Connect with us

Spread & Containment

Goldman Admits Reddit Raiders Could Crash the Entire Market

Goldman Warns If The Short Squeeze Continues, The Entire Market Could Collapse

Published

on

This article was originally published by ZeroHedge.

Goldman Warns If The Short Squeeze Continues, The Entire Market Could Crash

Last Friday (Jan 22) we advised readers who thought they had missed the move in Gamestop (they hadn't), to position appropriately in the most shorted Russell 3000 names which included such tickers as FIZZ, DDS, BBBY, AMCX, GOGO and a handful of other names, as it was likely that the short-squeeze was only just starting.

We were right and all of the stocks listed above - and others - exploded higher the coming Monday, and all other days of the week, with results - encapsulated by the WallStreetTips vs Wall Street feud - that has become the top conversation piece across America, while on WSB the only topic is the phenomenal gains generated by going long said most shorted stocks. To wit, the basket of top shorts we compiled on Jan 22 has tripled in the past week.

And while some are quick to blame last week's fireworks on the "dopamine rush" of traders at r/wallstreetbets who seek an outlet to being "copped up with little else to do during the pandemic" (as Bloomberg has done, while also blaming widespread lockdowns and forgetting that it has been Bloomberg that was among the most vocal defenders of the very lockdowns that have given us the short squeeze of the century), the reality is that at the end of the day the strategy unleashed by the subreddit is merely an extension of the bubble dynamics that were made possible by the Federal Reserve (of which Bloomberg is also a very staunch fan) pumping trillions and trillions of shotgunned liquidity into a financial system where there are now bubble visible anywhere one looks. In short, main street finally learned that it too can profit from the lunacy of the money printers at the Marriner Eccles building, and some are very unhappy about that (yes, it will end in tears, but - newsflash - $300 trillion in debt and $120BN in liquidity injections monthly will also end in tears).

That aside, one week later, Goldman has finally caught up with what Zero Hedge readers knew one week ago, and all the way down to a chart showing a basket of the most-shorted Russell 3000 stocks...

... Goldman's David Kostin has published a post-mortem of what happened last week, writing that "the most heavily-shorted stocks have risen by 98% in the past three months, outstripping major short squeezes in 2000 and 2009."

He then points out something we discussed in "Hedge Funds Are Puking Longs To Cover Short-Squeeze Losses", noting that while aggregate short interest levels are remarkably low (imagine what would have happened has shorting been far more aggressive marketwide)...

... "the -4% weekly return of our Hedge Fund VIP list of the most popular hedge fund long positions (GSTHHVIP) showed how excess in one small part of the market can create contagion."

As an aside, and as we showed previously, as the most shorted stocks soared...

... hedge funds were forced to cover (as well as paying for margin calls), and as part of the broader degrossing they also had to sell some of the favorite hedge fund names across the industry, in this case represented by the Goldman Hedge Fund VIP basket.

Yet what may come as a surprise to some, even as hedge funds deleveraged aggressively and actively cut risk this week, gross and net exposures "remain close to the highest levels on record" (something which may come as a huge surprise to Marko Kolanovic who has been erroneously claiming the opposite), suggesting that if the squeeze continues, hedge funds are set for much more pain.

According to Goldman Sachs Prime Services, this week "represented the largest active hedge fund de-grossing since February 2009. Funds in their coverage sold long positions and covered shorts in every sector" and yet "despite this active deleveraging, hedge fund net and gross exposures on a mark-to-market basis both remain close to the highest levels on record, indicating ongoing risk of positioning-driven sell-offs."

With that in mind, here are Kostin's big picture thoughts:

It was a placid week in the US stock market – provided one was a long-only mutual fund manager. US equity mutual funds and ETFs had $2 billion of net inflows last week (+$10 billion YTD). Although the typical large-cap core mutual fund fell by 2% this week, it has generated a return of +1.3% YTD vs. S&P 500 down -1.1%. However, life was very different last week if one managed a hedge fund. The typical US equity long/short fund returned -7% this week and has returned -6% YTD.

