Latest / Felix Nikolas Prehn's Podcast / BREAKING: Market *Just* Flipped 📈 + Stock Market News 03 May 2024

Transcript

BREAKING: Market *Just* Flipped 📈 + Stock Market News 03 May 2024 · Felix Nikolas Prehn's Podcast

• 0:00
  Speaker 1: rates should come down.
• 0:01
  Speaker 1: Someone's kicked my camera.
• 0:05
  Speaker 1: I hope I blame Winston.
• 0:07
  Speaker 1: If in doubt, blame Winston.
• 0:09
  Speaker 1: There we are.
• 0:10
  Speaker 1: No, seriously, this is a momentous day.
• 0:13
  Speaker 1: I wanted to talk about Apple, which, of course, we will 7% up.
• 0:17
  Speaker 1: Is that justified?
• 0:18
  Speaker 1: Well, we'll talk about that in a moment, but really, there is a much, much bigger beast in the room right now that we need to address here.
• 0:27
  Speaker 1: Might be a glorious day for our spy bullish trades.
• 0:31
  Speaker 1: Indeed, if you've got anything bullish open today, I think it's a pretty glorious day.
• 0:36
  Speaker 1: And do you want to see it?
• 0:39
  Speaker 1: Do you want to see it?
• 0:40
  Speaker 1: Do you want to see it?
• 0:40
  Speaker 1: Do you want to see it?
• 0:41
  Speaker 1: Here's the pre-market.
• 0:42
  Speaker 1: Why am I in the wrong corner?
• 0:43
  Speaker 1: Someone's put me in the corner.
• 0:46
  Speaker 1: There we go.
• 0:46
  Speaker 1: Look at that.
• 0:47
  Speaker 1: Look at all that green.
• 0:48
  Speaker 1: Look at all that green, even more green.
• 0:50
  Speaker 1: Everything is green.
• 0:51
  Speaker 1: Fat drugs aren't green.
• 0:53
  Speaker 1: Everything else is green.
• 0:54
  Speaker 1: Basically, you pretty much struggle to have something red in your portfolio here this morning.
• 0:57
  Speaker 1: Google, microsoft, meta, amazon up, Nvidia up, apple up, johnson, johnson up, tesla up Everything's up.
• 1:04
  Speaker 1: Why is everything up?
• 1:05
  Speaker 1: Let me show you.
• 1:07
  Speaker 1: Let me show you, and before I do, there we go.
• 1:13
  Speaker 1: If you want to see how we made $6,000 in April and about a 30K portfolio.
• 1:17
  Speaker 1: These are the trades that I did in April.
• 1:20
  Speaker 1: Then come and join me on Tuesday and I'll teach you Very simple.
• 1:23
  Speaker 1: I don't promise you returns, but I promise to teach you what I do and how I do it the rules, the systems, the structures, the automations and how this can be done in a couple of hours a week.
• 1:33
  Speaker 1: You see how lazy I am as a trader, right?
• 1:35
  Speaker 1: Barely trade more than once a week.
• 1:37
  Speaker 1: And the real thing, the real story, the story of all stories today is, of course, this as I grab my hot cup of herbs Not the kind you're thinking about, this is probably mostly cinnamon, I would say by the taste of it, it's quite pleasant.
• 1:56
  Speaker 1: Actually, let's color code this like we're five.
• 2:00
  Speaker 1: We haven't done that in a while.
• 2:02
  Speaker 1: Non-farm payroll data has come in at 175,000 jobs created.
• 2:07
  Speaker 1: Last month it was 315,000.
• 2:10
  Speaker 1: We were expecting about 240,000 jobs.
• 2:12
  Speaker 1: So it's a massive, monstrous miss.
• 2:14
  Speaker 1: And, of course, bad news is glorious news.
• 2:18
  Speaker 1: Why?
• 2:18
  Speaker 1: Because it means Papa Powell has finally destroyed some jobs, something he's been gagging to do for the last two years and the unemployment rate is up 3.9%.
