The Market Shock Set for Tomorrow

Posted On Sep 6, 2016 By Dave Gonigam

  • The least-ballyhooed iPhone launch in years…
  • … or is Apple about to spring the biggest surprise in years?
  • A quiet stock market (again)… but for how long?
  • One reason gold popped today… and the reason crude didn’t
  • Dollar death march underway: A G-20 postscript
  • Movie studio issues copyright notice for its own website… more financial travails for Americans living overseas… the mooing masses and the War on Cash… and more!

With little effort, you can find a meme on the Internet these days to express almost any sentiment…

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“Low expectations” was the phrase that came to mind looking at this morning’s Wall Street Journal and its preview of Apple’s latest media event set for tomorrow. The new versions of the iPhone “likely won’t include the kind of significant new features that Apple consumers have come to expect every other year.”

It’s true that big upgrades come during even-numbered years. 2014 brought the debut of the 4.7-inch and 5.5-inch models. But this year? The Journal channels conventional wisdom when it says the company will wait to introduce big changes until next year, which will mark the iPhone’s 10th anniversary.

The problem is that Apple doesn’t have another year to tread water.

Apple’s revenue is down 14.6% year over year. And it’s not hard to see why: In the most recent quarter, the iPhone accounted for 57% of Apple’s sales, down from 63% in the same quarter last year. Sales in China, once hot, have slowed by one-third. American users, meanwhile, are waiting longer to upgrade.

Perhaps Apple will benefit from the woes of Samsung. That company’s signature Galaxy Note 7 debuted to much fanfare last month because it can still function after being immersed in water for 30 minutes. Unfortunately, it’s now being recalled for a phenomenon that’s the opposite of water — batteries that spontaneously catch fire.

Still, Apple needs to move the needle with the iPhone, and now.

Which brings us back to the one new “feature” nearly everyone agrees will be part of the new iPhone 7 tomorrow — a missing headphone jack.

We mentioned that last week. You’ll need either Bluetooth headphones or a clunky adapter to plug into the Lightning port.

Or maybe Apple will include earbuds that plug into the Lightning port. But whether you use those included earbuds or an adapter for your own headphones, there’s still a problem.

“As I write this,” says Evan Selleck at the website PhoneDog, “I’m charging my iPhone and I’m listening to music with my headphones plugged in. There’s a potential future where I can’t do that, and that seems ridiculous to me.”

True. For a company with a long and storied history of user-friendliness and “it just works”… that’s not gonna fly.

But it will fly if Apple can solve that problem and deliver a huge new benefit at the same time — indeed, a “significant new feature,” to use The Wall Street Journal’s words.

After a recent visit to Apple headquarters, our Ray Blanco is more convinced than ever that benefit will be wireless charging. He’s been following the fortunes of a tiny company with an unnamed “key strategic partner” and a lock on wireless-charging technology that would allow you to charge a device from a distance of 15 feet. You could be texting away in the next room and charging your phone at the same time.

Now… If you’ve been reading us for a while, you know Ray’s been keen on this tiny company for some time. In fact, he felt strongly that Apple would make a wireless-charging announcement back in June, coinciding with the company’s Worldwide Developers Conference.

“Even if I’m wrong, the company still has a lot going for it,” he said.

It turns out the announcement did not come in June. But the share price of that tiny company didn’t tank, either. It recovered its previous highs in August… and has moved higher since, as investors recognize the company indeed has a lot going for it.

So you can’t get shares for as good a price as you could a few weeks ago… but if Apple indeed unveils wireless charging in the iPhone 7 tomorrow, the share price will run away from you completely.

We urge you to examine Ray’s thoroughly researched case while there’s still time to do so. It’s your chance to get in on a market niche with 79,000% growth potential. Here’s where to go.

To the markets… where the senior traders are back from the Hamptons but the action is as slow as it was while they were away.

The major U.S. stock indexes little moved, the Dow off a tenth of a percent, the Nasdaq up the same.

“For the last 36 days, the S&P 500 has been stuck in a 1.5% trading range,” says Jonas Elmerraji, analyst for our trend following guru Michael Covel. According to Bloomberg, that hasn’t happened since 1964. Meanwhile, volatility as measured by the VIX remains low… especially relative to the S&P itself…

Don’t expect that to last indefinitely. “Volatility is cyclical,” says Jonas. “That means that low volatility is generally followed by a period of high volatility. And the extremely extended do-nothing market we’re in now is likely to be followed by a market that does a lot pretty quickly.”

Nothing quiet about gold this morning. It crept a few bucks during electronic trading yesterday… and today has added nearly $14 on top of that. At last check, the bid is $1,340.

The price climbed steadily overnight and made a small vertical leap at 10:00 a.m. EDT.

It was at that moment the big economic number of the day laid a big egg.