With the average WSB portfolio up double digits this past week, one can see why hedge funds are upset. Anyway, moving on:

The past 25 years have witnessed a number of sharp short squeezes in the US equity market, but none as extreme as has occurred recently.In the last three months, a basket containing the 50 Russell 3000 stocks with market caps above $1 billion and the largest short interest as a share of float (GSCBMSAL) has rallied by 98%.  This exceeded the 77% return of highly-shorted stocks during 2Q 2020, a 56% rally in mid-2009, and two distinct 72% rallies during the Tech Bubble in 1999 and 2000. This week the basket’s trailing 5-, 10-, and 21-day returns registered as the largest on record.

Thanks Goldman, and yes, your "brisk assessment" would have been more useful to your clients if it had come before the event (like, for example, this) instead of after.

Kostin then goes on to point out that the "mooning" in the most shorted stocks took place even though aggregate short interest was near record low (imagine what would have happened had short interest been higher), which is odd because historically, "major short squeezes have typically taken place as aggregate short interest declined from elevated levels. In contrast, the recent short squeeze has been driven by concentrated short positions in smaller companies, many of which had lagged dramatically and were perceived by most investors to be in secular decline" to wit:

Unusually, the rally of the most heavily-shorted stocks has taken place against a backdrop of very low levels of aggregate short interest. At the start of this year, the median S&P 500 stock had short interest equating to just 1.5% of market cap, matching mid-2000 as the lowest share in at least the last 25 years. In the past, major short squeezes have typically taken place as aggregate short interest declined from elevated levels. In contrast, the recent short squeeze has been driven by concentrated short positions in smaller companies, many of which had lagged dramatically and were perceived by most investors to be in secular decline.

Of course, there is nothing "historical" about what happened last week, because - as we all know - the biggest difference between the typical short squeeze of the past and the recent rally in heavily-shorted stocks "was the degree of involvement of retail traders, who also appear to have catalyzed sharp moves in other parts of the market." Why thank you WSB, but that's ok - you will be handsomely rewarded.

Last week we discussed the surging trading activity and share prices of penny stocks, firms with negative earnings, and extremely high-growth, high-multiple stocks. These trends have all accompanied a large increase in online broker trading activity. A basket of retail favorites (ticker: GSXURFAV) has returned +17% YTD and +179% since the March 2020 low, outperforming both the S&P 500 (+72%) and our Hedge Fund VIP list of the most popular hedge fund long positions (GSTHHVIP, +106%).

So why does this matter? One simple reason: contrary to the bizarrely nonchalant optimism spouted earlier this week by JPMorgan's Marko Kolanovic who said "any market pullback, such as one driven by repositioning by a segment of the long-short community (and related to stocks of insignificant size), is a buying opportunity, in our view," Goldman has a far more dismal take on recent events, and writes that "this week demonstrated that unsustainable excess in one small part of the market has the potential to tip a row of dominoes and create broader turmoil."

He then picks up on what he said last weekend when responding to Goldman client concerns about a stock bubble, which we summarized in "Goldman's Clients Are Freaking Out About A Stock Bubble: Here Is The Bank's Response", and which turned out to be 100% warranted, and writes that "most of the bubble-like dynamics we highlighted last week have taken place in stocks constituting very small portions of total US equity market cap. Indeed, many of the shorts dominating headlines this week were (prior to this week) small-cap stocks. But large short squeezes led investors short these stocks to cover their positions and also reduce long positions, leading other holders of common positions to cut exposures in turn."

As a result, Goldman's Hedge Fund VIP list declined by 4%. Which is a problem because as Kostin concludes, "in recent years elevated crowding, low turnover, and high concentration have been consistent patterns, boosting the risk that one fund’s unwind could snowball through the market."

Translation: if WSB continues to push the most shorted stocks higher, the entire market could crash.

And since Kostin admits that "the retail trading boom can continue" as "an abundance of US household cash should continue to fuel the trading boom" with more than 50% of the $5 trillion in money market mutual funds owned by households and is $1 trillion greater than before the pandemic, what happens in the coming week - i.e., if the short squeeze persists - could have profound implications for the future of capital markets.

