“Upon Closer Inspection…"

Posted On Sep 16, 2016 By Dave Gonigam

  • New wireless-charging rumors abound, but we’ll shut up about them after today
  • One sector immune to the stock market’s recent tumble
  • The Russo-Iranian anti-dollar plot
  • Rickards on why the slump in Treasuries won’t last
  • A feel-good lemonade stand story that makes us livid… one place where the War on Cash isn’t being waged… driverless cars and winter weather, continued… and more!

Don’t pretend you were just early — you blew it,” writes a reader after yesterday’s episode of The 5.

“You said wireless charging would be part of the iPhone 7 and it wasn’t. The stock of the wireless-charging company dropped like a rock right after the Apple announcement last week.

“You have to know what you’re talking about, and many times, you don’t. Get your act together and don’t try to make excuses for your mistakes.”

He must be a newer reader, because he forgot the part about “I dare you to print this!”

Funny thing is, even as we went to virtual press yesterday and the reader felt compelled to rip us a new one… shares of that tiny company were leaping to highs last seen when it was “dropping like a rock” last week.

The tech press was abuzz with “previously overlooked regulatory filings” that suggest a partnership with Apple dating to 2014. The filing describes the company’s efforts to comply with requirements from Underwriters Laboratories, the Federal Communications Commission and “Apple compliance testing.”

Several tech-y websites reached the conclusion that while this wireless-charging technology didn’t make it into the iPhone 7, it will make it into iPhone due for release next year. The iPhone 7 has been generally panned for incremental improvements, but Apple surely wants to deliver something big and bold for the 10th-anniversary iPhone in 2017.

Whatever the case, it was enough to make shares pop more than 7% on the day.

Meanwhile, with the iPhone 7’s release today, the “teardowns” have begun… in which geeky types pull the device apart to see what’s inside.

Already, they’re discovering things that at least hint at a design that’s making room for future improvements. Says one account: “Closer inspection shows a new, second lower speaker grille that leads… nowhere? Interesting.”

We can’t say with certainty the teardowns will fuel another spike in the stock price today. But this story isn’t about trying to capture a one-day phenomenon. Growth potential of 79,000% doesn’t take place in a day or even a year.

But considering that 50 billion “smart” devices will be online by 2020… our tech maven Ray Blanco says that number is very real if this tiny company pulls in just $1 of revenue per device.

Ray’s latest presentation might well be out of date by tomorrow or Sunday as the teardowns proceed and the rumor mill churns. So we’re taking it offline at midnight tonight. If you want to see it, it’s now or never.

Make it five out of the last six trading days with significant volatility.

As we check our screens, the Dow industrials are registering another swing of 100 points or greater. Today, it’s to the downside and the Big Board presently sits near 18,100.

Gold is losing more ground, the bid down to $1,308. But the big mover is crude — off more than 2% as we write, back below $43 and retesting its lows from just before Labor Day.

The lone economic number of consequence is the consumer price index — up 0.2% in August, which works out to a year-over-year increase of 1.1%. As we’re wont to say, any resemblance to your own cost of living is purely coincidental.

“Biotech stocks could be shaping up for a big end-of-year rally,” says our Greg Guenthner — despite the wild action of the past week.

“The iShares Nasdaq Biotechnology Index (IBB) just endured a bear market that saw shares drop 40%. That’s 12 months of terrifying downside action for any investor who decided to try to ride out the move.

“But IBB is holding on tight as the major averages slip lower this month. While the Dow and the S&P remain well below their Friday lows, biotechs are charging ahead as if last week’s pullback never happened.”

New developments in the global “Escape From the Dollar”: Russia and Iran are working on a plan to trade using each other’s currencies, bypassing the greenback.

That’s according to Russian state media, citing the former head of something called the Russia-Iran Friendship Society, named Bahram Amirahmadiyan.

Western sanctions remain a stumbling block, but Amirahmadiyan says it’s critical they be overcome: “At the moment, all banking operations between Russia and Iran are carried out in dollars or euros. It’s very inconvenient, because all these operations are controlled either by the EU or U.S. central banks.”

We’ve noted even as recently as last week that scores of countries have already executed such arrangements; this one doesn’t seem all that meaningful.

That said, Jim Rickards sees another move coming from the Russian government that could rock markets worldwide. He’s still keeping an ear to the ground to gather all the details, but he knows enough already that he’s scheduling a live online briefing for Agora Financial readers before the end of the month. Watch here next week for more…

“One of the best pieces of financial advice I ever got was, ‘If something can’t be sustained, it won’t be,’” says Jim Rickards — applying that wisdom to the government bond market.

Treasury yields have been on a tear the last 10 days. The yield on a 10-year note popped from 1.54% to 1.73%. The story’s been similar with government bonds around the world — rising yields and falling prices.

“There’s been a bloodbath in Japanese government bonds, and rates are going up in Europe and the U.S. as well. Prominent voices such as Bill Gross and Jeff Gundlach are saying this is the end of the 35-year bull market in bonds (and yes, I was around in 1981 when it started) and that a bond bear market has begun.”

