Ponder The Future Market's Performance And The Apple Bubble

| About: Apple Inc. (AAPL)

Since the bull market peaks of 2000 and 2007 the time frame over the past twelve years has been one of trying to recover on the part of the U. S. Market Indices.

I frequently write about Treasuries and with a smile I can say those guys out-performed the U. S. Stock Market Indices during the above time frame. And they did so with far less pain and suffering. For purposes of this missive I am using an oldie ETF from SPDR S&P 500, (NYSEARCA:SPY). Yes it is a few points higher today than at its peat in early 2000. It is also slightly lower today than its peak in 2007. The point should be quite clear; the equity market has been very selective and nonproductive for a very long time.

Apple, Inc. (NASDAQ:AAPL) is definitely one of those companies that does not confirm my 'point' mentioned above. It is however a representative company with respect to the bearish warnings offered in this missive. It is also, by default, one of thousands of common stocks that will and has historically reacted the same way as the General Market Indices does in bullish and bearish environments. Please focus on the below twenty year chart for a perspective of how to invest wisely.

(Click to enlarge)

With unrealistic growth being the trend even in the Dow 30 components, my valuations suggest a future multi-year flow of poor performance by the Dow 30. On balance its components will underperforming the U.S. Market Indices. It is likely that this bearish warning will be applicable for many other County Indices throughout the world.

Bluntly stated, even the current yields, offered by Treasuries is better deal than negative growth in bearish time frames. Oh, I almost forget to say, most Treasuries are guaranteed by the US of A. For the record I am definitely not a fan of Treasuries.

With the state of the world economies and the flow of historically very high valuations of most securities, it is not at all difficult to project another bear market with similar results to previous disasters. I recently read that the number one reason people invest in gold is as an inflation hedge. That is great but they do not know that from the mid 70's to the mid 90's gold lost about half of its value. I understand the words 'inflation hedge' to be an investment, any investment that can beat inflation. Sounds simple but the U. S. Indices have not offered such an opportunity since the turn of the millennium.

It is now S.O.P. for both strange and unconventional valuations of securities to be presented by governments, Wall Street, financial analysts, etc. by the bucket full. All these valuations are distorting facts, to say the least, and you are being presented with information and data that will not pan out on your annual bottom line. Securities are clearly over-valued and over-bought. A very high percent of corporations are showing a reduction in earnings growth over the next several years and way too many of those companies are projected as going under zero earnings growth.

The economic news continues to support poor housing, few jobs and low savings rates. The G. K. is in a formal recession and both European countries and Asian countries are likely candidates to follow. I purposefully leave out the U. S. in shear disgust.

High and inaccurate valuations will continue to flow for some time. All that means is that when the balloon breaks the damage will be all than more severe. The "trick" (a word I often use) is to know when the next bearish inflection point is going to arrive. I attempt to give you that answer by publishing in financial blogs such as SA.

Simple stated I am sending you this bearish warning to suggest your seeking safe harbors for your invested assets.

The Math

As an economist with a math background it is actually fun to do my routine valuations especially when I work with the currently (high powered) growth stocks that seem to be plentiful. If you follow these (high spirited) companies you know that one by one they are getting the axe.

I shake my head every time I read a report of a new issue or the financing so many companies are pursuing so actively in today's marketplace.

The saying: "Liars can figure but figures can't lie" is again a simple way for me to rest my case and do my best to publish articles that will hopefully be of help to you. Perhaps you know I principally offer my thoughts and analytics in articles covering the components of the Dow 30. I also have used Apple, Inc. as a bellwether for years and will continue to do so, but with much more restraint.

Apple, Inc.

I briefly offered some information on The Math. I hope you agree that Exponential Growth, Asymptotic Curves, Regression Formulas, Algorithms, etc. don't lie!

AAPL is alive and well because of excellent products and excellent management over the years. The current list of excellent products includes the iPod, the iPhone, and the iPad. Congratulations! In the coming years it will be difficult match or beat these and former greats; perhaps it will be impossible. However, the price movement of Apple, Inc. stock will always be a super bellwether.

Apple, Inc. Earnings Growth:

2012 -- Earning Growth 68%
2013 -- Earning Growth 15%
2014 -- Earning Growth 13%
2015 -- Earning Growth 33%
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This simple table of data is similar to many companies for the next few years. It is sad for me to say most companies that I valuate are much more negative. Fundamental valuations are still the basis of investing wisely. If the economies of the world are in peril and valuations are on the decline for the foreseeable future something negative is going to happen. These and may more economic and fundamental facts worry me about the General Market and Apple, Inc.

Please study the above 20-year chart of SPY and AAPL Needless to say Apple, Inc. has, like so many companies, suffered some hard times in bear market environments.


Said as simple as I can, these words are a Bearish Warning. This is my second recent article with a bearish warning for Apple, Inc. A bearish warning is not a sell recommendation. Selling is much more surgical.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.