we're being lied to.

hey everyone me kevin here look i can't

help but feel a little bit jaded all of

the banks wells fargo jp morgan bank of

america all of them told us hey even

though we got economic headwinds the

consumer is in great shape in fact jamie

dimon says quote and the consumer well i

feel like a broken record the consumer

right now is in great shape so even we

go in a recession they're entering the

consumer they're entering that recession

with less leverage in far better shape

than they've ever been in such as in

2008 and 2009 and in far better shape

than they were even in 2020 jobs are

plentiful and now of course jobs may

disappear things happen

but they're in very good shape and

obviously when you have recessions it

affects consumer income and consumer

credit and bank of america told us hey

we might have four quarters of negative

gdp but the consumer is doing very very

strongly wells fargo told us the same

thing

but why then if the consumers doing so

well

and this is sussing me out a little bit

is apple being so weird about the

consumer now i don't want to suggest

even though that is somewhat what's

being implied here that apple is the

definition of the consumer right

and so that's why it's also important i

think that we start with with some

statistics to make sure that that you

know that i'm not just considering apple

here uh and so we'll talk credit card

volumes and i'm going to talk to you

about something that sustains me out

with apple so

first credit card volumes uh are up

from uh well they've decelerated a

little bit but at q1 quarter over well

year over year from q1 so q1 2022 to q1

at 2021

credit card and debit card volume was up

21

that's decelerated to 15

year over year in q2 but that's still

nearly twice what inflation is so even

though inflation is let's say eight

percent we're still seeing nearly twice

the level of inflation as an increase in

debit and credit card spend the bulk of

that by the way is credit card spend

debit card spends only up about four

percent and this is based on bank of

america securities that gives us this

research as published on july 14th so

just a few days ago on credit uh spend

here and uh debit spend which is really

really important to look at that that

the consumer is still spending money

so what then is sussing me out right

well what's sussing me out is

yesterday

apple tells us that oh we're gonna

not hire as much because we're uncertain

about the economy going forward and

we're going to cut spending on certain

teams but we're still going to maintain

our product roadmap now this was

reported by bloomberg bloomberg broke

the story based on conversations with

confidential sources at apple so apple

didn't officially make this statement

right but

what's fascinating is it's very

interesting to go back to a tweet that i

made and you could go back and look at

this but it's on may 8 2022 i tweeted

the following apple executives were

asked three times to answer how demand

from consumers is changing

apple dodged the question

three times

not good i wrote and then i wrote that i

had actually sold my apple state and so

what i think is so fascinating about it

this is

on one hand you have the consumer still

spending a lot of money uh clearly we're

seeing consumer spending still positive

on consumer growth spending numbers

retail sales data was actually pretty

strong and we're seeing that gain in uh

in year over year spending whether it's

through debit cards or credit cards

we're still seeing that and it's

outpacing inflation the banks are

telling us the consumers are strong

and we're seeing balances in all

quartiles of consumer incomes inflect up

in just the last two weeks do you think

we're going into a recession you know

people are maybe worried maybe their

incomes would be going down but no

people are either still getting paid

more or

they're pulling money out of somewhere

to increase their bank balances and and

still fund net purchases in the stock

market which we're also still seeing

inflows into markets and now we're

seeing inflows into crypto so it's like

i i don't know where this whole

narrative of of the super weak consumer

is coming from

but

somebody must be lying because it

doesn't make sense to me that apple is

super nervous and now cutting again

unless for some reason people just don't

like apple or something anymore

and yet the banks are saying strong

consumer

balances are going up

and spending's going up and this is

where what i want to do is i want to

just go through that earnings statement

that that little

earnings report where we got our first

red flag and i think it's a learning

lesson

so i'm going to read that

so katie one of the analysts says

congrats on the quarter this is q1 a

couple of macro related questions just

given everything that's going on in the

market this is three months ago right

the first is how you're thinking about

the consumer spending as we see more

stock market volatility rising interest

