Tag Archives: AAPL

The Biggest Stock Bubble In U.S. History

Please note, many will argue that the p/e ratio on the S&P 500 was higher in 1999 than it is now. However, there’s two problems with the comparison. First, when there is no “e,” price does not matter. Many of the tech stocks in the SPX in 1999 did not have any earnings and never had a chance to produce earnings because many of them went out of business. However – and I’ve been saying this for quite some time and I’m finally seeing a few others make the same assertion – if you adjust the current earnings of the companies in SPX using the GAAP accounting standards in force in 1999, the current earnings in aggregate would likely be cut at least in half. And thus, the current p/e ratio expressed in 1999 earnings terms likely would be at least as high as the p/e ratio in 1999, if not higher. (Changes to GAAP have made it easier for companies to create non-cash earnings, reclassify and capitalize expenses, stretch out depreciation and pension funding costs, etc).

We talk about the tech bubble that fomented in the late 1990’s that resulted in an 85% (roughly) decline on the NASDAQ. Currently the five highest valued stocks by market cap are tech stocks: AAPL, GOOG, MSFT, AMZN and FB. Combined, these five stocks make-up nearly 10% of the total value of the entire stock market.

Money from the public poured into ETFs at record pace in February. The majority of it into S&P 500 ETFs which then have to put that money proportionately by market value into each of the S&P 500 stocks.   Thus when cash pours into SPX funds like this, a large rise in the the top five stocks by market cap listed above becomes a self-fulfilling prophecy. The price rise in these stocks has nothing remotely to do with fundamentals. Take Microsoft, for example (MSFT). Last Friday the pom-poms were waving on Fox Business because MSFT hit an all-time high. This is in spite of the fact that MSFT’s revenues dropped 8.8% from 2015 to 2016 and its gross margin plunged 13.2%. So much for fundamentals.

In addition to the onslaught of retail cash moving blindly into stocks, margin debt on the NYSE hit an all-time high in February. Both the cash flow and margin debt statistics are flashing a big red warning signal, as this only occurs when the public becomes blind to risk and and bet that stocks can only go up. As I’ve said before, this is by far the most dangerous stock market in my professional lifetime (32 years, not including my high years spent reading my father’s Wall Street Journal everyday and playing penny stocks).

Perhaps the loudest bell ringing and signaling a top is the market’s valuation of Tesla.  On Monday the market cap of Tesla ($49 billion) surpassed Ford’s market cap  ($45 billion) despite the fact that Tesla deliver 79 thousand cars in 2016 while Ford delivered 2.6 million.    “Electric Jeff” (as a good friend of mine calls Elon Musk, in reference to Jeff Bezos) was on Twitter Monday taunting short sellers.  At best his behavior can be called “gauche.”   Musk, similar to Bezos, is a masterful stock operator.   Jordan Belfort (the “Wolf of Wall Street”) was a small-time dime store thief compared to Musk and Bezos.

Tesla has never made money and never will make money.  Next to Amazon, it’s the biggest Ponzi scheme in U.S. history.  Without the massive tax credits given to the first 200,000 buyers of Tesla vehicles,  the Company would likely be out of business by now.

Once again the public has been seduced into throwing money blindly at anything that moves in the stock market, chasing dreams of risk-free wealth.  99% of them will never take money off the table and will lose everything when this bubble bursts.  And only the biggest stock bubble in history is capable of enabling operators like Musk and Bezos to reap extraordinary wealth at the expense of the public.   The bell is ringing, perhaps Musk unwittingly rang it on Monday with hubris.  The only question that remains pertains to timing…

If you are looking for ideas to take advantage of the inevitable stock market implosion, try out my Short Seller’s Journal.  It’s a weekly subscription newsletter delivered PDF form via email that drills down into the latest economic data and presents short-sell and put option ideas.  You can find out more and subscribe using this link:  Short Seller’s Journal information.

There’s Lies, Statistics And Apple Corporation

Apple announced earlier this week that its “initial quantities” of the new iPhone 7+ had already sold out.  Of course, it also announced a new policy in which it would not would disclose the first weekend sales volume of the new iPhone.  Nothing like using opacity to boost the use of propaganda.

On the news that the new phone had “sold out,” Apple’s stock went parabolic, running up 13.5% in four trading sessions.  Coincidentally, or not coincidentally, AAPL’s price surge this week helped the Fed prop up the S&P 500 and Dow.  By the way, AAPL’s revenues are now declining every quarter.

