The markets have gotten euphoric since the Trump election, apparently because someone believed what he was selling. Take a look at the broad market jump (powered greatly by the bank jump), and even more unbelievably the bank index jump.

Someone with over 53 years on Wall Street sent me this article from Lex of the Financial Times...

The animal spirits are whispering... They are calling into question the stability of the US in light of the significant geopolitical uncertainties introduced by the new US administration and how that plays into increasingly unprecedented global macroeconomic forces coming into play as the EU and US achieve their long sought after inflation in a world of negative interest rates and central bank sponsored asset purchases to distort the markets.

These spirits are whispering... Is it time to short the United Stages of America?

Since Trump's election, US equity markets have been on a tear. The stated reason was belief that his America jobs first, tax cuts and lowered regulation would stimulate business.

I've instructed my analysts to delve into companies whose fundamentals may not be able to follow up on that promise...

Over the last 5 years, I have warned that T-Mobile would start turning up the heat in the US dead beat carrier business (see links below). I call them dead beat carriers because they relied on a virtual duopoly of cash cow cash flows and failed toi innovate. They actually allowed Silicon Value to capitalize on thier apathy, and now they are rlelgated to bg dumb utlitiy pipes in lieu of the lifeblood... the synapses of communication and commerce between all people an businesses. 

Brand spanking new research is available to all paying subscibers, with a super bonus to my professional and institutional subscribers. To excerpt from said pages...

The professional and institutional versions of this report contain over 30 pages of data and analysis. These trades are for big boys (and girls), or at least those who can think like big boys (and girls). It is my intent to have traders, investors, companies and speculators use our Zero Trust Digital Contracts often, and knowledge of opportunities such as these do a lot to foster such use. Click here to subscribe.

Paying subscribers, download here:

• Making Real Money from Virtual Money – Arbitrage opportunities in Bitcoin trading
  (Global Macro, Trades & Strategy)
• Digital_Currency_Returns Pro blog download (excel spreadsheet)
  (Global Macro, Trades & Strategy)
• Making Real Money from Virtual Money ~Arbitrage opportunities in Bitcoin trading - Professional & Institutional

Google has fired a shot across the bow of the smartphone market, and it quivers in response

Yesterday, Google's Motorola division released the Moto G, a $179 full featured smartphone with a screen resolution and size superior to the $650 iPhone 5S, and an all day battery that bests the iPhone and Samsung Galaxy S series as well. This is a fully functional smartphone that is priced below the cost (as in the cost to build!!!) iPhone 5S and Samsung Galaxies (as in all of them!). Needless to say, this threatens to give Google significant market share in the low and mid-tiers, not to mention full vertical integration (the hardware, software, app ecosystem, cloud and services will belong to Google - leaving only the wireless pipes for it to contend with, and I would not sleep there either [Google Fiber in your diet}).

Google's cost shifting business model allows them to sell this phone below the actual cost of manufacturing and development of many if not all of its competitors. For those not familiar with the concept of cost shifting...

This is how Google did it...

For those who do not remember the importance of market share on margins, let's reminisce on post past...

Looking Through Windows To See The Big Data On Fruit - Or Android Gets 'em Again

In early 2010 I warned on Blackberry (then RIMM), with market share loss to Android being the prime determinant... Many More Black Eyes for the Blackberry? A Complete Forensic Analysis of Research in Motion. I put significant data out in the public domain to illustrate my point and put explicit price points out for subscribers, ie. RIM Smart Phone Market Share, RIP? Was I right?

Blackberry market share vs margin correlation analysisBlack

I explained this in detail in the post "Cost Shifting Your Way To Prominence Using The Network Effect, Or Google Wins - Apple, RIM & Microsoft Have ALREADY LOST!". Failure to achieve the network effect effective is tantamount to a failure to be able to control you margins, long term. Of all people to of know this, who do you think preached it most convincingly? 

Margin compression was sure to kill Blackberry, even if they did hit their sales numbers, which they didn't and couldn't!!!

Related reading...

The Smallest & Liveliest Of The DeadBeat Carriers Successfully Launched Wireless WMDs

Again, The Sell Side Analysts (Even The Rock Star Analysts) Don't Seem To Understand The Mobile Computing Wars

Reggie Middleton's Apple Q4 2013 Analysis: RDF In Full Effect As Analysts & Press Go GaGa Over Garbage!

