Bill Gross doesn’t think you should buy the dip.
“Investors should not try to ‘catch a falling knife,'” Gross told Bloomberg on Thursday, in an email.
Far be it from me to question a man of Bill’s legend, but that’s exactly the sort of thing someone like him would say at such a juncture as this one. If you ask a billionaire, there’s never a good time for regular people to buy stocks. If stocks are expensive, they’re a bubble and you should stay out. If stocks are cheap, or at least cheaper than they were, they’re a falling knife and you should stay out too.
Anyway, no one other than a Bloomberg editor looking to exploit an old man’s name for a few clicks has cared what Bill has to say in a very long time, God bless him. He was washed up well more than a decade ago. I don’t know what comes after washed up, but whatever that is, that’s Gross in 2025.
I bought some some stocks on Thursday during the post-“Liberation Day” rout on Wall Street. One of those stocks was Apple, which as most of you are doubtlessly aware, had its worst session since 2020.
There’s the selloff, visualized in all its glory — a 9.3% drubbing which erased $300 billion or so in market cap.
Maybe buying Apple right now’s an example of what Gross means by catching a falling knife, maybe not. I honestly don’t care. That’s the “great” thing about having no children, no spouse, no friends and no interpersonal relationships: Bad financial decisions by definition affect no one but you. If you f-ck up, you f-ck up. C’est la vie. It’s only money. You can always rob a bank or sell a bunch of coke if you run out of it. (I’m kidding, I’m kidding, calm down.)
Anyway, I mention this not so much to opine on the near-term prospects for the shares, but rather because I’d be remiss not to flag the somewhat disquieting fact that the most valuable company in the world is also the most exposed to Donald Trump’s trade war escalations with China. Readers are encouraged to note that Apple’s China exposure is inherently risky anyway, which is to say independent of “Tariff Man.”
Consider the following short excerpt from a recent episode of Bloomberg’s Odd Lots program, which featured Nick Denton as a guest late last month:
Apple has had almost no success in diversifying its supply chain into India or Vietnam. [It would be] easy for the Chinese government just to — you know — basically seize the factories and become the dominant supplier of smartphones to the world. The most valuable company in existence could go up [just] like that with a couple of decrees. I don’t think that kind of risk is actually priced into the market. So I have a short on Apple.
Congratulations to Nick. Thursday must’ve been lucrative.
While I’m (more than) confident that Apple will figure the supply chain out — I’m actually more concerned, as a shareholder and also as a consumer, that the company hasn’t produced a new hit product since Steve Jobs died — but I do agree that the China risk is under-appreciated and thereby probably not in the price, even after Thursday’s 10% haircut.
As JonesTrading’s Mike O’Rourke wrote, “the shares have levitated north of 30x earnings for over a year despite slow growth, a lack of innovation and little to no AI offerings.” He mentioned Buffett’s selling on the way to implicitly chiding investors for bidding up the stock to new records late last year.
“This is just an illustration of the complacency that has proliferated throughout the tape,” O’Rourke said. “As by far the largest importer from China, Apple should have suffered during President Trump’s first term [but he granted] an exemption so it could remain competitive with Samsung.” This time around, O’Rourke remarked, Trump’s “been adamant there won’t be exemptions.”
Spoiler alert: There will be exemptions, and carveouts and reprieves. Whether Apple gets one I have no idea, but Tim Cook’s just as good a candidate as anybody else. Over the longer-term, the CCP’s a bigger threat to Apple than any protectionist US administration. Or that’s my view anyway.
Of course, if aggressive US trade policy prompts the CCP to take action against Apple’s interests in China, then the two risks are inseparable.
I bought some Vietnam-tariff-tanked apparel names, betting on a “deal”.
I was curious if there was a good ETF (bonus points if it’s leveraged) to play the apparel companies with factories in Vietnam. Then again, probably best to yolo my retirement account into Newsmax.
China has a number of trade-related nuclear options, and I am on tenterhooks waiting to see what they’re going to deploy. For the most part, I expect them to be restrained. They’re waiting to pull the really big levers for something that matters a lot more (like the sanctions regime that will obtain when they make a move on Taiwan). Smaller levers abound though, and blowing up Apple is one of them.
At some point in the coming recession, the Megas will be rewarded for their quality and defensiveness. First they have to pay the price of being 30 cents of every index dollar sale.
“I’m actually more concerned, as a shareholder and also as a consumer, that the company hasn’t produced a new hit product since Steve Jobs died. . . .”
That.
I resisted the urge to catch that particular knife today, but I may succumb if the price continues to drop. Apple still builds beautiful machines–the packaging alone is amazing–but the lack of Jobs’ innovative vision is really clear now. He was always working on the next level of consumer tech, not just Apple’s new line. P/E ratio is still high, and they are really exposed as you have said.
Is this a sure buy signal? Or something to heed? It is noteworthy that the #1 unrelenting Apple bull is getting worried:
“Wall Street’s biggest tech bull warns of $3,500 iPhones as ‘economic Armageddon’ looms from Trump tariffs”
It’s not the price of the stock I’m watching, it’s the price of the phone. Verizon and AT&T can only handle so many $2000-3000 phones as cereal box toys. Soon people will have to buy them. Four i-phones at $2000 each is the price of a used car for their HS kid with a new license.
Since the country collectively freaks out if gasoline rises by $0.50/gallon or eggs rise by a few dollars a dozen, I don’t think we are going to see many purchases of $3,500 or even $2,000 phones.
I am at a bit of a loss to explain how people think these tariffs are either going to be absorbed or passed through (except at the margins), as opposed to stopping commercial activity entirely. By the same token, any projections of tariff windfalls sufficient to offset the cost of extending the tax cuts seem similarly misplaced.
I feel like Trump took one of those $19 Japanese strawberries, coated it in Splenda, and proclaimed that NOW it was the best strawberry anyone’s ever tasted, because sweetest is best and everyone likes sweet, right?
“new hit since Steve Jobs” so many of the new features on the hardware or in the software that they add or delete puts the thought in my head “Steve would have never signed off on that” Not much innovation, just remodeling with new curtains and paint.