Today felt as if reality intrudes. Shares of Apple Inc (AAPL) fell over 8-points when AT&T (T) said that its subscriber numbers for customers of Apple's iPhone were well below even the most sobering of estimates. As the exclusive service provider for Apple’s iPhone, possibly the most over-hyped piece of silicon and plastic ever, said it signed up just 146,000 iPhone subscriber customers in the first two days of the iPhone rollout. Some analysts had estimated sales of the iPhone to be somewhere "north of 500,000." Even as many semiconductor issues were getting hit rather hard, particularly the capital equipment makers thanks to another airball by a major semiconductor company, Texas Instruments (TXN), Sandisk (SNDK), the maker of flash memory was up as much as $1.60 before finishing essentially flat based on some regurgitating by Jim Cramer. This was even in light of the bad Apple data point from AT&T. Apple, as you know, is a major buyer of flash memory for its many i-gadgets….As folks were being forced to grapple with more bad news from their “non-housing” play, tech, everything even slightly related to housing, mortgages and CDOs were cracking-up. Countrywide Financial (CFC), the largest mortgage lender in the U.S. missed earnings by a wide margin and dramatically lowered forward guidance. Then its CEO Angelo Mozilo slathered on a thick layer of reality on during his conference call with analysts. He uttered the “D” word while trying to describe the prior precedence of home value depreciation. “D” as in Depression. Finally, as the housing and mortgage complex was unraveling, the Yen set out on a pretty robust spring of its own. The yen, probably the most putrid currencies on the planet, is ironically also the currency most likely to see the biggest appreciation in value vis-à-vis other currencies as the great credit bubble unwinds. The yen has been the source of a tremendous amount of leveraging due to its nearly free borrowing costs. These yen will be “called” as the most leveraged “carry-traders” are forced to unwind their bets. Even though crude oil sold-off over $1/barrel, the precious metals finished nearly unchanged after trading green most of the day. This remains to be a healthy development as it concerns the precious metals versus similar broad market sell-offs in late February and again in June when news of the Bear Stearns hedge funds were being felt. Finally, the “canaries in the coalmine” as it concerns the private-equity and hedge fund bubbles, the major investment banks, continue to get sold. Goldman Sachs (GS) closed under $200/share for the first time since early March.
Lastly, Bill Gross’ August Investment Outlook reads like an emotional catharsis. The missive from the “Bond King” may have also been part and parcel to some of the overall angst that accompanied the day’s trading as the Dow Industrials suffered its second largest sell-off of 2007, down over 200-points. Below is a small teaser of Gross’ recent prose:
“That the golden glazed surfboards of the 21st century seem unique with their decals of ‘private equity’ and ‘hedge finance’ is mostly a mirage. Wealth has always gravitated towards those that take risk with other people’s money but especially so when taxes are low. The rich are different – but they are not necessarily society’s paragons. It is in fact society’s wind and its current willingness to nurture the rich that fills their sails.” And, “If gluttony describes the acquisitive reach of the mega-rich, then the same gastronomical metaphor applies to today’s state of the credit markets. Stuffed! Both borrowers and lenders may have bitten off more than they can chew, and even those that swallow their hot dogs whole – Nathan’s Famous Coney Island style – are having a serious bout of indigestion.” And in regards to the backing-up of junk bond yields and its relationship with the mortgage/subprime convulsions, Gross says, “Some wonder what squelched the hunger of potential lenders so abruptly, while in the same breath suggesting that the subprime crisis is ‘isolated’ and not contagious to other markets or even the overall economy. Not so, and the sudden liquidity crisis in the high yield debt market is just the latest sign that there is a connection, a chain that links all markets and ultimately their prices and yields to the fate of the U.S. economy…..To be blunt, they seem to be thinking that if Moody’s and Standard & Poor’s have done such a lousy job of rating subprime structures, how can the market have confidence that they’re not repeating the same structural, formulaic, mistake with CLOs and CDOs?”
You can read Mr. Gross’ full depressing Investment Outlook below:
Bill Gross, “Enough is Enough”
Lastly, Bill Gross’ August Investment Outlook reads like an emotional catharsis. The missive from the “Bond King” may have also been part and parcel to some of the overall angst that accompanied the day’s trading as the Dow Industrials suffered its second largest sell-off of 2007, down over 200-points. Below is a small teaser of Gross’ recent prose:
“That the golden glazed surfboards of the 21st century seem unique with their decals of ‘private equity’ and ‘hedge finance’ is mostly a mirage. Wealth has always gravitated towards those that take risk with other people’s money but especially so when taxes are low. The rich are different – but they are not necessarily society’s paragons. It is in fact society’s wind and its current willingness to nurture the rich that fills their sails.” And, “If gluttony describes the acquisitive reach of the mega-rich, then the same gastronomical metaphor applies to today’s state of the credit markets. Stuffed! Both borrowers and lenders may have bitten off more than they can chew, and even those that swallow their hot dogs whole – Nathan’s Famous Coney Island style – are having a serious bout of indigestion.” And in regards to the backing-up of junk bond yields and its relationship with the mortgage/subprime convulsions, Gross says, “Some wonder what squelched the hunger of potential lenders so abruptly, while in the same breath suggesting that the subprime crisis is ‘isolated’ and not contagious to other markets or even the overall economy. Not so, and the sudden liquidity crisis in the high yield debt market is just the latest sign that there is a connection, a chain that links all markets and ultimately their prices and yields to the fate of the U.S. economy…..To be blunt, they seem to be thinking that if Moody’s and Standard & Poor’s have done such a lousy job of rating subprime structures, how can the market have confidence that they’re not repeating the same structural, formulaic, mistake with CLOs and CDOs?”
You can read Mr. Gross’ full depressing Investment Outlook below:
Bill Gross, “Enough is Enough”
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