Is Apple the Next IBM? (EP.325)

Episode Summary

Executive Summary: A live Animal Spirits episode mixed market commentary, firm operations, and audience banter. The hosts explained what they actually do at Ritholtz Wealth Management, then debated tech dominance, Apple’s lifecycle, Tesla vs. legacy automakers, options market growth, rates, housing, and changing consumer behavior. They closed with media and travel recommendations, keeping the tone humorous and self-aware.

Main Topics: What Ritholtz Wealth Management actually does (Priority: 5/5): The hosts answered a viewer question about how they have time to produce content while working at a wealth management firm, outlining the firm’s staffing structure and their own roles in investment committee work, client meetings, and business operations. Market risks, upside surprises, and the difficulty of forecasting (Priority: 5/5): They discussed Torsten Slok’s downside-risk list and contrasted it with the harder task of identifying upside risks, arguing that positive surprises like AI and a prolonged soft landing are often underappreciated. Big Tech dominance and the 'next IBM' trope (Priority: 5/5): The conversation focused on whether Apple or other tech giants could follow the path of IBM, emphasizing how unusual the last decade has been and how hard it is to apply historical analogies directly to today’s market leaders. Apple, iPhone trends, and product-cycle maturity (Priority: 4/5): They reviewed Apple’s revenue trends, lower average iPhone selling prices, China exposure, and the move from Lightning to USB-C, using Apple as a case study in a mature mega-cap company facing incremental rather than explosive growth. Tesla, Toyota, and the fate of legacy automakers (Priority: 4/5): Using a recent discussion with Nick Colas, they explored the market’s apparent belief that Tesla and Toyota are best positioned for the future, while noting political and industrial realities that may protect Ford and GM longer than the market expects. Market structure: 0DTE options and debt/rates effects (Priority: 4/5): They touched on the rapid growth of zero-days-to-expiration options trading, then shifted to government refinancing needs and corporate interest costs, questioning how much higher rates ultimately feed through to markets and the economy. Housing scarcity, remodeling, and changing consumer tastes (Priority: 4/5): A long housing segment compared U.S. and Canadian housing markets, argued that better information helped reprice desirable real estate, and suggested the U.S. may face a long period of constrained supply and renovation activity.

Key Arguments: The firm can produce lots of content because it has a large supporting staff and dedicated teams; the hosts still do real work through the investment committee, client interaction, and business responsibilities. Downside risks are easier to list than upside risks, but markets are often moved by positive surprises that people failed to anticipate, such as AI and a longer-than-expected soft landing. Comparing today’s mega-cap tech leaders to historical examples like IBM is useful rhetorically but usually oversimplifies because current businesses have different margins, moats, and ecosystems. Apple may be in a more mature phase: revenue has softened, iPhone average selling prices have fallen, and the company is focused on incremental upgrades and ecosystem management rather than disruptive growth. Even if Tesla looks like the future on paper, Ford and GM may be politically protected because of their importance in Michigan and the broader Midwest. The rise of 0DTE options is notable, but available research cited in the show suggests it has not yet produced a clear intraday volatility or price-pattern impact. Housing has been repriced by better information and more visible amenity value; people now place more value on views, location, and design than earlier generations did. The U.S. is unlikely to see a sudden housing supply flood, though aging boomer households and renovation demand could change the market gradually in the 2030s.

Data Points: Ritholtz Wealth Management advisors: 30 - Number of full-time financial advisors at the firm mentioned in response to the viewer question Firm tax team: 4 people - Staffing count cited when describing firm operations 401(k) team: 3 people - Staffing count cited when describing firm operations Traders: 4 - Number of traders at the firm Client service associates: 7 - Staffing count cited during the explanation of the firm’s structure Apple stock performance over 10 years: 28% annual average return with dividends - Used to argue Apple has performed extraordinarily well and may deserve caution in forward expectations IBM stock performance over 10 years: 28% total gain - Compared against broader tech outperformance to illustrate IBM stagnation IBM revenue change over 10 years: -34% - Cited as evidence of IBM’s long-term business decline IBM net income change over 10 years: -88% - Used to show how dramatically IBM’s profitability fell Apple market cap: $135 billion - Mentioned while discussing how much smaller IBM is today relative to modern mega-caps China iPhone units: 40 to 50 million units - Estimated range discussed as Apple’s China exposure Apple iPhone average selling price in U.S.: $948 - Journal-reported figure noted as the first decline since 2017 Apple iPhone sales change last quarter: -2.4% - Cited as evidence of weaker handset demand Top 100 S&P 500 leaders’ survival rate: 99% - Referenced from the M&G chart discussion on how long the biggest companies remain dominant 0DTE options share of total options volume in 2016: 5% - Bank of America chart showing early adoption was minimal 0DTE options share of total options volume now: 43% - Illustrates the rapid growth in same-day expiration options trading U.S. government debt maturing in next year: 31% / $7.6 trillion - Apollo/Lisa Bromowitz statistic about refinancing pressure Corporate net interest payments: -30% year over year - Shown in a chart comparing rising Fed funds rates with falling corporate net interest costs Canadian mortgage rate example: 1.6% - Listener example of a fixed mortgage rate in Canada Canadian housing price growth vs disposable income since 1975: Large divergence - Described as real house prices rising far faster than incomes in Canada U.S. housing price growth vs disposable income: Roughly tracked income - Contrasted with Canada to show a more balanced long-term pattern 0% credit card offer credit limit: $15,000 - Host’s approved limit on a promotional 0% card 0% credit card introductory period: 21 months - Duration of the promotional rate mentioned by the host

Pivotal Quotes: "We actually do do stuff." — Michael/Ben: Response to questions about whether the hosts do real work beyond media content "The 12 most dangerous words in investing are it's different this time." — Michael: Discussion of historical analogies, megacap dominance, and why investors overreact to new eras "The market is saying that only Tesla and Toyota will be around in 20 years." — Nick Colas (as quoted by the hosts): Used in the debate over the future of automakers and the survival of legacy manufacturers

Implications: The episode reinforces that today’s market is being shaped by mega-cap concentration, tech-led deflationary forces, and persistent housing scarcity. Investors should be skeptical of simple historical analogies, watch for policy/fiscal risks, and recognize that structural winners may stay dominant longer than expected.