• 2:31
  Speaker 1: That's higher than expected and that, of course, is also wonderful, except for people who are unemployed.
• 2:36
  Speaker 1: Sorry about that, but at this moment we're just excitable equity investors, options traders and average hourly earnings.
• 2:44
  Speaker 1: Well, we're expecting them to go up 0.3% a month.
• 2:48
  Speaker 1: They only went up 0.2%.
• 2:49
  Speaker 1: That means there is less wage inflation because people are not asking for pay rises as much because they're worried about getting fired, and that's, of course, wonderful.
• 2:59
  Speaker 1: The participation rate stayed up.
• 3:01
  Speaker 1: That's good.
• 3:02
  Speaker 1: Average hours worked slightly down Doesn't mean a lot.
• 3:07
  Speaker 1: Even the government, in its usual reliable idiocy, did not hire a lot of people.
• 3:13
  Speaker 1: Manufacturing okay.
• 3:15
  Speaker 1: 3,000 jobs means nothing really.
• 3:17
  Speaker 1: Non-farm payrolls private is also significantly below expected Youth unemployment is that what U6 is?
• 3:24
  Speaker 1: Is that what U6 is?
• 3:25
  Speaker 1: Is that what U6 is?
• 3:26
  Speaker 1: I never really know, so I can't tell you what that is, but this is good.
• 3:29
  Speaker 1: This is the best jobs data we've had since.
• 3:32
  Speaker 1: I mean the worst.
• 3:33
  Speaker 1: It's the worst jobs data since December 2021, when Biden and his statisticians, or comedians as we generally call them on Wall Street, decided to just really make a complete pig's breakfast of jobs data, and it's a big one.
• 3:56
  Speaker 1: It's a big miss.
• 3:57
  Speaker 1: And does the market love it?
• 3:58
  Speaker 1: Oh well, the market loves it, and let me just show you how much the market loves it.
• 4:02
  Speaker 1: Where did our window go?
• 4:03
  Speaker 1: Look at Bloomberg.
• 4:04
  Speaker 1: Let me look at the US edition.
• 4:06
  Speaker 1: Here Traders pull forward fade rate cut bets on soft jobs data.
• 4:11
  Speaker 1: You see how much of a flippity-floppity place this stock market is.
• 4:15
  Speaker 1: Yesterday everyone said only one rate cut, maybe none.
• 4:19
  Speaker 1: Today they're like we're going to get rate cuts, lots of them.
• 4:22
  Speaker 1: Well, let's just have.
• 4:22
  Speaker 1: Let me zoom in a bit on this.
• 4:31
  Speaker 1: Okay, not much of a movement on that one.
• 4:34
  Speaker 1: What about July?
• 4:35
  Speaker 1: About a 7% shift towards more rate cuts?
• 4:44
  Speaker 1: 8% shift for July.
• 4:46
  Speaker 1: For September, we now have 25% of the market pricing in more than two rate cuts by September and by December, the end of the year, we now have a consensus here of at least two cuts, possibly three.
• 5:07
  Speaker 1: Right, yesterday it was kind of like one, maybe two.
• 5:11
  Speaker 1: So yeah, it's a big shift.
• 5:12
  Speaker 1: It's a big shift.
• 5:13
  Speaker 1: One, maybe two.
• 5:17
  Speaker 1: So yeah, it's a big shift.
• 5:17
  Speaker 1: It's a big shift.
• 5:18
  Speaker 1: And let me show you Can I get a magnifier?
• 5:25
  Speaker 1: You see that number here.
• 5:26
  Speaker 1: Yesterday it was 14% for three cuts.
• 5:27
  Speaker 1: Now it's 23% for three cuts, 24% almost.
• 5:29
  Speaker 1: So it's a doubling in the three rate cut division, which is wonderful expectation and we should all celebrate by, I don't know, congratulating Jerome Powell for destroying some of the inflation that he's caused.
• 5:40
  Speaker 1: Marlonis talks about what's in your mug?
