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This morning Apple began accepting pre-orders for their new watch. Although I have noticed some analysts dampening down their expectation for this new product, there are still quite a few that are full-on-bulled-up about its prospects. This is in contrast to the lukewarm reviews from tech journalists who have actually been using the product for the past week. My favourite quote was from CNET:

“I like wearing the Apple Watch, and it might be my favorite smartwatch…if its battery life lasted beyond one day,” Scott Stein of CNET points out.

The Wall Street analysts aren’t letting something like poor battery life stop them from drooling all over Apple. No, these silly tech journalists don’t know what they are talking about. The all mighty Apple knows better. You know the famous line about Henry Ford and the faster horses? Of course it applies in this case. There is no way that Apple could make a mistake. Just look at their history.

As a perfect example of this unbridled optimism from Wall Street, Oppenheimer’s analyst recently published a piece highlighting all the naysayers of previous Apple products:

Rarely does the general public get Apple products right at first sight, before their actual shipment. Looking back at Apple’s first generation product launches (iPod, iPhone, and iPad), one thing becomes clear: each product begged the question: what does it do?

Below are some reviews/quotes that followed the product announcements.

First iPod (announced in October 2001):

“Clearly Apple is following Sony’s lead by integrating consumer electronics devices into its marketing strategy, but Apple lacks the richness of Sony’s product offering. And introducing new consumer products right now is risky, especially if they cannot be priced attractively…” (Technology Business Research, October 2001)

First iPhone (announced in January 2007):

“The keyboard more or less requires “faith” in the word auto-correction, an Apple rep likened it to using The Force, and while all three reviewers were able to get up to speed sooner or later, it’s most certainly agreed that this is no BlackBerry- killer.” (Engadget, review of other journalist’s iPhone reviews, June 2007)

“Five hundred dollars? Fully subsidized? With a plan? That is the most expensive phone in the world. And it doesn’t appeal to business customers because it doesn’t have a keyboard, which makes it not a very good email machine.” (Steve Ballmer, 2007)

First iPad (announced in January 2010):

”This time around the Next Big Thing is called an iPad. It’s basically an oversize iPod Touch… Jobs and his team kept using words like “breakthrough” and “magical”, but the iPad is neither, at least not right now…At the very least, we had hoped a tablet from Apple would do something new, something we’ve never seen before. That’s not the case…” (Newsweek, January 2010)

Not that we think we get it right all the time—but in this report, we attempt to at least “think different”. We believe all products are built to solve problems, some obvious, some less so. When a problem is less obvious, designers need to ask the right questions and correctly frame the problem, then find a solution. The reason opinions are divided on the Watch, is that it solves both existing problems (time-keeping, fitness tracking) and problems we don’t know exist (new ways to connect to people and potentially to other devices). It’s this second question that Apple tends to get right, and early reviews tend not to answer.

And maybe Oppenheimer is right. Maybe Apple does know better. Maybe I am demonstrating a dramatic lack of imagination. Maybe I simply don’t understand yet how this product is going to change my life. Maybe…

Or maybe Apple has jumped the shark. Don’t forget that all those previous products were introduced when Steve Jobs was leading Apple. I don’t think Tim deserves the same benefit of the doubt as Steve.

And I am especially scared when I see Apple’s new marketing plan for selling the watches.

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Seriously? They are training to their staff to offer “fashion” advice?

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They are being instructed to provide fashion advice like an eyeglass salesperson might at a glasses store. The Apple employees are expected to make comments like “I love how it will coordinate with many outfits.” I think I just threw up a little bit in my mouth writing that down.

Apple has lost its way and the Wall Street analysts are still following them down the wrong road, encouraging investors to follow along because the previous CEO had an unbelievable sense of direction.

I think the Apple Watch is going to fall flat on its face, and the stock will suffer accordingly. I am a seller. And if I buy the Apple Watch at any point in the next year or two, I will make sure I report back so all the Apple bulls can give me a big “I told you so.”

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What’s going on with stocks?

Although US stocks have been grinding higher over the past week, they have been dramatically underperforming much of the rest of the world.

Have a look at this chart of YTD (year to date) percentage returns of various stock indexes:

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The US markets are reluctantly being dragged higher. In fact, you could argue that given the immense strength throughout the world, the US stock market is quite weak. This relative poor performance is not surprising. I have been pounding the table on the fact that given the BoJ and ECB’s aggressive balance sheet expansion, those stock markets will outperform the US. Even though the US stock market is meandering around the previous highs and failing to break out, the Japanese and European stocks are rocketing to new highs every day.

The Nikkei ticked at 20,000 last night:

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And the European indexes are not far behind with their recent strength:

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I am bearish of US stocks, but I should really have the trade on versus these other countries. On a relative basis the US market is especially tired.

Even though I have been bullish on the prospects of world growth bottoming and picking up, I did not expect these stock markets to rip higher quite as violently as they have. But I guess in hindsight I should have been more optimistic about financial asset reflation as opposed to actual economic improvement as this theme has played out over and over again in the recent past.

And I am thoroughly confused to as the absurdity of the recent Chinese stock market rally. I know all the reasons that it has been going up, but the sheer magnitude of the move is terrifying.

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We are experiencing a world wide “just get me in” rally in stocks. This is dragging the US stock market higher, but I suspect that once we get a correction in these other indices (and don’t worry, the correction is coming), I think the US stock market will sag badly. I am sticking to my belief that the next big move in US stocks is lower, not higher.

Thanks for reading and have a great wk-end,

Kevin Muir

the MacroTourist