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Time to Get Real?

ilene's picture




 

Time to Get Real?

By Phil of Phil's Stock World

Do you REALLY think this will go on forever?

On the right is the AAPL quarterly chart but it could also be the quarterly chart of SHLD, NFLX, FOSL, STX or PCLN (Bespoke Chart), all of which are up more than AAPL (which is up 50%) in 2012.

We've discussed PCLN as one of my favorite shorts and we had a good discussion in Member chat last night comparing PCLN to EXPE, which drops the same amount of cash to the bottom line (before buybacks and dividends) but has just 1/8th of the market cap of PCLN.   

Sure you can say that PCLN is twice as good as EXPE (it isn't, but you can say it). But can you say it's 4 times as good? How about 8 times? EXPE nets $500M a year - 8 times that is $4Bn - more money than the entire travel sector makes!  How, exactly, will PCLN grow into that valuation?  Eliminate all competition and then grow the sector by 50%?  

Yes, that's pretty much what AAPL did but how many AAPLs can you have in one market?  

 

 

THAT is the problem, my friends. Aside from the macro concerns we discussed in yesterday's post, we have a sort of value mania that is driven by the very real success of one company, much the way we had a dot com boom in the late 90s driven by the very real success of just a few companies. Back then, everyone was the next QCOM, YHOO, MSFT, CSCO - whichever category you were supposed to be the best.  Qualcomm, in fact, was the best performing tech stock of 1999, gaining 2,619% that year and finishing right about $100. By the end of July, 2002, it was trading at $10, but hey, what a ride!  

In fact, here's the CNet story from Dec 29th, 1999 titled "Qualcomm Jumps on $1,000 Price Target" and coming on the heels of "Qualcomm to offer Net2Phone services in Eudora."  It's no wonder people were super-excited!  AMZN was "only" up 25% that year to $100 but Jeff Bezos was Time's Man of the Year and yes, its business has been growing at an amazing rate for the past 12 years and it has crushed its competition and dominated the sector - and gained less than 6% a year for their troubles.  

 

What else was up huge in 1999?  Well I can't even use their symbols because some don't even exist anymore (yet all were over $1Bn, not small caps) but they were BroadVision (1,494%), Metricom (1,416%), Ortel (1,271%), VeriSign (1,192%), ARM Holdings (1,171%), BEA Systems (1,042%), DoubleClick (1,037%), Emulex (1,025%) and InfoSpace (1,023%). So maybe AAPL up just 50% is a chance to get in early!   

The two worst performers of 1999 were IM, which dropped 63% to $10 but is up 80% since then, and XRX, which fell 62% to $20 and never did recover. Long-Term, the market doesn't know a thing!  In the short-run, we can play PCLN, FOSL, NFLX or the CMG but don't delude yourself that these are long-term investments - that's how fortunes get lost...

Meanwhile, the real question is - are we in late 1999 and about to get a major shock of cold water thrown in our faces or are we in late 1998 and taking a pause that refreshes before the real fireworks begin?  

The bull case is all about recovery, which we're just not seeing on a Global basis (and even the US is debatable) and INFLATION.

Inflation I consider a good reason to bet AAPL can go to $1,000 - because $1,000 is how much a new IPhone will cost once inflation takes hold and it's very likely it will take hold as the supply of money, world-wide, is through the roof - up over 100% since 2007.  

The problem is that money is not moving (no velocity) so the economy is not growing.  Until we see the money move through the broad economy (wage increases, interest rates rising), we're not going to have inflation that sticks because the consumer is out of money.  

How will PCLN (now $704) take over the entire travel sector AND increase sector revenues and profits by 50% if the consumer is out of money?  That's why PCLN strikes me as particularly vulnerable - it depends on the bottom 90% traveling and the company has been benefiting from a recovery in top 10% travel and higher airfares but, like gas prices - we are hitting a wall at how much money the average consumer can afford to pay.  We're already seeing drastic cutbacks in fuel consumption (see yesterday's post) and David Rosenberg postulates that the only thing that saved the economy in January and February this year was a mild winter - now that we hit driving season, where is $80 per tank going to come from?  

