• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

Jim Cramer: This Strong Dollar Is Biting Deeply Into Apple

Dollar strength is affecting the competitive advantage of U.S. companies around the globe, and it is a more insidious problem that most people recognize.
By JIM CRAMER
Jan 30, 2019 | 07:28 AM EST
Stocks quotes in this article: AAPL, JNJ, MMM, CAT, UTX

The dollar. It's almost always the dollar. We keep on underestimating how strong the dollar is, and concomitantly, how weak every other currency is under the sun. And it is playing havoc like I haven't seen in ages as this earnings season goes along. It's become the number one reason why numbers have to come down when they do come down.

On Tuesday, when I got a chance to interview CEO Tim Cook about Apple's (AAPL) quarter, I was struck by how we all just shrug when we hear the strong dollar hurt sales. It comes with the territory, right? Our ears tend to tune out when we hear it.

But I caution about minimizing or overlooking the impact this strong dollar has when it comes to competitive disadvantage over other products that have similar high price points.

Plus, it's not going away. It's just getting more pronounced. Our rates are higher than most of the developed world. Our growth, while slowing, is still faster than most countries. Our inflation rate, while unsatisfactory to some, remains tame. Our ascendance because of our employment strength and our stable government -- I know it may not seem like that to you, but it sure does if you live or visit so many other countries -- makes the dollar the king, queen and rook of all currencies.

All of that makes the U.S. a magnet for investment, especially for our bonds -- and you have to buy dollars to buy those bonds to complete the virtuous circle for dollar lovers -- and, more germane, the vicious cycle down for trade afficionadoes.

Consequently, we are in a period where the dollar is truly beginning to price our merchandise out of a lot of very important growth markets.

For example, it's difficult to explain the gigantic 27% fall-off for Apple in the Chinese market without referencing the dollar in the mix. How much of the decline is a lack of subsidies by telephone companies? How much of the decline is the rise of nationalism not just in China but globally? The latter is something Tim specifically brought up when I talked about the Chinese people wanting to buy Chinese for a sense of national purpose. How much is the brutal competition from Huawei and Xiaomi and Oppo and Samsung hurting Apple?

And, perhaps least talked about and often ignored, how much has the dollar raised the price of the iPhone iterations above local manufacturers?

I would say it is significant enough to account for more than just three or four percent of that decline, which, when dealing with Apple, is a huge number. Apple does and did have to cut prices to defend itself from the dollar, which hurts gross margin more than analysts are imagining.

That's a story that is untold. We just hear about how Apple can't compete any longer, that it is not innovative enough, that it has lost cache.

To me the larger issue in China is how Apple has not one, but two hands tied behind its back: It is American and it is more expensive than before because of the strong dollar.

The weakness via the dollar crisscrosses the globe. For example, in the Turkish market, the weak lira cost Apple more than $500 million dollars in translation. That's right, just translation. Not nationalism, where President Erdogan has been blasting American goods to no avail. The lira is doing more to defeat Apple than the president ever could. Their numbers in many lesser developed countries with weaker currencies are just eyepopping -- and it sure isn't Apple's fault.

Yet, that's the crux of the problem. Our eyes may glaze over on any chatter about currencies at this point. But we are seeing radically different sets of numbers before and after currency.

Tuesday, for example, I found myself awash in translations for 3M (MMM) to figure out how it really did. Same with Caterpillar (CAT) the day before and United Technologies (UTX) and Johnson & Johnson  (JNJ) the week before for that.

We are getting distortions at mind-numbing levels.

I think it has gotten to the point where if the Fed raises again, we will be at such a competitive disadvantage that we are going to have trade wars all over the place BECAUSE of currency disadvantages.

So you may think our companies aren't doing as well overseas as they used to. I say don't blame ingenuity, blame currency.

It has a lot more to do with it than I have seen in ages -- and it's a much more important factor than anyone, the analysts, the commentators and the thought leaders are making it out to be.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long AAPL and JNJ.

TAGS: Currencies | Earnings | Fundamental Analysis | Investing | Markets | Stocks | World | U.S. Equity | Global Equity

More from Stocks

Updating My Triple Net Active Versus Passive Portfolio

Jonathan Heller
Jan 22, 2021 11:00 AM EST

My belief is that within this deep value pond, an active approach can outperform passive.

What Does Friday's Downside Gap Mean for IBM Stock?

Bruce Kamich
Jan 22, 2021 10:51 AM EST

Let's check out the charts after its fourth-quarter earnings.

Insiders Increase Selling Activity to Last March's Levels

Guy Ortmann
Jan 22, 2021 10:39 AM EST

Charts remain constructive, but some of the psychology levels have intensified their warning signals.

Nano One Materials Is a Rare, Truly Innovative Company

Jim Collins
Jan 22, 2021 10:00 AM EST

It's patented One-Pot process allows for coating of the cathodes of lithium-ion batteries with a cobalt-free, nickel-rich substance.

What's Up With the SPAC Silver Spike Acquisition?

Bruce Kamich
Jan 22, 2021 9:58 AM EST

WM Holdings, a cloud software provider for the cannabis industry, will soon be coming public by a reverse merger with SSPK.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:01 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    I'll discuss price targets in my Saturday column.
  • 07:54 AM EST GARY BERMAN

    Friday Morning Fibocall for 1/22/2021

    SPX (Long-Term View) The 1/21/21 NEW high @ 3861...
  • 11:16 AM EST CHRIS VERSACE

    Worst Stocks to Buy for the Biden Presidency

    Biden's take on the minimum wage, likely moves on ...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login