
Apple becomes first U.S. company to reach a $2T market cap - drocer88
https://www.cnbc.com/2020/08/19/apple-reaches-2-trillion-market-cap.html
======
wmab
Apple succeeded because they managed to do something that was previously
unimaginable in business theory - create a mass-market luxury good. A well
taught theory in business school is Porter's general theory, which was to
create a sustainable competitive advantage you either competed on
differentiation or cost, and if we did something in the middle, you would die.

Apple managed to create a luxury product - the iPhone (differentiation) at
mass-market scale (low cost base) which has driven the majority of their
profitability since it's launch.

~~~
microcow
That's half the story. Apple makes ~10% more this year than last year, but
it's more than 2x as valuable as it was a year ago today.

The other half of the story is low interest rates/high asset prices. A year
ago federal funds rate was ~2%; today it's ~0%.

~~~
devy
> The other half of the story is low interest rates/high asset prices. A year
> ago federal funds rate was ~2%; today it's ~0%.

Yep! S&P 500 reaches pre-COVID level record high again recently all thanks to
U.S. Fed's UNLIMITED Quantitative easing (QE) policy. The aftermath and the
side effects[1] are going to be serious concerns now.

[1]:
[https://en.wikipedia.org/wiki/Quantitative_easing#Risks_and_...](https://en.wikipedia.org/wiki/Quantitative_easing#Risks_and_side-
effects)

~~~
JMTQp8lwXL
Even with all the stimulus and lowered lending rates, today's PE ratios were
dwarfed by the dot-com bubble. We're at 31, max was 44.

[https://www.multpl.com/shiller-pe](https://www.multpl.com/shiller-pe)

~~~
judge2020
A fun outlier is Tesla :)

> PE Ratio (TTM) 984.55

[https://finance.yahoo.com/quote/TSLA](https://finance.yahoo.com/quote/TSLA)

~~~
MichaelDickens
If you want to look at individual companies, there were lots of publicly-
traded companies in 1999 that not only had negative earnings, but didn't even
have _revenue_.

~~~
owyn
Ha yes I worked for a company that went public in 1996 with approx 75k of
revenue for the previous year.

------
stephanheijl
A large contributor to this would be the increase in investors pumping money
in "safe" and easy ETFs. Instead of taking the time to investigate the market
and looking into novel ventures, people want to ride the market into wealth.

If there ever was any social responsibility in investing, it would have been
providing fluidity into new ventures and making markets efficient by making
educated investments. I find this trend worrisome and I think it might be
sending incorrect market signals.

~~~
ng12
It's not about passive investing, it's about TINA:
[https://www.investopedia.com/terms/t/tina-there-no-
alternati...](https://www.investopedia.com/terms/t/tina-there-no-
alternative.asp)

~~~
Tiktaalik
This is me 100%. Especially with covid making big swaths of the economy (ie
travel) unviable in the near to mid term. What does still make sense is tech,
and drilling into that deeper, AAPL.

~~~
ascar
I don't really understand how this train of thought seems viable. Even the
most profitable company in the world might be overvalued and then this
investment isn't safe but risky, especially if the profit is primarily from
rising prices and not dividends. So, how can one think there is no alternative
and it's "safe"?

~~~
Tiktaalik
It's as the parent says: TINA. It's not that Apple isn't risky, but that
everything else feels _more_ risky.

Casino stocks, more risky. Cruiselines, more risky.

The money has to flow somewhere.

I mean it's not just tech that's not risky. There's some other equities out
there too which seem to be concensus safe havens by investors. Eg. Lululemon,
Home Depot.

This is why we're seeing big interest in some sectors of real estate too.
money is cheap and big chunks of the economy seem risky. Why not invest in
something else. Also risky, but TINA!

------
shadowtree
It's so interesting how people try to rationalize modern valuations by
connecting them to some other metric (P/E, growth, etc.).

None of that is true.

Stock price presents demand for the stock. Demand is emotional. The stock
market represent (rich) people's feelings.

I want to own a piece of Apple, because a bunch of others want a piece of
Apple.

Tesla's stock is exhibit A for this.

If there was a direct correlation between some metric and stock price, every
trade would be automated.

~~~
gzu
Don't forget the non-emotional constant demand for Apple shares caused by
stock buybacks combined with a 7% weight in the S&P 500. Every new dollar
invested in an index tracking ETF/mutual fund needs to buy 7c worth of Apple
stock from _someone_.

It's a huge supply/demand problem. At what price will _someone_ forego Apple
shares? What happens when Apple is 10%, 15% etc of the S&P 500 index? Where
will these shares to sell come from? At this point, why would anyone holding
Apple shares outright sell?

This demand may only lead to a self reinforcing feedback loop where: a greater
market cap (3T?) -> higher index weight (10+%) -> greater buying pressure ->
more shares locked up in index funds (not available for sale) -> repeat

This is explains why there has been increasingly volatile movements in Apple
shares. This lack of share liquidity works both directions: buying and
selling. Not enough _active_ investors are available to step in when passive
investors (who now make up an enormous portion of capital markets) decide to
start selling index tracking funds in bulk.

~~~
naveen99
Share buy backs raise the share price, but not market cap. so if you have 101
shares of Apple. And Apple buys 1 of those shares back from you, not much has
changed as far as who has more value.

~~~
gzu
Sure in a perfect world you decide to sell 1 share to Apple. The share price
increases to account to for the lost share and market cap stays same.

In reality, _enormous_ swaths of shares are held by index tracking funds and
everyday investors who don’t sell their shares into buybacks. In this case the
market price based off supply/demand must rise in order to find _someone_ who
will let go of a share so Apple can buy it.