Tyler Durden Sat, 01/30/2021 - 18:30

Read More

Continue Reading

Government

The Dystopian Vision Of The Health-Information Police

The Dystopian Vision Of The Health-Information Police

Authored by Laura Powell via The Brownstone Institute,

When Assemblymember Evan Low,…

Published

on

The Dystopian Vision Of The Health-Information Police

Authored by Laura Powell via The Brownstone Institute,

When Assemblymember Evan Low, the principal author of California Assembly Bill 2098, told the California Senate Committee that his bill was “really straightforward, very straightforward,” many of us in the gallery failed to restrain ourselves from expressing our incredulity. 

He delivered this statement at the conclusion of a hearing that had lasted over an hour, during which it seemed no two Senators on the committee had the same idea of how the law would operate. Assemblymember Low had struggled to respond to questions from the committee and had often resorted to simply reading the text of the bill. That June 26 hearing presented the only time any legislators questioned the bill during its entire passage through the legislative process.

Assembly Bill 2098 would empower the Medical Board of California to go after the licenses of physicians who disseminate “misinformation” or “disinformation” regarding Covid-19. The bill in its latest iteration defines misinformation as “false information that is contradicted by contemporary scientific consensus contrary to the standard of care.” The inscrutability of this definition lies at the core of the bill’s opponents concerns. 

No clear scientific consensus exists with respect to this novel virus, and even if it did, it may be proven incorrect later. Without clear guidance regarding what would constitute “misinformation,” physicians can only guess if they risk losing their licenses for expressing their good-faith disagreements with positions of public health officials. Even if in practice, the Medical Board only applied the law to speech that the First Amendment does not protect, the law’s vagueness would render it unconstitutional, because it would tend to cause doctors to censor themselves.

The million-dollar question remains unanswered: Who would be targeted by Assembly Bill 2098? On one hand, the California Medical Association, the bill’s sponsor, cites the example of doctors who call “into question public health efforts such as masking” as creating the need for this bill. Likewise, the taxpayer-funded lobbying group County Health Executives Association of California decries “a small minority of medical professionals” who have led some Californians to “reject public health measures such as masking and physical distancing.” 

The analysis of the bill from the Senate committee, in discussing the need for this bill, cited the example of the state of Florida refusing to take action against the license of Florida Surgeon General for, among other things, “question[ing] the value of face masks in preventing the spread of the pandemic.” The idea that the effectiveness of masks in preventing the spread of Covid is part of the “contemporary scientific consensus” confirms physicians’ fears that they would risk discipline for questioning any edict from public health on Covid.

On the other hand, when critics of Assembly Bill 2098 argue that questioning the effectiveness of masks falls well within the bounds of legitimate difference of opinions, proponents poo-poo their concerns about the law being applied in an overly broad way and insist that the law would only be used against truly “bad doctors.” But imbuing bureaucrats with power while trusting they will not exercise it would be incredibly foolish. 

Some, such as Assemblymember Low, bill co-author Assemblymember Akilah Weber, and a representative of the California Medical Association, imply that this bill would only apply in cases of intentional harm. There is nothing in the letter of the law that limits the bill’s reach to situations where someone was harmed or where the information was disseminated knowing it was false. (Intentionally misleading would fall under the definition of “disinformation” as opposed to “misinformation.” An earlier draft of the bill mentioned harm to a patient as a factor for the Medical Board to consider.) 

Members of the Medical Board of California itself have expressed confusion about how the law would be applied and withheld its support initially. MBC President Kristina Lawson, an attorney who has been a driving force behind this bill, claims to have clarity about how it would be applied but apparently is only willing to discuss the matter in private

While most proponents say as little as possible regarding Assembly Bill 2098’s implications, one group is more vocal and less guarded in its statements. Two self-described “frontline” California doctors, Nick Sawyer and Taylor Nichols, formed No License for Disinformation (NLFD) in September 2021. 

As its name suggests, the organization’s purpose is to promote policies that use the threat of medical license revocation to discourage doctors from spreading information it believes to be false. Sawyer has twice testified before legislative committees in favor of Assembly Bill 2098. NLFD’s prolific tweets and other public statements paint a dystopian picture that reflects opponents’ worst fears of the type of authoritarian regime proponents wish to impose. 

