be right now is in the commodity-oriented names. Copper is solidly above $4 a pound this morning. Crude is starting the week at $81.71, another high last seen in early November. Gold is holding firm at $2,159 and silver is still over $25.
GDX, the gold miner ETF he mentioned here on Friday, is slightly in the red on the day — but nothing to be concerned about in the context of the intermediate-term trade (a few weeks) that he recommended for readers of The Trading Desk.
Bitcoin did a lot of back-and-forth over the weekend. This morning, it’s back below $67,000.
➣ One economic number of note: Homebuilder sentiment as measured by Wells Fargo and the National Association of Home Builders is back in positive territory for the first time since last summer. It helps that mortgage rates are holding below 7%... but NAHB chair Carl Harris says none of the hassles facing builders have gone away: “Builders continue to face several supply-side challenges, including a scarcity of buildable lots and skilled labor, and new restrictive codes that continue to increase the cost of building homes."
Tomorrow the Federal Reserve convenes its every-six-weeks policy-setting meeting. No one expects a cut to interest rates at the conclusion of that meeting Wednesday, so the focus will be on the Fed’s projections for when rate cuts start later this year: Paradigm macroeconomics authority Jim Rickards says they won’t start till September.
How Will Humanity Survive?!
LOL…
Yeah, so the Publix supermarket chain that’s a staple in the Southeast will be closed on Easter.
As the individual who submitted this story on the Fark website says, “The Sun proves that you can make even the most mundane of news items sound alarming.”
After TikTok, They’re Coming for Twitter
On the subject of federal legislation that could ban TikTok, a reader writes…
“Knowing that any of the major social media platforms are manipulated by their respective governments, the only thing more terrifying than the U.S. manipulating the content served to this nation is the Chinese government doing the same.
“So while I can’t make sense of the means by which this ban was accomplished, the end result does make sense on a basic level. If you’re going to play in the U.S., you need to be accountable to the U.S. in some form, and have U.S. interests at heart.
“As investors, the lesson learned in the TikTok episode is: Don’t invest too heavily into a company that crosses the geopolitical line.
“However bad our government is, it is the one we have, and we are to support it and do what we can to correct its errors.”
Time for another TikTok update, because 1) the news doesn’t stop and 2) if Congress won’t take the time to thrash out the stakes properly, we will.
Here’s the thing: There’s no evidence that TikTok is doing all the horrible things that congresscritters accuse it of — spying on or propagandizing Americans.
There’s an excellent piece by Ken Klippenstein at The Intercept making it clear that in the eyes of U.S. intelligence, the “threat” from TikTok is entirely hypothetical.
In 2022, FBI Director Chistopher Wray said TikTok’s parent firm “is controlled by the Chinese government, and it gives them the potential [emphasis added] to leverage the app in ways that I think should concern us.”
Even after the secret briefing by the “intelligence community” to Congress about TikTok a few days ago — the one that prompted the rush to passage of the House ban bill — Director of National Intelligence Avril Haines could speak only in hypotheticals: Could TikTok influence the 2024 elections? “We cannot rule out that the CCP could use it.”
In the end, the reason there’s a sudden rush to ban TikTok or force its sale is that in the eyes of congress members, TikTok is hosting too many young people who are airing too much criticism about U.S. support for Israel’s slaughter in Gaza.
Or as The Economist put it, “The proposal gained momentum partly as a consequence of disquiet over the app’s handling of misinformation and anti-Semitic content following Hamas’ attack on Israel in October.” The Wall Street Journal corroborates this account, with some additional detail.
And guess what? Democrats in Congress are already seizing on the “links to foreign adversaries” angle to go after X-formerly-Twitter…
The Mailbag: More Musk and Rear Turn Signals
As long as I brought up Twitter, we might as well pivot to more reader takes about Elon Musk…
“He's a freedom of speech fighter,” says one. “I'll back close to everything he says because he is an extremely intelligent person and businessman. Although he has his (alleged) drug issues, I think governments hate him because he's fighting for what's morally correct in this world of lies, and that's why I love him.”
Says another: “I didn't weigh in on Musk at first because the inquiry was addressed to your newbies. But now that I have revisited Dave's conclusion, I do wish to respond to that.
“I think Matt Taibbi was, unsurprisingly, pissed off and consequently, unfair to Musk. And in retrospect, Dave was too. Musk is a flawed human being, as are we all. I think he believes in free speech, but he desires very much to continue to be a multibillionaire, with all the perks that provides. If you want a historical example of that sort of conflict, look no further than Thomas Jefferson and slavery.
“Musk is under intense pressure from Israel and the deep state, and he frequently caves. I doubt that I would be braver under those circumstances. My experience is that overall, free speech is far better supported on X today than it was under the previous ownership. And yeah, he is kind of a flake, inconsistent, etc. No way he is going to Mars, but when it comes to ridiculous beliefs there are so many others who buy into more dangerous nonsense.”
Dave responds: That’s an evenhanded assessment I can’t really take issue with.
Musk’s continued dependence on staying in the government’s good graces is highlighted by this Reuters scoop from over the weekend: “SpaceX is building a network of hundreds of spy satellites under a classified contract with a U.S. intelligence agency, five sources familiar with the program said, demonstrating deepening ties between billionaire entrepreneur Elon Musk's space company and national security agencies…
“The contract signals growing trust by the intelligence establishment of a company whose owner has clashed with the Biden administration and sparked controversy over the use of Starlink satellite connectivity in the Ukraine war, the sources said.”
On the subject of red versus amber rear turn signals — the occasion for a rant last Thursday — we heard from a handful of readers…
“I’m happy if drivers just use their turn signals, regardless of what color they are,” says one. “It doesn’t matter what color they are if they are not used,” concurs another.
“When I lived in California, a lot of people didn't bother to use them,” agrees a third. “When I moved to Idaho, I found that most people were courteous enough to use them but many did so incorrectly — they began braking or started a turn before turning on their turn signals rather than signaling before they began their maneuver.
“It's not that hard. I remember an episode of Cops from many years ago in which officers were pursuing a young miscreant who was fleeing in an attempt to avoid arrest, but he signaled every turn he made and was eventually captured. The arresting officers surmised that he must have been raised in a good home before turning to unlawful pursuits.”
Speaking of my Thursday rant: “I have been reading for years and I don’t think I‘ve ever seen an uncensored cuss word in the 5. Thanks for the chuckle.”
Dave’s last word: Profanity has an impact only when used sparingly. Thank you for affirming my judgment!