~~~
naveen99
you haven't said anything new here. Price must rise to account for destruction
of a share, but market cap stays the same... (price / share goes up, price /
fraction of company stays the same)

~~~
rubber_duck
>price / share goes up, price / fraction of company stays the same

That is obviously not true and he's pointing out why - if the market isn't
very liquid, in this case not a lot of sales, price can jump nonlinearly.

~~~
naveen99
by this logic a reverse stock split would increase the market cap. No need to
even waste money buying back any shares... free market cap rise, bonuses for
ceo, cfo, existing shareholders rejoice :)

~~~
rubber_duck
What does reverse stock split have to do with it ? Buyback happens on the
market and it removes stocks from circulation, if the demand is still there
but buyback eliminated supply because people are holding on to the rest of the
stock then the price automatically goes up and increases the market cap more -
it's about liquidity - if you do a buyback of 1 billion suddenly there's 1
billion on the sell side that's gone but people still want to buy the stock -
so the price goes up.

~~~
naveen99
the price changes immediately when buybacks are announced, not when the
buybacks are executed. Case in point, intel jumped 4% today immediately after
announcing a stock purchase of $10 billion (to be executed by end of the
year), which is about 5% of its marketcap. No shares needed to change hands,
the bid / ask moved instantaneously. The quoted price of a stock reflects
people's willingness to buy and sell at certain prices (bid / ask), its not
simply the last traded price, which is almost useless, given new information.

------
GeekyBear
A comparison of the current share price relative to the per-share earnings (PE
ratio) for various tech companies.

(Numbers pulled from Google Search)*

Facebook PE ratio: 32.50, Apple PE ratio: 35.48, Amazon PE ratio: 126.70,
Netflix PE ratio: 82.61, Google PE ratio: 34.46

At least within FAANG, Apple's share valuation is still quite reasonable when
compared to income.

A couple of others.

Microsoft PE ratio: 36.80, Tesla PE ratio: 984.47

*I've edited the post to source all numbers from Yahoo Finance.

~~~
safog
Not sure where you're getting your numbers from but AAPL P/E is 35.46 today.

[https://finance.yahoo.com/quote/AAPL/](https://finance.yahoo.com/quote/AAPL/)

~~~
GeekyBear
>Not sure where you're getting your numbers from

Google's info cards. I'll have to just pull them all from Yahoo and edit the
original, I guess.

------
typest
Are the market caps of Apple and other tech giants growing as exponents, or
sigmoids? This, to me, is the big question. Can multi-trillion dollar market
caps continue to grow at this rate, or will they taper off?

Naively, one expects to get returns as a percentage of investment. In this
multiplicative sense, Jeff Bezos at a 188B net worth is much closer to being a
trillionaire than a one-billionaire (a factor of 5 vs a factor of 188). But
can Amazon's market cap continue to grow in such a fashion? What bounds it
(and that of other tech companies)?

One might assume that they _have_ to be bound by world GDP (80T). But if
they're truly creating value, can't they expand world GDP along with
themselves?

~~~
pavpanchekha
GDP is value created per year. Market cap is (a proxy for) value created over
the whole future existence of the corporation, at some discount rate. The
obvious cap on market cap of a company is total world wealth, which is on the
order of few hundred trillion.

~~~
typest
Thanks, yeah, I felt a little uneasy with the comparison. I figure this means
market cap should be a bounded function of GDP, yeah?

~~~
pavpanchekha
You're basically asking how to convert assets (market cap) to income (GDP).
But there isn't a fixed conversion: it depends on your discount rate (how
valuable is future money compared to current money) which itself you can
loosely think of as related to interest rates, which themselves change over
time. Alternatively, think of the P/E ratio, which also changes over time.
There's no bound. If you think humanity will exist forever, and you're willing
to wait forever, and you think Apple will continue selling iPhones at a large
profit forever, its value is effectively infinite.

------
vmception
My personal metric is seeing these publicly traded non-state enterprises catch
up to Saudi Aramco!

The American engine is producing awesome results, still a long way to go!

Saudi Aramco 2018 net income was $110 billion Saudi Aramco 2019 net income was
$88 billion

Apple 2018 net income was $59 billion Apple 2019 net income was $55 billion

 _Then_ I will be really impressed! It is more likely to be an inflection
point as incumbent oil producers fail to diversify and revenues go down. But
I'll accept either result.

~~~
fermienrico
> My personal metric is seeing these publicly traded non-state enterprises
> catch up to Saudi Aramco!

Why is this a good metric?

~~~
vmception
Its a _better_ metric than marketcap. Marketcap is just what a few people are
willing to pay for shares, literally the one person at the auction house that
bid higher than others and got SOLD to, except in the stock market everyone
pretends to multiple that 1 share by the other 4.28billion and act like its an
indicator of value.

Whereas net income shows what MANY people bought, and how the company is able
to keep a bunch leftover.

And regarding "good", it's a good metric for value creation and the
infrastructure for independence, as this has been unachievable before and
always required a monopoly on power derived from the entire social contract of
society and force. So it is merely interesting for it to occur in the absence
of those things. It is not a comment on "good" in terms of society and whether
the social contract should include a way to limit them, it doesn't factor that
in at all.

