Apple’s $7 Trillion Gambit

  • iPhone predictions abound…
  • …and here’s why we couldn’t care less
  • Gold leaps to near 12-month highs…
  • …but wait till you see what “Trump’s Fed” has in store
  • Nevada’s pot “emergency” alleviated
  • California’s AG blanks on the First Amendment
  • Triple play: Reader gets salty with The 5 about the city of Baltimore, the WaPo and our editors!

Oh, no: “The iPhone will be forced into a game of catch-up this fall,” reports the New York Post in typically breathless fashion.

A report out yesterday from Counterpoint Research says Apple is now the No. 3 maker of smartphones, based on the number of units sold. Samsung’s been out in front for what feels like forever, but now China’s Huawei has surpassed Apple. The horror.

Deep inside the article, the air comes out: “It seems unlikely that Apple’s losing streak will continue, however, as Huawei’s lead is slim and comes during the traditional summer lull in Apple’s sales as customers await the launch of the newest iPhone, which is slated for Sept. 12.”

Well, yes. With only five days to go before Apple unveils the first major redesign of the iPhone in three years, Wall Street’s best and brightest are falling all over themselves with sales projections.

Piper Jaffray created a stir this week by saying sales will prove a disappointment, no better than the iPhone 7 launch a year ago. In contrast, Nomura Instinet says there’s pent-up demand that will trigger a new “supercycle” of upgrade purchases.

As usual, Wall Street is looking for opportunity in all the wrong places.

While analysts speculate about new features like an edge-to-edge screen and face recognition, our research team tells us Apple executives are already thinking three or four steps ahead… to a time when the iPhone will be rendered obsolete.

That’s right: The seeds of the iPhone’s destruction are embedded in the new model’s hardware and software.

We’re talking about an entirely different kind of “supercycle” — not of current users upgrading their phones, but the birth of Silicon Valley’s next big act, a $7 trillion mega-growth market.

If your portfolio missed out on the smartphone boom… or the cellphone boom before that… or the personal computer before that… here’s your chance to make up for lost time.

[Ed. note: To make the most of the opportunity, you’ll want to act before the iPhone launch next Tuesday.]

The major U.S. stock indexes are treading water today, the Dow barely budging from yesterday’s close.

For all the news and noise of August and early September — hurricanes, North Korea, politics — the Dow is still a mere 1.5% below its record close notched one month ago.

This morning, traders are chewing on the following developments…

  • A possible deal to kick the debt-ceiling can down the road. Shortly after we went to virtual press yesterday, President Trump came to terms with congressional Democrats on a package deal of Harvey relief, a temporary federal budget and an extension of the debt-ceiling deadline. What looked like a drop-dead date for a “partial government shutdown” Sept. 29 is now put off until Dec. 15 — assuming the deal doesn’t come undone with a wild-hair 3:00 a.m. presidential tweet
  • A European “tapering.” The European Central Bank signaled it will start dialing back its quantitative easing/money printing program starting next month
  • A funky job number. The Labor Department’s weekly report on first-time unemployment claims rang in way higher than expected at 298,000, thanks to an early flood of Harvey-related filings from Texas.

Gold jumped as soon as that job number came out this morning and added to those gains when the ECB announcement boosted the euro and weakened the dollar. The bid on the Midas metal is up to $1,346 — the highest in nearly a year.

Gold is set to move still higher over the next year as Trump puts his stamp on the Federal Reserve. So Jim Rickards concludes after two momentous days at the Fed.

As we mentioned yesterday, Fed vice chair Stanley Fischer is resigning nine months before his term is up. He cited personal reasons, and Jim says that’s credible; we’ll trust Jim on this matter seeing as he’s been acquaintances with Fischer for more than 20 years.

More important, “this resignation now means that four of the seven Fed board seats are now vacant,” says Jim. “One nomination by Trump is pending (Randy Quarles), but that still leaves three more nominees to fill the board. And that’s not counting Janet Yellen, whose term as chair expires at the end of next January. All in, Trump will get to name five out of seven Fed governors in less than one year after being sworn in as president.”

Meanwhile, the White House leaked it to The Wall Street Journal last night that National Economic Council director Gary Cohn is out of the running to be the next Fed chairman. Apparently, Goldman Gary didn’t have plausible deniability for his own leak to The New York Times last month. Heh…

Five months ago, Jim told us the inside track for the chairman job belonged to Kevin Warsh — a financier who was a Fed governor from 2006–2011. Jim is now more confident than ever in that forecast: “Kevin Warsh and a group of new appointees vetted by Warsh will be the new guard before the end of this year.”

And their accession comes at a time when the old guard at the Fed has confessed they’re clueless.

On Tuesday, Fed governor Lael Brainard — one of the four power brokers currently in place at the Fed along with Yellen, Fischer and Bill Dudley — delivered what Jim calls “one of the most significant Fed speeches ever.

“Translating from Fed-speak to plain English, she more or less admitted the Fed has no idea how inflation works.”

The Fed raised its benchmark fed funds rate three times between December of last year and June of this year. The Fed figured the economy was resilient enough to handle the rate increases and that inflation would stay near its 2% target. Instead, as we’ve chronicled all year, the number has fallen steadily from 1.9% to 1.4%.

“Of course, this is what we’ve been telling readers to expect all year,” Jim reminds us. “The Fed was tightening into weakness, not strength, and would soon have to flip back to ease in order to avoid an outright U.S. recession. And ease is exactly what Brainard called for in her speech.”

