Investors in GM need to be worried today. The company has a potentially VW-sized scandal brewing. A new lawsuit from the owners of over 705,000 GM trucks alleges that the company used “defeat devices” to cheat on emissions tests just like VW. The suit alleges the environmental damage, wrought by GM using such devices on two models of truck, could surpass that of VW’s infraction. Emissions were alleged to be two to five times the legal limit, and the case was filed at home in Detroit. GM is denying the claims they call “baseless” and says they will vigorously defend themselves.
FINSUM: In our view a suit of this size would probably not be brought if there was not some evidence to back up the claims. This makes us believe this scandal will grow.
Many are considering whether the current 8-year bull market may be on its last legs. One of the key warning signs for bull markets has been that towards the end, small groups of stocks tend to create the majority of gains. That is currently occurring as tech stocks surge, but Barron’s dismisses the idea, saying that just because it is happening, it does not mean stocks will fall. The reason why Barron’s dismisses the argument is that the last 20+ years of market performance shows that it is perfectly normal that a small handful of stocks provide the bulk of gains in the market, so it is not on its own a troubling signal.
FINSUM: This is a good point to make as the market (and journalists) spend a lot of time worrying about concentrated gains, when in reality they have proven quite common and do not seem to be an indicator of much.
Here are two simple pieces of math: firstly, Apple is currently valued at around $800 bn; secondly, many analysts expect it to rise by 25% in coming months. That means many on Wall Street see Apple becoming the first $1 tn company. There appear to be three key factors which could propel the stock to $1 tn. These are the prospect for higher iPhone prices, increased profitability as “services” become a bigger part of the company’s performance, and more share repurchases. Apple is already the first company worth $800bn. To put its size in perspective, consider that it is worth approximately 60 Twitters.
FINSUM: If the iPhone 8 is as big a splash as it seems like it will be, we wholly expect the stock to reach a $1 tn valuation.