In my Morning Alert to Members yesterday, I put up an aggressive DDM ($69.66) spread for playing the Dow if it ever gets back over 13,200, playing it to hold that line through May for 500-1,000% gains.  Nearer the close, we were discussing what to do if inflation does kick in and I laid out another way we can play the Dow over 13,200, looking for another 50% move in the Dow over the next two years:  

When wage inflation does kick off an inflationary cycle, you won't have missed much as we're talking Dow 20,000+ so, if you are dying to buy, the DIA 2014 $160 calls are $1.80 and you can offset 10 of those ($1,800) with the sale of 3 $80 puts at $2.90 ($870) for net $930 and a $2.5K margin commitment. That way, if the Dow pops up to 20,000 as suddenly as you fear, you'll collect $40,000 for your troubles. Worst case is the Dow crashes and you are long 3,000 DIA at net $89.30 and if you aren't willing to be long at Dow 8,930 (32% down from here) – you'd better re-check that bullish premise.

This is a point I keep trying to make - if we are, in fact, heading into a 1998-1999 style rally, we're not going to miss very much by failing to participate in the initial break-out.  If you missed the first doubling of BRCM in 1999, it was OK, as it doubled 5 more times by the end of the year. YHOO went up 4x in 6 months AFTER it doubled at the beginning of the year (now 1/10th of where it was). IF the rally is real, IF the Global recovery is real - then we will see broad, deep participation and will have many, many opportunities to get more bullish. But, if it's all an illusion and about to blow up in our faces, then Cash will be King - and that is how I prefer to play it at the moment.  

We had our usual fun shorting oil yesterday (and this morning) as we got not one but two spikes to $107.50 that we caught for nice short moves in Member Chat and now (9:15 am), we're getting a very nice move down to our $105 target so congrats to all the players and a big thank you to all the evil bastards who tried to manipulate the NYMEX yesterday and gave us a perfect entry at the top! My commentary to Members is noted on the chart to the left.  

We're also getting a winner off my Russell call this morning as that index is already down to 816 in the Futures but nowhere near as exciting as oil, which is down to $104.79 - as I am writing this and just ahead of the bell.  

Will this be the beginning of the big sell-off I predicted on March 5th? After being wrong for two weeks - it's way too early to declare victory based on a one-day pullback and I am still trying to get into that bullish mindframe and will be more so if our technicals hold up on this pullback but, meanwhile, I still see many, many reasons to stay cashy and cautious at the moment.  

Life of Illusion

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Fri, 03/23/2012 - 09:32 | 2283103 AN0NYM0US
AN0NYM0US's picture

All I know is that the Captain has made a gazillion on his PriceLine deal, and an analyst was out yesterday saying it will hit $1000 before Apple. 

 

http://blogs.barrons.com/techtraderdaily/2012/03/22/priceline-piper-sees...

Fri, 03/23/2012 - 09:04 | 2283028 orangedrinkandchips
orangedrinkandchips's picture

First, Joe's song is a classic....life of illusion! POW! RIGHT BETWEEN THE EYES.....He is talking about the fucking market...no doubt.

 

Secondly, SHLD....of COURSE it will zing straight up...From Halloween to the first week of the year you had maybe 5 up days and all down days....

YOU KNOW THAT CROOKED COCKSUCKER EDDIE WILL NOT LIE THERE IDLE!

You know that he will buy this shit up...not to mention with a RSI in the lower teens....it's not a bad idea to load up.....

 

PCLN....what a joke! 1999 all over again....

 

 

Fri, 03/23/2012 - 07:53 | 2282865 johnQpublic
johnQpublic's picture

A measure of wheat for a penny - The chaenix here mentioned was a measure of dry things; and although the capacity is not exactly known, yet it is generally agreed that it contained as much as one man could consume in a day; and a penny, the Roman denarius, was the ordinary pay of a laborer. So it appears that in this scarcity each might be able to obtain a bare subsistence by his daily labor; but a man could not, in such cases, provide for a family.

 

And I heard a voice in the midst of the four beasts say, A measure of wheat for a penny, and three measures of barley for a penny; and see thou hurt not the oil and the wine.

 

a scenario much more likely than wage inflation

Fri, 03/23/2012 - 07:21 | 2282834 Clowns to the l...
Clowns to the left_ jokers to the right's picture

Okay, maybe the whole song doesn't apply but the beginning certainly does:

http://www.youtube.com/watch?v=kK62tfoCmuQ

Fri, 03/23/2012 - 06:57 | 2282822 Silver Dreamer
Silver Dreamer's picture

AAPL is the only example a person needs to realize we are surrounded by sheeple.

Fri, 03/23/2012 - 07:44 | 2282855 I am a Man I am...
I am a Man I am Forty's picture

People want to use quality products.  People moved to apple because windows sucked.  This isn't complicated.  First it was computers, then they created a new way to listen to music, then they made a better phone, now they are paving the way for tablet computing.  It's called cutting edge technology.  Not a bad reason for people to act sheep like.