~~~
3pt14159
It is an excellent indicator of value. Every single share holder could have
been the person to have sold the share, but they choose not to. Yes, HOLD is
different than BUY, but in terms of what a company is actually valued at
market cap is an extremely good source of information. It values in
information about future trends from a sea of market participants. There is a
reason Amazon and Apple have very different price to earnings numbers.

------
jameslk
It's not that Apple has grown that much in value, but rather the US dollar has
become more worthless. Even gold is up nearly 20% since May.

~~~
typest
Examining the price of coffee I buy every day, it hasn't risen. Do you predict
it will? Should this take awhile, or will it happen pretty soon?

~~~
hjnilsson
Since the cost of making that cup is all domestic (labor, rent, marketing etc.
the beans are maybe 1% of the cost), it will not change. Imported products may
become more expensive though.

~~~
jmercouris
A lot of coffee in the US is imported.

------
no_wizard
I think Apple sees one of its biggest moats as the App Store, and I believe
rightly so. I really think that’s where a large portion of their stringent
rules are coming from is protecting that moat.

I wouldn’t be surprised though if they actually experienced more growth
overall by focusing more on the developer experience, loosening some of their
restrictions on payments (to me it should be a blessed API for other payment
processors. Sure require they accept Apple Pay. That’s fine. But I do think
that’s the way forward) and allow app developers to sell upgrades rather than
just subscriptions, one time purchases, and in app purchases.

I think it could really reignite the marketplace on their devices

~~~
cblconfederate
Is the app store really valuable ? How often do we read about app store devs
becoming millionaires (they don't). Users spend 97% of their time in the top
10 (free) apps from the usual suspects. App development is a dead end
business.

Apple is a premium products company and software was (and will be) always
cheap so there s no way they will make their usual profit margins on that.
They need to keep selling premium stuff, which has to be physical. At best
they can add some premium content , but that's it.

~~~
treis
In app purchases are a huge market. This site puts it at $50 billion a year in
the US alone:

[https://techcrunch.com/2020/01/15/app-stores-saw-
record-204-...](https://techcrunch.com/2020/01/15/app-stores-saw-
record-204-billion-app-downloads-in-2019-consumer-spend-of-120-billion/)

It's a huge market and Apple takes a 30% cut of that for not doing too much.
The margins have to be bonkers.

~~~
cblconfederate
That's 15B for apple, but there's not a lot of room for growth. Plus it doesnt
seem apple has a big moat there, all big publishers are looking for ways to
bypass them or just sue them. It doesn't seem like apple has a healthy
relationship with devs, hence their heavihanded practices.

------
goalieca
Holy crap. Feels like just yesterday they hit 1T.

~~~
felipellrocha
Your first T is always the hardest

~~~
beached_whale
Well, it is about 30 doublings from the first dollar

~~~
Jugurtha
I believe 30 doublings are about a billion. The poster is referring to a
"Trillion".

~~~
fastball
Yep, and that's just 40 doublings. Add 10 doublings to go up 3 orders of
magnitude.

------
samfisher83
If we are doing discounted cash flow analysis, apple made about 70 billion in
free cash flow. From the balance sheet balance sheet they have about 100
billion in tangible assets. So if we take 1900/x=70 years which would imply a
rate of 4% which is reasonable. However how many companies have been on top
for 30 years?

The whole market seems insanely overvalued during a pandemic. The entire stock
market cap is 1.6x gdp. which is greater than the .com crash. This is one of
the things buffet talks about.

[https://www.advisorperspectives.com/dshort/updates/2020/08/0...](https://www.advisorperspectives.com/dshort/updates/2020/08/04/market-
cap-to-gdp-an-updated-look-at-the-buffett-valuation-indicator)

~~~
victor106
> So if we take 1900/x=70 years which would imply a rate of 4% which is
> reasonable.

How did you get to 4% from the above calculation?

~~~
317070
(2000B value - 100B assets) / (70B cashflow) = 27 years investment payback. At
this point I think he did 100/27 years=4% interest rate per year. However,
that would be for the simple interest case, i.e. not taking into account
compounding.

However, for the cumulative interest rate, you would normally do ln(2)*100/27
years = 70/27 or a 2.7% YoY interest rate.

As a general trick: if you want to convert payback time to cumulative interest
rate, use 70 instead of 100. There was a TED talk on the topic iirc.

------
MadSudaca
This is certainly an amazing accomplishment for Apple, but let's not forget
who else played a big part in this, the FED.

~~~
sharemywin
Don't forget Robinhood. you can now buy $1 of apple at an infinite market
cap!!!

------
smattiso
I'm buying long dated puts on Apple personally. Here is my investment thesis:

In a nutshell my belief is that Apple will have a few quarters of declining
revenue and that is going to torpedo their market cap.

* Apple is 100% reliant on selling new hardware, whatever push into subscriptions they are trying to do is going to fail or take ages to catch on. The reason for this is that Apple sells primarily to consumers, so the subscription needs to be a consumer subscription. What could that be? $30 a month for Apple Music + Apple TV + Apple Fitness + Apple Photo Storage? I suppose this is possible but I don't see people switching away from Netflix, HBO, or Spotify so easily. Spotify is likely the most at risk. This strategy is possible but I think the timeframe is going to take longer than people expect.

* We are close to reaching the end of phone innovation. The things on the horizon that could possibly drive continued revenue are: smaller iPhones, folding iPhones, planned obsolescence, and from the software side a merge of iOS/iPad OS such that you can use your iPhone 15sMAX-SE with a USB-c monitor as your computer. This is possible but say in 2021 apple releases a 4" folding to 8" iPhone with USB-C out to an external monitor that would fly off the shelves. However that is basically the logical end-point of smartphones and after that Apple is going to have a hard time selling anything new until AR glasses arrive.

In a nutshell Apple needs a subscription model to sustain this valuation, and
without obsolescence essentially being a forced subscription (you rent your
1000 iphone for 4 years and then chuck it as worthless) I'm not sure they will
find success.

The planned obsolescence thing is a real revenue driver for Apple though and
without some antitrust lawsuit maybe they can maintain that for a long time.
My bet is that 2 quarters from now they miss earnings and the valuation blows
up.