NLFD pushes the idea that there is, as Sawyer described it his testimony before the Assembly committee on April 19, a “well-coordinated and well-funded network of doctors” who promote “anti-vaccine conspiracy theories, sow distrust in the Centers for Disease Control and Prevention, the federal government, and ultimately the Covid-19 vaccines.” 

At the outset, note the irony that NLFD frequently criticizes “conspiracy theorists” while promoting its own conspiracy theories. And NLFD not only wants to silence those who undermine faith in public health measures, but anyone who “sows distrust” in the government. Let that sink in.

NLFD’s tweets elaborate on its conspiracy theories, which are, like most conspiracy theories, built on weak evidence that magnify tenuous connections. A recent tweet shared a long thread posted by one of its founders that purports to uncover a web of right-wing “disinformation” purveyors funded by oil money. It implicates, among others, anyone associated with the Great Barrington Declaration or Brownstone Institute and specifically names UCSF professor and doctor Vinay Prasadjournalist and author David Zweig, and Johns Hopkins epidemiologist Stefan Baral as part of this cabal. 

An August 13, 2022 tweet promotes a Substack article, written by NLFD “Research Consultant” Allison Neitzel, which calls America’s Frontline PhysiciansFront Line COVID-19 Critical Care Alliance, the authors of the Great Barrington Declaration, and The Unity Project the “Big 4” responsible for a “physician-led attack on public health.” NLFD has often identified these four as its primary targets, sometimes adding the American Association of Physicians and Surgeons and Urgency of Normal to its hit list. NLFD asserts, without any basis, that these groups work together. 

Some of NLFD’s targets, such as the Urgency of Normal’s leadership, are mainstream physicians. NLFD dismisses them as ranging from “formerly well respected immunologists to outright frauds.” It links to a long thread from one of its founders that accuses Urgency of Normal of being part of a right-wing operation to promote an “anti-mask narrative.” 

It complains that CNN gave Dr. Jeanne Noble, Associate Professor at UCSF, a platform. It retweeted a tweet calling for Dr. Lucy McBride to be reported to the medical board for opposing mask mandates in schools and responded with a link directing the public on how to do so.

It dismissed every doctor who participated in a roundtable hosted by Florida Governor DeSantis, which included Dr. Tracy Høeg, as “Covid deniers” and “disinformation doctors” and warned that no one should accept medical advice from any of them.

These attacks contradict any claim that NLFD claims only wants to silence doctors who peddle dangerously false medical advice rather than those who have good-faith disagreements with official Covid policy.

The inclusion of the authors of the Great Barrington Declaration—Sunetra GuptaMartin Kulldorff, and Jay Bhattacharya—at the top of NLFD’s hit list is puzzling. Not only does the declaration espouse a conventional viewpoint, none of the Great Barrington Declaration’s authors is a practicing physician and therefore law like Assembly Bill 2098 would not affect them. 

NLFD has called out the Great Barrington Declaration around a dozen times and frequently targets Stanford professor Bhattacharya in particular (he earned a medical degree but does not practice medicine or hold a medical license). NLFD doesn’t just accuse Bhattacharya of being wrong, it accuses him of intentionally lying, calling him a “disinformation doctor” and a “prominent purveyor of Covid-19 disinformation,” accusing him of telling lies that have killed people (along with Vinay Prasad), and insinuating he should be reported for perjury. In addition to its direct attacks, NLFD has retweeted dozens of criticisms of Bhattacharya and seemed to delight in a journalist getting Twitter to temporarily suspend his account for a minor oversight.

NLFD’s messaging has an unquestionably partisan slant, despite claiming to be nonpartisan. It has posted dozens of tweets critical of the Republican Party. Some of these criticisms do not clearly relate to the organization’s mission of combating misinformation. 

