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Remember Those Apple Bonds?
Remember when on March 19 of last year every homeshopping financial network was pitching the then just announced annual AAPL dividend of $10.60 as the greatest thing since the Apple Newton sliced bread, that it would send the stock into hyperspace as it unlocked an entire universe of dividend buyers, and that AAPL would provide countless years of fixed-income equivalent fun? Well, it did send the stock soaring. Briefly. It then crashed, and is now at a price which is almost to the dollar unchanged from a year ago when adding the benefit of dividend cash flows.
Fast forward to today, or rather a month ago when on April 30 AAPL announced that in lieu of repatriating its $100 billion in offshore cash it would instead sell $17 billion in 3-30 Year bonds, a move which some speculated is an interim top in the bond market. They were right.
What followed was a quick and painful, for some, lesson in duration and bond math (and a reminder of what happens to both dividend stocks and rate-sensitive prices in a rising rate...supposedly...environment):
What happened? Well, Treasury yields soared. Which means that all linked instruments with duration exposure, such as the above AAPL bonds, got doubly crushed:
- The 10 year which priced at +75 (and par of course) has lost nearly 5 points of notional in less than a month.
- The 30 year (at +100) - down nearly 8. All of this in under one month.
Biggest winner here - Apple which raised hundreds of millions more by coming to market then and not now. The losers? Those who bought the bonds. But don't worry: these are just paper losses, and paper losses never become real losses.
Of course, this is simply a preview of what will happen to all risk classes in a rising interest rate environment (especially in an economy in which the bulk of EPS growth in the past two years has come from the net interest line which has collapsed resulting in a boost to EPS). What is worse is that stocks tend to cancel dividends when prices plunge at whim, or when they anticipate economic difficulties, which further crushes the stock. At least bonds have immunity from management team whims.
Wouldn't it be ironic if as a result of expectations of rising yields, the resulting drop in bonds is less than what happens to stocks: including dividend stocks, and results in a greater rotation, only in precisely the opposite direction of where the Fed wants?
Either way, still think rising rates are good?
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Wait until you see what happens to house prices when mortgage rates rise. Prices that are 6X median income in LA are not sustainable.
I never understood why Apple didn't just issue $1T of bonds and then distribute it all back to the shareholders in a cash dividend before the great train wreck that awaits them occurs...
Peak Apple has already come and gone.
I said that last fall as AAPL approached $700 and was junked heavily for it. Seems many love chasing a bubble.....
Or Blowing one!
Cuz even the idiots watching CNBS might suspect something at that bold of a stroke.
Not if Apple sent a little advertising love their way first they wouldn't...
LOVE > BLIND
Apple is such shit. Retards buy Apple's crap. No - I hate Microshaft and Google too.
Ruling out every major software provider, shit out of luck?
Freddie is an abacus guy
http://www.linux.org/article/view/what-is-linux
How is that TRS80 working out for you on FaceBook?
Yes they are. If they crumble, the Fed will buy real estate. Voila, problem solved.
Any price denominated in USD toilet paper can be sustainable if the Fed wants it to (except that of gold, of course).
You may be onto something.
Plus it makes for easier access for installing the listening devices before they rent it back to you...
I assume you mean mortgage payments, since housing prices shouldn't be affected by a higher interest rate. ZIRP is a problem, even if it means mortgage interest rates are historically low. It's time to stop penalizing savers and pensioners only to help banks. Screw them.
Ha. Hahaha. Housing prices will be affected by higher interest rates because it affects how many (marginal) buyers can get financing.
AMZN's ten year bonds issued at 2.50% are/were a thing of beauty are they not?
O.K., I just got to say, that JCP is STUPID for pulling the Michael Graves Design Bells and Whistles Stainless Steel Tea Kettle that looks supposedly like Hitler.
I mean really, they had a mini-iPhone in tea kettles here and free publicity, DUH!
Just put up a different picture and a simple statement and sell the damn thing!
You know, make some money!?!? (unlike buying AAPL bonds).
That is hilarious
At first I was like "WTF are they talking about"
Then I saw the kettle saluting me, and I was a little put off.
last apple i had had only half a worm in it
Lots of bugs in my Apple IIe also.
The nostalgia of it all.
moon patrol and karateka bitchez!
Sell em to the Bernak at par.
coming soon to a POMO near you
Oh, I bet he'll pay more than that. After all, there's an economy to save.
And everyone began chanting at once: Apple, Apple,Apple.... while they all pulled out thier iphones, ipads and other i things (including ibonds) and set them on the ground while they bowed facing east every day.
Wrong religion. (You mean West)
LOL sorry about that! Had my directions messed up!
Timm8ng is everything
In today's environment, KISS your assets or kiss 'em good bye.
Do we have a lift-off? http://static3.businessinsider.com/image/4edf614769bedd3a2a00000b-650/ap...
If the Fed lets interest rates continue to rise there will be PANIC BOND SELLING.
If you want to know how badly the shark has been jumped:
Despite the numerous reported leaks and claims from anonymous sources that the company has literally hundreds of employees working on some sort of wrist computing device, Apple has remained mum on the subject. But a recently revealed patent filing indicates that all the rumor and speculation may in fact be rooted in truth.[Source - contains patent images]
Apple Inc Chief Executive Tim Cook defended the company's record of innovation under his stewardship, saying he expected it would release "several more game changers" and hinting that wearable computers could be among them...
Cook stopped short of clarifying if Apple was working on wearable products amid speculation that it is developing a smartwatch, saying only that wearable computers had to be compelling...