• 5:44
  Speaker 1: No, no, nothing like that.
• 5:45
  Speaker 1: Even CBD isn't allowed here.
• 5:48
  Speaker 1: So no, no, nothing like that.
• 5:49
  Speaker 1: These are Chinese herbs the finest, apparently.
• 5:53
  Speaker 1: Oh yeah, it's a Fulton Mason's mug.
• 5:58
  Speaker 1: You're quite right, fulton had bad earnings.
• 6:06
  Speaker 1: Okay, is it Overpriced?
• 6:09
  Speaker 1: We'll see.
• 6:09
  Speaker 1: On that, flippity-floppity Fed, fed, flippin' flapjacks indeed.
• 6:13
  Speaker 1: And shall we bother?
• 6:18
  Speaker 1: Looking at Apple, I think we probably should.
• 6:20
  Speaker 1: Apple is a baffling one, right?
• 6:22
  Speaker 1: So what's Apple done?
• 6:24
  Speaker 1: Well, look at the numbers.
• 6:25
  Speaker 1: First, full video coming out on Apple as well later on for you, apple-rati.
• 6:29
  Speaker 1: Actually, I'd encourage you to watch it.
• 6:31
  Speaker 1: I think it's brilliant.
• 6:33
  Speaker 1: No, seriously, I think, even if you're not on Apple, apple makes the market.
• 6:37
  Speaker 1: I think it'll still do that for some period of time, and therefore it's important.
• 6:40
  Speaker 1: Iphone sales minus 10%.
• 6:43
  Speaker 1: Macbook sales are actually up.
• 6:45
  Speaker 1: Ipad sales minus 17%.
• 6:48
  Speaker 1: Apple Watch and AirPod sales minus 10%.
• 6:50
  Speaker 1: Apple Watch and Airpods sales minus 10%.
• 6:53
  Speaker 1: Overall revenue from products down 10%.
• 6:57
  Speaker 1: Revenue down 4%.
• 6:58
  Speaker 1: Spending more on R&D, spending more on admin.
• 7:02
  Speaker 1: So these are the bad things.
• 7:04
  Speaker 1: The good things, then, is they managed to improve margins.
• 7:07
  Speaker 1: Sorry, that should be a green thing.
• 7:09
  Speaker 1: They've significant growth in services 14% up.
• 7:13
  Speaker 1: Macbook sales up 4%.
• 7:14
  Speaker 1: That's pretty good.
• 7:15
  Speaker 1: Net profit margin actually improved a point.
• 7:18
  Speaker 1: That's pretty good.
• 7:19
  Speaker 1: So, and they've disclosed, I think for the first time ever, that on services they have a 75% gross margin, which is really really extraordinarily wonderful.
• 7:29
  Speaker 1: And I think they're telling us that because the rest of the picture looks pretty piss poor.
• 7:35
  Speaker 1: Right, but our expectations were so low that some of these actually better than thought.
• 7:42
  Speaker 1: Iphone sales didn't do quite as horribly.
• 7:46
  Speaker 1: China sales were a little bit better than expected, but still revenue is declining, which I don't love.
• 7:50
  Speaker 1: And what have they done to cause a 7% rally?
• 7:55
  Speaker 1: Well, they've said we're going to buy 110 billion of our own shares and that is the largest share buyback ever from Apple.
• 8:10
  Speaker 1: It is also the largest share buyback in the history of the stock market.
• 8:14
  Speaker 1: Now you might think, oh, that's amazing, that's fantastic.
• 8:17
  Speaker 1: It is.
• 8:18
  Speaker 1: It'll drive buybacks for the whole market to over a trillion this year, but it's 4% of Apple, so it's not like huge right.
• 8:29
  Speaker 1: There are plenty of companies buying back 4% of their shares, plenty of them.
• 8:32
  Speaker 1: It's just they're not as big as Apple.
• 8:34
  Speaker 1: Apple is the biggest beast out there and so their free cash flow, from memory, is something like 90 billion or something like that.