For example, this August 8, 2022 thread attacks Republican lawmakers for opposing a drug pricing control provision in a bill. The same day, another tweet alleges that the GOP Doctors Caucus is allied with “Pharma Bro” Martin Shkreli. They attempt to tie this issue in with their mission by asserting that Republicans in general are “affiliated with licensed physicians” spreading Covid misinformation

In another recent example, NLFD posted a clip from 2017 accusing Rand Paul of being in cahoots with Putin. It had previously suggested that Paul should be reported to the medical board for reasons it doesn’t identify. NLFD has even branched out to opine on political issues totally unrelated to the practice of medicine, encouraging the public to report “harassment, intimidation, and threats of violence” against school board members or staff to the FBI.

NLFD has numerous posts elaborating on its idea of a right-wing, Republican-led conspiracy to spread disinformation. It uses the phrase “disinformation pipeline” to describe an alleged process by which Republicans in state legislatures deliberately harm public health by “institutionalizing disinformation” through, for example, passing laws that shield doctors from discipline for controversial Covid treatments. It claims that the overall Republican agenda is to “create fear/animosity/victimhood amongst supporters, whipping up anti-science/anti-government sentiment making them more likely to take up arms against the government.” It has asserted that “[a]ll COVID disinformation doctors are inextricably tied to Trump.” 

Many of NLFD’s conspiracy theories are quite dark and disturbing. It recently retweeted a thread from its own Nick Sawyer, which argues that the United States is currently in the midst of a civil war, which goes unrecognized because it is an information war. Another recent tweet exhorts: “This is an information war, a battle for the truth, and [every] American is a soldier. Get up to speed and start fighting for evidence based reality. No one is going to do this for us.” 

NLFD’s primary weapon in this imagined information war is censorship, but it also advocates for criminal prosecution for expressing the wrong ideas. It frequently encourages its followers to report physicians to their medical boards, even if they have no relationship with them. It also frequently calls on Twitter to deplatform accounts it feels say things that are untrue. But it goes even further, tagging the FBI and posting a link to the FBI tip line, asking its followers to report people for alleged misinformation. 

It tags the United States Department of Justice’s Criminal Division in its tweets. It calls its targets a “threat to national security.” NLFD erroneously claims that under current California law, a physician can be criminally prosecuted for any untrue statement. NLFD wants to go far beyond having medical boards discipline licensed physicians—they want to see their enemies in jail.

Against this backdrop of NLFD’s other public statements, it’s hard to imagine how Sawyer managed to sound sincere when he told the Senate committee:

This bill is not supposed to cause problems with physicians’ free speech around academic discussion. This bill will allow the medical board to discipline doctors who say things like the vaccines cause AIDS or that the vaccines are killing more patients than Covid, using manipulated data or that the vaccines are implanting microchips so the government can track you. I’m all for academic debate—in fact, we wouldn’t be where we are today without robust academic debate, but that’s not what this is about.”

Make no mistake—Assembly Bill 2098 is not just about protecting patient safety. That is why one member of the Medical Board of California warned that the bill would be counterproductive to the Board’s mission.

Assembly Bill 2098 was not the brainchild of Assemblymember Low or any other California lawmakers. It’s part of an effort to enact similar policies around the country, sparked in large part by a declaration from the Federation of State Medical Boards in July 2021. 

California is often described as a bellwether: “As California goes, so goes the nation.” That saying rings especially true with respect to Assembly Bill 2098, given that this is a test case for a national movement and that Governor Gavin Newsom has obvious presidential aspirations. 

The bill will become law on January 1 unless the governor vetoes by September 30, and even then, the Democrats who voted for the bill have sufficient numbers to override a veto. Then we will discover whether our high courts still uphold the principle of free speech or whether they will allow themselves to be co-opted by the soldiers fighting to be the arbiters of Truth.

Tyler Durden Mon, 09/26/2022 - 22:20

Read More

Continue Reading

Spread & Containment

“Murderapolis”: Ground Zero For ‘Defund The Police’ Movement Now Suffering Horrendous Crime Wave

"Murderapolis": Ground Zero For ‘Defund The Police’ Movement Now Suffering Horrendous Crime Wave

In the mid-1990s, the murder rate was so…

Published

on

"Murderapolis": Ground Zero For 'Defund The Police' Movement Now Suffering Horrendous Crime Wave

In the mid-1990s, the murder rate was so high in Minneapolis that it earned the nickname, "Murderapolis."

