Saturday, September 17, 2016

Apple's revived stock price, Deutsche's pending disaster

After media skeptics continually raised doubts about the iphone 7 and had begun comparing Apple's stock to that of a sluggish Microsoft in the mid-2000's, the stock was up 11% in the past week more than 25% above the recent June 27th low of $91.50.  The new iphone is now almost sold out and a new Apple watch seems to be attracting more interest than the first edition.  At the new price as of Friday's close, Apple is still trading at a trailing twelve months p/e of 13.5, below the S&P 500 average, and it has a dividend yield of 2% that will certainly grow over time.  When the numbers work and the embedded core Apple users act, listening to most securities analysts and pundits is not worthwhile.

Meanwhile, back at the bank ranch, Deutsche Bank is the latest victim of U.S. regulators wrath about mortgage securities business seven years ago.  Will this ever end?  The fine proposed by these regulators is a preposterous $14 billion.  The only fine larger was the $16 billion paid by Bank of America, including its untimely acquisition of the massively flawed Countrywide, indigenous operations that were significantly larger than Deutsche.  Securities analysts had been projecting that the fine would be $4 billion to $5 billion, because that was what the company was telling them and what the company expected, or hoped for.

Is this payback for the EU's $14 billion tax bill for Apple, which the Irish government itself is not seeking? There is often no way to figure out the rationale for such charges, and many large U.S. banks like Goldman Sachs and J.P. Morgan have often paid up whatever very large fines as soon as possible to get bad publicity behind them, even if executives viewed them as extortion.  Most of these fines do not go to holders of such tainted securities, but simply to government coffers as punitive assessments. Deutsche insists that this is still a negotiation, but the stock market wonders and the more that 8% decline in the stock yesterday suggests that any fine, even if reduced, will be much larger than had been expected.  To many, it looks as if Deutsche will need to raise capital to meet its capital standards and this will temporarily put a further damper on its stock.  To repeat, will this ever end?  The fines do relate to some level of misconduct, but why could this not have been concluded earlier?

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