Fri, 03/23/2012 - 05:29 | 2282791 Bartanist
Bartanist's picture

Put who in jail??? Lol ... I believe now more than ever that this is all "part of 'someone's plan" and the Wall Street greedbags are just little soldiers turned loose on innocent civilians with the vast majority of them not having the tiniest idea of the role they are playing. They will also be victims, another holocaust (It did not occur to me that holocaust actually means "sacrifice", as in: burnt offering to a god, until I was reading Genesis last weekend).

The big question is WHY?!

A compilation of prophecy and Masonic literature would lead one to come to the conclusion that this destruction we are going into is seen as necessary for the purpose of creating a global fascist state, controlled by elitists.

 But why? And lead by whom through many generations?

... and those elitists supposedly comprise all of the leaders of the world with 13 interbred bloodlines (there are books written on the bloodlines of US presidents and European royalty and they are all related) that trace themselves back to ancient Egypt ... and most likely beyond that to some "other origin". It is a very poorly kept secret that almost all of our history here on earth, that we have been taught, is not true and real history has been hidden from us or destroyed.

But why?

Now there is the real question.... leading to: "who are we?", "where are we?" and "why are we here?". In that perspective, the questions related to why the markets do not actually act like markets seem just a bit petty ... and maybe we ARE in the wrong place or maybe we are exactly where we are supposed to be, waiting for something to happen so that some purpose can be fulfilled (maybe we are in "The Restaurant an the End of the Universe" ... what a trip ... thank you Douglas Adams).

Fri, 03/23/2012 - 16:24 | 2284837 RichardP
RichardP's picture

... but can you still admire a sunset, or marvel at the texture of a freshly-ripe peach on your tongue, juices dripping down ...

If you can, why does anything else matter?

Fri, 03/23/2012 - 05:17 | 2282788 Jacks Cold Sweat
Jacks Cold Sweat's picture

Apple is the pure example of what prestige pricing can do to your profits.

 

Fri, 03/23/2012 - 05:13 | 2282787 Jacks Cold Sweat
Jacks Cold Sweat's picture

Apple is the pure example of prestige pricing.

Fri, 03/23/2012 - 04:38 | 2282779 gwar5
gwar5's picture

BIDU beats AAPL 5 year charts, 2 year charts about the same.

BIDU more room to run, stronger currency, any downturn in China minimal impact on internet.

AAPL, great company, but Steven Jobs is still dead. 

Buy BIDU and sleep very well.

 

Fri, 03/23/2012 - 07:21 | 2282833 Panafrican Funk...
Panafrican Funktron Robot's picture

I know I super duper trust Chinese accounting!

Fri, 03/23/2012 - 03:36 | 2282758 Bubble
Bubble's picture

I went to a mall yesterday evening in London. My wife kindly put a DVD into my iMac(bought in late 08) with the plastic cover still on it so had to take it to the apple store to get fixed. Every shop in there was empty, really. Except the apple store. Twenty something's for the iPhone, older clearly computer illiterates looking at the iMac and a gay buying an iPad. Consumer spending dropping off a cliff over here as I can see it. But still a few racking up some iDebt to buy this brand. Just an anecdotal story from London. I guess it'll be the go to place when this summer's riots start.

Fri, 03/23/2012 - 02:36 | 2282723 Paracelsus
Paracelsus's picture

There's gonna be alot of innocents hurt by this next big crash.

To think that putting  3000 men in prison could've avoided this.

Seems like a small price to pay for stability.

Go to a little league game and think about their future.Sorta grim....

That rumbling noise is a couple million veterans spinning in their graves.

Next time put a secure lock on the money printing presses.

Fri, 03/23/2012 - 07:37 | 2282848 I am a Man I am...
I am a Man I am Forty's picture

Ohhh good ole Reggie, he doesn't talk about apple anymore, nope.  It's up around 200% since he started all of his poor analysis.  I tried to tell him numerous times that he was wrong, stubborn he is. 

Fri, 03/23/2012 - 03:00 | 2282745 AldousHuxley
AldousHuxley's picture

illusion is real if enough people believe it.

 

world is full of fools. Fed's illusion works on many...even the rich.

Fri, 03/23/2012 - 01:38 | 2282688 ItsDanger
ItsDanger's picture

I'd think under an inflationary environment, AAPL's margins would get squeezed quite a lot.  Wage/cost on international/domestic level will not likely be evenly inflated.

Fri, 03/23/2012 - 07:23 | 2282838 Panafrican Funk...
Panafrican Funktron Robot's picture

Since when did fundamentals matter?  That ship permanently left the port a few years ago.