~~~
shamino
People have been saying these kinds things about Apple forever. Betting
against a $2 Trillion company, not sure about that.

------
woranl
Back in 1997, Michael Dell famously said that if he were put in charge of
Apple, "I'd shut it down and give the money back to the shareholders."

Good that Apple didn’t hire you then.

Where is Dell now?

~~~
theandrewbailey
CEO of Dell Technologies, just like he was then.

~~~
woranl
Just as relevant as ever.

~~~
boring_twenties
Dell is not exactly irrelevant, they are basically tied for first place in
servers with HPE.

------
nonfamous
233 comments in this thread as of this writing. Not a single mention of the
word "taxes".

------
athenot
Even though it's not exactly new, in my mind this is still in sharp contrast
to the recurring headlines I used to read about whether Apple will survive in
the next year (mac user since 1990).

~~~
chrisseaton
> the recurring headlines I used to read about whether Apple will survive in
> the next year

Where are these headlines?

That seems like a patently ludicrous thing to claim that Apple will disappear
within a year.

~~~
gdubs
Look for the Wired magazine cover with the rainbow Apple logo surrounded by a
crown of thorns.

~~~
geerlingguy
I believe the caption was “PRAY”

------
dnprock
Schools are closed. We have a sky high unemployment rate. A raging pandemic
across the world with no end in sight. We want things to be normal. The Fed is
doing its best at pumping money to keep the market afloat. So we have some
weird things in the market like Apple reaching 2T within 3 years, Tesla going
5x within a year.

These things are normal given actions from central banks. The market is
rational. We're not rational for wanting things to be normal.

------
tempsy
their Q2 sales were better than a low expectation but in line with other non-
holiday quarter, but bread and butter iPhone sales have been very flat for a
long time.

investors are essentially thinking “if Apple can do the same in Q2 as other
quarters pre-crisis then it must mean it will do incredibly once this is over”

If you want to invest at these levels you should probably find out what
happened in Q2 - I wouldn’t be surprised if it was a mix of stimulus money and
need for lower end macs and iPads for video conferencing in the immediate term
due to stay at home that won’t necessarily translate to permanently
accelerated growth in future quarters.

------
adaisadais
“The slow one now will later be fast cause the times they are a changing” -Bob
Dylan

It is apparent that Apple has been successful financially and has reached new
heights but I don’t think this can continue for much longer.

We are hanging on longer and longer to the iPhone and the services (namely
Apple Music when compared to Spotify) Apple offers are less exciting than
their competition. AirPods have become and ubiquitous sign of the
technological times where people buy on brand and not on quality or
functionality (plus they’re ugly imo).

Where does Apple go from here? They can’t keep making iPhones and pissing
developers off forever. They must either rise to a new zenith from a pure
business standpoint (new products, cannibalize the old) or in several years
time people will begin really thinking critically and realizing that while the
Apple brand is “superior” that the technology is not.

I tell you all this typing on my iPhone X... I’ve owned iPhones since 2010.
But they times are a changing.

~~~
scarface74
_It is apparent that Apple has been successful financially and has reached new
heights but I don’t think this can continue for much longer._

People have been declaring the death of Apple since the mid 80s. I was around
then with my Apple //e.

 _We are hanging on longer and longer to the iPhone and the services (namely
Apple Music when compared to Spotify_

Yet and still Apple Music is growing faster than Spotify, service revenue is
growing like crazy, and Apple doesn’t have to spend a hundred millions of
dollars to get one person on their platform (Joe Rogan)

 _Where does Apple go from here? They can’t keep making iPhones and pissing
developers off forever._

Developers really overstate their role. Developers go where the money is. Most
of the money from the App Store comes from loot boxes and whales buying
virtual currency. Developers have been jumping through larger hoops for over 4
decades developing for consoles.

I’m sure people asked where does Apple go from here since they introduced the
Apple // in 40 years. Apple has shown an ability to evolve.

 _AirPods have become and ubiquitous sign of the technological times where
people buy on brand and not on quality or functionality (plus they’re ugly
imo)._

People have been accusing Apple to sell on brand for two decades. Now, but
especially when iOS 14 comes out, the integration between AirPods, iPads,
iPhones, Apple Watch and to a lesser extent the AppleTV is second to none.
Yeah, I have all of them....

Maybe you don’t have the pulse on what the consumer wants? I’ve seen analysts
who believe that the AirPods by themselves are larger in terms of revenue than
the iPod was at its peak.

 _They must either rise to a new zenith from a pure business standpoint (new
products, cannibalize the old)_

Has Apple ever shown an unwillingness to cannibalize it’s own products?
Microsoft for instance has been one of the five most valuable companies for 20
years. This is not rah rah Apple. The only one of the five big tech companies
that have shown an ability to evolve and diversify over the past 10-15 years
is Google.