The ISM nonmanufacturing index — measuring the service sector of the economy — usually doesn’t make as much news as its manufacturing cousin. As with the manufacturing survey, numbers above 50 indicate expansion; below 50, contraction.

The July number was 55.5. The consensus guess for the August number among dozens of economists polled by Bloomberg was 55.0. The lowest guess was 54.0.

Oops, the actual number was 51.4 — the lowest since February 2010.

We caution that one month does not a trend make. But the number will surely panic all the eggheads who jabber constantly about how the manufacturing numbers matter less these days because “we’re a service-oriented economy now.”

Gold traders likely sniffed out more monetary ease coming from the Federal Reserve. At the very least, the number is more confirmation the Fed won’t raise interest rates at its next meeting in two weeks.

Well, we never said the dollar’s early death throes would make for earthshaking headlines.

Leaders of the G-20 nations met Sunday in Hangzhou, China. There was a pointless spat over the absence of a red carpet for President Obama’s plane. There was much caterwauling over China’s relentless steel production flooding the global market, but no resolution. There was a joint statement issued at the end of the conference that dragged on for nine pages.

All along, Jim Rickards figured the anti-dollar maneuvering would take place behind the scenes — not unlike the “Shanghai Accord” that was reached in February during a summit of G-20 finance ministers and central bankers. As then, he’s keeping an ear to the ground for details to leak out in the days ahead; we’ll keep you in the loop.

This much is certain, says Jim: “Whatever affects the dollar affects you, your portfolio and your personal financial security.” And he sees the dollar dropping at least 50% in value in the coming years… maybe as much as 80%.

In that painful process, Friday, Sept. 30 will prove to be a pivotal date — for reasons he explains here.

Crude prices have taken a long round trip in the last 36 hours.

They opened electronic trading Sunday night around $44.44. Early on Monday, word began to filter in from the G-20 summit that Saudi Arabia and Russia had come to terms on limiting oil production. The price promptly zoomed past $46.

Then the details started to emerge. The two countries hadn’t come to terms on production limits. They’d agreed to engage in talks about coming to terms on production limits, maybe, at some future time to be determined.

No, you can’t make this stuff up. This morning as we check our screens, crude is back to $44.37.

Maybe it’ll finally dawn on Hollywood that its intellectual-property obsession has gone too far — but probably not.

Over the weekend, Warner Bros. asked Google to remove its own website from search results because it runs afoul of copyright laws.

Strictly speaking, the request came from an outfit called Vobile — hired by Warner Bros. to monitor the web for copyright violations, usually in the form of illegal uploads of movies and TV shows. Vobile issues hundreds of thousands of takedown requests every month… but to our knowledge, this is the first request involving its own client. Heh…

According to the website TorrentFreak, Google was asked specifically to remove links for the websites of Warner movies including Batman: The Dark Knight and The Matrix. Ditto for Warner-authorized movie portals like Amazon. And those movies’ entries at IMDB.

OK, so Google figured out right away that the request was insane. In the meantime, there’s been no comment yet from Warner Bros. And we’re not holding our breath…

“Just thought I would let you know that as a U.S. citizen living overseas, I have just been informed that my Charles Schwab account (which I have had for years!) had to have a U.S. address and phone number in order to be valid,” a reader writes.

“When I asked why, I was told that it was part of new Homeland Security laws regarding terrorism. Good thing there are no homegrown terrorists on U.S. soil. Seriously?”

“Doesn’t a credit card offering rebates on purchases discourage the use of cash?” a reader inquires in light of our recent War on Cash musings.

“If I use cash, relatively speaking, it costs me 1–5% more (depending on the available rebate) for the good or service than if I use the card (digital money). It’s a carrot to move the herd in the right direction.

“I’ve also recently discovered that my bank charges a small (for now) ‘administrative fee’ when I deposit cash (the stick).

“I like the convenience of my cards and their generous rebates. Mooooo.

“I also like The 5 and I don’t care that it takes me longer than five minutes to absorb it.”

The 5: Our mailbag went off on the card rewards tangent a few months ago. It was an interesting give-and-take.

Your editor’s personal policy is evolving into one of using cash when buying from locally owned small businesses. But when buying from soulless corporate behemoths, I don’t much care if they’re forking over 2% to the card processors, and I’ll gladly take the points. Your mileage may vary…

Best regards,

Dave Gonigam
The 5 Min. Forecast

P.S. We’re now 24 hours away from Apple unveiling the iPhone 7. And while conventional wisdom says Apple fanboys need to lower their expectations — see above — our science-and-wealth team is convinced a big announcement is in store.

In fact, this announcement has the potential to propel an entirely new industry with 79,000% growth potential.

It’s the tech story Silicon Valley doesn’t want you to know about. Click here for the details now while the profit potential remains its highest.


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