Jim’s not buying it. “What does it mean when nominal rates are going up (they are) and inflation is flat to down (it is)? It means that real rates (nominal rates minus inflation) are spiking.

“Real rates go up for one of two reasons: The first is that borrowers are bidding for funds in a robust economy. The second is that policymakers are in uncharted waters and both the central bankers and markets are confused about what to do. I see no sign of a robust economy. I see plenty of signs of confused policy and uncertainty in markets.”

Jim believes the rise in bond yields is setting the stage for a subsequent inevitable fall. “Higher nominal rates and much higher real rates contain the seeds of their undoing.

“They will choke what little life is left in the economy. Then comes a global recession, and all major interest rates will move closer to zero. Since the U.S. has relatively high nominal rates, there is ample room for rates to fall and bonds to rally.

“So the central tendency is still intact. That involves lower rates, higher bond prices, higher gold prices, disinflation and possible deflation. But we’re on a technical detour for the time being. My advice is to sit tight and wait it out. If something can’t be sustained, it won’t be.”

We’re not sure who to be angrier with as we relate this next item — busybody bureaucrats or the well-meaning people who are only enabling them.

It’s a new twist on the familiar story of a kid’s lemonade entrepreneurship that runs afoul of one or another local ordinance — in this case, a “gourmet lemonade stand” launched by 10-year-old Anabelle Lockwood of Fountain Valley, California.

The Orange County Health Department got wind of her venture and informed her that between the proper permits and getting her stand up to code, she’d have to shell out $3,500. In 30 days. Or else.

Anabelle’s marketing-minded mom decided to turn to the crowdfunding site GoFundMe….

As of this morning, the effort has raised $3,270.

But no, we’re not happy with the people who contributed to this effort. We daresay they’re only emboldening the bureaucrats. After all, young Ms. Lockwood is hardly the only child in Orange County who might want to open a lemonade stand. The next one is unlikely to meet with as much fundraising success. If someone really feels passionately about the issue, why not raise hell at the next county board meeting? Guess it’s easier to hit “Donate” and feel good about yourself that way…

“Banks are above criminal prosecution,” a reader writes after our brief account of Wells Fargo’s misdeeds this week.

“Even when they engineer the greatest financial disaster since the Great Depression; even when they are caught red-handed laundering money for drug dealers; even when they are caught, in this latest scandal, opening accounts without their customers’ permission and using them as a vehicle to steal from their customers. Where is the criminal prosecution?

“Meanwhile, the head of the unit under which the fraud occurred was retired with a $125 million bonus. Jeez. How long will it be before we are asked to bail out (or bail in) these cockroaches again?”

“Time to move your money to a credit union,” says a reader responding to the fellow who wrote in saying he had trouble withdrawing cash from his Seattle-area bank and had to settle for only $300.

“I have cashed two $1,000 checks at my credit union in southwest Oregon in the past two weeks without any strange looks or propaganda.”

“I must have read three dozen different accounts in The 5 about people unable to pull cash out of their banks,” chimes in one of our longtimers.

“These same people piss and moan about how evil the big banks are but then do nothing to change the situation and keep banking with these ‘vampire squids.’

“I switched from U.S. Bank to a local credit union when I couldn’t withdraw money in 2008. I have never been turned away for withdrawals as large as $8,000. No waiting. No questions other than if I had a preference for bill sizes.

“Stop banging your head against a brick wall and expecting different results. And if you decide to keep banging your head against the big bank wall, at least stop whining about it.”

This reader had another “tough love” moment we’ll share today…

“To the gentleman who wanted to see how autonomous vehicles drive on black ice and through two-foot snowdrifts when you can’t see the road…

“They won’t. They will be programmed to not do all the stupid things people insist on doing that cause major pileups and deaths every year.

“If one does get caught on black ice, it will immediately upload that information to the cloud so safer routes can be used by other vehicles.

“If there are two feet of snow already on the ground, the AVs will hopefully prevent idiots from running out to the store to pick up milk and eggs or even going to work, which only leaves them stranded on the highways and delays the reopening after the storm clears.

“Oy!”

“If these new wireless chargers are intended to work within a 15-foot radius,” a reader muses, “there may come a time when an electric bill will skyrocket because the neighbor is charging his Tesla through the common wall, intended or not.

“Has there been any mention of a login requirement before the wireless charger will function?

“Keep up the good work, or as we longtime Austin residents would say, ‘Onward through the fog!’”

The 5: We imagine these wireless charging units would work much the same way your Wi-Fi does. As long as you go to the modest effort of password-protecting it, you stand a reasonably good chance you won’t have people mooching your bandwidth — or your electricity, as the case may be.

Have a good weekend,

Dave Gonigam
The 5 Min. Forecast

P.S. One last time: Events are rapidly overtaking Ray Blanco’s latest video presentation on the wireless-charging technology with 79,000% growth potential over the next four years. We’re taking it offline at midnight. If you want to watch the link, nows the time before it goes dark


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