Thu, 03/22/2012 - 23:42 | 2282569 Cursive
Cursive's picture

A couple of weeks ago my boss/business owner was touting Lenovo Group to one of his salesmen.  I said their PC's and tablets were good and reasonably priced, but avoided discussing the stock price because I wouldn't buy it with Bob Pisani's money.  Anyway, the boss says he thought they were an energy company and only half-believed me when I repeated that they had bought IBM's PC business several years ago.  Here is a man who owns something about which he has no knowledge.  I am not ignorant to technical analysis and many people claim success with it, but the behavior of it's adherents does explain a lot about the behavior of our "markets."

Thu, 03/22/2012 - 22:43 | 2282458 FXPortent
FXPortent's picture

I'm very bewildered by Apple. Yes, they are great, if not superb products. But, they do not warrant the amount of hype that they are getting. 

 

I mean individuals who don't even have the faintest idea about computing are treating every Apple product as the second coming.

 

People are incredibly irrational about this company.

 

 

Thu, 03/22/2012 - 22:19 | 2282415 DarthVaderMentor
DarthVaderMentor's picture

Look, narcissistic, incorrigible sociopaths are running the country. They have discovered that they can continue the game of immunity and stealing from the people by just changing the laws of the country to suit their needs. The club is getting bigger and bigger by the day, as more people give up righteousness and justice to join what is an unstoppable train of self-serving corruption.

This will continue until something happens to the system they either cannot cover up using Congress and changing the laws or they don't see it coming until it's too late. When that happens, all hell will break loose. Some who see the inevitable calamity are arming and providing their guards the weapons, concentration camps, etc. to control the rise of the citizenry.

Until then, it's party on and keep plundering America!

 

Fri, 03/23/2012 - 05:51 | 2282797 Bartanist
Bartanist's picture

They are not only running the country, but they are running the world ... but for whom? And, it is a club...

"just turn over your free will and we will make sure you are one of us, taken care of, because you, like we are the elite, better than the rest and have a right and responsibility to lead. Isn't it better for the intelligent, strong and powerful, like us to lead, rather than have chaos? And, we, the elite, the leaders are deserving of the fruits of the world ... because we are better. So, lie in this coffin, worship this idol, let me make the decisions for you and one day it will all be yours... but keep it a secret between just the two of us because they are not capable of understanding the bigger picture. We are better than them and its not an exclusive club is everyone's in it ..."

I don't believe that good can come from evil acts. I do not worship idols nor desire to be one; am not a joiner of clubs and will not surrender my free will for the promise of wealth, power and being considered "one of the club" ... but apparently many humans are weak and they make covenants for temporal wealth and power. They make their choice as ultimately all of us must.

Party on? Not if it requires me to be ignorant.

Thu, 03/22/2012 - 22:15 | 2282409 illyia
illyia's picture

All very well but the music was 5.

Thu, 03/22/2012 - 21:47 | 2282370 hairball48
hairball48's picture

I'm just an old redneck...but what happens when we get big time inflation in commodities but without markedly higher wage inflation? What will happen to AAPL when the "sheeple" can't afford to buy a new iPad, or replace an older model....'cause they'll need every cent they earn for gasoline, food, etc.

Thu, 03/22/2012 - 21:57 | 2282386 Lednbrass
Lednbrass's picture

If previous events are any indicator, this will convince our politicians of both so-called parties  of the need for massive stimulus to be placed on the tab of those too young to do anything about it.  Every other economic plan boiils down to serial mass child abuse, dont see why that would change.

Thu, 03/22/2012 - 21:42 | 2282363 non_anon
non_anon's picture

one of my favs,

Styx- The grand illusion

http://www.youtube.com/watch?v=ZW8TlrYhBxk

yes, I'm a middle-aged fuck!

Fri, 03/23/2012 - 00:37 | 2282639 bluebare
Thu, 03/22/2012 - 22:17 | 2282413 Van Halen
Van Halen's picture

How about some Black Sabbath - Wheels of Confusion!

http://www.youtube.com/watch?v=SueDn40C3Wg

Fri, 03/23/2012 - 09:06 | 2283034 orangedrinkandchips
orangedrinkandchips's picture

BETTER YET....

 

SYMPHONY OF DESTRUCTION!!

 

WHAT A GREAT SONG!!!

Thu, 03/22/2012 - 23:12 | 2282521 non_anon
non_anon's picture

woooo, woooo, wooot! Black Sabbath/ We Sold Our Souls for Rock n Roll!

 

Rock on Brothers!

