Apple recently announced their latest range of new products. There were no surprises in the line-up given the usual speculation and leaks in the run up to the event. The iPhone range is now topped by the new XS Max with a base price in the US of $1,099 for a larger screen version of its latest phone, and $1,449 for the highest specification version. The price increases over the previous record levels for the X model were the big surprise. However, given the success of the iPhone X which was launched at a premium to the iPhone 8 (launched at the same time), there is clearly a part of the Apple customer base that is price insensitive and likes to acquire the latest technology from Apple at (almost) any price. This seemingly allows Apple to flex its pricing ever upwards. It also helps drive demand for its enhanced Watch which will now contain a heart-rate monitor medically approved by the Food and Drug Administration (FDA). Handy for when Apple bills you for the iPhone and Watch!

For bond holders in Apple, this successful projection of the iPhone as the ultimate luxury good continues to drive strong positive cash flows. This makes the commitment of Apple to reduce its net cash position to zero an ever longer prospect and supports the strong credit rating. It reduces the need to issue bonds which provides better technical support for the outstanding issuance.

It was quipped on the desk that the next model may be called “Max Gouge”.

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