But it appears that the iPhone’s first day in stores is a complete dud.  Perhaps the most entertaining anecdote was the post on Zerohedge with several twitter posts showing no lines whatsoever outside of several mobile phone shops around New York City:  Sold Out?  USA Today wrote an article which contrasts the move in AAPL with the apparent lack of demand for the new product:  Apple Shares On Fire; iPhone Lined Decidedly Chill.

A colleague of mine told me this morning that he received an email from Apple informing him that if he trades in his old iPhone he can buy  a new IPhone 7 for $249.   The retail list price $699.

Companies do not sell a product with a list-price of $700 for $250 if there is high demand for that product or if that product is sold-out. 

Apple has transformed from the country’s most respected corporation into the same bag of lies, propaganda and fraud that has enveloped the entire financial, political and economic system.

Sure, Tim (Apple CEO), your new iPhone is sold-out just like Hillary Clinton is perfectly fit to run for President…

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The S&P 500 Is Set Up To Crash

Let me preface this commentary with the proviso that none of us has any idea the extent to which the Fed and the Working Group On Financial Markets, which has its offices in the same building as the NY Fed, has the ability to prevent a stock market accident.

Having said that, a large portion of the stock market has been in a tail-spin. The Dow Jones Transports Index is down over 18% from its peak last November; the SPDR retail ETF, XRT, is down 15% from mid-July this year; the iShares Biotech ETF, IBB, is down 18% since its high close in mid-July – perhaps ironically one day after XRT closed at its high; AAPL is down 20.3% from its February 23, 2015 all-time high – technically AAPL is now in a bear market; Dow Jones homebuilder/construction index, DJUSHB, is down over 10% from its high close (not even close to all-time high) in August – notwithstanding all the other fundamental headwinds starting blow at housing with full force, hiking interest rates will act like a roadside bomb on the housing market.

The point here is that many sub-sectors of the NYSE, sectors which had been extraordinarily hot as Untitled1stock trades, are now reflecting the truth about the deteriorating condition of the U.S. economy. (click on image to enlarge).

We can dissect the debate over the reasons why the Fed has decided to start “normalizing” – whatever that means – interest rates now. The fact of the matter is that it is impossible to know for sure why the Fed decided to nudge the Fed funds rate up by one-quarter of one percent. What we know based on reams of empirical evidence is that the U.S. economy is now collapsing at the rate it was collapsing in 2008/2009. Unless the FOMC is completely brain-dead – a consideration I would not fully dismiss – the Fed must have had some ulterior for setting a posture of tighter monetary policy.

With the high yield, and now investment grade, bond sectors imploding (I suggested over 2 weeks ago that the virus infecting the junk bond market would spread to investment grade), the next part of the capital structure that will be attacked is the equity “layer.” Many of you might have missed this news release yesterday:  Fed Votes To Limit Bailouts. The Fed is now restricted legally in the scope of its ability to prop up crashing banks.  There has to be a reason this legal restraint was allowed to be executed, because certainly the big banks and the Fed had the ability to derail it.  Perhaps it’s just putting window dressing on impending market developments that the Fed is now powerless to prevent anyway.

I have suggested for quite some time that eventually the natural forces of the market could not be prevented from seizing the S&P 500 and pulling it down to a level that reflects the true underlying economic and fundamental conditions from which markets derive their intrinsic over long periods of time.  History has already shown us many times that market interventions never work indefinitely.  Just ask OPEC.

Again, it’s impossible to time the markets perfectly, but the probability of a big downside event in the stock market is now highly skewed in the favor of those who set up their market bets to take advantage of the coming downside action.  My SHORT SELLER’S JOURNAL is a weekly subscription service, delivered to your email on Sunday night or Monday morning, is a market briefing with two ideas for shorting the market.  I also include some market comments not covered in this blog.

This week I will be featuring a financial stock and some interesting information on the housing market that you won’t see anywhere – at least not at this point.  You can subscribe to this service by clicking here:   SHORT SELLER’S JOURNAL.  If you subscribe by Sunday afternoon, you’ll get last week’s report plus this upcoming report.