He added that Google's Glass -- a cross between a mobile computer and eyeglasses that can both record video and access the Internet -- is likely to have only limited appeal.[Reuters 29th May]
Slagging off Google, and your alleged secret weapon is this. While Google is now openly admitting to attempting to build a weak AI [WSJ - May 16th 2013]. Let me guess - it'll synch with your iPhone so you don't have to pull that extra 1" of screen out of your pocket to check the time? It'll have an AMD GPU and can project a hologram?
Holographic wrist phones are soooo 2010.
Genius, I can see why you make the big bucks. If they launch the holographic wrist iMasturbator that can project porn while you sit on the toilet dodging your boring cubical job, I suspect their share price to hit $2000 and Star Trek to become real while the world burns down. Make it so!
p.s. This post is satire. If their product release is anything less than a holographic wrist device that you can order to search for porn via Siri, short the fuck out of it.
Tim Cook was always a logistics guy, not an innovator...
I don't think Glass will be huge, but its a patent and first mover thing. When they have full blown HUD headset in what, 5 -10? Then Google will look like geniuses, IMO.
As far as I can tell, the long term plan (for this strand of Google) is for Glass (contacts or otherwise, however minature they can eventually make it, probably with a synch to a worn device which is why APPL have also gone this way) + weak AI running the overlays in the cloud + non-hierarchical networks + enhanced reality. Valve have been making noises about the tech & enchanced reality as well, it's not solely Google. However, Google has the leading edge, and they've been running a game called Ingress for a while now, which has had hidden data mining benefits (pedestrian crowd flow, for one, which is something that a lot of smart raccoons are working on, as a well as better coverage for their map software off-road) but is fairly obviously about both testing the public reaction to enhanced realities and "gamification" of product / desire / processing. People will work for free if you make it fun (the FaceBook / Zynga lesson).
Oh, and the planted joke in the above comment was: 2010 trend device was designed by... Mac Funamizu.
If you need a reference, there's a semi-decent SF book that I can't remember the name of that quite directly describes "layers" of enhanced reality via this input. e.g. Layer 10 has full on neon advertising splashed all over the reality (mundane concrete buildings), Layer 12 has Google Maps style info all over it, Layer 20 has historical tags, and so on and so forth. I want to say Neal Asher (The Skinner is good, his later output merely filling in cheques to a degree), but it all goes back to Gibson really. Or P.K. Dick, if we're being honest (and he died in poverty, for shame!).
Personally I'm hoping for a shoe product that doubles as a wireless telephone device. they can call it the iSmart.
Branding Lines could include "Don't just Get Smart, Get iSmart" (copyrighted by Nue inc. all rights reserved)
We saw what you did there.
Sadly, MoneyPenny owns the patent.
Ironic, and expected. I would argue the rampalooza in stocks this year is a result of investors gaining false confidence in endless QE, allowing them to drive yields on stocks down to relative parity with risks and yields of bonds (which was already pumped by the Fed). As rates rise, the whole process will reverse itself, with equities getting crushed even more than bonds.
When we look back on all this 20 years from now, if we get that luxury, the whole thing is going to look like one giant pump and dump orchestrated by the pumper in Chief, the Fed.
And dollar devaluation. Its just difficult to guage dollar devaluation when the price of everything is either goosed upwards or suppressed downwards, as the case may be.
Game over for Apple. Instead of innovation, they now resort to patent-trolling and financialization for their profits. Apple products are increasing becoming another commodity. Everyone who wants/has an iProduct already has a few. They're already "in that crowd." I don't buy iCrap. Don't give a damn about being "in the club."
+1 yup gotta say, left my galaxy at work and used my wife's phone. had to flip through 1000 icons to find the text icon. there is no dynamic organization to the iphone, or if there is, my wife has not figured it out. got tired of having to trip out of the thing with the return to start. i kept reaching for "touch" options that simply are not there. felt like i was using a bb all over again. So all that to say i will NOT be buying an i phone any time soon.
> had to flip through 1000 icons to find the text icon.
Instead you should have moved 1 screen to the left and used the search button to easily find and start your program
> there is no dynamic organization to the iphone
In other words there is order, instead of the Android mess.
I owned both iPhone and other phones. iPhone has superior stabïlity and privacy. Do you ever look at permissions you need to give even to the simplest Android apps?
Not an Apple fan, just saying
How dare you insult the Lord thy Apple. May Steve Jobs smite thee. Smite thee I say!
Actually I don't use Apple products either. It's not that I hate Apple but their products don't do anything I can't find a different product that will do the samething for about 1/2 the cost. In the end price rules all.
So if I have an IRA with 60% bonds and 20% stocks, and the Fed slows printing, the market dives, interest rates rise, WHAT DO I INVEST IN? No jokes please, I really want ideas!
I have physical already. Wonder if I should pull the IRA and buy more.
Illicit drugs.
Since that is probably not practical, you can get exposure to illicit drugs by owning bitcoins.
Not sure I totaly understand this; it seems incidental to me. Apple sells bonds and Treasury prices fall. Is the issue from apple the cause to T Bills fall? I have a hard time connecting one as cause to the other. . . And of course there was an effect on all other bonds. It just seems like unfortunate conicidental timing. Am I wrong?
I'm no financial expert, but I'm pretty sure it's the other way around. The Treasury "market" is much much bigger than Apple bonds (or corporate bonds). T-bond interest rising causes all dollar-based bond prices to fall.