When people ask why the stock market isn't in the dumps when it feels like the whole economy is stopped, this is why. Small business isn't on the S&P, and out of the businesses in it, a large percentage of the market value is concentrated on the tech giants who aren't getting nearly as affected by the current crisis as everyone else. If they don't actually benefit from it. Still super impressive results.
Apple is doing... OK. They are still down 13% from their highs.
Boeing is trashed and announced layoffs.
GM is as well and are suspending their dividend, Ford isn't exactly happy either, and plenty of other S&P giants.
Disney has taken a huge hit due to sports/ ESPN revenue, theme parks, and cruise lines.
Small businesses aren't on the S&P 500, but unemployed people and small businesses all buy from companies in the S&P 500.
Apple also happens to have a massive cash pillow to soften their fall. Nobody else has reserves like Apple and a lot of companies have substantial debt.
The stock market hasn't quite priced in damage yet.
> The stock market hasn't quite priced in damage yet.
Quite the claim. Anyone with confidence in this theory should take a short position now and pick up their million bucks after the market “prices in the damage.”
That's assuming you can time it right. I've been holding puts for ~2 months, and I went from very right to very wrong very quickly. I also fully anticipate to be very right again as soon as the fed stops pumping trillions of dollars into companies that were ill prepared for risk.
This is totally the hard part to know: how much will Trump prop up the stock market?
I recently heard the expression "the stock market is just a graph of rich people's emotions" and find it to be the most pithy truth of economics that I've encountered. A lot goes go into those emotions that we can not anticipate.
But timing is the whole thing. There is nothing else to be right or wrong about.
I mean, sure I can predict that the market go down and sure, sometime between now and the heat death of the universe the market will go down. Same about the market going up. But these kind of predictions are meaningless.
I just said be careful, they can pump and release at will. You can't predict when they will do it, it's better to wait for them to announce it and THEN take action.
Making a killing on a market downturn is hard. Particularly when the majority of your investments are in an IRA which has pretty strict limits on shorting and trading options. Trust me, I tried in early March.
The big problem is unless your timing is perfect, you have to be able to suck up huge losses until things fall apart. To make your million bucks, you might have $100,000 in puts which you watch turn into $10,000 over 6 months only to have the market correct after you cover your position.
Bill Ackman did set up a hedge and pocketed a couple billion betting the market was wrong about the risk the virus presented.
I’m not Bill Ackman. I doubt you are either. If you’re lucky, you spot these trends enough where you avoid getting soaked on downturns. I’ve been pretty good at that last bit.
Boeing, GM, and Disney are more representative of the other 95+% of the S&P 500. There are 495 companies outside of the "FAANG" stocks and most of them are hurting and small businesses and a lot of individuals are doing even worse. You talk about putting things into context even as you are using a laser focus to highlight one the few companies that is doing well.
Keep in mind they have a significant presence in Asia, they felt this for nearly the entire quarter.
Plus like Facebook, it's not all straight down. Tim Cook:
> “We’ve seen a further change in the last part of March and first part of April were very depressed and then we’ve seen a pick up relative to that period of time in the second half of April"
They also announced $50b more in buybacks. Apple is confident in a way that most businesses are not.
Good point re: Asia presence and agree they seem confident + have the balance sheet to back it up.
Overall would just be nice to see weekly splits of revenue from all these companies instead of the vague descriptors we're getting. Would be much easier to project worst case/Q2 that way.
Macy’s, Boeing, United, Carnival, GE, Ford, and so on.
The tech companies are important, but the overall stock market is a lot bigger than them. The companies listed above are in bad shape, but their stock should be in worse shape. Why they aren’t is the same reason the market is up. My guess? Wait for the second drop to be bigger and more brutal than the first (although it may take longer to drop).
Did they have a shortage of products to sell? I think the impact of not selling in China may have been more important than the impact of not producing in China last quarter. And in any case the second quarter will probably be worse.
Very much so. I ordered a new watch and it took three weeks to arrive, when usually they are just a few days.
My friend who works at Apple said in March people weren't getting laptops when they joined the company because they didn't have any to give, as all the new ones were being sent to customers.
I’d be interested to know from someone knowledgeable whether Apple can recognize the revenue from a sale before the product has been delivered to the customer. It’s not clear to me that they can/do.
I’ve just moved within Apple, and requisitioned a top-of-the-line MBP (my current one is from 2014, I used to use a Mac Pro in my old position). Even with a custom build to top spec, and with it being internal (ie: not customer), it was still shipped in 2 days and arrives tomorrow.
Definitely, products that Apple were always available with deliver within 2 business days. As the crisis grew worse, a lot of products started slipping to 2-3 weeks for delivery. Apple usually doesn't stockpile and sells things as they make it, with a tiny ~margin~ inventory.
The thing is that the restaurant has waiters. Those waiters don’t take a vacation because they can’t afford it so Boeing doesn’t sell planes. Boeing isn’t growing so they lay off engineers who now don’t upgrade their iPhones. And Apple will suffer, just awhile from now.
This is not true. The mega-wealthy aren't needing to sell their assets because the Fed is doing unlimited QE. Since the mega-wealthy own most stocks, they don't need the liquidity when their "stable" investments are backed by the Federal Reserve's unlimited free money program. This is crony capitalism.
Wouldn't the mega-wealthy be the ones who'd be least likely to need to sell anyway? Versus people with investments that they want to liquidate for a buffer after losing a job, or retirement?
> Wouldn't the mega-wealthy be the ones who'd be least likely to need to sell anyway? Versus people with investments that they want to liquidate for a buffer after losing a job, or retirement?