Within two years of getting the mobile computing crown (toppling Apple and insuring that Nokia and Blackberry didn’t stand a chance), Samsung is already prepping to relinquish it. I know, the hoi polloi screams from the common street analyst’s rooftop, incessantly chanting “… but Samsung is dominating handset sales, creating and literally owning categories, and essentially out Appling Apple!”

Well, the reason why I apparently out-maneuver the Street in this space (as in others) is not vastly superior intellect nor a LiPoSilica Oxide powered crystal ball borne from some extraterrestrial technology. It’s actually so much simpler than all of that.

See also...

 5:31 Reggie Middleton Wins The CNBC Stock Draft 21 Stocks, 7 Traders, One Winner

Buy Apple till $1000! Hurry & get this Facebook IPO while its hot! Short Google to go long Apple! Reggie Middleton shorts Wall ...

 11:11Reggie Middleton Goes For 2nd Win On CNBC Stock Challenge & Causes TROUBLE!!!

Reggie Middleton goes for his 2nd consecutive win on the CNBC Stock Draftinvestment challenge. Look at the amount of ...

Subscribers, see also... 

•  Google Q1 2013 Valuation Note - Retail
  (Technology)
•  Google Q1 2013 Valuation Note - Professional & Instititional
  (Technology)
•  Google Q1 2013 Valuation Note - Professional & Instititional
  (Technology)

Subscribers, download the Q3 2013 valuation reports (click here to subscribe).

•  Apple 4Q2013 preliminary update
•  Apple 3Q2013 Valuation Update - Retail
  (Technology)
•  Apple 3Q2013 Valuation Update - Pro & Institutional
  (Technology)

The update from two months ago is also of value for those who haven't read it. It turns out that it was quite prescient!

1.  Apple 1Q2013 update - Pro & Institutional (Technology)
2.  Apple 1Q2013 update - Retail (Technology)

 

Bloomberg reports: T-Mobile Sales Beat Analysts’ Estimates as Subscribers Surge. So, how did BoomBustBloggers know this would occur? Well, It started last year with the article "Deadbeat Carrier Creative Destruction In The Ongoing Mobile Computing Wars". You see, US wireless carriers are running one of the biggest Ponzi schemes around. The buy overpriced hardware from manufacturers on contract (see Have We Reached "Peak Premium Smartphone"?) mark up said hardware and then offer it at heavily and usurious financing rate otherwise called a subsidy. The US consumer buys these overpriced devices for a relatively small downpayment and then proceeds to pay through the nose to the carrier a very, very margin rich wireless fee for what amounts to a commodity service of dumb virtual pipes through the airwaves.  Not only does the carrier recoup its outlay for the device purchased en masse from the OEM, the carrier also tacks on and collects a very large premium for its post paid wireless services as well.

There are 4 major national carriers in the US, basically two big ones two smaller ones. The smallest of the 4, T-Mobile, consistently go beat up - losing out on the right to subsidize the iPhone at a loss (like AT&T used to and Sprint still does) and basically losing subscribers. Then they decided to do something about it. They said, "Hey, let's stop being deadbeats!". By changing their pricing plans and eliminating subsidies and instead selling pure access to their virtual pipes (like a carrier is supposed to) combined with actual "real" financing of the hardware (at competitive rates, nonetheless) they essentially committed DeadBeat Carrier Blashphemy. The only issue was, it worked, to the chagrin of the competition - reference:

• Deadbeat Carriers Compete, aka #MarginCompression!!!
• The Death Of The Deadbeat Carriers, Part 2 - Apple Avoideth, Google Destroyeth
• Death Of The Deadbeat Carrier, part 3 - Home Internet Access Unplugged!

Now, back to the Bloomberg article whose substance we predicted this time last year: T-Mobile Sales Beat Analysts’ Estimates as Subscribers Surge

T-Mobile US Inc. (TMUS), the fourth-largest U.S. wireless carrier, reported third-quarter sales that exceeded analysts’ estimates as its cheaper service plans and phone-upgrade strategy attracted customers.

Sales rose to $6.69 billion, an increase of 8.7 percent when adjusted to account for T-Mobile’s merger with MetroPCS Communications Inc., according to a statement today from the Bellevue, Washington-based company. Analysts projected $6.58 billion, the average of estimates compiled by Bloomberg.

T-Mobile, which combined with MetroPCS in May, added 648,000 new monthly subscribers, topping the 401,000 average estimate and gaining for a second straight quarter. 