This Could Trigger The Start Of A Stock Market Avalanche

As reported in Zerohedge today, JP Morgan has cut its estimates for Apple’s iPhone sales for Q1  2016 by 10%.   JPM also believes that its Q1 estimates may be too high:

November sales signal signs of early weakness of Phone 6S cycle…1Q16 bears potential downside risks, while 2Q16 Street estimates seem unrealistic: Although the Street has lowered its expectations on the Apple supply chain, we still see downside risk to 1Q16 consensus numbers of 50-55mn units. TSMC saw 10% order cuts in November, which we believe is from Apple business with the impact during the end of 1Q16 or early 2Q.  – JPM analyst comments sourced from Zerohedge 

Recently several Wall Street banks have been reporting a considerable decline in orders received by AAPL suppliers.  This clearly translates into Apple’s expectation for a slow-down in end-user iPhone sales.   It was bound to happen eventually.   “Eventually” is now.

The Apple iPhone story has been one of the key sources of the helium that has inflated the stock market bubble.  Keep in mind that it doesn’t take a big brain to figure out that iPhone sales are slowing.  It’s the Law of Diminishing Returns engulfing the iPhone fad.  It is also likely that the JP Morgan analyst is taking the lead in lowering the bar for Apple in order to facilitate an earnings “beat,” albeit on lower revenues and earnings.

However, any meaningful slowdown or decline in Apple’s unit sales, revenues and margins will trigger heavy selling by the hedge fund universe.  AAPL is one of the primary non-FANG stocks being used by the Fed to manipulate the stock market.  Evidence of this is the large position in Apple taken by the Swiss National Bank, likely at the Fed’s encouragement.

The stock market grows more fertile by the day with opportunities to make money as the bubble pops and irrationally overvalued stocks begin to plummet.  My SHORT SELLER’S JOURNAL is a monthly subscription service that will be delivered to your email weekly.  Each issue will contain a brief market summary from my viewpoint and offer at least one short-sell idea plus some trading suggestions.  Click HERE on the link just above to subscribe to my unique newsletter which will help you make money as the stock craters.

NYSE Will Suspend Trading If S&P 500 Drops 7%

Comment from a reader who took advantage of my AMZN report: “Dave: sold 1/2 of my amazon Jan, 16 puts, thx man”

From Bloomberg:   If losses in the U.S. stock market worsen, keep in mind there might be a 15-minute break. The New York Stock Exchange said it will halt trading for 15 minutes if the Standard & Poor’s 500 Index drops 7 percent.

The stock exchange will pause trading if the benchmark for U.S. equities slumps to 1,832.92 before 3:25 p.m. New York time, Sara Rich, a NYSE spokeswoman said in an e-mail. The S&P 500 slid 3.9 percent to 1,894.93 at 9:42 a.m. in New York as markets were convulsed by a surge in selling.

Trading will stop for a second time if the gauge extends its losses to 13 percent before 3:25 p.m. If the plunge reaches 20 percent at any point during today’s session, NYSE will shut the market for the rest of the day.

Let’s see if the NY Fed and the Exchange Stabilization Fund – the Plunge Protection Team – can hold this up and prevent major embarrassment on the world’s stage.   Halting the market will make it worse because every time they re-open, anyone with half a brain cell left will try to sell.

Anyone out there brave enough to buy the dip?  C’mon dip buyers…

Something Snapped Again Behind “The Curtain”

While the movement in AAPL stock may have affected the first 30 minutes of trading in the NYSE, about 30 minutes ago the SPX fell of a cliff while AAPL remained largely unchanged. While financial tv clowns might attribute the sell-off to the Atlanta Fed’s Lockhart issuing a statement that September is the right time to raise rates, that was not the catalyst – click to enlarge:

Snapped

The Fed mannequins are now seen as “the boy who cried wolf.”  Only this cry has been going on for over two years now.  The market is immune to the good cop/bad cop routine.

Furthermore, you’ll note that the SPX also gapped down around 10:30 EST, again on no apparent news triggers.  This was well before Lockhart had to chance to memorize and rehearse his rate-hike comment.

Not only did stocks gap down twice today without any help lower from AAPL, but the price of oil has crashed through $50 in the last week and a half and appears to be headed to $40, if not lower.

Perhaps the recent plunge in AAPL stock is a reminder to momentum chasers that markets always have a way of moving in two directions and not just “up.”  Certainly the economic news continues to get worse and two homebuilders “missed” their highly managed revenue and income bogeys this morning.

No doubt the Fed will catch the knife again today – just like it did yesterday.  But the warning signal has been sent and there’s nothing Janet and Stanley can do about that.

