Wednesday, September 19, 2012

Here We Go Again

Mark Hulbert who I sometimes agree with, sometimes not, just penned an article on Apple saying that it was the Enron (latent catastrophe) of our time.  Now granted that's an extreme comparison given Enron's outright fraud, but it's certainly not an exaggeration to say that Apple is the most overbought, overbelieved stock of this era.  And we know from vast experience what happens when the iconic stock or investment of each era implodes.  Worse yet, given its outsized market capitalization, what happens to Apple will impact the entire market i.e. it's not leading the market, it is the market.  The stock just crossed $700 and its market capitalization is now $658 billion.  Each $1 increase in the stock price equates to almost $1 billion in market cap and since the iPhone 5 launch less than one week ago, the stock has tacked on an additional $30 billion in market cap all thanks to an extra row of icons on the screen.  

"Those Jobs are Going Boys, And They Ain't Coming Back..."
Anyone who doubts my Ponzi thesis is watching the Kardashians 24 x 7.  When a glorified gadget company can gain in a week a value greater than the GDP of over one hundred  countries, then the Ponzi is in sudden death overtime.  On a related note, one clueless presidential candidate is now excoriating almost half of eligible voters for being free loaders even though he made his personal fortune through downsizing and outsourcing aka. "private equity".  You can't make this shit up.  I am constantly amazed that so few people make the connection between outsourcing the economy and the fact that there are so few jobs now available.  That's because they were brainwashed into believing they are in an "ownership society", or what's otherwise known as a "lottery".  So that day of dawning recognition - that the better part of the economy is now gone and never coming back - is in the not too distant future and the underwear will be mighty stained at that juncture, that's for damn sure.  

We've Seen This Movie Before, Five or Six Times, We Have A Decent Idea How It Ends...
I have been highly skeptical of Apple since last Spring because a key reason I started this blog in the first place was to avoid getting sucked into another "bubble".  I got conned during the DotCom era, but since then, we have seen the housing bubble (2003-2006), commodities bubble (2007), gold bubble (2011) and now this latest Apple rocket ride.  One thing all of these bubbles had in common is that they were inflated by excessive monetary stimulus.  Granted the Dotcom bubble had other amplifying factors, but recall that Greenspan had his foot on the pedal coming out of the 1998 Asian Currency Crisis and he kept interest rates low straight into the "Y2K" date change event i.e. in case computers stopped working.  Fast forward and as one would expect in a deflationary liquidity trap, Bernanke's latest stimulus is stymied by the burgeoning cash-only economy, so his only recourse is to stoke the "animal spirits" i.e. encourage speculators to move out of low yielding assets (aka. Treasuries) and into risk assets.  Therefore, it should come as no surprise that the boyz on the Apple message boards are getting a tad rowdy, because as we have all learned several times in the past decade, greed truly is blindness and Bernanke just handed out some really dark shades.

Apple: The Leading leading indicator
More importantly, from an overall social mood perspective, Apple, having relative strength, is the leading indicator for risk appetite in the stock market.  The stock market in turn represents society's overall risk appetite and optimism.  The correlation between the stock market and social mood is well documented and is the basis of Elliot Wave Theory.  For those who eschew financial "astrology", scientists have found that they can use general Twitter posts to predict the stock market.  So the Arab Spring that coincided with the early 2011 market high and the Occupy Wall Street movement that manifested after the 2011 summer meltdown, were likely no coincidence in terms of timing.  Getting back to Apple i.e. the leading indicator of the leading indicator, and glancing at the chart above, the resurgent Arab Fall and various other nascent geopolitical dislocations will likely soon have a lot more gas poured on their fire.