What Matters More Than Apple’s Tax Bill
- Even Kafka couldn’t imagine Apple’s new tax bill
- The highly profitable replacement for the iPhone’s headphone jack?
- Yellen’s speech: Nothing new, says Rickards, but what does that mean?
- Negative interest rates backfire. No, this is not a repeat
- Virtual reality as a treatment for pain… gold stocks during a crash… “don’t blame the boomers”… and more!
Anyone who thinks Europe is an outpost for the “rule of law” — relative to emerging markets like China or Russia — might want to talk today with Apple CEO Tim Cook.
As we anticipated last week, the European Commission has hit Apple with a $14.5 billion bill for back taxes.
Once you cut through the lawyerly mumbo jumbo, here’s what the Eurocrats more or less said to Apple: “Your quarter-century-old tax arrangements in Ireland are completely legal and above board… but you’re just not paying your ‘fair share.’ Fork it over.”
“Using the Commission’s theory,” says an Apple statement, “every company in Ireland and across Europe is suddenly at risk of being subjected to taxes under laws that never existed.”
O the irony. Apple set up shop in Ireland in part to get around the byzantine corporate income tax rules here in the United States.
These latest developments reinforce a forecast we made last spring: Congress will enact corporate tax reform next year. Then Congress will raise corporate tax rates a few years later when it decides it needs more revenue.
Perspective: The impact on Apple’s bottom line is minimal.
The added tax bill, which covers 2001–2014, amounts to about one month of AAPL’s revenue. Apple shares are down only two-thirds of a percent as we write.
With that in mind, Apple is surely expending far more man-hours on the launch of the next iPhone a week from tomorrow.
Well, we presume that’s what’s happening. As we went to virtual press yesterday, the company confirmed the schedule for one of its periodic dog and pony shows in San Francisco. iPhone launches tend to roll around in September. Not hard to connect the dots.
The real question is what will Apple do to generate some buzz around the iPhone? Sales are slipping. People don’t see the need to upgrade as often as they used to.
The most common rumors about what’s in store for the iPhone 7 and 7 Plus next week are a snooze. A new dual-lens camera in the 7 Plus? Meh. A new home button that vibrates when you touch it? Whatever. Available in blue, in addition to the standard colors? Get real.
Then there’s the whole thing about removing the headphone jack.
This one’s been going around for months. “The iPhone 7 is rumored to be missing a headphone jack, which means that your new headphones will have to connect via the Lightning port or wirelessly via Bluetooth,” says a dispatch this morning at Macworld. “And your old headphones? You’re probably going to have to pay $29 to get an adapter at the Apple store.”
On the surface, that seems like shameless revenue grab. It’s the sort of thing bound to tee off an otherwise loyal customer base. It might well drive some people to switch to an Android phone whenever they decide it’s time to upgrade.
Then again, ponder that by jettisoning the headphone jack, Apple would free up valuable real estate within the iPhone’s case.
What if Apple used that space to do something new and radical and useful? Something so beneficial that people would quickly forget about the loss of the headphone jack?
As you might be aware, there’s a huge and thriving subculture of the internet devoted to speculation about future Apple products and innovations. Some sites are more informed than others.
One especially reputable site in China made a spot-on prediction at the start of the year — the launch of a souped-up but more affordable 4-inch iPhone model, the SE. In early July, the same site released a photo supposedly taken during a presentation at Apple’s big Chinese supplier, Foxconn…
Huh? Wireless charging?
That comes back to the forecast of our own Ray Blanco, spotlighted here yesterday. Imagine being able to charge your phone – or. for that matter, a tablet or laptop — as far as 15 feet away from the power source, untethered by any wires.
“This technology could transform the entire consumer electronics industry,” says Ray. “And the first big consumer tech company to use it would have a huge leg up on the competition.”
After a visit to Apple headquarters earlier this month, Ray is more convinced than ever that Apple is the company… and it’s partnering with a tiny publicly traded niche player with the technology to make it all possible.
Again, the “big reveal” might well come a week from tomorrow. The time to act for maximum gains is before then. Follow this link to begin.
Other than the Apple tax decision from Europe, there’s not much moving the markets on this late summer day.
At last check, the major stock indexes are slightly in the red, the Dow at 18,449. Treasury yields are inching up, the 10-year note at 1.57%
The dollar is firming, with the dollar index cresting the 96 level. That’s knocked a few bucks off the bid on gold, now $1,317.
“What was striking about the speech was how ordinary it was,” Jim Rickards reflects after Fed chair Janet Yellen’s Very Important Speech at Jackson Hole, Wyoming, last Friday.
“The conference at which the speech was delivered was titled ‘Designing Resilient Monetary Policy Frameworks for the Future.’ That title at least suggested that some new thinking and new policies might be on display. They weren’t.