T-Mobile, which merged with MetroPCS six months ago, added 648,000 new monthly subscribers, topping the 401,000 average estimate and gaining for a second straight quarter. T-Mobile has benefited from offers such as zero-down financing on phones and a $10-a-month service that lets customers upgrade their devices more often -- a program that rivals such as Verizon Wireless, AT&T Inc. (T)and Sprint Corp. (S) have now adopted. 

Umm... Margin Compression!!!??? Remember we called this in the telecomm space a few months ago... Deadbeat Carriers Compete, aka #MarginCompression!!!

The net loss was $36 million, following a second-quarter net loss of $16 million. The average phone bill for monthly subscribers shrank about 3 percent to $52.20 from the second quarter as more customers opted for cheaper plans. Analysts had projected $52.86, according to a survey of seven estimates by Bloomberg.

... T-Mobile rose 1.7 percent to $28.83 at 9:42 a.m. in New York. As of yesterday, the shares had climbed 72 percent since May 1, following the MetroPCS merger. Deutsche Telekom rose 0.6 percent to 11.82 euros in Frankfurt.

Who in the hell is behind this rampany wave of #MarginCompression? Oh yeah! Google Has Officially Gone On Record To Confirm Reggie Middleton's "Negative Margin Business Model" Tactics. Google has created an atmosphere and environment that is primed to drive down the cost of computing and Internet access even further. I will discuss that in detail in my next article on this topic. In the meantime and in between time, read: 

• Have We Reached "Peak Premium Smartphone"?
• Expect Signs Of Peak Smartphone From The Market Leaders Samsung And Apple As Competition Increases
• Here I go again – Hardware is Dead & Samsung Agrees
• Samsung Follows Footsteps Of Apple, HTC, Nokia - Wasn't That Quick?

Subscribers, this is directly relevant to both the Apple and the Google valuations. 

Recent Apple Valuation Reports

Subscribers, download the Q3 and Q4 2013 valuation reports (click here to subscribe).

•  Apple 4Q2013 preliminary update
  

•  Apple 3Q2013 Valuation Update - Retail
  (Technology)
•  Apple 3Q2013 Valuation Update - Pro & Institutional
  (Technology)

The update from two months ago is also of value for those who haven't read it. It turns out that it was quite prescienct!

•  Apple 1Q2013 update - Pro & Institutional
  (Technology)
•  Apple 1Q2013 update - Retail
  (Technology)

Recent Google Valuation Reports

•  Google Q1 2013 Valuation Note - Retail
  (Technology)
•  Google Q1 2013 Valuation Note - Professional & Institutional
  (Technology)

Note: The next three annual subscriptions (professional or higher) will get the opportunity to purchase their own pair of Google Glass Explorer Edition, through the Glass referral program. Click here to subscribe, and if you want to be referred to purchase your own pair of Glass then email me after payment.  

Last week in Reggie Middleton's Apple Q4 2013 Analysis: RDF In Full Effect As Analysts & Press Go GaGa Over Garbage! I wrote:

Apple Still Has The Business and Financial Press Mesmerized With It’s RDF (Reality Distortion Field)

For some reason when I read management comments and financial statements I seem to see something totally different from Sell Side Analysts and the financial and business press. This is an excerpt from “Business Insider” on Apple’s Q4 earnings results:

The stock initially tanked after the numbers were out thanks to weaker than expected margin guidance. Apple guided to 36.5%-37.5%, which suggests a flat margin despite a new iPhone. 

On the company's earnings call, it explained why margin was lighter than expected and the stock came roaring back. At last check it was down slightly in after hours trading. 

Apple's margin will be hit by a combination of factors. It is selling new iPads that cost more to make, new laptops, foreign exchange issues, and most importantly, a $900 million sequential increase in deferred revenue thanks to all the software it is giving away with iOS and Macs. 

On the earnings call, Gene Munster of Piper Jaffray said the real margin would have been closer to 38.5%, and Apple basically confirmed it. This sent the stock climbing. 

Apple's margins have been and will be hit harder as I've predicted.  This non-sense about the deferred revenue from giving away software and Gene Munster's "real margin" comments are utter nonsense. Apple's reported margin IS ITS "REAL MARGIN"! The reason it is giving away its core software products for free is to compete with the entry and the threat of Microsoft's Surface 2 tablet that comes bundled with a real, the real, office suite - Microsoft Office. This makes it real deal contender in the enterprise, where Office is not on the de facto standard - it is the standard. It also has to compete with Google's Android who bought Quick Office and is now giving that office suite for free. For those who don't think that makes a difference, what OS do you think took the iPad from 92% market share in 2010 to 32% market share last quarter?