Reality has funny way of hitting us in the back of the head when we least expect it.  How many of you were aware that a domestic revolt is brewing in Spain or that the Spanish financial system is one-step removed from sliding down the avalanche chute behind Greece?   If you only follow U.S. mainstream news you are unaware of a significant amount of realities hurtling toward the U.S. financial, economic and political system.

I mentioned in April based on some data from Fed – data that is well-hidden, arcane, and well-above the intellectual capacity of U.S. financial media – that a derivatives accident of some sort occurred behind “the curtain” in December.  I believe the sell-off in AAPL and the sudden waterfall sell-offs in the SPX may be just one of the ripple effects we’re seeing related to whatever occurred in December.

Of course, please ignore the collapsing price of oil…after all, that has nothing to do with economic demand – or lack thereof…Perhaps that train in that slow motion train wreck we’re observing has started to accelerate.

 

“AAPL Is Crashing – It May Be Over”

We’re dying to see Icahn’s next filing on Apple. The fact that Carl has not Tweeted anything on Apple since June 24 is interesting. – The King Report, M. Ramsey Securities, Aug 4, 2015

AAPL has been by far the biggest contributor to the run-up in the stock market since the Fed began printing trillions of dollars to save the big banks and reinflate every paper-fueled financial bubble that has infected our economic system since the mid-1990’s. While everyone points to Bernanke as being the “king of the printing press,” the Maestro himself, Alan Greenspan, worked his “maestro-ism” by pressing down hard on the money-printing accelerator in order to “fix” every big financial collapse since the 1987 stock market plunge.

Now one-by-one the bubbles are popping. EU sovereign debt and the Chinese financial system are clearly the most visible for the time being.  It also looks like the pancreatic financial cancer that took down Greece has now invaded Spain.

But the bubble-popping pin is also starting to invade the U.S. economy. One has to wonder if the Obama Government will invoke the “national security clause” of the Patriot Act and try to incarcerate the bubble-popping-pin without a judicial hearing at Guantanamo (the Guantanamo that Obama promised to close after he was elected in 2008). Maybe Wesley Clark will suggest putting the bubble-pin in an internment camp…

The poster-child for the U.S. financial system bubble has been AAPL.  Aside from Carl Icahn pimping his big position in the stock for a few years, Wall Street money slaves have tripped over themselves to drool over the Company’s overpriced cellphones and computers.  Not only is the price of AAPL stock a bubble, but it is a bubble in marketing, shameless promotion and the amount of unused tech gadget computer power for which the AAPL cult adherents happily pay – often with credit.

While no one knows which coming event will ultimately crash the U.S. financial system, the economy is clearly receding deeper into recession.  The GDP bounce reported for Q2 is nothing more than statistical smoke and mirrors fabricated by Government statisticians and Orwellian propaganda.  Every private-sector economic metric is now showing declines further into negative territory.  Today, for instance, factory orders plunged for the 8th month in a row, down 6.2% for June vs. June 2014.

Along with the deteriorating economy, the dislocation between the fiction of stock market valuations and the reality of Main Street continues to widen.  This will not have a happy ending.  The law of “regression to the mean” will at some point assert itself in brutal fashion and the multiple paper-fueled financial bubbles blown by the Fed will pop and decimate our entire system.

I doubt AAPL will be the trigger, but anyone blindly bullish on the stock market has to take notice of the 15% plunge in AAPL’s stock since its recent all time high:

AAPL

With Carl Icahn likely selling furiously, if not out of his position entirely, and every large hedge fund over-weighted in AAPL, who will catch the falling knife?  If the Fed or the Swiss National Bank does not insert a safety-net – and it appears as if the SNB is already filled on AAPL paper – AAPL has a long way to fall before it reaches a fundamental price that makes any sense.  Of course, the same can be said for the entire stock market…

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Apple To Buy Up To 30% Of The World’s Annual Gold Production?

Technology giant Apple (NASDAQ:AAPL) may soon buy up one third of the world’s gold in order to meet the demands of its highly anticipated Apple Watch, according to reports.  – Mining.com link

Apple is planning on producing 1 million units per month of its new gold iWatch beginning in Q2 2015.  According to sources each watch will contain 2 ozs of gold.  If you extrapolate out, that translates into 746 tonnes of gold per year – roughly 30% of world annual gold mine production.

Even if Apple’s sales of this watch – which apparently has very heavy demand in China – fall short of Apple’s business plan by 50%, it means that Apple will become one of the largest buyers of gold in the world.   This will place a lot more stress on the U.S./UK/EU Governments’ absurdly overleveraged fractional paper bullion scheme

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