What you may have missed last week:
1. Carl Icahn and the Apple Share Price.
Last week, first there was this:
Then there was this:
What you can’t actually see is the correct time-zone appropriate time stamp on that tweet – but if you’ll just take my word for it, it’s happening right there at that sudden spike in volumes and price at about 2:30pm CAT on August 13th.
Some observations:
- The market is filled with sheep.
- Carl Icahn made this announcement when the share price was $475. Clearly, he’s been buying since the share price was below $400 at the end of June, because the Apple share price has been on a steady run upward since then.
- *I-told-you-so-dance* (although it has taken some time!)
- We should all have deep and meaningful disdain of analysts and their price predictions.
Here’s a link to an article on some of the Apple price targets from Wall Street (floating between $380 and $430). Since the share price started rising, those price targets have suddenly started scaling upwards. To be clear: nothing has changed about Apple’s fundamentals, other than the expressed interest of Mr Icahn (who, let’s be honest, has only a passing acquaintance with sanity, having spent this year embroiled in the Dell takeover fight and the very public and enormously entertaining Herbalife feud).
If there’s anything more useless than an investment analyst that’s wrong, it’s an investment analyst who tells you what the market is doing after the market has done it.
2. The American Airways and US Airways Merger
The US Department of Justice has blocked the merger, because it thinks that “the era of ruinous airline competition has ended”. Alongside “the public’s tolerance for further industry consolidation”.
Rubbish.
US airline competition is alive and rather too well. Delta, United, American Airways and US Airways are the main “legacy” carriers. Then there’s Southwest, Alaska Airlines and Jet Blue. All low cost. All competitive. In addition, airlines compete with cars, trains, and Skype conference calling.
If there is anything that could do with a little streamlining, it’s airlines. Because too much cost-cutting means that they delay the replacement of capital equipment (ie. the aircraft), carry less fuel in order to save fuel, and turn off the engine during delays resulting in death by heat exhaustion while everyone waits for the bags of that idiot that checked-in-but-didn’t-board to be offloaded.
That said, merger or no merger, that’s unlikely to change. So maybe I should just argue this on the basis of “Is this really a good use of federal money? Because lawyers bill by the hour, baby…”
3. A Foolish Article about Walmart Wages
Walmart announced its quarterly results last week. Its sales were up (which goes without saying – each time Walmart opens a new store, Walmart gets an increase in sales). The interesting part: sales per store dropped. Only by 0.3%, to be sure, but a drop nonetheless while the Retail Sales across the industry were up by 5.2% over the same time frame.
To me, this can be explained by more Walmarts being opening in closer proximity to each other. You gain more sales overall, but you might do a bit of cannibalising from the surrounding Walmarts. To me – that’s a good deal.
The author of this particular article has “prefers a simpler solution”:
“By paying low wages, Walmart is effectively limiting the ability of a large chunk of the American workforce to consume.”
Here’s the argument:
- Walmart employs 10% of low-income workers in the retail industry.
- By paying low wages, Walmart sets the industry benchmark.
- So all low-income workers in the retail industry don’t get paid a lot.
- But low-income workers are the ones that would be spending their money in Walmart.
- So by limiting their buying power, Walmart is limiting its sales.
Then why, pray tell, are “retail sales across the industry up by 5.2%”?
And on the other hand, low wages mean that it is cost effective to build more supermarkets, which creates more jobs and allows more people to earn a low wage and spend it at Walmart….