~~~
spideymans
>The only one of the five big tech companies that have shown an ability to
evolve and diversify over the past 10-15 years is Google.

Google has a diversified offering of products, but don't all of those products
ultimately feed their advertising business?

~~~
scarface74
They are completely dependent on ads. 95% of their profit comes from ads.
Compare that to Apple’s revenue mix. I know it’s not exactly comparable
(revenue vs profit), but no one can argue that Apple doesn’t have margins on
all of its products.

[https://images.app.goo.gl/Z2ragT21ubHEPQNb8](https://images.app.goo.gl/Z2ragT21ubHEPQNb8)

------
serjester
P/E ratio of almost 40? Seems crazy to value the largest tech company in the
world at a price where you wouldn't see your money back for 40 years. Do they
really have enough room to grow to offset that? Seems unlikely to me, but then
again you don't see me shorting it :)

~~~
c1b
You're thinking about this wrong. P/E 40 is comparable to an interest rate of
2%. Would you rather take 0% from bonds?

~~~
sudosysgen
Only if you expect that the company can survive 30 years at the current level.

------
tzm
It took Apple 37 years to reach $1 trillion market cap and 2 years to reach $2
trillion.

What happened?

Keep in mind, in 2020 more than $6 trillion has been committed to economic
stimulus (Congress + Federal Reserve). Along with 0% federal funds rate, you
get liquidity that boosts the market overall.

~~~
scarface74
Apple was a niche computer maker. But also don’t forget that until 1992-1993,
Apple was more valuable than MS and most of the then major computer sellers
besides HP.

Apple and HP were going back and forth as the largest seller of PCs back then.
This was Apple’s first foray into the wide consumer market with Macs.

Then Windows 95, Apple’s bad decision when it came to clones, and the
Performance line happened.

Apple wasn’t “beleaguered” when it made the PPC transition between 1994-1995.

Lastly, computers weren’t a big deal back then. When I was in college, most of
the students didn’t have computers at home.

------
VoxPelli
These records sure doesn’t play in their favor when it comes to investigations
of being harmful to the competitive environment.

One could ask the questions:

Should any single (non-state?) entity be this large?

Is it overall better to have innovation and production concentrated like this
or would society benefit from increased plurality?

I don’t know, but numbers like these sure makes me wonder

~~~
scarface74
It’s not like a powerful state is harmless. Ask all of the countries where the
US tried to “bring Democracy”.

~~~
VoxPelli
No, but they are much more complicated and their size are determined by many
more factors, so discussing whether they should be powerful or not is an
entirely different conversation

------
mistersquid
The headline and article specify “U.S.”, but isn’t this true for any company
in the world throughout history?

Honest question.

~~~
joshuaissac
Adjusted for inflation, the Dutch East India Company had a peak market
capitalisation of $7.9t.

[https://www.visualcapitalist.com/most-valuable-companies-
all...](https://www.visualcapitalist.com/most-valuable-companies-all-time/)

~~~
em500
Only according to fantasy inflation adjustments, see my earlier comment on
this:
[https://news.ycombinator.com/item?id=19622046](https://news.ycombinator.com/item?id=19622046)

~~~
sudosysgen
How much do you think just the land that the Dutch East India company owned
would be worth? (Hint: multiple trillion dollars)

------
BbzzbB
As the saying goes, the first trillion is the hardest. This year proved to me
beyond any doubts that I understand nothing about the markets, the fact the
world's largest (publicly traded) company raised 125% in a single year boggles
my mind (not even related to the COVID drop).

~~~
sylvain_kerkour
I believe it's what we call a 'bubble'

------
cblconfederate
Is this the US stimulus package finding its way to the pockets of
shareholders?

~~~
adventured
No, it's mostly multiple expansion.

You'll see a lot of responses across other threads claiming it's due to the
low interest rate environment (the justification). That plays a role, sure.
Interest rates have commonly been near zero for the better part of the past
decade though. So why was Apple's PE ratio ~11-13 previously while interest
rates were very low (0% or sub 1%) with a quasi normal economy, and now its PE
ratio is more like 30-35 during a crushing pandemic recessionary environment
while interest rates are zero? Apple's operating income for the past four
quarters is not considerably higher than it was in fiscal 2016, so why is the
stock three to four times higher? Surely their growth rate must be extreme
right now, to justify that radical increase (answer: nope). What must the
future growth expectations be to justify a 300% stock increase; that Apple's
enormous profit will double soon? (nope, it's not gonna happen)

It has more to do with a stock market mania that has taken over, than it has
to do with interest rates, at this point. The interest rate explanation maybe
gets you to second base, the rest of it is mania. You see that represented in
the ever expanding dotcom bubble style extreme valuations that are
increasingly common (SHOP, TSLA, NVDA, AMD, DOCU, etc). NVDA's context for
example will remind of CSCO in 1999-2000 (except NVDA is growing slower today
than CSCO was then). You'll see it in the pop-celebrity status of people like
Dave Portnoy (who suddenly decided to become a trader with little experience).
Whereas such extreme valuations were not so common three to eight years ago
(circa 2012-2017), while we had a quasi normal economic situation and 0% rates
(or otherwise near 1% or lower) as well. All that said, nobody should ever
doubt how far a mania can go in regards to pushing valuations toward the moon.