Thu, 03/22/2012 - 21:41 | 2282362 NuckingFuts
NuckingFuts's picture

Nature loves her little surprises, Continual crisis

Thu, 03/22/2012 - 21:35 | 2282351 bankruptcylawyer
bankruptcylawyer's picture

haters gonna hate.

Thu, 03/22/2012 - 21:26 | 2282333 navy62802
navy62802's picture

To me, SHLD is the most shocking figure on this list ... more than triple the return of even Apple in 2012.

Fri, 03/23/2012 - 02:39 | 2282725 JuicedGamma
JuicedGamma's picture

Short covering before the shit hits the SHieLD again.

 

"Sears where America doesn't shop anymore"

Fri, 03/23/2012 - 07:27 | 2282839 Panafrican Funk...
Panafrican Funktron Robot's picture

Exactly.  How the fuck have they avoided bankruptcy?

Fri, 03/23/2012 - 07:36 | 2282844 Sudden Debt
Sudden Debt's picture

MAybe they rehypoticated their non existing stock in their warehouses to make money?

Thu, 03/22/2012 - 21:24 | 2282329 celticgold
celticgold's picture

im investing heavily in ecommerce these days.., namely " myfreecams.com "....so far ive paid for shares in a village in the phillipines , 3 small hog farms in china , a korean lingerie retailer and a sizeable liquor outlet in bogata , columbia.Ive looked at a few east european IPO's , but what ive seen so far has been a little jaded  and , frankly, oversold, for my liking . However im very pleased with results in asia and south america. The concept is fantastic ...invest now ... then travel and oversee the operations in the near future . They even comp you with a PR lady, to show you around ! Interestingly, there have even been hints to us "platinum" investors , that should we be considering  relocating to these areas , they can help with willing participants in the ..marry a local ... method of immigration !!  who woulda thought !!  they really do go out of their way to help, unlike the majority of companies in the west these days , who are interested only in relieving you of your hard earned dollars , then dropping you like a hot rock when the going gets tough!. All i can really add is , thank god for the internet!! Support your cams.com!

Thu, 03/22/2012 - 22:59 | 2282487 CvlDobd
CvlDobd's picture

Sarcasm is da shit!

Thu, 03/22/2012 - 20:51 | 2282259 rsnoble
rsnoble's picture

I'm still waiting for the AAPL chart to not only go straight up, but actually start falling to the left so far that you'll actually have 2 candles per each day, one lower and one higher.  That will certainly be the definition of defying gravity. 

Is AAPL a great company? Yes. Is it this great..........OR is it so heavily weighted it is a favorite of the liquidity crowd to pump it up to drag all the other crap with it?  This irrational thought  of AAPL is the universe is similar to Mcdonald's being touted as the US #1 employer(asides from the other one) and then we can't figure out why people can't afford to buy shit like houses.  Of course they can't buy cars either but you don't need credit for that at the moment.

Thu, 03/22/2012 - 20:33 | 2282217 CompassionateFascist
CompassionateFascist's picture

"not going to have inflation that sticks because the consumer is out of money". Doubt this...first, consumers have resumed debt leveraging; and second, a sustained IranWar oil price spike will rapidly spread through most of the economy. In fact, between now and this time next year, I expect 100%-400% price inflation on most commodities, whatever the "official" numbers.

Thu, 03/22/2012 - 19:33 | 2282105 ChitownTrader
ChitownTrader's picture

Yes it can continue. Have you heard of microsoft? Take a look at their chart. This stock my not go to 1000, but it sure as hell will not go below 400 in the next 5 years. It's called admitting you missed the ride up.

Thu, 03/22/2012 - 21:21 | 2282318 navy62802
navy62802's picture

Microsoft popped in 2000 along with every other tech company during the dot com bubble collapse. Over the course of the year 2000, MSFT lost 62.8% of its value and hasn't regained these highs even in nominal terms over the ensuing 12 years.

Thu, 03/22/2012 - 20:53 | 2282264 rsnoble
rsnoble's picture

And just which microsoft are you referring to?  It sure's the hell isn't MSFT. 

Thu, 03/22/2012 - 23:41 | 2282564 i-dog
i-dog's picture

He's talking about the new "micro-soft" FRN toilet tissue. Their sales figures have gone through the roof! (coincidentally, along with Apple scrip). They'll both come in handy when the rollercoaster goes over the top....

Thu, 03/22/2012 - 23:53 | 2282581 LowProfile
LowProfile's picture

Wage inflation...  Hah hahahaaa...

Ain't gonna happen, because this was about ASSET PRICE INFLATION.

Lol.  Wage inflation... Good one.

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