• 8:45
  Speaker 1: So yeah, they can afford it.
• 8:47
  Speaker 1: But I would much rather they tell me that they've created some brilliant, new, you know flying drone that will follow YouTubers around and film them all day long.
• 8:59
  Speaker 1: You know, that kind of type of thing, something that people would actually really want.
• 9:01
  Speaker 1: I'm not sure they'd actually want that, but you know what I mean.
• 9:04
  Speaker 1: They need to.
• 9:04
  Speaker 1: I want to see innovation.
• 9:05
  Speaker 1: I don't really want to see.
• 9:07
  Speaker 1: I'll be just going to chuck some money at it.
• 9:08
  Speaker 1: So that's kind of the Jeremy shaved his head.
• 9:22
  Speaker 1: You know what Jeremy shaved his head, has he?
• 9:25
  Speaker 1: Okay, there are ways of getting attention and there are ways of getting attention.
• 9:29
  Speaker 1: Some of them are beyond my humble means.
• 9:32
  Speaker 1: Apple is probably the best-run company in the world, says McFlush.
• 9:35
  Speaker 1: We've got a fan there.
• 9:36
  Speaker 1: Let me know why.
• 9:37
  Speaker 1: Let me know why you think that.
• 9:39
  Speaker 1: I think it's well-managed.
• 9:40
  Speaker 1: I agree.
• 9:40
  Speaker 1: I think the fact that they're squeezing margins out is impressive.
• 9:43
  Speaker 1: I don't think anybody doubts Tim Cook's ability as a I want to say COO, but I don't know if he's really CEO like innovation material.
• 9:56
  Speaker 1: I think Apple needs an innovator and maybe they need to bring in somebody else.
• 9:59
  Speaker 1: Who's the innovator, who does the innovation?
• 10:02
  Speaker 1: And Tim Cook does a very, very excellent job.
• 10:05
  Speaker 1: He does that managing the business.
• 10:07
  Speaker 1: I think he's very good at that.
• 10:08
  Speaker 1: Douglas, you're very kind.
• 10:14
  Speaker 1: Appreciate that.
• 10:15
  Speaker 1: If Coinbase had amazing earnings, why is it not a lot higher?
• 10:20
  Speaker 1: I think a lot of people are thinking that Bitcoin might have peaked for some period of time and Coin tends to move with Bitcoin.
• 10:29
  Speaker 1: It's just the way those two are correlated.
• 10:32
  Speaker 1: And, glenn, yeah, you're completely right.
• 10:39
  Speaker 1: Unemployment is good for stock markets.
• 10:41
  Speaker 1: It's what the Fed.
• 10:42
  Speaker 1: The Fed's basically saying.
• 10:43
  Speaker 1: We need higher unemployment so there's less pressure on wages going up, because it doesn't want you to earn anything.
• 10:50
  Speaker 1: And if that happens, you can cut interest rates, which means that those of us who can have lots of assets and want to borrow more, we can do that at cheaper rates.
• 10:58
  Speaker 1: We can invest more, we can make more money and stock valuations go up.
• 11:01
  Speaker 1: Why are share buybacks good when the companies are in the all-time high?
• 11:14
  Speaker 1: Well, the company isn't really an investor.
• 11:17
  Speaker 1: They just reduce the number of shares out there.
• 11:19
  Speaker 1: And if you think about how that works, so say you have.
• 11:24
  Speaker 1: This is basically what a buyback looks like.
• 11:27
  Speaker 1: Buyback, so say you have five shares okay, five stocks Shares would be more appropriate, five shares.
• 11:43
  Speaker 1: This is expertly drawn.
• 11:45
  Speaker 1: Obviously you know one, two, three, four and five, and you have down here, shareholders.
• 11:54
  Speaker 1: I probably should have drawn a few more boxes there to make that a little bit better.
• 11:58
  Speaker 1: Okay, we are going to have to draw 10 of them, right?