~~~
tfehring
I think you're understating the impact of discount rates here. Long term
interest rates are down ~70 bps from their previous all-time low in 2016 and
something like 130 bps from their average over the period you're describing.
That's a huge change, especially if you expect Apple's profits to come in over
a long duration.

There's probably been a shift in investor preference in favor of equities too
(which means decreases in interest rates are smaller than the decrease in
discount rates used for investors' DCF valuation of equities), but I think
"mania" is far too strong a word. I think of it more as a result of investors
shifting to riskier assets as returns to capital decline in general, in part
due to leverage aversion. I mean, how else are you supposed to deploy your
capital? Buy the junk bonds that are currently being issued at yields below
3%?

~~~
naveen99
The other big change is downward pressure on location based real estate
values. Even a 10% reallocation of wealth from real estate to equities would
have a huge impact.

------
paxys
A recession is the perfect opportunity for the rich to get richer.

~~~
cuspycode
Do you have any practical suggestions for how to accomplish that?

I'm not rich, but I'm thinking that anything a billionaire can do with $1
billion can also be done by ten thousand households who have $100k each. So
the middle class could perhaps get richer if they only knew the secret?

~~~
paxys
The problem is really (1) having money lying around that you can afford to
"play around" with without, say, putting your retirement or mortgage in
jeopardy, and (2) having professional advice from people who know what the
hell is going on (including borderline or overt insider info). A hedge fund,
for example, isn't going to touch someone wanting to invest $100K.

------
sek
Isn't Apple in a pretty mature market, they have to double their earnings in
the next few years to justify this p/e ratio.

Is that realistic?

~~~
humanlion87
I don't think metrics like P/E ratio are as useful as before any longer when
analyzing companies like this. The FED printing money and lack of other
investments in this zero-interest rate economy has a significant role in
raising stock/asset prices.

------
monadic2
We really, really need anti-trust action. No other state other than the
american one can effectively do this....

------
ctdonath
How do y’all mentally process that fact? Why does the stock market think the
company is “worth” that?

My rationalizations:

Profits are ~$88B/yr. would take ~22 years to total $2T, sooner with growth.
...but shareholders don’t receive that whole profit, so why own?

Apple has room for growth, up to 2x in mobile and 5x in computers (assuming
static market), making a cap of $8T look feasible.

Thoughts?

~~~
mxschumacher
in addition to margins and growth, their cash position and the very low
interest rates play a role, Apple just borrowed $5.5bn over 40 years for
2.55%: [https://www.barrons.com/articles/apple-is-the-latest-to-
tap-...](https://www.barrons.com/articles/apple-is-the-latest-to-tap-bond-
markets-in-a-record-setting-week-51597344992)

------
fortran77
Microsoft isn't too far behind. They were ahead of Apple last year.

------
dis-sys
so apple added $1t market cap in just 24 months, did apple actually created
$1t value in any way or form to justify that $1t market cap increase?

~~~
rmah
Apple made apx $115B in net income over that two year period and paid out
around $30B in dividends. So... yeah.

In case you're wondering how much $115B is in terms normal people can
understand... if that was in $100 paper notes...

\- Stacked up on top of each other, it would reach 12,000 km high (the ISS
orbits at about 400km)

\- The notes would weigh around 1,150 tons

\- To ship them, you'd need over 1000 4'x4' shipping pallets, each weighing a
ton

$115 billion is an absurdly huge amount of profits

~~~
dis-sys
The answer is not convincing - with a comparable net income level, the world's
largest bank ICBC only has 1/7 of apple's market cap. Vodafone had over 100
billion earnings back in 2014, that was like two years of apple earnings in 12
months, Vodafone never had a 24,000km high market cap built with $100 notes.

~~~
rmah
For ICBC, it's a state-owned institution. And a bank. The accounting is
special for banks (and mostly beyond me). Some say, it's doubly "special" for
companies like ICBC.

For Vodafone, that number was a special one time gain from the sale of Verizon
Wireless. In 2014, they showed an operating loss of £3.9B (but a overall gain
of £11B because of income tax credits -- hoorah for financial engineering?)

------
sidcool
Is it the first US company or the first company ever?

~~~
angio
Saudi Aramco hit 2.1T in December of last year.

------
FartyMcFarter
I'm not an Apple hardware guy. I hear a lot of people complaining about their
recent laptops, which makes me wonder if they're losing their edge.

~~~
biztos
I'm one of those people, I thought my fancy new 16" MBP would make up for my
previous-gen lousy 13" but oooooh was I wrong.

However, they would probably have to do even worse to get me to switch away
from their laptops altogether.

First, because a few generations ago they were so good I still (irrationally?)
hope they'll get back on track, especially with ARM.

Second, because I have a hard time believing anyone else's high-end laptops
are, on balance, any better.

Third, because I'm all-in on iPhone/iPad and think I would miss the
integration.

Fourth, because for work I need to use software that's only available on
Windows or Mac, and I haven't seen anything to convince me that Windows would
be better.

Finally, I plan to learn Xcode, which will lock me in permanently, but I
realize that's my own fault. :-)

I don't know if these reasons are typical, but I suspect they are at least a
subset of the ten or so most common motivations for us complainers to stick it
out.

Can't wait to get rid of this 16" MBP though! _Grumble..._

~~~
FartyMcFarter
> Second, because I have a hard time believing anyone else's high-end laptops
> are, on balance, any better.

The X1 carbon is pretty great, but I can't compare.

