Triple Game-Changer Day: Apple, Dow Industrials, Syria

I’m on news overload today! Syria agreed to surrender its chemical weapons, the Dow Industrials swapped out three stocks, and Apple presented two intriguing new iPhones.

Three game-changers in one day … let’s get right to them.

***

"Plan" may be the wrong word for the latest Syria developments. Planned or not, a potential deal is taking shape.

Syria can hand over its chemical weapons to some kind of international control, the U.S. won’t attack, and Assad will keep fighting the rebels with conventional weapons.

This still leaves many unanswered questions.

Who, if anyone, used chemical weapons on Aug. 21? What made John Kerry go to London and Syria’s foreign minister visit Moscow? Will the U.S. continue supporting Syrian rebel groups?

I’m not convinced this story is over yet, but here at Uncommon Wisdom Daily, we are certainly convinced the markets will go up and down a few more times as new solutions and problems are presented.

***

A deal along these same lines happened in Libya a few years ago. Strongman Muammar Qaddafi surrendered his nuclear program materials to the U.S. and other powers.

It worked well at first. Western companies gained access to Libyan oil, Qaddafi avoided (or at least postponed) the Saddam Hussein treatment, and Libya gained international normalcy.

Rebels later ousted Qaddafi. His attempt to escape mob justice failed and he is no longer with us.

***

Yesterday I asked if Obama and Putin had some kind of big plan. Here’s an interesting take from one of our readers.

Reader Michael M. says: "Based on the ‘tensions’ building between Putin and Obama due to issues such as human rights, Snowden and now the Syria crisis, resulting in cancellations of meetings between the two leaders, one could logically conclude that relations are getting worse and we are on a path moving back to the Cold War era.

"However, on the other hand, it would not surprise us if there is some ‘false flagging’ going on here to make it ‘appear’ that there is freezing of relations, when, in fact, it is all set up to make Putin and Obama look good in the long run.

"I am not saying this is the case. However, in a global economy, with global missions, global institutes, global commissions, global initiatives and global objectives, it would not surprise me if this turned out to be the case."

Brad: Good thinking, Michael. The geopolitical picture is definitely changing. Let’s hope it is for the better.

What do you think? Will Bashar al-Assad have better luck than Qaddafi? Where does the deal leave Obama politically? Did Vladimir Putin just checkmate the U.S. or Obama politically?

***

When people talk about "the stock market," they usually think of the Dow Jones Industrial Average. Most investment professionals ignore the Dow because indexes like the S&P 500 better represent today’s economy. The "Dow 30" nevertheless lives on.

Today the Dow got its biggest reshuffling since 2004, with three stocks kicked out and three new names moving in. You can see the current Dow components here.

The following changes take effect after the close on Sept. 20 (another day to mark on your September Hit List):

  • Outgoing: Alcoa (AA), Bank of America (BAC), Hewlett-Packard (HPQ)
  • Incoming: Goldman Sachs (GS), Nike (NKE), Visa (V)

Don’t put your calendar away just yet. Sept. 20 is on our radar for another new reason …

***

Among other weaknesses, the DJIA ignores Apple (AAPL) and Google (GOOG). Today was Apple’s day in the spotlight — and it might be bad news for Google.

Much to my dismay, Apple didn’t offer live video of the event, so I had to eavesdrop on reporters in the room via Twitter. They described quite a show from CEO Tim Cook. Here are the quick highlights:

  • Apple will begin selling two new iPhone models in the U.S. on Sept. 20.
  • The lower-end iPhone 5C will start at $99 (with a two-year service plan, of course) and feature five colorful plastic case options.
  • The cutting-edge iPhone 5S, priced at $199-$399 (again, with a service plan), has a super-fast processor, new motion sensor and camera capabilities, and a fingerprint scanner they call "Touch ID."
  • Apple is adding Japan’s largest carrier, NTT DoCoMo, and is reportedly near a deal with China Mobile.
  • The company intends to discontinue the current iPhone 5 model, but the older iPhone 4S will stay on the menu. The price will be $0 if you agree to a two-year service plan.
  • By next month, Apple will have sold 700 million iPhone, iPod Touch, and iPad devices worldwide.
  • By the end of this year, the iPhone will be available in more than 100 nations.

I read quick takes from several industry analysts this afternoon. They were all impressed.

Mobile devices running Google’s Android software — which is free for phone carriers — stole market share from Apple with lower prices. Apple answered today with the free iPhone 4S and $99 iPhone 5C.

Microsoft (MSFT) took two hits. First, the new iPhones give the Windows Phone an even-steeper uphill climb. Second, the powerful iPhone 5S appears to have real potential as a gaming device. Combined with some yet-to-be-seen Apple TV product, the Microsoft Xbox could get evicted from many game-addict living rooms.

On the other hand, Apple investors appear to be unimpressed. Shares fell after the mid-day event, closing back below $500 at $494.64.

Part of the disappointment was in the full pricing scheme. Phone carriers will have to pay Apple $549 for the "cheaper" iPhone 5C. Customers pay less because the carriers subsidize the phone cost — and $549 is more than some expected.

Our AAPL model trade is still open for now. I want to wait a few days to let everyone absorb the news. You can view photos and learn more about the new iPhones on the Apple website.

What do you think? Will you get a free 4S or leap forward to a 5S? Does the fingerprint scanner sound creepy? Should Google and Microsoft worry? Post your comments here.

***

Finally, here’s a letter connecting technology with the employment problem.

Reader Tomm R.says: "This is not a solution; I just would like to comment on productivity. Back in the 1990s, Alan Greenspan used to talk a lot about increases in productivity. I noticed at the time that [many] customer services that people used to get paid to provide [are] more and more provided by the customers themselves, without pay[by] automated telephone systems.

"In other words, the work moved from paid employees to unpaid customers! Producing services for free is as productive as it gets."

Brad: Tom is right. Labor-saving technology lets us enjoy lower prices for all kinds of goods and services. It also unfortunately leaves some people looking for work.

This process isn’t new. The Industrial Revolution created factory jobs and destroyed farm jobs at a level not ever seen before that time period, or since. But eventually, everyone adjusted to the new economy.

We are going through a similar process now in the decades-long, and ever-ongoing, Digital Revolution. I think the challenge we all face now is figuring out the best way how to help people through that process.

***

Those were the big topics for today, but here are a few final headlines to keep in mind in your trading and investing …

  • The Dow, S&P 500 and Nasdaq Composite joined hands to move higher today. All three look good for September so far.
  • A potential peaceful Syria solution helped stocks but worked against gold and energy. Spot gold dropped 1.6% to $1,364.40. WTI crude fell 2.3% to $107.25.
  • China reported higher than expected industrial output and retail sales for August. Financial markets around the globe seemed happy today. Can the good feeling last?
  • A Bloomberg survey of 34 economists expects the Fed will taper QE3 to $75 billion per month starting this month. We will know for sure a week from tomorrow.

Good luck and happy investing,

Brad Hoppmann

Publisher

Uncommon Wisdom Daily

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Brad Hoppmann originally grew up in Florida, but has lived in Baltimore, Charlotte and New York as well throughout his career. Always an athlete, he played varsity football and water polo at the University of Florida and received All-SEC/SCC honors.