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Apple Posts Record Quarterly Profit, Sales - Fullermoney

This announcement reported by Bloomberg came after Wall Street's close today. Here is the opening:

Apple Inc. reported record quarterly sales and profit, as holiday purchases of the new iPhone helped the company steer clear of the consumer spending slump that has hurt rival technology companies.

Fiscal first-quarter profit more than doubled to $13.1 billion, or $13.87 a share, compared with $6 billion, or $6.43 a share, a year earlier, Apple said today in a statement. Sales rose 73 percent to $46.3 billion.Analysts surveyed by Bloomberg on average estimated profit of $10.14 a share on sales of $39 billion.

Apple sold 37 million iPhones, up from the previous record of 20.34 million. Customers snapped up the 4S model that went on sale in October, a week after the death of co-founder Steve Jobs. The results mark the first time the company's quarterly revenue topped Hewlett-Packard Co.'s, underscoring how its focus on sleek touch-screen mobile devices has reshuffled leadership in the industry.

"It's a milestone," Brian White, an analyst at Ticonderoga Securities LLC, said of Apple surpassing Hewlett-Packard in sales. "There are so many growth drivers around this company."

Cupertino, California-based Apple, in looking ahead to results for the second quarter, forecast revenue of about $32.5 billion and profit of $8.50 a share. That compares with average analysts'predictions for sales of $31.9 billion and profit of $7.96 a share.

Apple shares, up 25 percent in the past 12 months, had closed at $420.41 in New York. They were halted before the report.

My view - These results are obviously impressive and should help market sentiment tomorrow.

While Apple remains one of the best performing Autonomies (weekly & daily) it is temporarily overstretched relative to the 200-day moving average. Consequently we may see some mean reversion towards the rising MA in coming weeks.


Email of the day (1) - On discipline in trading:

"First of all, thank you for an excellent service! Here around the New Year I have been reflecting on 2011 and my investment and trading results in general. I enthusiastically started investing and trading in 2007. I invested in the fullermoney themes: resources, India and China and gold bullion. I was quickly exposed to the meltdown in 2008, and thanks to your service stayed calm and even took the opportunity to add a little when markets started to recover. Obviously gold bullion has done the best.

"However, during the 2008 melt down, I lost quiet a lot trading futures - I considered it tuition fees. And the next couple of years I had a very good income trading. However, this has all been wiped out (and more) during 2011 by shorting the Yen and US treasuries and finally going long gold at the wrong time. Obviously the 2008 tuition fees weren't sufficient in my case.

"When I try to analyze it, I reach the conclusion that it all comes down to lack of discipline. I have gone in without clear trends having been established, and I have let them run the wrong way far too long, instead of cutting my losses (which may be ok when investing, but not when trading futures).

"I have read in one of your articles that when you were a young man, the accountant in the company you were working for exposed you to how important discipline is to achieving success in especially trading, but obviously also investing. I would highly appreciate if you could elaborate on what this discipline consists of and how it is implemented in practice. I think this topic is so important for achieving success, and it could be great if also others in the collective would contribute to this discussion with their practical experience implementing discipline in trading. Thank you very much!"

My comment - Thank you for your enthusiastic comments, for sharing your experiences, and raising points of interest to all subscribers. You will appreciate that this is a huge subject which cannot be fully addressed in one response to an email. However, both trading and investment disciplines are features of The Chart Seminar and they are periodically referred to in Comment of the Day and Audios.

My first point concerns the often different disciplines required for investing as opposed to trading. At the beginning of our financial careers many of us are drawn to leveraged trading because we lack the capital for longer-term unleveraged investing. Leveraged trading can be very profitable but the risks are correspondingly high. The learning curve in trading is steep and this can be emotionally exhausting. For these reasons I never encourage investors to take up trading if they have no need to do so.

Additionally, we can only deal with the realities that markets provide and a volatile, choppy environment is inevitably more difficult than markets which trend over the medium term. Due to volatility, 2011 was one of the most difficult trading and investing environments that I can recall. I think this is confirmed by the performance statistics for most funds which invest or trade in stock markets, commodities or currencies. The best performances last year appear to have been achieved by credit market specialists.

That said, there were opportunities last year, including precious metals during 1H 2011. Also, the corporate Autonomies often mentioned and reviewed by Fullermoney - the big, successful multi-national companies - had a generally good year. Nevertheless, the prevailing choppy volatility, plus Eurozone woes, resulted in very low consensus expectations at yearend 2011.

