"Did perpetual happiness in the Garden of Eden maybe get so boring that eating the apple was justified?"
First, allow me to apologize for writing about something I just expressly stated I have no desire to hear about anymore because that is precisely what I am about to do.
Following the market on a regular basis can be quite an interesting experience. You learn about politics, innovation, fashion, the environment, corruption, greed, and most importantly all you will ever need to know about human behavior. Over time you get used to certain things like the utter celebration of up days and the raw and sheer panic that occurs if the market goes down for what seems like no more than half a second; this is normal behavior that you quickly become accustomed to. But what you never get used to is when the market becomes seemingly obsessed with just one company. These days that company goes by the name of Apple (NASDAQ:AAPL). Yes, the forbidden fruit, a symbol of knowledge, sin, temptation, and ultimately redemption represents the financial world's current obsession. I find it difficult to ignore the irony of the world's most valuable company being named after such a troublesome fruit. I often wonder if the talking heads think about this before they trot another person out to recommend why the stock must be bought. If an apple can be blamed for the Trojan war and mankind's expulsion from the garden of Eden, one has to wonder what kind of damage it will ultimately cause in the financial markets?
I mean when a guy like Brian White, the analyst who managed to get his name in the paper and his face on TV by slapping a $1111 price target on the stock, calls Apple's recent 25% decline "insanely, insane" does he not understand what he is getting himself into?
Will Brian's Apple one day become the financial equivalent of Adam's Apple, and has this guy even heard of Walter Piecyk? I mean come on -- the only thing insanely insane about the recent price action in Apple's stock is that someone would actually call a 25% decline after a 75% nine month rally insane. But I guess if an apple hanging from a tree was enough to tempt man to give up a paradise, I can't fault investors for being tempted by an Apple trading at below market multiples. The only difference is that the investors should know better because unlike Adam, they can at least turn to history for some sort of guidance on the matter. See, Apple's cheap valuation is really not so perplexing if you start digging through history and looking at comparable consumer oriented dominant technology companies. What you will discover during such an endeavor is that dominant consumer electronic companies have short market shelve lives. Sony (NYSE:SNE), Casio (OTC:CSIOF), Motorola, Atari, Nokia (NYSE:NOK), RCA, Phillips, Panasonic (PC); I could go on and on. At the end of the day consumer technology is even worse than fashion because the premium brand value is virtually impossible to retain. And if that is the case, paying low market multiples for these names makes sense because earnings sustainability doesn't extend much farther than the not so distant horizon. Sure Apple today is cheaper than Microsoft (NASDAQ:MSFT) was when it hit $630 billion in 1999, but if given a choice between the two I'd still rather own that Microsoft over today's Apple. The reasoning behind that is Microsoft had enterprise monopoly insulation to go with consumer domination. Apple only has the consumer and it is selling them lower margin hardware, history has proven this doesn't end well. Basically, if you held a gun to my head and made me pick from the most valuable companies of generations past, Apple would be at the bottom of my list. I'd rather own Exxon (NYSE:XOM), Standard Oil, Ma Bell, Petrochina, Microsoft, GE (NYSE:GE), or the Dutch East India Company. Don't go nuts after you read this, but yes I think the Apple story as far as mainstream cultural fascination with the name is coming to an end.
P.S. If you feel need to be invested in the space, go buy some Samsung (OTC:SSNLF) shares you will sleep better for now.