~~~
biztos
Noted, thanks.

------
fallingfrog
It’s a bubble. Just remember, the investor is the customer and the stock price
is the product.

------
magedqwani
the dot-com bubble again 2021

------
DINKDINK
Sound similar to our current situation?

“[...]her position was alarmingly worse, the financial situation beyond her
understanding. The krone, at 25 Swiss centimes the previous Christmas, was now
quoted at one-twelfth of a centime. Her shares, however, were going up.
Gambling on the stock exchange had become the fashion — the only way to avoid
losing all one's money and perhaps to add to it. Many new bankers were giving
people advice, the flight from the krone governing all transactions.
'Meanwhile,' Frau Eisenmenger wrote, the large numbers of unemployed, their
passions fermented by the Communists, are seething with discontent … a mob has
attempted to set the Parliament building on fire. Mounted policemen were torn
from their horses, which were slaughtered in the Ringstrasse and the warm
bleeding flesh dragged away by the crowd … the rioters clamoured for bread and
work … Side by side with unprecedented want among the bulk of the population,
there is a striking display of luxury among those who are benefitting from the
inflation. New nightclubs are being opened.”

[...]

“Speculation on the stock exchange has spread to all ranks of the population
and shares rise like air balloons to limitless heights … My banker
congratulates me on every new rise, but he does not dispel the secret
uneasiness which my growing wealth arouses in me … it already amounts to
millions.”

[...]

“It was significant enough that union, demands were still for higher wages to
meet rising prices rather than, before all else, stable prices and a stable
currency. A few of the financially sophisticated could be heard blaming the
government, and the Finance Minister in particular, but a typical view was
that prices went up because the foreign exchange went up, that the exchange
rate went up because of speculation on the Stock Exchange, and that this was
obviously the fault of the Jews. Although the price of the dollar was a matter
for almost universal discussion, it still appeared to most Germans that the
dollar was going up, not that the mark was falling; that the price of food and
clothing was being forcibly increased daily, not that the value of money was
permanently sinking as the flood of paper marks diluted the purchasing power
of the number already in circulation.”

[...]

“Erna von Pustau recalled the same trend in Hamburg, where 'stock exchange'
and 'Jews' were ideas very much connected in the minds of the people, and
where the circumstances of a situation which no one really understood made
those who had lost their savings or their fortunes ready prey for anti-Semitic
propaganda. Her father began to speak against the Jews more and more,
asserting now that 'creative capital is the capital we Germans have:
parasitical capital is the capital of the Jews.”

FERGUSSON, Adam - When Money Dies: The Nightmare of Deficit Spending,
Devaluation, and Hyperinflation in Weimar Germany (1975)

------
zackmorris
What does everyone think about the idea of market cap providing UBI?

I've been following AAPL since it was about $12 (as I recall) after the dot
bomb:

[https://finance.yahoo.com/quote/AAPL/chart?p=AAPL](https://finance.yahoo.com/quote/AAPL/chart?p=AAPL)

If I scroll way out, I can see that low corresponds to about 1.04 on
12/10/2000\. It's current high as of 8/19/2020 is 466.60, so that's roughly a
450 times return on investment in the time I've been paying attention. Had I
invested $1000, I'd have $450,000 today. I could have retired on a cool $4.5
million had I invested $10,000.

The problem is, I had no disposable income at that time, having just graduated
with about $25,000 in student loans. I only paid them off at the age of 40,
almost 20 years later. I spent 6 years of that working extremely hard moving
furniture and working in a Mac repair shop for 3 years each. The other 14
years were divided between good high-paying jobs like 1 year at hp as a
contractor, and many as an entrepreneur attending the school of hard knocks. I
had to settle many debts along the way. I learned a bit, but for the most part
consider the last 20 years to be 2 lost decades. I feel that applies to all of
Gen X, Millennials and younger, but that's still up for debate.

Now, we hear that there is no money for UBI from the government. But that
doesn't really sound right to me. My feeling is that we actually have 2
economies in the US now. One for the working poor (the bottom half of the US
population, ~200 million people who have no net worth and no savings), and one
for the capitalists who have any money at all to invest and ride the waves of
prosperity.

The real heart of what I'm asking is whether other qualities in life like
potential, enthusiasm, work ethic, etc should be equivalent/convertible to
capital. What is it about me and my life choices that excluded me from
enjoying the gains that many readers on here enjoy? Was it my choice to attend
college? To be an entrepreneur? To choose computers instead of say, sales?
What was it?

And when we answer that, we get to the $64,000 question, which is:

A) Is there any way to structure our economy so that the whole population
could have $1000 to invest early on? Or B) is that a fallacy, would the $1000
just create inflation, a leveling out of everyone's wealth so that Apple's
market cap of $2 trillion wouldn't represent anything especially high per
capita?

If the answer is A), then why didn't we do that? Why don't we do it now? Why
couldn't the returns of the stock market provide UBI?

If the answer is B), then why are we excited about this? How is this different
from rubbing the bottom half of the country's faces in the elite's prosperity?

------
polote
The next one will probably be Tesla

~~~
Octoth0rpe
I'd expect amazon long before Tesla, given the shift _away_ from driving and
_towards_ more online ordering.