Now, more than two years after the Democrat stronghold turned into ground zero for the 'defund the police' movement after the murder of George Floyd, Murderopolis is back.

In a kind of Newtonian response, the city became the epicenter of the culturally seismic "Defund the Police" movement. But that progressive local effort fizzled with a decisive referendum last November.

Now, with its police department under investigation by the Department of Justice, the city of 425,000 is trying to find a way forward amid a period of heightened crime that began shortly after Floyd's death. -CNN

In 2020, murders jumped from 46 to nearly 80. In 2021, 93 people were killed in the city. This year, homicides are on track to surpass 2020.

"The criminals were celebrating. They were getting rich" after police withdrew from violent neighborhoods in the wake of Floyd's killing, said longtime resident, KG Wilson. "They were selling drugs openly."

Wilson's 6-year-old granddaughter was killed in May of 2021 after getting caught in the crossfire of a shootout in north Minneapolis.

Others are blaming the pandemic.

"It unsettled settled trajectories," said former federal prosecutor, Mark Osler, who now teaches at St. Thomas School of Law in Minneapolis. "Kids who were going to school, who would have graduated but drifted off because there is no school — we're seeing a lot of the violent crime is by juveniles."

After the left demonized cops following Floyd's murder, the Minneapolis PD headcount dropped from 900 in early 2020 to around 560 in August - a loss of more than 1/3 of the force.

The hate was so strong that a 2021 ballot measure which would have replaced the Minneapolis PD with a new "public health-oriented" Department of Public Safety, barely failed - with 56% of voters rejecting it (61% in north Minneapolis).

Then, the city council got wise as crime skyrocketed - dealing a final blow to the "defund" movement with a vote to re-fund the police by reversing a cut they'd made the prior year. Mayor Jacob Frey, meanwhile, has proposed beefing up the police budget for the next two fiscal years.

Feeling of lawlessness

According to the report, some 60% of police calls for shots fired have come from the north side, despite it making up just 15% of the population. Young men are openly selling drugs in public during the day, such as a gas station on Broadway ave. dubbed the "murder station" due to all the fatal shootings.

"You pull up to get gas -- they try to sell you drugs," said Paul Johnson, 56. "And not just three or four, but it's a bulk of people."

Johnson's friend, Brian Bogan, said he moved from north Minneapolis to relatively safer St. Paul, because he didn't want his kids growing up in an area where you don't know if "it's fireworks or gunshots."

911 wait times have jumped

After Floyd's death average 911 response times from from 10 or 11 minutes in May of 2020, to 14 minutes later in the year - jumping in 2021 to more than 17 minutes in the north side's fourth precinct, where they remain.

Some nights are so busy that the dispatchers are directed to hold all non-priority-1 calls citywide; these would include reports of property damage, suspicious persons or theft. That happened during a frenetic five-hour stretch on the night of September 8, when officers responded to multiple shootings and calls for shots fired — many of them in north Minneapolis; one near the "murder station" — that left two dead and seven wounded. -CNN
Things have gotten so bad that the Minneapolis PD has flatly refused to respond to certain crimes in a timely manner - such as thefts and stolen goods. According to the police, hostility towards officers has compelled them to take a slower approach in certain parts of town.

Police officials have characterized the slower response times as an "expected byproduct of a depleted force that has witnessed an overwhelming wave of retirements, resignations and disability leaves" due to post-traumatic stress.

"There's really been a very fundamental challenge to our sense of purpose in law enforcement," said interim Minneapolis Police Chief Amelia Huffman. "(Minneapolis) is the eye of the storm. So all of those challenges and the pressure is magnified, you know, a hundred fold -- a thousand fold."

 

Tyler Durden Mon, 09/26/2022 - 23:20

Read More

Continue Reading

Spread & Containment

Tim Cook and Apple Make a Move That Could Annoy China

iPhone maker wants to diversify its supply chain and expand in a crucial market.

Published

on

iPhone maker wants to diversify its supply chain and expand in a crucial market.