One of the most important disciplines for investors and traders is to study market history over the last few decades. The best way to do this is not by reading market histories. They can be interesting but tend to concentrate on a few specific events, often involving bubbles and slumps. To understand how markets move most of the time, one learns a great deal by reviewing historic charts seen on semi-logarithmic scales.

Markets move in cycles, as most of you already know, and these are heavily influence by monetary policy. Human nature causes crowds of investors to extrapolate trends, so they are inclined to be too fearful following a down year and too optimistic following a really good up year. For this reason most investors figure out what they should have done in the last cycle and then apply those tactics in the next cycle which is more than likely to be different. For instance, following a choppy year such as 2011, people feel that they should trade more actively and this may cause them to jump off the next medium-term trending moves which often follow ranging phases.

This item continues in the Subscriber's Area.

Email of the day (2) -
On reintroducing the uptick rule:

"Given your oft stated support for reinstatement of the 'up tick' rule, I thought you may be interested in this.

"Let's hope that the regulators will listen to a firm which utilises algo trading techniques but at the same time has a vested interest in market integrity and orderliness - as we all do."

My comment - Thanks for the article from Reuters, posted on Yahoo News and quoting Peter Clarke, head of Man Group.

I have heard comments that the uptick rule could not be enforced in the world of electronic trading. That is a complication but surely not an insurmountable challenge and it would be good for market integrity and orderliness, as you point out.

Now in the public Archive -
Would this lead item posted in the Subscriber's Area on Monday 26th September have been of interest to you at the time?

Additional commentary by Eoin Treacy

Hohhot property tour takeaways Thanks to a subscriber for this report from Deutsche Bank, expressing a rare bullish attitude toward Chinese property. The full report is posted in the Subscriber's Area but here is a section:

We recently visited the property market in Hohhot, a Tier-3 city in Inner Mongolia. Overall, the scenario in Hohhot is very different from Erdos, another city in Inner Mongolia, which some bearish market participants tend to refer to as a "ghost town" in China. The property market in Hohhot is driven more by end-user demand from city dwellers and those living in other parts of Inner Mongolia. There have not been significant rises in ASPs in the past, so there is now also less downward pressure on property prices.

Adequate land supply in the city has had limited ASP growth in the past

Compared with the Tier-1 and bigger Tier-2 cities, where new land supply in the city-center areas is more limited, there is still adequate new land supply in Hohhot's city center, especially as city center areas continue to expand on the back of the city's economic growth. With this adequate new land supply, there has been less drastic property price appreciation in Hohhot than in Tier-1/2 cities, and, consequently, we now expect there to be much less pressure for ASPs in the city to decline compared with Tier-1/2 cities.

Around 40% of homebuyers pay completely in cash when buying properties

According to property consultants and the sales managements of developers, about 40% of homebuyers pay completely in cash when buying homes in Hohhot. For low- to mid-end projects, the buyers are mainly domestic citizens in Hohhot, while, for higher-end projects, about 50% of the buyers tend to be from other parts of Inner Mongolia, and these people like to have homes in Hohhot because it has more pleasant city living conditions, especially as it can be very cold in Inner Mongolia during winter.

My view Considering the widespread fear of a Chinese property crash, this report offers a contrarian perspective by highlighting the granularity evident in the market. There is little doubt that Tier 1 cities are most at risk of price declines since they experienced by far the largest advances. The central government actively targeted the property market in its tightening measures and has succeeded in reversing runaway price appreciation. This policy was particularly negative for property developers and banks. They fell earlier and farther than other many sectors. They could be among some of the greatest beneficiaries of a change to China's tightening bias.

This section continues in the Subscriber's Area.

Selling The Buying In The Home Builders This article by David Penn from Forbes is reflective of sentiment towards the US homebuilding sector. Here is a section:

That investors would be in a profit-taking mood in XHB is no surprise. The ETF last traded in oversold territory in late December as part of a three-day pullback shortly after the fund rallied back above its 200-day moving average. And even with Friday's 2% pullback, XHB is trading more than 12% from the low point of its December correction.

My view While still at an historically high 200,000, the rate of foreclosures displays every appearance of having peaked in early 2010 and looks likely to continue to decline. There is still a large inventory of homes and this will take time to liquidate. However affordability is at record levels for those with access to credit which should help the demand component recover.

