Practical analysis for investment professionals
04 March 2015

14 Charts Worth Your Time: Apple, Macro Trends, and Global Inequality

Am I the only one starting to feel like we’re pretty darn late in the business cycle? With venture capital investment surpassing 1999 quarterly levels and cyclically adjusted P/E ratios that reach ever skyward, it’s certainly getting easier to pursue that line of argumentation. Five-plus years after the official end of the last recession, a betting man has to wonder if we’re due.

Of course, the only thing that investing and betting have in common is that if you’re going to be good at either, you’d better understand probability. This week, I’ve curated a bunch of charts focused on macro trends as well as Apple’s future and global inequality that I hope will help you understand a couple of key elements of your risk equation, both personally and professionally. The goal is that you’ll be able to better align your time and your capital with your beliefs in the weeks and months ahead.

This week, I’m pleased to feature the first submission from a reader, something I’d love to do more of in the future. If you see a chart that you think is a good candidate for this series, please do shoot me an email or tweet it at me. Of course, if you haven’t subscribed to the Enterprising Investor yet, you’d better do that. Who knows what you might miss?

Without further ado, let’s ask the question that seems to be on everybody’s mind:

What Needs to Happen for Apple to Grow More?

I guess I shouldn’t be too critical of Apple, since I’m writing this post in between my MacBook Air and my iPhone. I have also been bullish on the Apple Watch almost since it was announced. But this seems like an . . . um . . . aggressive increase in addressable market, especially when you remember that “addressable” does not imply Apple will necessarily capture any particular share of the market at any particular margin.

I love my Apple products, but exuberance for this company seems to have drifted from thoughts like “they will continue to execute really well on their core competency” to “they will invent three completely new markets.” Granted, if they were to execute well on even one of the three, it would be big. But what sort of risks are you taking as a new investor? How many technology companies that reached the level of dominance that Apple has were in a comparable position 10 years later? This time might be different. But if Warren Buffett complains he will not be able to earn as great of a return on his capital in the future as he has in the past across his myriad subsidiaries, how probable is it that Tim Cook will be able to at Apple?


I had to include this because I love Jay’s tweet, but I also wanted to pick up on an element of this chart that seems confusing. It is intuitive to imagine that people will consume an increasing amount of content while in transit (particularly if the self-driving car thing takes off), but can we talk about the implied spend on content that’s baked in here?

Assuming that the car of tomorrow costs about as much in real terms as a base-model 2015 Honda Accord ($22,105) and that its cost roughly equates to its value, there is apparently $4,421 of “content value” in the car of tomorrow. If you assume the car is bought for, say, a five-year time horizon, that’s an undiscounted additional $74 a month that consumers are expected to spend on content. Color me skeptical.


This is a little creepy, and it’s indicative of what happens when you grow to such scale that you’re not really sure what to do next. The notion of one technology company involving itself in every layer of my life like this is deeply reminiscent of The Circle and also seems massively difficult to execute. What product does Apple plan to release that will break into the sleeping area of our lives, pray tell?


And are those estimates of how Americans spend their time really correct?


Macro Monitor

Australian house prices are climbing more than four times faster than Australian wages, which is no fun for folks Down Under (unless they happen to own their house). An interesting thing that Chris notes in the article that’s linked under the chart is that the bulk of Australian mortgages are tied to short-term rates, and so there’s significant reason to believe that this activity is driven directly by local interest rate policy.


Which, in case you forgot, is heading in a similar direction pretty much everywhere. I included this chart to make another point: It may not be in fashion to refer to interest rates in the United States as “high,” but when compared to those in Germany and Japan, they certainly are. Next time you find yourself surrounded by financial services workers and eager to find some amusement, try talking about how stubbornly high interest rates are in the United States and report back in the comments section. I would love to hear the reaction you get.


This chart is hyper-interesting but I particularly like it in the context of the one below, which adds quite a bit more historical background.


This is not a great comparison: The chart above shows the comparison between European companies and their own debt, while this shows the comparison in yield between the S&P 500 and the US 10-year bond. But it makes a point that is forgotten quite a bit: Stocks can yield more than bonds. This is true especially in contexts where the market outlook sees future growth as challenged (like in Europe).


Since the integrity of the euro is routinely called into question these days, this graph seems especially applicable. It charts the relative homogeneity of various groupings of countries, beginning with the market economies of Latin America and ending with the major countries in the European Monetary Union (EMU). Kudos to whoever decided to rank it against the 14 countries beginning with the letter “M.” If you’ve got other cool comparisons up your sleeve, hit me up.


Inequality

As of 2013, there were 14 million slaves in India. There were also 60,000 in the United States. There’s not much to say here except “please be aware” and “do what you can.”


That “do what you can” request applies as well if you live somewhere where the amount you spend on lattes in a work week could feed someone for a month. I wrote something last week that, among other things, tracked the supply of labor and the supply of money around the world. This is going to be a particularly big issue in the years to come, especially since . . .


Many of the world’s largest and fastest growing cities are located outside of what the previous tweet referred to as the “gated community.”


As a guy named William, I guess it’s nice to see that I’ve got a decent chance of making it to a board seat. But as a someone with an extremely talented sister, it grosses me out that there will be roughly a quarter as many Williams as women when I get there. This isn’t just a point about diversity. There is money to be made by including women on your board. This makes intuitive sense: if you want to run an innovative business, why would you seek board members who all have the same background?


Since we’re on the “amazing comparisons” train, isn’t it a bit amazing to imagine that a group of people who could stand altogether in our conference room controls as much wealth as almost 3.5 billion people?

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Photo credit: ©iStockphoto.com/FrankRamspott

About the Author(s)
Will Ortel

Will Ortel has worked in investment management since 2006 and joined CFA Institute in 2010.

Ethics Statement

I try to see the world in its particularity and convey my curiosity clearly. I hope you think I do this in a fair and transparent way, and invite you to write me if you feel otherwise (or just want to say hello).

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