The Everything Bubble And The Second Great Depression

The importance of Apple to the foundation of the everything bubble cannot be overstated – Kevin Duffy, Co-Founder, Bearing Asset Management

The last few months have witnessed the return of volatility. The S&P is down 14% from its all time highs a few months ago and the Nasdaq 17%.  However, this masks much of the carnage underneath and is only the precursor of what is to come in my opinion.

Apple (AAPL) is the most important stock in the market so when it preannounced a revenue miss last Wednesday afternoon investors took notice. Apple reduced its 4Q18 revenue guidance to $84 billion from a midpoint of $91 billion given just two months ago. Crucially, it attributed 100% of this miss to a slowdown in China. This is important because it is “macro”, having implications for every company that does business in China. AAPL is now down almost 40% from all time highs reached just a few months ago.

AAPL is not the only economic bellwether to guide down in recent weeks. On December 18, Federal Express (FDX) reduced the midpoint of its Non-GAAP EPS guidance by 8% citing a slowdown in global trade: “Global trade has slowed in recent months and leading indicators point to ongoing deceleration near term” – Alan Graf, CFO. FDX is down 40% from all time highs reached just a few months ago.

One of the best stocks in the market the last few years has been Nvidia (NVDA). They have reported phenomenal revenue growth quarter after quarter, including 41% growth for the year ended Jan 28, 2018. However, on November 15, they forecast 4Q18 revenue of $2.7 billion – a year over year decline from last year’s $2.9 billion. When hot growth stocks stop growing the bottom can fall out and that’s exactly what has happened with NVDA, which is down more than 50% from all time highs just a few months ago.



We have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand – John Maynard Keynes

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