Daily: Threads on Lower Apple Sales Estimates and on the Irish Economy

Quick post here. Apple’s sales estimates were downgraded, as I posted yesterday. The reason for the downgrade was channel and supplier checks which revealed lower sales volume than initially believed. Apparently, Apple has told suppliers to cut volume because demand is less than anticipated. As I mentioned a few weeks ago, Apple’s new strategy, which is a dodge between price, margin and volume,  is much more dependent on good volume. And Apple had a very bullish Q1 forecast for sales volume. Unfortunately, it looks like the volume is not as high as anticipated. And the potential for even Q1 to disappoint is larger as a result. While I am not surprised that Apple is experiencing margin compression as the Wal-Mart post below shows, it would be surprising if Apple missed its own Q1 forecast. That would be a first and a sign that the problems at Apple are deeper than we thought.

On Ireland, the economy there is doing better than in the rest of the periphery and much of this is due to exports and lower wage costs. But the suffering is great, with unemployment near 15%. Moreover, the austerity pill continues, even as demand in the rest of Europe and the UK flags. Ireland is a bright spot for now but it would not be a surprise if they too started missing targets if Europe continues mired in a double dip recession. I should also mote the Irish Independent article on Irish lending to small and medium sized business below. This tells you that the financial system in Ireland is still weak even now. The country cannot afford a setback in growth because it would then find itself in the same situation as Spain, with house price declines adding further downward pressure in a debt deflationary way.



iPhone 5 launch fails to excite China | Technology | The Guardian

“Peter Misek of Jefferies said he was lowering his iPhone shipment estimates for the first quarter of 2013 by 5m to 48m, on the basis that the company was cutting orders to suppliers. He also cut his estimates for the company’s gross margins by 2 percentage points, to 40%. He said it was unclear how much the snowy weather and requirement to pre-order were factors in the small queues.”

Wal-Mart selling Apple’s iPhone 5 at big discount | Reuters

“Wal-Mart said it is selling the 16 GB Apple iPhone 5 for $127, versus an original price of $189.97. The price is valid with a two-year contract from wireless carriers Verizon, Sprint and AT&T, the retailer added.

Wal-Mart said it is also selling the 16 GB iPhone 4S and the 16 GB iPad with Retina display and WiFi at discounts.”

Apple Stock Slide Endangers $241 Million of Structured Notes – Bloomberg



Ireland Meets Targets, but Economy Still Struggling – WSJ.com

“Ireland was the only member of the currency area to report an increase in business activity in November, according to a survey of purchasing managers at manufacturers and service providers compiled by Markit. That was largely due to exporters, who benefited from a fall in wages and lower property costs.

The Irish Exporters Association estimates exports of goods and services will rise 6% to €183 billion in 2012 and will rise more than 3% next year. “We have been improving our competitiveness—that has been one of our crucial factors,” said Philip Halpin, economics adviser to the IEA. “The way we will get out of this mess is when growth to [exports] ultimately feeds through to jobs and other sectors of the economy. When we have a more balanced growth we can begin to get out of the doldrums.”

But Ireland’s ability to generate the strong growth that would make it easier to repay its debts is out of its hands, dependent on recoveries in the U.K., the euro zone and the wider global economy.

Without stronger growth, ratio of government debt to gross domestic product will remain uncomfortably high. At the end of 2011, government debt stood at 111% of GDP, compared to a euro-zone average of 90%. By the end of next year, it is expected to be 119%.”

Banks still not lending to SMEs despite fixing their balance sheets – Irish, Business – Independent.ie



Employment reaches record high in further sign of jobs market resilience – Telegraph

“The Government received a welcome respite this morning as official unemployment figures showed a further fall in the jobless total, with tens of thousands more people in full-time jobs.”

EU nations agree banking union: statement in full – Telegraph

“EU finance ministers have agreed to make the European Central Bank the chief supervisor for banks in the euro zone, a move designed to underpin the currency and its financial system. Here is their statement in full.”

Germany slashes growth forecasts | Business | guardian.co.uk

Bundesbank’s Weidmann blasts new Greek debt deal – paper | Reuters

“Weidmann criticized the fact that Greece would meet part of its funding needs through auctions of short-term T-bills, saying this paper would mainly be bought by local banks, who in turn were largely financed through central bank means, complicating the ban on direct state financing.”

