Can Apple Withstand the Financial Sector's Fall? 19 comments
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Will Lehman (LEH) be the next bailout? Or will the government let this big financial house just fail outright? The Treasury stepped in and took over Fannie (FNM) and Freddie (FRE), making US taxpayers the default caretakers of these two behemoths. Is Lehman next, seems everyone is concerned over Lehman, how about Wachovia (WB)? The sad thing is, you could ask that of just about any bank and identify it as a valid takeover target, with few exceptions.
So, Lehman lost 44 percent of its value yesterday! And the Banking Index ($BKX) lost virtually all the gain it enjoyed Monday, September 8, after the weekend seizing of Fannie and Freddie! The BKX also lost the support of its 20 day moving average, and plotted a Bearish Engulfing candlestick pattern. Very, very bad karma. The next stop is to slide down Monday's gap up, which should provide little resistance at this point.
So, where does that leave Apple (AAPL)? Can it withstand this onslaught of market turmoil in the shadow of its "Let’s Rock" event? The Bigger question is, can the anemic Tech Sector withstand this onslaught? I don’t think it can. Most Tech companies are growth companies, and thus heavily reliant on the financial sector for their stability and operations.
Now, this is definitely not the case with Apple, it’s a big cap and has no debt. But Apple is not an island, it has suppliers and partners that are all part of that same sector, and I venture to guess that most are not debt free like Apple. Plus, this just puts a drag on the entire economy. That means there’s fewer people with 229 clams of disposable income, and thus fewer people to buy the sleek new iPod Touch with volume controls, extended battery life, built-in speaker, and Nike + built-in.
It’s all well and good that Apple came out with a refreshed iPod line up and some nifty new features in a totally revamped iTunes 8, like the Genius Playlist from the cloud, and interface enhancements borrowed from iPhoto. Alas, no subscriptions. But this Rock out event will do Bo Diddley squat to keep Apple’s share price from dropping. By the way, if you caught any of that event, Steve Jobs is not dead yet, and John Maher’s name was mentioned about a bazillion times.
So, what to do? The safe thing is to stand aside until it all shakes out. The brazen thing to do is ride debacle down into the ground. But do it on the cheap. You can purchase in the money puts and discount them by selling calls.
Disclosure: Short AAPL.
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This article has 19 comments:
I don't get it. Now if u were to say u are short because the bad chart and negative market sentiment, then I understand. But to sell a short position due to the fundamentals of the company... well that is just crap.
If not for a questionably legal, but definitely manipulative environment, a company that is doing great, has enormous popularity, has people standing in line to buy their products and an absolute "rainbow," of future opportunity, would have a stock valuation without sufficient fluctuation to attract heavy buy / sell activity.
SO... UNLIKE a long investor, the entire short sell community, every Wall St. Brokerage and virtually every financial media reporting entity needs "churn" (and the subsequent "news") generated by fluctuation to make commissions off of.
Ergo, a little negative news, a few pot shots, a few bad words at the Wall Street water cooler, a couple of nasty little asides to some institutional groups & whaddaya get?
SWING!!
Good old commission-gathering market SWING and loads of trashy news to report!
Thanks for listening.
VERONICA T. WOLFE
on the puts AND the calls.....Are you nuts????
Hey, did you hear? Steve Jobs has a paper cut! Yeah - lets short the stock.
Idiots.
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Wrong!
You should have done this when AAPL was in the 180 to 200 price range.
You approach is not only too late, it is the opposite of what should be done at this time.
Hedge fund investors typically must give 90 days to get their money out. Their deadline is September 30, 2008. They are requesting their money now, because the hedge funds don't publicly disclose their investment positions, and investors don't know the actual level of (toxic) investments and the true extent of the leverage in bad investments in these hedge funds.
Also, many investors need cash because their credit lines, home equity lines, credit card lines have been reduced. The funds MUST sell to raise cash to return to these investors and the funds then sell what is liquid and profitable: i.e. Apple stock.
There is very little wrong with Apple. Most of the decline in Apple stock has been due to market concerns: banks, investment banks, real estate, etc.
Apple is down to 150 from 200. I believe it is time to start accumulating more of Apple. In 12 months, I believe the buyers will be well rewarded.
RE: "... You can purchase in the money puts and discount them by selling calls."
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Wrong!
Your should have done this when AAPL was in the 180 to 200 price range.
You approach is not only too late, it is the opposite of what should be done at this time.
Hedge fund investors typically must give 90 days to get their money out. Their deadline is September 30, 2008. They are requesting their money now, because the hedge funds don't publicly disclose their investment positions, and investors don't know the actual level of (toxic) investments and the true extent of the leverage in bad investments in these hedge funds.
Also, many investors need cash because their credit lines, home equity lines, credit card lines have been reduced. The funds MUST sell to raise cash to return to these investors and the funds then sell what is liquid and profitable: i.e. Apple stock.
There is very little wrong with Apple, and everything is right with Apple. Apple is a rare company that is running smoothly in all of its product lines and services. Most of the decline in Apple stock has been due to market concerns: banks, investment banks, real estate, etc.
Apple is down to 150 from 200. I believe it is time to start accumulating more of Apple. In 12 months, I believe the buyers will be well rewarded.
Spend some time. Go to an Apple or AT&T store. Walk through a gathering place at a university to see what the kids are using. Between iTunes, iPhone, and Macs, Apple has a brilliant cohesive strategy to ensure revenues for years to come. When the market paranoia fades and we get some clarification that global economies can survive the multi-trillion dollar value destroyer called George Bush, isn't that financial picture what matters?
A forward P/E of 27-28, I say buy buy buy.
big on your puts AND the calls will rise quickly and you lose again.
And you're going to this when the stock is so far under it's 50 day ma.=os
That is nuts........
Problem is that in the short term it looks like growth is slowing and margin guidance was low. If in fact we see Apple gets hit by the economic slowdown like everyone else AND their margins do shrink even a little, this stock could very well hit $130 again.
As far as charting goes right now. That's a recipe for disaster. Talk all you want about tops, resistance points, and moving averages you want, that isn't working right now.
Now that the stock has dropped you are now bearish.
Think you'll be wrong again.
But these are not the reasons I am shorting the stock, like Duh! I'm shorting the stock because investor sentiment, tech sector breakdown, and overall dismal market conditions dictate shorting the stock.