Five things you should know before starting your work day on Jan. 3
Good morning, and Happy New Year! Today we look at how climate change is affecting the far north, what happened to Apple in its most recent quarter, why Tesla chopped the price of its cars, why Chinese wealth is hightailing it to overseas trusts, and why it’s increasingly likely the Fed will announce a rate cut soon.
Apple CEO Tim Cook announced after market close on Wednesday that the company’s first-quarter revenue drop will be up to 10% on weak holiday season and China sales. As we’ve seen, there’s been tepid response to the new iPhone models, and China’s ban on iPhone sales over the Qualcomm issue has also bitten into the quarter ended Dec. 31. Analysts felt that this revenue projection was yet another indicator that the bears will be digging deeper into hibernation this winter.
While Arctic waters are drawing more shipping traffic, Gabe Friedman reports that less-certain ice conditions are causing conflicts to flare up in communities across the North. Ice roads are a necessity for transporting supplies, but aren’t being built because of ice unpredictability. So residents and businesses are doing without until the ocean thaws again; yet, some believe the mining companies are unfairly getting what they need.
Tesla’s stock price plunged yesterday after a sudden price cut on all its cars and on disappointing Model 3 deliveries. No sooner did Elon Musk put a year behind (wilder than recent market gyrations) than a new worry erupted for Tesla: a potential ceiling in demand for its cars. The output fell just short of analysts’ predictions, and its junk bonds fell as well. At least one analyst said the 10% share drop was an over-reaction.
China’s super-rich are bracing for a tax raid on their $24-trillion pile of wealth. The country’s plan to cut taxes in 2019 for the masses has the nation’s super-rich running for cover. Authorities will undoubtedly pay closer attention to assets and investment holdings, which has many of the wealthy creating overseas trusts. Corporate taxes could rocket to 20% of profits, up from as low as zero. Some are even giving up their Chinese citizenship to avoid the far-reaching tax web.
For the first time since 2008, this key yield gauge is predicting a Fed rate cut. The little-known near-term forward spread, which reflects the difference between the forward rate implied by Treasury bills six quarters from now and the current three-month yield — and is very accurate — fell into negative territory yesterday. When that spread turns negative, it indicates bets on easier policy. Money markets have been pulling back expectations of rate hikes as economic data weaken and equities whipsaw, and now see a cut in early 2019.