EU Car Sales Reach 19-Year Low as Recession Hits Peugeot – Bloomberg

“Eleven-month registrations in the 27-nation EU fell 7.6 percent to 11.3 million vehicles, the lowest figure for the period since 1993, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today in a statement. The decline was propelled by a 10 percent plunge in November.”


United States

Consumer Credit in U.S. Rose More Than Forecast in October – Bloomberg

“Non-revolving debt, such as that for college tuition or auto purchases, climbed $10.8 billion in October after surging $14.4 billion in September.

Revolving debt, which includes credit cards, rose by $3.38 billion in October after a $2.19 billion decrease the prior month. Revolving credit has declined in three of the five months through October.”

Fannie and Freddie Are Not Piggy Banks – Bloomberg

“Right now, Fannie Mae and Freddie Mac own or guarantee almost 84 percent of mortgage debt. Private capital is almost nonexistent, largely because of the heavily subsidized presence of Fannie and Freddie. Until the government decides what role it wants the companies to play, including whether they should provide any type of mortgage guarantee, private capital is likely to stay on the sidelines.”

Dalio getting bad vibes – NYPOST.com

Industrial Production in U.S. Jumps on Rebound From Sandy – Bloomberg

“Industrial production in the U.S. rose in November by the most in two years as manufacturers recovered from superstorm Sandy.
Output at factories, mines and utilities increased 1.1 percent last month after a revised 0.7 percent drop in October that was more than initially estimated, the Federal Reserve reported today in Washington. Economists forecast a 0.3 percent advance, according to the Bloomberg survey median. Manufacturing, about 75 percent of production, surged 1.1 percent in November, the most this year.”

America’s demographic squeeze: Double bind | The Economist

“ALTHOUGH America’s fiscal problems are among the worst in the rich world, its policymakers long took comfort that, when it came to demography, its outlook was one of the best. Because Americans have so many babies and welcome so many immigrants, they had more room to deal with the coming burden of pensions and health care for the elderly.

But the savage recession of 2007-09 and its aftermath have not just deepened America’s fiscal hole; they have weakened those demographic advantages. America’s fertility rate has been falling since 2007, as has net immigration. Compounding this, the share of the population that is active in the labour force has slipped, both because of ageing and because of the recession’s lingering effects.”

Roubini: Housing Optimists Will Be Proven Wrong: Video – Bloomberg 


Central Banks

How the Liberal Party lost Mark Carney – The Globe and Mail

“Speaking to The Globe this week, Mr. Carney refused to go into details about the conversations, or explain why he didn’t immediately shut down the campaign as a non-partisan public servant working under a Conservative government.

He insisted, however, that he never actively sought the job or reached out to Liberals.

“I never made an outgoing phone call,” Mr. Carney said. “I never encouraged anybody to do anything.”

Mr. Carney tried to put an end to the speculation about a Liberal bid through Bank of Canada officials in late September. Then, in October, he went public in a more overt effort to kill the story, heaping scorn during a news conference on media questions about him entering politics.”

Fed hawks take aim at central bank’s latest policies | Reuters

“Two top Federal Reserve officials on Friday raised questions about the U.S. central bank’s unprecedented decision to tie monetary policy to specific economic guideposts, and warned that its latest policy actions risk straying into fiscal territory.”

El-Erian: Why Fed’s Suprise QE Announcement Garnered Yawns

“PIMCO boss compares recent central bank action to ‘taking experimental drugs'”



China’s Ghost Towns Won’t Have a Hard Landing – Bloomberg

Japan falls into recession | World news | guardian.co.uk

Central Bank Regime Change: an update following the Fed last night, and Carney the day before | Bond Vigilantes

tax.com: Capital Gains Frustration for Tax Reformers

“The problem is that in the short term any increase in the capital gains rate will slow down sales of capital assets. In the first few years after enactment the negative revenue effect of this reduction in capital gains realizations can completely offset the positive revenue effect of a lower rate, so that it is possible for a rate hike on capital to lose revenue in the short term. Over time the slowdown in realizations fades away, but in the ten-year revenue window conventionally used by Congress the net revenue gain from a capital gains tax increase is only a small fraction of the revenue pickup suggested by the tax expenditure estimates.”

Roach Sees Abe’s Unlimited Easing Failing to Push Japan Recovery – Bloomberg

““Quantitative easing, which they should have learned long ahead of everybody, doesn’t help drive a cyclical recovery,” Roach, 67, said today in a Bloomberg Television interview in Hong Kong. “What he wants he may get, but that doesn’t mean it’s going to work.””

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