~~~
visarga
I used to think it's a good idea to ditch cars and use public transport and
bikes, but now I don't think I want to ever use public transport again. The
personal car is a protection shield against infection, and for that reason I
think many people will turn back to them.

~~~
Octoth0rpe
I don't disagree with your assessment re: infection, but I'd point out that
transportation overall is dropping, possibly permanently; and that the long
term economic damage from the pandemic and the debt loads that we're taking on
will likely hurt auto sales for a long, long time. I'm not sure that whatever
shift away from mass transit to private vehicles will make up for the overall
loss of transportation, and you have to have a job to go _to_ in order to need
a car to get there.

------
catmcgee
The fact that only 5 major companies have increased in value since COVID is
terrifying.

~~~
joubert
This is an illuminating list of 100 companies doing well during the pandemic.
[https://www.ft.com/content/844ed28c-8074-4856-bde0-20f3bf4cd...](https://www.ft.com/content/844ed28c-8074-4856-bde0-20f3bf4cd8f0)

------
jordache
The semiconductor value stream will be huge! W/O that, I've always considered
Apple to be one phone competitor's pivot away from being obsolete.

------
user5994461
For comparison, that's more than the GDP of Italy or Spain.

~~~
adventured
I want to explain why you're being downvoted, why this happens in every HN
thread like this (I've been observing it for more than a decade here), and why
they're all wrong (every single time).

First, you did nothing wrong. You can very easily, very obviously, compare
Apple's market cap to the total annual economic output of a nation, or the
economic output of any thing over a given amount of time.

Apple's market cap of $2 trillion, is greater than the annual economic output
of the nation of Italy's 60.3 million people ($1.98t 2019). You just got told
that is impossible to do. I just did the impossible. Which do you think is
more likely true? It's obvious.

It takes the 60.3 million people of Italy a year to produce enough total
economic output to almost match the total value of all outstanding Apple
shares. Oh shit, I did it again. A spontaneous blackhole may appear and we may
all die. I just successfully compared two things everyone repeatedly says is
impossible to compare.

You can obviously compare the two, and do so quite cleanly, have no fear.

I've been watching this herd action for a long time here. People don't seem
able to stop and think about the context beyond a primitive twitch action,
they just reflexively downvote, and parrot the same responses ad nauseam (it's
always the same responses without exception).

Second, you have to understand, you're facing off against many people's
favorite "gotcha" Smart Person(TM) response. It's an arrow they hold in their
bag, for times like this, that helps them feel smarter than you (that's why
you'll see so many of the same response, unnecessarily; if they were right,
one would be enough). They may not know much about economics or the stock
market, however they know this thing, they saw it somewhere else, it sounded
true, and they can feel good by downvoting you and by drowning you in one line
responses. You deserve better dear user5994461, for your four years of HN
dedication and contribution. I want you to know that what you did is perfectly
OK.

~~~
romanoderoma
It doesn't make any sense though

If Apple bough Italy they wouldn't have enough money to make it work

Italy needs two trillions/year to go on, Apple only owns a fraction of that to
spend.

That's why it is a worthless comparison.

A more apt comparison is

Apple is valued 2T at 260 billions of revenues in 2019

The total amount of Italian wealth is around 11T at ~2T year of output

------
api
This, or at least the breakout that led to this, has been achieved on the
strength of product and user experience.

Apple's tech isn't really much better than its rivals, except in a few areas
like inputs and haptics. Its high performance ARM cores are impressive but
there are other impressive ARM cores and it's a very recent development
anyway. Until a few years ago they were "good enough for a phone" but not
rivals of Intel or AMD for anything serious. In fact I seem to remember
Qualcomm Snapdragon chips being better on some metrics a couple years ago.

The thing that made Apple really stand out was the polish and attention to
detail in its product. This has two parts. One is the product being good. The
other is the striking absence of tacked-on crap features and shitware.

I recently switched to an iPhone from Android due to privacy issues and the
thing that immediately struck me about the iPhone was the lack of shitware
preloaded on the device. It did not come preloaded with Google Spy... err...
Play Services or Facebook, let alone a bunch of Samsung and carrier apps that
are surely encrusted with spyware. I can even uninstall most Apple apps that I
don't want!

Same goes for the Mac. A new Mac does not show you ads. Its equivalent of the
start menu isn't full of loot box games and other shitware of the sort found
on Windows or Android tablet or "laplet" (or is it "tabtop?") devices. On the
Mac I can uninstall pretty much anything except system apps (well you could
but that might be problematic). You can even uninstall Safari and replace it
wholly with Firefox or Chrome AFAIK.

Going way, way back, when I first tried an early 'oughts Mac I was struck by
the lack of the worthless but prominent "Thinkvantage" button found on my
Thinkpad or any other obvious committee tack-ons. The design was clean.

This same lack of shit is what made the original Google break out way back in
the early 'oughts. Back then most search engine web sites looked like the home
pages of online casinos. Google had a blank and a button that said "search."
The instant I saw it, I never again returned to another search engine.

Apple has occasionally gone too far with "clean" or "thin and light," but if
you are going to err I'd err on that side. Erring on the side of cruft and
shitware is much worse.

Take note people.

------
scott31
That is even higher than US military budget. I really don't know which one is
a bigger waste of money and effort

~~~
stephanheijl
The US military budget is an expenditure that occurs every year. Apple's
market cap is the expected value of _all_ of Apple's outstanding shares. These
are really not comparable.

~~~
kaycebasques
If anything, the comparison drives home how big the US's military is.