This section continues in the Subscriber's Area.

Homebuilders Get Cameron Boost With 5% Down Payments: Mortgages This article by Chris Spillane for Bloomberg may be of interest to subscribers. Here is a section:

The British government's plan to help reduce down payments for new homes to as low as 5 percent will give a boost to a homebuilding industry that's learned how to survive a slowing economy and four years of stingy credit.

Mortgage lending is less than half the level of 2006, at the end of the housing boom, with buyers now required to pay as much as 25 percent of a home's value up front. The program would lower that by providing a guarantee, shared by the government and builders, to protect lenders from some losses in a default.

U.K. homebuilders have cut costs, changed their products and acquired discounted land over the past two years to improve margins as home sales fell to about half the level of 2006. Profit growth will likely accelerate from the down payment program, said Charlie Campbell, an analyst who follows builders at London-based Liberum Capital.

If mortgage lending creeps up a bit and new build continues to take share from existing stock, profits will go up quite a lot because the input costs have come down, Campbell said in a telephone interview. The government measure may lift prices by as much as 3 percent above current estimates and boost homebuilder shares, he said in a note to investors.

Housing construction may rise by 15 percent or more after the measure goes into effect in the second quarter, Taylor Wimpey Plc Chief Executive Officer Pete Redfern said on Jan 17. The same day, the company said it would meet a profit-margin target early after home sales increased 2 percent in 2011.

My view While the UK's housing market has not suffered the same price declines as the USA, availability of credit and the economy's low growth trajectory are both challenges. The UK's homebuilding & construction sector has a high degree of commonality with the USA's. Base formation development is now in its third year.

This section continues in the Subscriber's Area.

Email of the day (1) on the Baltic Dry Index:

I just listened to Friday's upbeat audio and agree it's been a good January thus far. You rhetorically asked what's not doing well?

I'd be happy to hear your comments on the Baltic Dry Index and how to play it. As always, I appreciate your insight.

My comment Thank you for this topical email. There is a tendency among some pundits to assign a crystal ball significance to the Baltic Dry Index. However, all it represents are shipping prices. Like any other market these are governed by supply and demand.

In the synchronised global economic expansion that presaged the financial crisis, demand for ships outstripped supply by a wide margin. Companies used this as an opportunity to order new ships and planned to retire older parts of the fleet. Demand collapsed from late 2008 and a large number of ships were delivered in 2009 and 2010. Both these factors exacerbated the pressure on pricing.

This section continues in the Subscriber's Area.

Email of the day (2) on an addition to the Chart Library:

Would it be possible to add Gold Standard Ventures (TSX V: GV)? Thanks.

My comment Thank you for this suggestion which has been added to the Chart Library.

Speaking engagements in the USA - I have accepted an invitation to speak to the Los Angeles chapter of the MTA on April 11th. The venue has yet to be confirmed but will be in the Long Beach area. Non-members are welcome to attend. The topic will be "To Hoard or to Horde: risks and opportunities from participating with the crowd."

I have also accepted an invitation to speak to the San Diego chapter of the MTA in the first week of April. A date and time has yet to be fixed but it will take place in the Del Mar area.

I still have some space available on my itinerary. If you would like me to speak to your local chapter or organisation in California or New York please contact your respective chairperson and ask them to contact me.

The Chart Seminar 2012 - Following a sell-out tour to Singapore and Australia last year, The Chart Seminar will be held in San Francisco, New York and London this year. Please be aware that the early booking rate for non- subscribers at the US seminars expires on January 31st.

We are currently taking bookings for our San Francisco and New York dates in April as well as London seminars in May and November. Anyone interested in securing a place at any of our events should contact Sarah Barnes at [email protected].

The date and venues for my seminars so far in 2012 are:

San Francisco - April 16th &17th 2012 Nikko Hotel

New York - April 23rd & 24th 2012 at The Manhattan Club (above Rosie O'Grady's) at 800 7th Avenue

London - May 25th & 25th 2012 at the Radisson Edwardian Hampshire

London - November 22nd & 23rd 2012 at the Radisson Edwardian Hampshire

The full rate is £950 + VAT. (Please note US delegates, as non EU residents are not liable for VAT). The early booking rate of £875 for non-subscribers expires on January 30th for the US seminars. Paid-up Fullermoney subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates. 

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