Yes but...they want profit. They want to go UP...UP...UP...
So, if they felt that their entire portfolio is at risk, they'd cut and run. But since the mega-rich are too big to fail, they are now being (partially) subsidized by the Fed.
> ... The Fed hasn't bought a single share of stock.
1. This is actually currently being debated within the Fed.
2. I didn't say the Fed is buying stocks. They are buying the stable assets that the mega-wealthy have in their portfolio. Mega-wealthy don't have all their eggs in one basket. The Fed in solidifying a portion of their basket which allows mega-wealthy to retain the added risk in the markets.
When you throw extra demand in a market, prices go up all across the board, not equally though.
As for this particular situation, Fed buys corporate bonds, making companies less risky for stockowners. They also push those yields down, so capital goes to stocks to seek better returns.
Tell me how Federal reserve's actions don't prop up the stock market?
The Fed is artificially keeping interest rates low allowing idiotic stock buybacks to continue for almost no cost, keeps the cost of investor speculation cheap and they are bailing out companies that have bad non-performing loans (banks included)...
The Fed's "Rube Goldberg activity" holds up the stock market...uuuuntil it doesn't.
Surprised why so many people are surprised. Digital services and platforms are booming in this current climate. We have no choice but to be consuming content.
App downloads (30% thank you very much), Apple TV+ ($10 a month thank you very much), Apple Music...the list goes on. That list, apart from TV+ specials, is just revenue on the backs of other work. Others taking advantage of lockdown to product more content. Which makes these companies more and more without lifting a finger. And the Apple TV specials are short change. Just drive growth.
Microsoft, Amazon, Netflix, remote tools like Mural and Zoom, all these digital platforms offering consumer and business services are king right now. Ad supported services are booming, the Facebooks, Googles, because we’re consuming more ads.
It’s the cash cow of the 2010s and 2020s. Corona is only accelerating that.
But ads are supposed to be paid back by customers buying real stuff. And if they won't buy real stuff because of crisis, it just means that ads budgets will be cut soon.
I wonder what fraction of consumption people who’ve been lost their income during the crisis is. If 20% of the workforce is laid off, does that mean consumption will go down 20%? Is the salary/spending power of the group who were laid off representative of the entire workforce? Or does it skew in a particular direction.
I ask because one explanation of the disconnect is that consumer spending in general hasn’t actually dropped that much, it’s just moved away from in-person small businesses.
If you have the free TV+ you should watch. Many of the shows have been really good in my opinion. Haven't watched one of the shows (besides See) that I didn't think were pretty well done.
Could you throw out some names you liked? I tried See thinking it would be really good. I was unfortunately really disappointed and stopped watching after a little over halfway through the season. It diminished my faith in the platform because it was so heavily marketed.
Your comment makes me willing to give it another shot before my year is up.
See, Truth Be Told, and Amazing Stories seem to be widely panned, and I haven't liked them either though I have yet to finish them. For All Mankind would probably resonate most with the HN community. I liked The Morning Show much more than I expected to, and it was a nuanced depiction of workplace power dynamics along with the behind the scenes of those types of shows. Little America is outstanding, the immigrant stories are authentic and multi-layered without being political. Servant is quite good, it's unsettling throughout and you have to pay close attention. Mythic Quest I found to be funny and entertaining, and people who work in game development say it points to underlying truths. People who I know personally are split on it, maybe if you like the Always Sunny in Philadelphia style then you'll like it more. Episode 5 of Mythic Quest comes out of left field and is in my opinion the single best episode on Apple TV+.
Likewise, See seemed like it had so much potential but I didn't enjoy it much. I stopped part way as well. Admittedly I watch some pretty awful TV sometimes, so perhaps it really was just disappointment that it didn't live up to expectations.
> Ad supported services are booming, the Facebooks, Googles, because we’re consuming more ads.
Ad revenue is flat YOY. That's normally death for these companies. In these times, it's positive relative to the market, but that's not what your assertion is.
It’s annoying that Apple is given a free pass on pushing media-centric devices and claiming that services are their future, but then making it HARDER for customers to consume those services, with offensive moves like deleting headphone jacks and reducing battery size.
Consuming more ads only helps ad-servers when there are enough ads to serve. A lot of big advertising categories (travel, cars, restaurants) are having a tough time and will likely cut their ad spending.
Apple TV+, Apple Music, and Netflix revenues have nothing to do with ads.
EDIT: parent comment was significantly changed after I replied to it. Initially, it was saying that "Apple TV+, Apple Music, Netflix, and Microsoft" were having a tough time and that their ad-serving customers will likely have to cut their ad spending.
Your comment was changed some time after I replied to it (I checked about an hour or two after, so I don't know the exact time it was changed). I think most people would consider it as being "edited".
I would agree that if my comment changed, it would be edited; however, I'm asserting that it was not changed -- it is how I wrote it originally. Perhaps you saw a similar comment that was edited?
Hold onto your hats though when companies release results next quarter (in early July).
Consumer spending is way down across the board (everything from appliances to travel). Early indications are the stimulus checks are being saved or used to pay off existing debt - not consuming/purchasing.
The ripple effect of this sudden drop will likely be unprecedented.
That's because it's not a stimulus cheque. It's an insurance payment. You can't stimulate the economy while you're (for good reasons) shutting it down. I don't know how it is in the US but here in France I can't even go buy an appliance, or to the restaurant, or even get a fucking haircut.
does anyone have a good definition of services without bundling in fees paid by google etc to be default search engine. one thing to note though, is services is an excellent business $13bn qtr revenue, $4bn short of FB quarterly revenue.