Let me add to this since both Gene Munster and I are both frequent CNBC guests:

On the same network, I recommended an Apple short:

If you did this investment thing to actually make money, who do you think CNBC should have on more regularly???

Well, my analysis has been vindicated once again, as per the NextWeb: 

KitKat ships with Google’s Quickoffice, bringing Microsoft Office editing out of the box to all new Android users

With Android 4.4 KitKat, Google’s biggest blow to Microsoft isn’t against Windows Phone. It’s against Microsoft Office. You see, KitKat ships with Quickoffice, letting you edit Microsoft Office documents, spreadsheets, and presentations on the go, without paying a dime, straight out of the box.

This tidbit was largely lost in the news yesterday, given the large number of improvements and new features that KitKat offers. Yet it’s a very big deal: every Android user that upgrades to KitKat will get Google’s Quickoffice, and every new Android device (starting with the Nexus 5) that ships with KitKat or higher will get access to Quickoffice.

Google acquired Quickoffice back in June 2012. In December 2012, the company released Quickoffice for iPad, making it exclusively available for free to its Apps customers. In April 2013, it followed up with free Android and iPhone versionsfor Apps customers as well. Last month, Google released Quickoffice for free, making it available to all Android and iOS users.

Here’s what we wrote at the time:

Microsoft shot itself in the foot here. Sure it finally released Office Mobile for iOS in June and Office Mobile for Android in July, but there was one small problem: an Office 365 subscription was and still is required.

In other words, Microsoft matched Google’s deal. Now Google has hit back and undercut Microsoft once again, and this blow might be the biggest yet.

Click here to subscribe or purchase this update. Paid subscribers click here:  Apple 4Q2013 preliminary update. As we wait for my elfin magicians and presdigitation analysts to finsih up on the updated valuation numbers, I'm quite comfortable in recommending subscribers adhere to the latest set of valuation numbers proffered in the last Apple update. 

Subscribers, download the Q3 2013 valuation reports (click here to subscribe).

•  Apple 3Q2013 Valuation Update - Retail
  (Technology)
•  Apple 3Q2013 Valuation Update - Pro & Institutional
  (Technology)

The update from two months ago is also of value for those who haven't read it. It turns out that it was quite prescienct!

•  Apple 1Q2013 update - Pro & Institutional
  (Technology)
•  Apple 1Q2013 update - Retail
  (Technology)

See also:

What Sell Side Wall Street Doesn't Understand About Apple - It's Not The Leader Of The Post PC World!!!

 The short call - October 2012, the month of Apple's all-time high and my call to subscribers to short the stock:  Deconstructing The Most Accurate Apple Analysis Ever Made - Share Price, Market Share, Strategy and All

The 20 page preliminary report is ready for download to all paying subscribers. It tells the "truth" about Apple. This report does not contain an updated valuation section just yet. I'm still working on that for it is a bit more involved and complicated than I originally anticipated. Considering how quickly all of the sell side came up with thier updated valuations and marking their historical accuracy to market as compared to mine, one would think the prudent investor would be given pause. 

Click here to subscribe or purchase this update. Paid subscribers click here:  Apple 4Q2013 preliminary update. As we wait for my elfin magicians and presdigitation analysts to finsih up on the updated valuation numbers, I'm quite comfortable in recommending subscribers adhere to the latest set of valuation numbers proffered in the last Apple update. 

Subscribers, download the Q3 2013 valuation reports (click here to subscribe).

•  Apple 3Q2013 Valuation Update - Retail
  (Technology)
•  Apple 3Q2013 Valuation Update - Pro & Institutional
  (Technology)

The update from two months ago is also of value for those who haven't read it. It turns out that it was quite prescienct!

•  Apple 1Q2013 update - Pro & Institutional
  (Technology)
•  Apple 1Q2013 update - Retail
  (Technology)

See also:

What Sell Side Wall Street Doesn't Understand About Apple - It's Not The Leader Of The Post PC World!!!

 The short call - October 2012, the month of Apple's all-time high and my call to subscribers to short the stock:  Deconstructing The Most Accurate Apple Analysis Ever Made - Share Price, Market Share, Strategy and All