• 12:02
  Speaker 1: So 10 shares and we have five shareholders.
• 12:08
  Speaker 1: Okay, five shareholders down here.
• 12:10
  Speaker 1: One, two, three, four, five.
• 12:14
  Speaker 1: They all get heads.
• 12:16
  Speaker 1: Should we give them arms and legs?
• 12:19
  Speaker 1: We give them arms and legs too.
• 12:20
  Speaker 1: Okay, you get the idea artist at work, artist, as they say, where I'm heading next week and the company then goes and says all right, you both have two shares each.
• 12:29
  Speaker 1: Right, I am going to take away some of these shares, say, let's do half of them for the sake of it.
• 12:38
  Speaker 1: And that means there are less shares left, but there's still the same number of shareholders down here or the people wanting to buy the shares, so there's literally less shares left.
• 12:47
  Speaker 1: So what does it mean?
• 12:48
  Speaker 1: It's like money shredding.
• 12:49
  Speaker 1: It's like reducing supply.
• 12:51
  Speaker 1: So they've reduced supply.
• 12:52
  Speaker 1: I could have probably done a slightly better job of the example here.
• 12:54
  Speaker 1: But by reducing supply, you artificially increase what.
• 12:59
  Speaker 1: Artificially increase what?
• 13:02
  Speaker 1: What do we look at as investors?
• 13:04
  Speaker 1: Earnings per share, right, profit per share.
• 13:07
  Speaker 1: Well, if you have the number of shares.
• 13:09
  Speaker 1: Then say your earnings were $100 and you previously had 10 shares.
• 13:14
  Speaker 1: Your earnings per share were 10.
• 13:15
  Speaker 1: Now, if you change that to five, your earnings are now 20.
• 13:24
  Speaker 1: So your stocks are now worth twice as much.
• 13:26
  Speaker 1: That's the simple math.
• 13:28
  Speaker 1: That's probably the place I should have started at.
• 13:35
  Speaker 1: Do you have a poor intern building all your Excel documents?
• 13:40
  Speaker 1: No, no, no, we don't.
• 13:40
  Speaker 1: I do actually have a stock researcher who is very, very kind and very brilliant and helps me with lots of things.
• 13:48
  Speaker 1: So, yeah, I do have a stock, but I pay her full time.
• 13:50
  Speaker 1: Is there ever a good scenario where buybacks are good for a growth company that hasn't achieved profits yet?
• 13:58
  Speaker 1: No, no, no.
• 14:00
  Speaker 1: A growth company should never buy its own shares.
• 14:02
  Speaker 1: They should never pay a dividend.
• 14:03
  Speaker 1: It makes no sense whatsoever, really.
• 14:05
  Speaker 1: If you are someone like Palantir and you're buying back shares, you're doing it because you're offsetting share-based compensation, which is the opposite of what I just described, which is dilution.
• 14:14
  Speaker 1: So you're offsetting dilution.
• 14:16
  Speaker 1: It's not really quite the same thing as share buybacks, but it does imply that you don't know what else to do with the money, and in some businesses that's fine.
• 14:23
  Speaker 1: But you need to kind of rethink about that.
• 14:25
  Speaker 1: Is there.
• 14:26
  Speaker 1: There's no innovation that you could invest this money into.
• 14:28
  Speaker 1: That would be give you a better return.
• 14:30
  Speaker 1: That's what Apple is saying, right, but the glorious thing we're celebrating is this morning is rather immoral higher unemployment and the market's like woohoo, see, see that.
• 14:42
  Speaker 1: You see all the green.
• 14:43
  Speaker 1: That's what higher unemployment does on Wall Street.
• 14:45
  Speaker 1: The champagne corks will pop tonight, more Ferraris will be bought, parties will be thrown this weekend on yachts and in the Hamptons and they're all saying, isn't it lovely?
• 14:54
  Speaker 1: More people are unemployed.
• 14:55
  Speaker 1: I mean, let's face it, the jobs data is completely made up, so this is probably also