Turkey Raises Rates to 24% and Apple Screws w/my IPhone!

OK. Ok.....the broader mkt - Dow and S&P - waffled all day -  The Dow swung 216 pts (or 0.8%)  between hi to low while the S&P swung 15 pts (or 0.5%)  from hi to low… while the Nasdaq got crushed early on – falling 88 pts or just over 1% in the first hour…. …. Tech got wrecked.   Apple - under pressure over trade war ‘stuff’ led the Nasdaq lower - dragging so many of the other tech names with it....but when the WH announced that they scheduling ‘new’ trade talks with China while also indicating that the US is willing to compromise on trade the mkts (Nasdaq) stabilized and began the move to erase the earlier losses.  Algo’s read the positive headlines and did an about face - cancelling the sell orders and replacing them with buy orders...taking the Nasdaq from -80 to -18 within the hour while the Dow and S&P pierced the unchanged line and moved into positive territory…and then the focus turned to Apple….

Yesterday was the annual ‘September Event’ - an event where Timmy (Cook) stands up and talks about what was and then introduces a whole new lineup of Apple IPhones, IWatches, Macs etc....In fact – Timmy introduced the latest and most expensive IPhone yet….while building an ‘electrocardiogram functionality’ into their next gen IWatch……   The latest IPhone has a larger screen – tough to fit into your pocket any longer – but Timmy is hoping that the larger screen is going to persuade 750 million people around the world to throw out the old one and upgrade to a new one…. The IPhone XS MAX!  (sounds like an ad for adult diapers!)

He sets it up for the holiday selling season - (understand that there are less than 100 days before ‘the holidays’) ....besides this new version – which sells for $1100 -  It has a new camera, it has new touch screen technology, new battery,  it has a bigger end to end screen, it has an upgraded operating system that allows you to store more data and it has the capability to allow Apple to spy on you even more...(if that’s possible?)   

- Siri - I’m sure has new listening technology & new ‘vision’ technology - that he won’t tell you about and if you think I’m kidding - have a conversation about - say a new BMW - then turn on your google search engine- or log into FB,  and boom - all of a sudden you are getting hit with ads for new BMW’s....this year I am willing to bet that Siri can listen to you when the phone is OFF….

Now he also introduced the XS - $999 and the XR which will retail for $750 – bringing the avg selling price to $950 or 15% higher than the phones he introduced at last years event…..…..and this is important to him…because IPhone sales account for 67% of Apple’s revenues……and last QTR those revenues were $53.3 BILLION….I mean look – he has to run faster just to stay in place….

And at the same time - I think Apple somehow started to ‘infect’ all the current IPhones that are our there - causing them to malfunction - all to create demand.

Is it me or is anyone else suddenly having trouble with their ‘old’ IPhone?  I mean - yesterday - my keyboard started to malfunction (Coincidence?).  I would go and type something and the keys wouldn’t work, or they would work sporadically or I would type a ‘G’ and a ‘P” would appear....Look - G & P are not even NEXT TO EACH OTHER.....I could see if it was a G & H or G & B but G & P???  Nah.....I am convinced that as Apple introduces their new phones they manage to Screw up their ‘old phones’.... It’s called creating demand... So, what better way than to create new demand?  Frustrate the user with the current product just as you are introducing the latest, greatest, newest product and tease us....

So, two things - number 1 -  anyone who is an Apple Junkie is out the door - ready to fork over $1100 just because they have to be the first kid on the block to say - “Hey!  Look at me!  I have the newest IPhone” and number 2 - if my IPhone 8 starts to malfunction - the thought is that I will just go out and ‘upgrade it’ - because - it’s just easier.....and so the antics continue.....and while it may sound like I am negative on Apple - I am not - I’m just sayin’ what everyone is thinking....

