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Apple's Mass Market Mistake

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Exclusivity part of iPhone's appeal.

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Man, that was a sad sack of a session yesterday.

Wait For It...

The market wanted to trade higher but volume never materialized and then there was the disappointment in Apple (AAPL). Steve Jobs' reputation took a hit yesterday when he said the 3G iPhone would be delayed, again, to July 11. Messages boards were livid as diehard fans complained.

I think Wall Street was more concerned with the cheaper price tags, which can be subsidized in the United States and Canada. Apple lowered the prices on its new 3G iPhones in an effort to get the masses but one has to wonder if they derailed their chance to grab the business crowd. It's going to take more than sky high gas prices for business types not to want some level of exclusivity with the gadgets they own and $199.00 (for the eight gigabyte model) and $299.00 (for the 16 gigabyte one) means everyone from Orchard Beach in the Bronx to the Hamptons could own the phone.

These days mass market is the way to go, however. Just look at the share price of Mickey D's (MCD) and Wal-Mart (WMT). Still, I'm not sure this is the shot across the bow that Research in Motion (RIMM) was bracing for. The real gamble here comes from AT&T (T), which is subsidizing the new 3G iPhone. It's a serious gambit, one that simply can't work just a little. Everyone better buy this phone or AT&T will see top line gains off set by margin pressure. More than likely the stock will trade in a narrow range until the (new) official launch of the new phone.

Stocks Can't Capitalize on Lower Crude

On another topic, the NASDAQ Composite wasn't able to benefit at all from the pullback in crude oil. Then again few industries were able to gain meaningful traction on lower oil.

The transportation stocks looked solid, particularly the rails. Of course, the rails were supposed to move higher on lower oil and most of the session went according to script. What was a tad off-script were the comments out of OPEC concerning the price of crude oil. Sure, the cartel, which controls 40% of the world's supply of crude, has been keener in deflecting blame but it really threw out a doozy yesterday. In addition to calling together all the nations that produce crude, OPEC also wants to meet with countries that use crude, too.
I do appreciate someone finally putting a number on the reasons crude is through the roof. Of course the source is dubious, but OPEC President Chakib Khelil, says he knows the exact source of soaring oil.

  • $40.00 of crude is the result of the weak U.S. dollar.
  • $30.00 of crude is the result of geopolitics, particularly saber rattling with (not from) Iran.

So all we have to do is make nice with Iran and look the other way and find a way to rally the dollar. The former is unlikely to happen but the latter could. There were comments from several quarters that helped to lift the dollar and lower crude.

  • Richard Fisher says we must "come to grips" with the possibility of higher rates.
  • Hank Paulson says the Treasury hasn't rules out any policy option, "including intervention in the foreign exchange market."

Crude oil is so far above its key moving averages that it could slip to $128.00 and just tickle the 20-day moving average (and fill that huge gap soon). I don't even try to think about the upside even with technical tools. At this point everyone is looking for $150.00.

On the downside, if $128.00 fails to hold crude could slide to $123.00. OPEC is saying the price isn't justified, many pundits are saying the move is parabolic and the general public is screaming bloody murder. This is the perfect witch's brew for crude: Shorts are being waylaid and speculators are scoffing at the notion they have so much power. This is a saga that deserves its own reality television show.


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