Is Apple Inc. a bubble?

PUBLISHED ON WELEARNTODAY.COM 

On September 21st, the shares of Apple reached $705 and became the company with highest market capitalization in  history, beating Microsoft, which in the nineties got a capitalization of 620,500 million dollars. Even with  the death of its CEO, Steve Jobs, Apple continued its exponential growth.

Everything was perfect. Despite of the small disappointments that the new Iphone 5 caused in the market, it achieved records in sales in the first weeks. A few days later, the decision of having its own map system seem a disaster, the maps had so many errors that Tim Cook had to had to apologize publicly.

Later, Apple introduced its new product, the iPad mini, smaller and more affordable, to fight against other tablets. In my opinion, this has broken what I really think is a key factor in the success of Apple, the luxury image, which has provided so many benefits to the American firm.

To all of this, we must add that Tim Cook has removed the vice president of iOS and the senior vice president of the physical stores of Apple from the management of the firm.

After these facts, the investors seem to distrust Apple. The shares has fallen $129 in one month.

I think Apple is not longer the technological reference and the absolute leader which become with Steve Jobs. Maybe this is not only Apple’s responsibility (with all of its mistakes) but also the investors, whose expectations about Apple’s products and figures were too high. As well, in the other hand, the competitors are doing the things correctly, making the work hard for Apple.

However, Apple’s figures are still enviable. iPhone’s income (26,910 million dollars) is higher than Microsoft’s income with all of its products (16,008 million dollars). New iPhones and iPads’ sales always beat the previous versions, and although the competence is doing a great job, Apple is still the King of the market.

Maybe if Apple would sell its products cheaper, (iMac, MacBook) would attract more potential customers, but this could break the firm’s exclusivity image which governs the company; Expensive products, not to suits all the budgets

In the following months we will realize if Apple is a bubble or not

The property bubble which threats the world

PUBLISHED ON WELEARNTODAY.COM 

The real estate business has been a secure investment for many countries. It provided great incomes to several countries. Ireland and Spain are some clear examples of these investors; Ireland became the “Celtic Tiger” and Spain was one of the largest world economies being very close to the  G8 countries.

In these countries, banks played an important role to increase the speculative activity, granting low interest mortgages, which often covered 100% of the property value. Later, the American banks, realizing that the business was declining, wrapped those liabilities and sold them to insurance companies, pension funds, etc. However, it all fell apart, and U.S banks had to be rescued by the Government. The same happened in Ireland and is happening in Spain.

Today, China is the threat. Its real estate has been growing at double digits since the eighties and in 2011 represented 10% of the GDP and employed more than 15% of the total active population.

The Asian giant consumed more concrete per capita than Spain in its boom in 2007. If this bomb explodes, it will affect so negatively to the world economy.

According to the estimations, there are more than 64000 empty apartments and it has caused the appearance of ghost cities.  Despite the efforts of the Chinese Government, the real estate price is going down.

In a real estate dependent economy as the Chinese, this could have a devastating impact. The assets value will decline, banks with a high degree of leverage could fail, and those which enjoyed a better cash position could stop lending money.

It would affect the investments dramatically and families would prefer to save their money and reduce their goods and services demand. Companies will need to produce less so unemployment rates will be likely to increase. Unemployment will contract even more the demand of goods and services.  If we take into account that the Chinese economy is a key factor for the American and European economic recovery, the damage to the global economy would be tremendous.

China is too big, and if we like or not, its economy must be supported by the other great economies to avoid a greater world recession.

2012, a hard year for Spain.

Enjoying this long Christmas holidays, I will try, to make an analysis of the New Year for Spain.

An economic miracle is not expected, actually, the only news that we have watched on the news are that, a deficit is expected for the next quarter, the fact that it was an 8% instead of 6% like the socialists said and the famous cuts. For the end of 2012, a small economic growth is predicted, but its impact will be insignificant.

After an inoperable and useless government, which has not known how to face the economic crisis for a few years, the biggest issue that Mariano Rajoy’s government must solve is the unemployment. Spain can’t afford that figure, like the King Juan Carlos said in his Christmas speech, “it is morally unaffordable” because unemployment rates are not only macroeconomic rates but behind them, there are families. That way, rich creation is impossible. The government must have clear ideas, and decide its direction and act consequently, doing a labor reform which flexible the market.

Mariano Rajoy will have to take many unpopular decisions; wage freeze, raise the taxes sanitary compensations, etc. These decisions will cause the anger of the labor unions and will go on strike after some catastrophic years without doing anything, just waiting for the conservative government of Partido Pupular

Instead of demanding, we should think about our obligations, not with the State, but with the weakest, these 5 million of unemployment people (those who will be never helped by the labor unions) and help to improve, together, without asking the impossible, because there is no money.

After a year, when the situation have improved, those cuts will have to disappear gradually and try to find a good way in the medium term trying to benefit from the economic improvement in the EU, and we should not forget the tourism, which was the main responsible of the Spanish Economic Miracle which we lived in the sixties, taking into account not only our good weather and rich culture, but also our infrastructures. But we should be also focused in the long term, investing more in R+D+I and being more efficient and productive. A rich country does not investigate why it’s rich, it’s rich because it investigates.

So, we must trust Mariano Rajoy’s government, to leave this crisis behind