rates inflation and what metrics you're

watching either internal to your

business or external to understand

whether you'll ultimately see a demand

impact particularly on the product side

of your business tim cook

katie hi it's tim we're obviously

monitoring our daily sales very closely

hmm okay if you're monitoring your daily

sales very closely then all of a sudden

you're cutting your staff clearly you're

probably seeing something happen here

but tim cook goes on to say from an

inflation point of view we are seeing

inflation it is or was evident in our

gross margin last quarter and in our

opex last quarter and it is assumed in

guidance that luca gave for this quarter

as well so we're definitely seeing some

level of inflation that everyone's seen

okay everybody's seeing inflation and

apple's regularly talked about inflation

that they're seeing in freight but total

dodge on a very clear question how

you're thinking about consumer spending

particularly on the product side of the

business what metrics you're watching

the only thing you talked about was

inflation which i understand that could

be argued as is is

a metric fine maybe that could be a pass

on that

so katie comes back

and how are just as a follow-up to that

how are you thinking that might impact

either the consumers in your business

and whether it influences their ability

to purchase at the same level in other

words she literally just restated the

same question because again the first

one was a dodge he says well we're

monitoring that very closely and we've

sort of right but right now our main

focus frankly speaking is on the supply

side

again going back to freight and that

freight based inflation so second dodge

then katie okay and as it relates to

that in china how should we think about

the lockdowns from an impact on supply

and an impact on demand

third

question and what products in your

portfolio should we expect to see most

impacted yes good question for q2 we

just finished restrictions in china blah

blah blah and so in q2 we did have

supply chain constraints they were

significantly lower than what we had

experienced during december driven by

industry-wide silicon

shortages but looking ahead we have two

causes of supply chain constraints and

we're gonna have a four to eight billion

dollar uh constraint because of that

blah blah blah that's it then ends

no commentary at all on demand that's

folks three times

tim cook was asked about demand

he says oh we're watching demand very

very closely gives no hint at all

three times in an earnings call and

dodges it three times

then three months later we hear oh all

of a sudden you're slowing hiring and uh

you're gonna slow investment spend on

some of your teams

folks

like this confuses me and and what one

of the things that i always say and we

talk about this in the

course member streams as well when we do

fundamental analysis you have to

remember uh these companies

are trying to sell their stock that's

pretty loud i don't know if you can hear

that

hello that's the sign swagging

you call one one two and then the

returns

comes some people call it a cranking

wagon

anyway uh rescue wagon or sick wagon

whatever you want anyway let's let's

walk so the the way to wrap this up is

really just to think

somebody's not telling us the truth

either the banks aren't telling us the

truth because

they want their stocks propped up

because they want investors to think oh

well people are still spending on cards

and as long as people are still spending

on cards then maybe loan growth will go

up

or

it's companies that don't want to admit

that consumers are going to slow down on

spending because they want their stock

to remain strong for their employees so

that stock-based compensation is

valuable to them right and their

employees are happy their existing

employees feel more productive whatever

right

maybe

uh or here's another potential reality

maybe apple is a leading indicator that

maybe the banks are right maybe in the

last six months the consumer spending

has still been strong and the consumers

have been great and this is probably the

bigger warning right maybe

apple in just the last couple weeks is

actually finally starting to see the

consumer slowdown that the banks are not

seeing yet or not talking about yet and

so maybe

apple is actually a leading indicator

that finally we're going to see the

consumer spending slowed down and that's

actually what's going to create the

recession going into q3 uh and

potentially q4 as we get our second

quarter of negative

thoughts i think it's a warning i think

it's a lesson in terms of when we look

at earnings calls and how companies

operate how uh

chief executive officers or whatever

ceos cfos how they can sort of cherry

pick data to to uh

suggest that their company's still doing

great you should buy their stock when

the reality is that the day-to-day

fluctuations are actually a red flag my

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