Apple comes clean, leaves investors stuck in the mud

[Bloomberg]( Today’s Agenda - Apple [hasn’t been straight]( with investors about its [big problems](. - Much of Corporate America feels Apple’s pain – especially [luxury brands](. - One [massive pharma deal]( doesn’t mean 2019 will be [another megadeal year](. - With great power comes [great responsibility](, Dems. - Mitt Romney is the [new John McCain](, basically. NOW You Tell Us, Apple America’s corporate sweetheart had a bad day. Apple Inc. stock plunged 10 percent to early-2017 lows, shaving about 100 points off the Dow Jones Industrial Average all by itself. Live by the Apple, die by the Apple. Last night, the company cut its revenue outlook, citing Chinese economic weakness, and CEO Tim Cook declared the smartphone market a shell of its former self. But [none of this should have been such a shock]( to investors, writes Shira Ovide: China’s economy has been in trouble for a while, though Apple executives declared everything fine as recently as November. Yet Apple has been whistling past the smartphone-market graveyard for years, writes Shira, who has herself been warning of it all along, with charts like this one: If you’d listened to her, dear Apple investors, you could have saved yourselves some money and pain. But maybe you believed Apple’s press releases instead – which turned out to be a mistake, Shira writes: “Apple failed in the No. 1 mission of being a public company: being honest with investors about its business.” Read the [whole thing](. For example, Apple said it was completely gobsmacked by the depth of China’s slowdown. But Anjani Trivedi points out Japanese companies such as Fanuc Corp., which make the machines that make iPhones, have been [warning of weakness in China]( since at least last April. One big problem for Apple is that China’s weakness thwarts some of the maneuvers the company has used to keep revenue growing as phone sales stagnate, such as jacking up phone prices, writes Alex Webb. In fact, the [only button that still jolts Apple numbers these days is stock buybacks]( – hardly the hallmark of a growth stock. Cook did say Apple would try to make it easier for customers to upgrade iPhones. But in a second column, Shira Ovide notes Apple already offers plenty of upgrade incentives, and [those haven’t been working](. “I hope Apple has better ideas than this,” she writes. Apple’s Fall Bruises All As mentioned, Apple’s stock collapse [rattled the whole market](. The sell-off got far worse when White House CEA Chairman Kevin “[Dow 36,000](” Hassett said many more American companies [will feel Apple’s pain]( as long as China trade tensions continue. Of course, not all companies will suffer equally, note Sarah Halzack and Andrea Felsted: Nike Inc. and other, more smallish-ticket consumer companies seem to be doing fine in China. But [luxury brands have much more to worry about](, Sarah and Andrea suggest. For one thing, China is increasingly the center of the luxury universe: And Apple’s phones are arguably luxuries; rivals sell similar products for much less. If Chinese consumers are shunning iPhones, then maybe they’re also thinking twice about other splurges, Sarah and Andrea warn. Read the [whole thing](. Merger Thursday It’s not all bad news for Corporate America. Bristol-Myers Squibb Co. bought sleepy little mom-and-pop biotech Celgene Inc. for a mere $74 billion, which Max Nisen [declares is a bargain](. It wasn’t that long ago, he notes, that Celgene was worth $114 billion. With the right management of its pipeline of promising new drugs, it could be a gold mine. It certainly makes Bristol-Myers Squibb suddenly much more interesting. This is the biggest such deal that’s ever happened so early in the year, notes Tara Lachapelle. But rather than signaling a new round of megamergers, this is [probably more like a last hurrah]( after a weirdly long stretch of monster deals: Tara expects a few more big purchases here and there, but mostly these companies will be trying to digest after this feeding frenzy. Read the [whole thing](. The Pelosi Era, Part II Nancy Pelosi today became the first person to [reclaim the title]( of Speaker of the House since Sam Rayburn in 1955. She leads a Democratic majority that is sure to make life miserable for President Donald Trump this year. But Jonathan Bernstein warns Dems [not to abuse their oversight power]( as Republicans did, by chasing conspiracy theories and trying merely to score political points. How Dems handle their newfound status is one of five big questions Jonathan has about them as Pelosi starts swinging the gavel in anger. More Romney Fallout Over in the other legislative body, newly minted Senator Mitt Romney hasn’t gotten a lot of love (publicly anyway) from fellow Republicans for his op-ed chiding Trump. And in fact he may not be able to turn many in his party against the president – but [he should by all means keep trying](, Bloomberg’s editorial board writes: “[A] leader who can help Republicans rediscover the values they used to stand for might make a difference.” One of those formerly held values is defense of the post-World War II international order Trump regularly belittles. Romney’s op-ed has [made him the new John McCain]( – the last GOP defender of that order, writes Hal Brands. Romney lacks McCain’s clout and may not be as effective. But this is a hopeful sign the post-Trump GOP will uphold the international order, suggests Hal. Further Political Reading: While Trump was [tweeting memes]( at her, Elizabeth Warren was quietly [assembling a crack team of Iowa operatives]( that once worked for an array of other Democrats, from Bernie Sanders to Barack Obama. This is the kind of “coalition” campaign that tends to win. – Jonathan Bernstein Telltale Charts Socialism is the hot new thing with the kids these days. Yet while Bolivia may offer an example of how to do socialism right, notes Noah Smith, Venezuela offers [a nightmarish example]( of how to do it wrong. With Americans moving to bigger houses in warm (and getting warmer) locales, electricity use has jumped lately, notes Justin Fox. But the [longer trend in energy demand]( tells a different story: Investors seem to not get what personalized shopping service Stitch Fix Inc. does, exactly. [They’re missing out](, suggests Sarah Halzack. Further Reading Warren Buffett just refinanced floating-rate debt with fixed-rate bonds. That should [tell you something about the direction]( of rates. – Brian Chappatta Super-low bond yields are [sowing the seeds of their eventual destruction]( by attracting a whole bunch of new borrowing. – Marcus Ashworth Last night’s “flash crash” among Asian currencies against a spiking Japanese yen is a [bad omen for Japan’s ability]( to stimulate its economy. – Marcus Ashworth It’s time to accept that we’re never going to be happy with [how speech is policed]( on the Internet. – Tyler Cowen Meet Gunther Glaub, who [in a travesty of justice]( may soon go to prison for constitutionally protected free speech. – Noah Feldman Kickers This year’s color of the year is [living coral](. It turns out Ultima Thule is [a big, 4.6-billion-year-old snowman](. The Domesday Book was [finished later than thought](. Rare duck brought back [from the brink of extinction](. (h/t first four kickers to Chief Duck Correspondent Scott Duke Kominers) Squirrel [enjoys egg roll](. (h/t Alistair Lowe) “Yeet” is one of [several overused words]( you should yeet from your vocabulary. (h/t Mike Smedley) How [not to be stupid](. (h/t Barry Ritholtz’s [newsletter]() Sorry and Thanks: Because I am an objectively bad person, I forgot yesterday to thank Shira Ovide for skillfully handling the newsletter last week and making it look easy. Sorry, Shira. And also, belatedly, thanks, Shira! Note: Please send egg rolls, suggestions and kicker ideas to Mark Gongloff at mgongloff1@bloomberg.net. New to Bloomberg Opinion Today? [Sign up here]( and follow us on [Twitter]( and [Facebook](. [FOLLOW US [Facebook Share]]( [Twitter Share]( SEND TO A FRIEND [Share with a friend] You received this message because you are subscribed to Bloomberg's Bloomberg Opinion Today newsletter. [Unsubscribe]( | [Bloomberg.com]( | [Contact Us]( Bloomberg L.P. 731 Lexington, New York, NY, 10022