Apple dipping sauce
Apple reported revenue growth of approximately 5% in 2020. 
In addition, the Apple Store division grew 28%. Without the contribution of this division, which accounts for almost 20% of Apple’s sales (a staggering 78% margins), the company would not have grown. The Apple Store makes particularly good money on app downloads to mobile phones (between 25 and 30% of the cost of the app). Using the unconvincing excuse of wanting to protect the customer from viruses, Apple prevents iPhone owners from downloading the same apps through other providers, despite the fact that the user has already paid lavishly for the phone and its software. In August 2020, Tim Sweeney, CEO of EPIC GAMES, made the company’s games (including the famous Fortnite) available through an alternative source on the web, at a much cheaper price than the price at which such games could be purchased from the Apple Store.
Apple consequently blocked the apps for those games from iPhones. EPIC GAMES sued. The above was already described in a previous newsletter, exactly one year ago, which also contained links to the video released for the occasion by EPIC GAMES and the video from which the latter was inspired, in another famous battle where Apple played the role of David and not Goliath (Goliath being IBM at the time). Why are we still talking about this story? While in the US, Judge Yvonne Gonzalez Rogers is preparing her ruling, expected in the coming weeks, something has happened in South Korea. On Monday 30/08/21 the Korean parliament passed a law allowing users of iPhones (and android phones) to download apps from other providers than the Apple Store (or Google Play). If this were to happen in the US as well, with the long-awaited ruling, Apple would suffer a major blow to its growth, which investors are already predicting. However, the market does not seem to be thinking about this or seems to be particularly positive about the outcome of the ruling, with Apple reaching new highs in recent days. More pessimistic perhaps is Mr Cook, Apple’s CEO, who a few days ago sold $750m of his own stock on the market. Let’s see.
China according to Soros
We try again on China, following an interesting article published in the FT (click here).
The columnist is George Soros, one of the leading figures in global finance. His hedge fund, the Quantum fund, has created more than $40 billion in wealth since its inception in 1973 with exceptional returns. George Soros is the man who in 1991 won against the Bank of England, forcing it to devalue the pound. His approach is macro and so it is always interesting to hear his top-down views. Soros points out in his article that about $5 trillion is invested in passive products that replicate the MSCI All Country World index (ACWI) and that a multiple of that amount is allocated in active products that follow this index. An enormous amount of money. A significant portion of this money follows a declination of the previous index, the MSCI ACWI ESG Leader Index. Here, Alibaba and Tencent are two of the top ten stocks by weight and many more are the Chinese stocks featured here.
Soros goes on to argue that the crackdown on many Chinese companies at the hands of the government in recent months reflects President Xi’s view that the corporate world is instrumental in the pursuit of government strategy. This is extremely bad for the corporate governance of Chinese companies, one of the ESG requirements. If Chinese stocks begin to be excluded from ESG indices because of this, selling pressure from both active and passive investors could be rekindled. If, as some have rumoured, the US government passes a decree targeting Chinese equities, preventing investment in companies without decent corporate governance, then the pressure could become enormous.
We don’t believe much in the second hypothesis. We are more open to the first, and that is a risk. How much this is already reflected in the market is hard to say, but the market tends to exaggerate. Whether or not Soros was heavily invested in the Chinese stocks that collapsed as a result of government pressure and, therefore, whether and how much his analysis is objective and detached is beyond us. Yet, it certainly makes sense.
We remain invested in our Niche ‘the CUB’ (China Under Biden) where the portfolio is made up of Chinese state-owned companies, companies that are already outside the major indices and trading at bargain levels.
Between heaven and earth
This is the title of a beautiful 1993 film by Oliver Stone. 
The film recounts the painful vicissitudes of a Vietnamese woman from 1965 to 1975 during the Vietnam War, her marriage to an American sergeant, her abandonment of her native village, and her subsequent integration into Californian life, ending with the suicide of her husband who, however, is unable to overcome the traumatic experience of war.
A few days ago, Paolo Bronzi, CEO of a prestigious and innovative family office, as well as a former colleague and friend, published an interesting article on LinkedIn (Future Mirror – conquering space – Vector WM) in which he clearly and succinctly explains the potential of the satellite network in which several companies are now investing heavily. At the same time, terrestrial telephone operators are accelerating their investments in the terrestrial network. The point of union between these two networks is that, for the first time, both networks will use the same protocol, 5G. Today, the 4G network and the non-terrestrial network (NTN) use different technologies. The combination of these two networks under the same technology will allow the creation of a truly global network, with very high coverage and very low latency. Opening the way to unprecedented and irresistible applications. To work, study, move, play and communicate as never before. In a new virtual world. Between heaven and earth.
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