Everyone me kevin here look i can't help but feel a little bit jaded jaded all of the banks wells fargo jp. Morgan bank of america all of them 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 thoughts check out the program's link down below use that coupon code before the price goes up and folks we'll see in the next video.