Apple Trying to “Beat” the Competition!

MARKET ROUNDUP

Here’s a quick recap of the important news of the day …

Â Another day, another all-time closing high for the Dow Industrials! The Dow finished up 32.4 points at 16,583. But the broader Russell 2000 Index is still languishing down around 1,105 — off about 100 points from its early-March high, though up more than a half percent on the day.

Â Ten-year Treasury yields rose two basis points to 2.62 percent, while long bond yields rose more than twice that much to 3.47 percent. Agricultural commodities like wheat, soybeans and corn are something I don’t talk about every day. But they’re continuing to hold recent gains, hovering near 1-year highs in today’s session. Thank goodness there’s “no inflation” anywhere, like in food, right Janet Yellen?

Â Meanwhile, I’ve gone on record multiple times panning the euro currency. I looked a little silly earlier this year, but now? Not so much! It plunged a full cent against the dollar to 1.375, probably the most noteworthy move in any capital market today. That comes on the heels of a key reversal yesterday, spurred by complaints about the euro’;s strength from European Central Bank President Mario Draghi.

Â Now let’s talk about one of the other major things on my radar screen today — the news out of Apple (AAPL)!

I have a stepson who just turned 15. Sometimes, I call Gunnar my “Junior Analyst” because like many teenagers, he knows all about cutting-edge technology, consumer electronics trends and the like.

Take Skullcandy (SKUL), the headphone and earbud company that went public with plenty of hype in 2011, trading above $20 a share its first day. It seemed like an intriguing name to me at the time, but Gunnar wasn’t too keen on its products. He was spot on because the stock plunged as low as $5 last year, and it’s still languishing in the mid-single-digits today, thanks to ongoing concerns about sales and earnings.

Some time ago, when Apple was rising almost every week and trading in the $600-to-$700 range, he said something else striking to me. Apple was about to release its newest iPhone version and Gunnar’s response was: “So what?” He panned the retina display talk, and said it wouldn’t be much different than what was already on the market.

Sure enough, those lines around the block that you used to see with every Apple product release have dwindled dramatically. This kid was definitely on to something — Â and Apple still hasn’t seen those 2012 highs, even after announcing the biggest stock buyback and dividend hike in the company’s history!

But now, Apple is trying to turn things around with a bold foray into the headphone and streaming music markets. Reportedly, Apple is close to purchasing Beats Electronics LLC for around $3.2 billion.

If you’ve never heard of Beats, you’re not alone. I hadn’t either until, once again, Gunnar filled me in during a trip to Best Buy. He wanted to head over immediately to the Beats display and try on the company’s “cans” — what you and I call headphones!

They cost a pretty penny — as much as $450! But they’ve been very popular the last few years with professional athletes, musicians and others in the public eye. The company itself was founded by the hip hop artist Dr. Dre and a famous music exec, Jimmy Iovine.

More recently, Beats has gotten into the music rental and streaming business. You can pay a nominal subscription fee per month, and get access to the entire library of songs available through the Beats Music system.

“It’s good to see Apple trying to find its groove again after a period of product stagnation.”

Apple has so much dough, that a couple billion dollars is chump change in the grand scheme of things. But analysts believe the deal could help boost Apple’s presence in the music business beyond its aging iTunes song and video purchase platform. Me? I think I’m going to have to ask my junior analyst about this one! But in the meantime, it’s good to see Apple trying to find its groove again after a period of product stagnation. Throw in the big dividend and buyback increase, and you can see why investors are starting to warm to the stock again.

So how about you? Is this a transformative deal for Apple? Or is the company grasping at straws? Do you like the outlook for consumer tech right here … or are you worried about whether spending will hold up? Let me know at the blog.

OUR READERS SPEAK

Speaking of the blog, Reader P.V. B. sounded off on the central bank policies we’re stuck with these days, and how he is defending himself against the Fed’s alchemy. His warning?

“The Fed can devalue all your paper-based assets in the twinkling of an eye or presidential stroke of the pen. Removing your wealth from the current system and converting it into tangibles effectively puts you into control again … . redeem the tangibles assets as needed as wacko as it sounds. Prices can and will be manipulated with precious metals but they cannot physically reduce the weight of tangible assets at the end of each day. This sort of wealth is irreducible.”

I’m a fan of having some money in gold and other tangibles, too. But the yellow metal largely has been treading water for several months, and until that pattern changes, I don’t recommend going too overboard!

Reader Gene M. may be a Broncos fan (LOL). But I’m always willing to answer questions like his — Â even if I think Tom Brady has the edge on Peyton Manning! He wanted to know why I’m comfortable with Sunoco Logistics (SXL) because of its “small trading volume.”

Gene, I’m showing a three-month average daily trading volume of around 190,000 shares. That’s plenty liquid for me, even if it’s a lot less than you see with big names like Apple. The stock also shows very few crazy opens, closes and major spikes or declines on the daily chart, which is what you sometimes get with illiquid ETFs or stocks.

Finally, Reader Ed asked if I could “give us your educated guess about the “new global currency’ which looks like it would be the IMF SDRs and how much do you think the dollar will be worth?”

Ed, I find it hard to believe that the powers that be in Washington, Berlin, London, or anywhere else will give up the power of the purse completely. That’s what would be required as part of any proposal to roll out a world currency.

Look, the euro has been enough of a mess, and the currency union almost fractured completely a couple years back. So while we may see regional economic cooperation or currency blocs form from time-to-time, I’m skeptical there will ever be a “global” issued!

As for the dollar and its value, I know our country has plenty of problems. But for this year at least, I think it wins the “ugly contest” against the other major alternatives like the euro!

Any other thoughts on that topic? Or any of the others we’ve covered? Hit the blog and let me know!

OTHER DEVELOPMENTS OF THE DAY

Â Â Not all deals end in merger heaven. The $35 billion deal between advertising giants Publicis Groupe (PGPEF) and Omnicom Group (OMC) just fell apart. Tax, regulatory, and power-sharing problems appear to take the blame.

Â You know that plunge in trading volume and revenue that I highlighted at investment banks like JPMorgan and Barclays? A key force behind it is plummeting volatility in stocks and bonds … and that plunge is a side effect of central bank market manipulation the world over.

One key measure of bond volatility has sunk to a level that’s 38 percent below its long-term average. Heaven help us when central banks lose control of the market again … just like they did in the mid-2000s!

Â Russian President Vladimir Putin set foot in the Crimean peninsula for the first time since his shadow forces annexed it from the Ukraine several weeks ago. He also oversaw massive military parades and demonstrations in Russia. Why do I suddenly want to watch “Hunt for Red October” again?

Â Noah was the most popular boy’s baby name in 2013, while Sophia came out on top for girls. Liam was number two on the boy’s list — Â but I’m secretly hoping hope that’s not because he’s one of the members of the One Direction band my 8-year-old and 11-year old daughters like so much!

Reminder: If you have any thoughts to share on these market events, don’t hesitate to use this link to put them on our blog.

Until next time,

Mike Larson

Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. MikeÂ then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.

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