What should you expect as the old guard gives way to the new guard at the Fed?

Jim says Kevin Warsh and company “are pragmatists, not ideologues like Yellen.

“Brainard is right about one thing. Disinflation is a serious problem for a country with a 105% debt-to-GDP ratio. Inflation is needed for the U.S. to have any hope of getting the debt problem under control. This means government theft from savers and negative real rates. Warsh and the pragmatists understand this.

“You should expect lower real rates, slower balance sheet normalization and higher inflation than markets are now pricing. This will not happen all at once, but in stages over the next year. The biggest winner will be gold. The time to enter your gold position, if you don’t already have one, is now.”

The booze business just passed on a golden opportunity in the Silver State

Back in July we took note of a crisis in a major American city — at least a crisis by Sin City’s standards.

You may recall, once Nevada was ready to roll with legalized marijuana this summer, the state came up short — there wasn’t enough weed to go around. And it wasn’t necessarily because everyone in Vegas decided to light up. Booze wholesalers — not cannabis purveyors — were to blame for the pot shortage.

Way back when Nevada hashed out pot regulations, the state made concessions for the alcohol industry. “Nevada’s new recreational pot legalization included a catch when it was voted in: Liquor wholesalers have exclusive rights to transport legal marijuana,” our penny pot stock pioneer Ray Blanco reminds us.

“Considering the size of Nevada’s pot market. it was a massive gift to the booze business. Being a government-mandated middleman is a lucrative gig.” Yes. Indeed.

But a funny thing happened on the way to the booze industry’s pot distribution monopoly: “No wholesale liquor distributors had yet met the requirements to receive a marijuana-distributor license,” Ray goes on.

With tax dollars from marijuana sales on the line, regulators told wholesalers: “Fuhgeddaboudit.”

In late August, “Nevada’s tax commission voted unanimously to allow businesses other than alcohol wholesalers to transport pot from cultivators to retail stores,” Rays says. “Clearing that bottleneck in pot supply should remove an artificial constraint to marijuana sales in the Silver State.”

And good news for the pot industry equals profits for investors. Ray reports a 10% pop in one of his favorite pot stocks, a direct result of Nevada’s loosened restrictions.

Ray’s advice for investors? Don’t “snooze and lose” — like the booze business in Vegas — when you can make serious bank on penny pot stocks.

Bureaucrats gone wild, updated: California’s attorney general has just demonstrated he knows squat about the First Amendment.

Nearly a year ago we told you how Gov. Jerry Brown signed a bill allowing actors to ask IMDb and similar websites to delete their birth dates and ages — even if the information is truthful — on the theory that some people who consult the site might be potential employers in Hollywood, who then might perform acts of age discrimination.

IMDb has challenged the case in federal court. Last week, California Attorney General Xavier Becerra defended the law before the court. “If [the bill] is to be considered a speech regulation, it is a valid commercial speech regulation,” he said, because the legislature found “the problem of age discrimination in the entertainment industry to be real, adopted the provision to aid in solving that problem and matched the restriction to the problem to be addressed.”

So it’s the responsibility of a website to help actors get work by concealing their ages. Got it.

The next hearing in the case isn’t till late next month; for the moment the judge hearing the case has barred the law’s enforcement. To be continued…

“Dave, there are times I almost forget what you, your staff and friends are,” a reader writes.

[We suspect we’re being set up here…]

“At best you are snake oil salesmen, admittedly of high quality.

[Well, thanks for the qualifier there…]

“You are also retarded enough to continue living and working within a 100 miles of the city straining to take the ‘death by murder’ title from Chicago — Baltimore.

The Washington Post — chief lying publication in America — is one of your sources? Thereby, you probably cling to every word that Al Gore utters, chief liar (maybe only in my opinion) in the world.

“It is amazing that in the several years I have subscribed to and read most of your printings, I have never HEARD of ‘one’ of your hirelings buying any of your snake oil items getting rich and retiring to a nice topless beach to enjoy the winnings. One did admit once that he made more writing than he would investing in your offerings.”

The 5: There’s a lot to unpack there.

In the first place, we’re not exclusively in Baltimore. Many of us are scattered hither and yon. I returned to my small-town Midwestern roots last year, for instance. To suggest everyone else pack up when we’ve grown in recent years to a team of nearly 200 people, many of them Baltimore-area natives, is fanciful. But thanks for advice on how to run our business.

We cited the Post last Saturday on a story whose veracity was not in question. One must know how to separate the wheat from the chaff these days. Besides, do we get no credit at all for our epic takedown of the Post’s sloppy-as-hell “fake news” exposé last November?

As a matter of policy, our editors cannot invest in the securities they recommend. That’s a conflict-of-interest issue we enforce strictly. We’ve lost popular editors in the past on account of it, but the policy stands.

Could they make more money by investing in those securities and just, well, not work for us? Sure. But it wouldn’t be nearly as much fun. We give our editors a platform to speak their truth to a receptive audience in a way that working in the butt-kissing (and butt-covering) culture of Wall Street never could.

Hard to believe, but some of the real rewards in life aren’t just monetary…

Best regards,

Dave Gonigam
The 5 Min. Forecast

P.S. Patience pays off: Readers of Alan Knuckman’s Weekly Wealth Alert got word moments ago that their standing sell order for Newmont Mining call options just got filled.

That’s a 100% gain in 10 days for the second half of the trade… on top of 60% in a single morning for the first half.

Yes, there’s more where that came from. As early as Monday, in fact — as you’ll see at this link.

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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