Away from that – the news is intently focused on Hurricane Florence and the damage it is about to inflict upon the US coastline…. Insurers got punched in the face – again -  bringing 5-day losses to - CB – 1.9%, ALL – 3.7%, TRV – 4.3%, AFG – 2.65%, THG – 6%, PRA – 1.8%.  The S&P Insurance ETF – KIE also getting kicked in the gut…. down 2.25% in 5 days while iShares Insurance ETF – IAK has also lost 2.6%. Now while Florence has been downgraded a bit – she is still going to kick the S**T out of the Carolina’s, parts of Georgia, Virginia, and Tennessee….

US futures are teasing higher- up 4pts as we await the arrival of Florence, more macro eco data along with the usual trade drama after the news emerged that we want to re-engage with China and apparently China wants to re-engage with us.  This news caused Asian and Emerging Mkts to bounce.  Japan reports that Machine Orders beat the estimate coming in at 11% vs. the exp 5% - that’s good.  Japan +0.91%, Hong Kong + 2.5%, China +1.09% and ASX – 0.7%.   The EEM – Emerging Mkts ETF – which is down 22% YTD – rallied 1.6% on the news…  
Now look the most important international emerging mkt story today is what the Turkish Central Bank (TCB) decision will be……Why?  Because if the Turks do not show that they are serious about stopping inflation by raising rates, then the Turkish Lira will decline further increasing the chances of a ‘full frontal” assault on emerging market currencies causing more pressure on mkts…. including the US.  So here is the playbook – expectations are between 2.5% - 3.25 %.... anything below 2.5% will be a negative – and anything above 3.5% would be an upside surprise causing mkts to surge….and BOOM!  They raised rates by 6.25% - BLOWING EVERY ESTIMATE OUT OF THE WATER…. bringing their interest rates to 24%.  The Lira is rallying….and US futures are moving higher still….

In Europe – mkts there are also higher…. Not exploding yet, but they are in the green.  German CPI did not disappoint and met the estimate. In addition, we will also hear from the BoE (Bank of England) and the ECB (European Central Bank) – as they prepare to make their policy announcements.  (No changes are expected….)  FTSE -0.24%, CAC 40 +0.37%, DAX +0.63%, EUROSTOXX +0.32%, SPAIN +0.41% and ITALY +0.11%. 

Eco data today includes: CPI (Consumer Price Index) of +0.3% m/m or 2.8% y/y.  CPI EX food and energy is expected to come in at +0.2% m/m or 2.4% y/y.   Strategists will also be looking at Real Hourly Wages and Real Weekly Earnings.  In addition, we get the usual suspects – Initial Jobless Claims of 210k and Cont Claims of 1.71 mil.   

Oil is down $1 at $69.41 after trading as high as $71.46 yesterday.  The IEA (Int’l Energy Agency) reported that

“Global oil supply hit a record in August despite Iran, Venezuela fallout”

“Global oil supply was firing on all cylinders in August, reaching a record 100 million barrels per day (bpd), the International Energy Agency revealed in its monthly Oil Market Report Thursday.”

So, what are we worried about?  We’ve talked about this…the world is awash in oil…. My suspicion is that oil will test support lower at $67.71 over the next couple of days.

Fish & Chips 

For this you will need: flour, 1 tablespoon baking powder, 1 teaspoon kosher salt, 1/4 teaspoon cayenne pepper, Old Bay Seasoning, 1 bottle cold brown beer, 1 1/2 lbs of your favorite white fish - tradition calls for codfish.

In a bowl, whisk together the flour, baking powder, salt, cayenne pepper, and Old Bay seasoning. Whisk in the beer until the batter is completely smooth and free of any lumps. Refrigerate for 15 minutes. (Note: The batter can be made up to 1 hour ahead of time).

In a deep-frying pan - heat up some oil until it shimmers. Dredge the fish in the cornstarch. and then dip the fish into the batter and immerse into hot oil. When the batter is set, turn the pieces of fish over and cook until golden brown - this should only take you about 2 mins.

Drain the fish on paper towels and Serve with malt vinegar, roasted potatoes or French fries and cole slaw on the side

Buon Appetito.

The market commentary is the opinion of the author and is based on decades of industry and market experience; however no guarantee is made or implied with respect to these opinions. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of O’Neil Securities, Incorporated or its affiliates.