Apple  (AAPL) - Get Apple Inc. Report no longer wants to be surprised. 

Like the rest of the multinationals, the iPhone maker has been impacted by the covid-19 pandemic which has exacerbated the disruptions in supply chains. 

The restrictive measures and lockdowns imposed in China to limit the spread of the virus have particularly affected the local suppliers of many Western companies. The zero-covid policy in China has been a nightmare for suppliers, forced again to temporarily close some of their factories or to have their employees work under exceptional conditions such as living on the production sites.

This dependence on China has raised many questions that companies have been trying to answer since the pandemic emerged. The most urgent is the diversification of the supply chain or trying to have suppliers both locally and in different regions of the world.

Apple

The iPhone 14 Will Also Be Produced in India

Apple has just answered it. The Cupertino, Calif.-based group will now produce some units of the new iPhone, the iPhone 14, in India, which is a big first.

"The new iPhone 14 lineup introduces groundbreaking new technologies and important safety capabilities. We’re excited to be manufacturing iPhone 14 in India,” the company said in a statement on Sept. 26, confirming speculation.

The iPhone 14 will be assembled in the country by Foxconn, Apple's historic supplier, which has a factory on the outskirts of Chennai. These phones will be sold locally in the next few days, but they will also be exported to other markets. 

Apple's decision also comes amid heightened tensions between Washington and Beijing over Taiwan. The Biden administration has banned chipmaker Nvidia  (NVDA) - Get NVIDIA Corporation Report from selling some of its chips to Chinese companies, for example. Beijing, for its part, has taken steps to develop its technology sector.

If Apple had been assembling iPhones in India since 2017, it was always old versions and not brand new ones. The iPhone 14 is the first newly launched smartphone Apple will assemble outside of China. It therefore marks a change in strategy on the part of CEO Tim Cook's group.

This decision allows Apple to accomplish two important things. 

The tech giant will diversify its supply chain even though the majority of iPhone production is still in China.

India, the New Eldorado

The decision also allows Apple to truly establish itself in a growing market where its market share is still very low. Indeed, Apple has only a market share of 3.8% in the second smartphone market in the world, according to a Counterpunch Research study on smartphone shipments in the second quarter of 2022.

The Indian smartphone market is dominated by China's Xiaomi  (XIACY)  with a 19% market share, followed by South Korea's Samsung  (SSNLF) with a 19% market share as well. India smartphone shipments reached 37 million units between April and June, according to Counterpunch, an increase of 9% year-over-year. 

But the market is down 5% quarter-on-quarter.

Apple "remained the top-selling brand in the ultra-premium segment," which are phones costing at least $650 or 45,000 rupees, the report said. "Increasing ‘Make in India’ capabilities for both local consumption as well as exports, offline push through multiple promotions and consumers’ brand preference (...) helped Apple retain its edge in the premium segment."

It added that: "The opening of its own e-store, iPhone SE 2022 and offers on other models will further drive Apple’s shipments in the coming quarters."

Action Alerts Plus

The Best Ideas For You To Build Wealth

A members-only investing club that helps you grow your portfolio with real-time trade alerts, analysis of major market events, and key opportunities.

  • Real-Time Trade Alerts
  • 24/7 Access To The Portfolio
  • Portfolio Price Targets

Apple unveiled the iPhone 14 early September, and it has a base price of 79,900 rupees in India, the equivalent of $980.

By producing its new products locally, Apple will be able to attract customers looking for the latest innovations and the group will also be able to benefit from local aid at a time when the Indian authorities are seeking to boost the tech sector by all means.

In a recent study released Sept. 21, JPMorgan analysts said that they expect Apple to move 25% of its entire iPhone production line to India by 2025 as it looks to diversify its supply chain. They added that by late 2022, 5% of ‌iPhone 14‌ production will be moved to India, with a significant decision taking place three years later. 

In addition to moving 25% of ‌iPhone‌ production to India by 2025, JPMorgan analysts said the company could also move 25% of other product lines to the country, including AirPods, Mac, Apple Watch, and iPad.

Read More

Continue Reading

Trending