Congress and the Obama administration are at it again. Talks broke down over the weekend, which is a familiar development. The impasse is certainly weighing on the stock market.
Precious metals are rallying, bonds and stocks are down. Of these assets, it’s the move in bonds that are most telling. Bond prices are falling, and yields are rising, because failure to pass a budget opens the door for a downgrade of U.S. debt from the ratings agencies. That, in turn, raises borrowing costs (interest rates) because repayment is suddenly less certain.
It seems unfathomable that the U.S. could default on its debt, or curtail social security checks and other obligations. But that’s the game the politicians are playing. And the consequences could be severe, if a deal is not reached.
Personally, I find it very hard to believe that a deal will not get done. As I’m fond of saying, politicians might be dumb, but they aren’t stupid. Letting the U.S. go into default would stupid. We must expect a deal to get done, and in the next few days.
From that perspective, we should view the current uncertainty as a buying opportunity.
Last week, 5 fake Apple stores were discovered in China. Today, it’s reported that the Chinese government has closed two of them. Three others were left open because they had operating permits, even though they are not sanctioned by Apple (Nasdaq:AAPL).
Apparently, Apple hasn’t said a thing about these fake stores, or the ones that were left open. That’s just weird, because Apple obsessively protects its products and reputation. If you breakdown an iPhone and reveal the components on the Internet, Apple might sue you or have police arrest you.
So it’s odd that Apple isn’t cracking down on unlicensed re-sellers in China. But this brings up a really interesting point about Apple’s China strategy.
Apple has 5 stores in China. That’s it. And they’re all in Beijing and Shanghai. Last quarter, Chinese bought 1.07 million iPads. Nearly were bought through unauthorized channels. For comparisons sake, Bloomberg reports that Lenovo has 10,000 outlets in China.
It might seem that Apple should get control of what’s going on in China. But, on the other hand, if the demand and products are there, Apple doesn’t have to add to its expenses to make sales in China.
Research in Motion (Nasdaq:RIMM) maker of the once-ubiquitous Blackberry is laying off 2,000 workers. That’s 11% of its workforce. And the reason should be clear: Apple’s iPhone and Android smartphones are dominating the market.
RIMM’s Blackberry has lost its niche status, that’s for sure. And its Playbook tablet, while getting good reviews, hasn’t sold as well as hoped.
Ironically enough, RIMM is headquartered in Waterloo, Ontario. And it seems that RIMM may be facing its own Waterloo as it fights against competition from Google (Nasdaq:GOOG) and Apple (Nasdaq:AAPL).
It might be tempting to buy some RIMM stock since its down better than 50% this year. But this would be a classic example of trying to catch a falling knife. There’s very little certainty with RIMM right now. The stock will give signs when it’s ready to rally, and it hasn’t given those signs yet.
Speaking of reading a stock’s signs, TradeMaster Daily Stock Alerts’ Jason Cimpl has offered Daily Profit readers a look at two hot technology stocks, Netflix (Nasdaq:NFLX) and Apple, in a free video. You can access that video HERE. Jason tells me he’d like to do more analysis like this in the future, so if you like let me know. Maybe we’ll get a new feature for Daily Profit.
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