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  • Apple (AAPL): Putting $558 Billion Into Perspective
    Is Apple (AAPL) really worth the money people are paying to own the shares? Is Apple's dominance so entrenched that they can withstand the upcoming assault from their competitors?

    One way to answer those questions is to put the total market cap of Apple into perspective by understanding what $558B can buy. First we point to the argument that Apple is worth more than the entire US Retail Sector or the entire Semiconductor space. Just stop and think about how big those sectors are and what that fact is saying about the size of Apple.

    Next, we compare Apple against 8 competitors combined in their space. In fact, if these 8 companies were combined, they would shake governments around the world with anti-trust claims of "how could anyone compete?". Could Apple? How safe do you think the future would be for Apple if these 8 worked to protect their market positions and market caps?

    Apple vs. Our 8

    CompanySymbolPriceMarket Cap
    MicrosoftMSFT$32$268.46B
    SonySNE$20.55$20.62B
    IntelINTC$27.9$139.36B
    ARM HldgsARMH$28.11$12.89B
    DellDELL$17.02$29.99B
    Hewlett-PackardHPQ$23.03$45.54B
    Research In MotionRIMM$13.78$7.11B
    8 Total (*not counting $34B of excess cash to shop with)  $523.97B
        
    AppleAAPL$599.34$558.81B

    If an investor could waive the magic wand and purchase chip leaders Intel and ARM Holdings ; hardware providers Sony , Dell , and Hewlett-Packard ; software titan Microsoft ; and waning but still significant Research in Motion ; would the value of these 8 companies be greater than that of Apple. Note: to be
    fair our fictitious roll-up would still have $34.8B in additional cash to go shopping with.

    Would AAPL really be worth more than the combination of:

    a) the largest software provider
    b) the largest microprocessor producer AND the most dominant low-power microprocessor producer
    c) 3 international personal computer, laptop, and printer producers
    d) 2 of the 3 largest video game producers
    e) a large phone handset and operating system provider for smartphones

    Imagine the combined power these 8 companies would have; the established business relationships, the customer branding possibilities, the technology, the earnings, the synergies, and yes, even the cash on hand.

    Conclusion

    Apple is a very successful company and has earned its place on top. They have great products, excellent vision, and have executed beyond anyone's dreams. Simply stated, they are a fantastic company.

    However when looking at their valuation in terms comparable to their peers, Apple seems to be priced to "definitely succeed". When looking at the list of the 8 companies above, I noticed more than a few that also carried the same label at one time or another in the past. It made me think: Is Apple really "the one that will definitely succeed", or is it more likely that competition catches up to them?

    Each investor can form their own conclusions, but for me the answer is simple: Apple operates in a very competitive space and no company's success is definite in the ever-changing technology space.

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

    Mar 26 3:01 PM | Link | Comment!
  • Mr. President More Jobs, Less Lawyers and Politicians
    President Obama delivers a major speech this week, and the topic will be on job growth.  He plans to discuss how to get the United States back on track and growing again.  He plans to improve mortgage refinancing, thereby saving homeowners $85B a year.  In addition, ideas for building more infrastructure are a good idea, as the country could always improve their roads, bridges, and tunnels.

    But one problem we see with any Washington generated initiative is none addresses the fear of future litigation.  In the last three years, we have moved to a blame-throwing, lawyer-driven, full shakedown of the entire financial system.  Whether it happens as a result of new zealous legislation, opportunistic ambulance-chasing class action attorneys, or from the state and federal agencies responsible for "oversight"; we see nothing but paralysis occurring with each passing day.

    Mr. President, we have passed the point of lost confidence, we are facing a full-blown 'investor strike'.  Investors are tired of the games being played by the bankers, politicians, and lawyers; which by the way are the only three groups of people making money in this morbid economy.