“Yellen basically said that interest rate cuts, quantitative easing, interest on excess reserves and forward guidance were sufficient to pull the U.S. economy out of a future recession if needed. She also agreed that ‘helicopter money’ (really fiscal policy supported by Fed bond purchases to finance deficits) could be useful, but made it clear that it was up to Congress to implement that and the Fed would not lead the charge. Yellen also said that negative interest rate policy was practically ‘impossible,’ so you can cross that off the list of policy tools.
“In short, Yellen said the Fed’s existing tool kit is adequate and it is unwilling to consider more radical tools or remedies.”
And certainly nothing to forestall the advent of “world money” Jim sees coming one month from today. If you’re not yet clued in, here’s where you can catch up.
If the Fed isn’t willing to consider negative interest rates — at least not right now — maybe it’s because of the German experience.
Sales of home safes jumped 25% in the first half of this year at Burg-Waechter KG, Germany’s biggest safe manufacturer.
“The moment the bank tells me I have to pay interest on my deposit, I’ll take my €50,000 or whatever it is and put it under my pillow, or buy a safe and stick the money inside,” businesswoman Dagmar Metzger tells The Wall Street Journal.
Earlier this year, we documented how safe sales in Japan were also spiking. Negative interest rates were supposed to spur people to spend their money. Instead, they’re prompting people to save even more. Go figure…
Take two virtual reality breaks and call me in the morning?
Seems VR is useful for pain relief — and we don’t mean the garden-variety headache. “It’s still a new and experimental approach,” Bloomberg reports, “but proponents of virtual reality say that it can be an effective treatment for everything from intense pain to Alzheimer’s disease to arachnophobia to depression.”
Bloomberg describes a 13-year-old burn victim in Texas undergoing a series of painful treatments during her recovery. For a diversion, she puts on a VR headset and visits a snowy landscape where she can build snowmen and hurl snowballs at penguins. “When I first tried it,” says Deona Duke, “it distracted me from what they were doing, so it helped with the pain.”
“Can someone please let us know what happens to precious metal mining stocks when the stock market tanks?” a reader inquires.
“Do they get thrown out with bath water… or do they thrive as people look for more stability?”
“Being a bit of an ignorant savage,” writes another, “please could you explain why we are being urged to buy gold bullion (or gold coins) as the market is going to crash yet you still recommend gold shares?
“Does this mean that the gold shares are protected from the rest of the upcoming turmoil?”
The 5: Not a dumb question.
Without being too cute about it… on some days, gold stocks act like gold and on other days they act like stocks.
During the Panic of 2008, gold stocks went into a sharp decline in tandem with the rest of the stock market. That was a deflationary scare. Contrast that with an inflationary scare like the one in late 1979, when it appeared the dollar had nowhere to go but down. Gold zoomed to record highs in January 1980, and the gold stocks were even stronger — even while the stock market as a whole languished.
Judging by the 2008 experience, the deflationary scares don’t have a long-lasting impact. Gold stocks bottomed late that year, more than two months before the rest of the stock market. They recovered their early 2008 highs by late 2009.
We’ll have more to say about these questions as the weeks go on. Stay tuned…
“Blame the boomers for not paying attention,” a reader reacts to David Stockman’s essay here over the weekend.
“They were busy raising children and pursuing careers and let the few highly motivated among them ruin the country. They listened to the media and did not demand unbiased reporting. They got lazy, but they still prefer peace to war, and privacy and autonomy to fear-based obedience.
“Every high school of every generation has the jocks and the cheerleaders, student council members, AV operators and techno-geeks, artists and mechanics, math and spelling wizards and slackers. Even a few history and economics nerds. This is good. But it all goes wrong when the most ambitious of them, highly motivated, glory-seeking, power-seeking, even love-seeking or any other agenda, are allowed to take over.
“And no, not voting or voting for the lesser evil does not let one off the hook but merely concentrates power (same with water pollution, measured in parts per million — the more water, the less pollution). Only a few boomers ran us into a ditch, but the rest of us let them do it.”
“Great truisms regarding the Clintons — however, a little overboard on the baby boomer generation,” writes another.
“Many of us went off to get a higher education, get a job or fight a war. I was born in 1967. Never had friends or even acquaintances who did drugs or participated in war protests. You can blame those like the Clintons, but don’t condemn the baby boomers as a whole. Most were shooting for the American dream by working hard, etc. Most were not social no political elites.
“The Clintons and those like them got where they are by hook and by crook. Their dynasty needs to come to an abrupt end. Hopefully, that will happen. If not, then the ignorant masses will get what they deserve.”
The 5: Huh? You’re not a boomer — either by the traditional definition (1946–64) or the “cultural boomer” definition from the authors Strauss and Howe (1943–60).
Every generation has its malefactors. The generation that came right before the boomers, often called the “Silent” generation, never did get a president elected. But they did give us the rogues’ gallery of Alan Greenspan, Robert Rubin, Madeleine Albright, Colin Powell and Dick Cheney.
Our own Xer generation hasn’t had its chance to do much damage (unless you count Obama, born in 1961). Give it time…
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