The Wall of Worry…The Steaming Pile of Cronyism… and Apple

Happy Saturday everyone. I plan on doing very little today other than this post.

I saw this front page photo of the Washington Post and had to share it:

As I have been saying…this has been the greatest ‘wall of worry’ of my investing lifetime. Markets climb ‘wall of worries’.

As we worry, lose our tempers, and try to get on with our lives, the grift continues on page 10-50. Ben Hunt captures the lastest steaming pile of cronyism in his Eastman Kodak post titled ‘The Grifters‘. This grift begins…

On Tuesday afternoon, the White House announced that Kodak – a public company with less than $100 million in market cap, basically a pension fund with a famous brand name attached – would receive $765 million in “loans” from the US government to create a “pharmaceutical start-up” that over a period of 8 YEARS will start making pharmaceutical “supplies”. Whatever the hell that means.

This $765 million in non-recourse, non-secured loans for pharmaceutical supply production, given to this micro-cap company with zero experience or expertise in pharmaceutical supply production, comes from the International Development Finance Corporation (DFC), a $60 billion piggy bank established by the Trump administration in 2019 to replace the Overseas Private Investment Corporation (OPIC).

Yes, “international development” and “overseas investment”.

The DFC is an institution that, per its mission statement and Congressional charter via the 2018 Better Utilization of Investments Leading to Development (BUILD) Act, is “focused on promoting inclusive economic growth in the world’s least developed countries.”

I mean … I knew things were bad in Rochester, but I didn’t know they were that bad.

To dust off an old Epsilon Theory catchphrase:

They’re. Not. Even. Pretending. Anymore.

Finally, that boring Apple corporation is growing like gangbusters even though iPhone growth is gone. Here is the monthly stock price chart since Tim Cook took over for the late Steve Jobs:

In November 2018, Tim Cook said services was the future, not iPhones and the stock was hammered. I argued that it was a great time to buy the dip (I bought some of course). Have a The Meta game Tim played is complete. Apple surged 10 freaking percent yesterday to all-time highs adding $170 billion in value.

iPhone sales were up 1.6 percent for the year but services sales were up over 15 percent.

I have no idea what happens next, but most of Wall Street is rejiggering their growth numbers and price targets.

Apple also declared a 4-1 split which is an old 1999 trick used to juice a stock. My friend John Street Capital predicted last week they would and his post was an excellent read titled Invest in What You Know: What does democratization of equity investing mean for valuations & performance? The money shot:

It’s interesting to highlight the difference in activity amongst some of these popular names for those firms that enable fractional equity trading / put that front & center and those that don’t. When it’s a core part of the product offering trading volume in names such as AMZN, TSLA, and GOOGL tends to be higher as they view this as “less expensive.” However, when fractional equity investing isn’t enabled you see more activity in names like SNAP, UBER, TWTR, with “lower notional dollar requirements.” While there has been a plethora of academic research to suggest stock splits shouldn’t have an impact on price, real world results have varied based on a number of key criteria. We think companies like AMZN, GOOGL, and TSLA will shortly have bankers pitching them splits, as the next “leg” of price appreciation.

Have a great weekend.