    While everyone is trying to cover their own, the system has gone from fantasyland to surreal as $100s of billions (if not trillions) in valuations lie in limbo.  With many of the system's largest having to defend against allegations that should have been dealt with in 2006-08, no one knows what's next.  When is this going to stop, why would anyone want to invest in ANY company when the biggest of the biggest has been shaken down on the whim of a few?

    This week's suit by Federal Housing Finance Agency (FHFA) takes the cake for the most absurd and damaging example of litigation gone wild.  To sue 17 of the largest financial institutions three years after the fact on the basis that the two largest government owned buyers of mortgage backed securities were 'duped' is completely insane. 

    Bank of America (BAC) has been rumored to be Lehmanized for roughly a month, and the only reason the rumor has ears is the fear that their legal liability will exceed their $125B in net tangible book value.  When the government shows no leadership, but instead joins the feeding frenzy, the cannibalistic consequences could very easily topple our whole economic system.

    BAC might be the biggest and most infamous, however there are plenty of other names being sued that put our system at risk if this legalfest continues.  JP Morgan (JPM), Goldman Sachs (GS), Morgan Stanley (MS), and Citigroup (C) all have substantial exposure.  And, as the US Feds carelessly destabilize our own financial infrastructure, why not throw in Deutsche Bank (DB), Credit Suisse (CS), and Royal Bank of Scotland (RBS) too! (like Europe needs another reason to come unglued)

    What is the purpose of all this litigation?  Who has been punished? 

    The politicians that tinkered with the laws to favor reckless lending are the same politicians that write the laws to "fix the system".  And to no one's surprise, no bankers have gone to jail and no executives have forfeited their tainted earnings.  In addition, the demand for good lawyers has grown exponentially, and with that demand has been a windfall of fees. 

    So since the politicians, bankers, or attorneys are "winning" (like Charlie Sheen), then the sad truth is that the losers are most everyone else.  The damage inflicted on market valuations goes well beyond the financial sector, and impacts the psyche of every investor, CEO, and small business owner alike.  

    In addition, since the financial sector has been hunkered down and defending the onslaught, they have been protecting precious capital and withholding it from the system.  Why would they make new loans, when they might need capital to pay for the 'next' potential settlement?   This is exactly why the velocity of money has ground to a virtual halt, as everyone is following human nature and protecting what liquidity they have left.

    This insanity must stop, we need leadership from the top.  We need confidence that our government is going to create circumstances to promote more business and job opportunities.  We are tired of the drama in Washington and Wall Street alike.  We know the blame can be spread to many, but what we really need now is to move forward. 

    On Thursday, addressing the fear of future litigation to our financial system must come first.  We must have confidence in order to have jobs.  We must have an environment built on stability of a sound financial system, or the Armageddoners will prove to be prophetic.  Mr. President more jobs, less lawyers and politicians.


     

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Tags: BAC, JPM, GS, MS, C, DB, CS, RBS, macro view, financial
    Sep 03 11:26 AM | Link | Comment!
  • S&P 500 Mini Opens Down 2.5% And Gold Up $25, As ECB Agrees to Buy Italian/Spanish Bonds

    The news flow is picking up with crisis meetings all over the globe.  There are thousands of projections floating about, and the situation is unstable to say the least.  But the latest information has two notable pieces of data:

    One: S&P mini's opened and they are down 2.5% as we type this (1168).
    Two: The European Central Bank has sent out a statement confirming that they will enter the market to buy Italian and Spanish bonds in the open market. 

    From Bloomberg:

    The European Central Bank said it will “actively implement” its bond-purchase program, signaling it is ready to start buying Italian and Spanish securities to counter the sovereign debt crisis.
     

    We're expecting the commentary to get more heated as we get closer to the US markets opening (along with the news flow), but it appears that the powers that be have managed to pull off a bit of coordination this weekend.  We will see how this evening and the day plays out, but for now its more bark and less bite.

    And we almost forgot, with the turmoil of the dollar dropping and central banks creating more money, gold has surged to a fresh record.



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Aug 07 6:38 PM | Link | Comment!
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