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Jason Schwarz
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Jason Schwarz authors the popular Economic Timing investment newsletter. His fundamental and technical research has become a primary resource for hedge funds and individual investors. Schwarz is the Chairman of Apple Investor Summit, he's a CFA instructor, and has emerged as a financial writer... More
My blog:
ECONOMIC WEATHER STATION
My book:
The Alpha Hunter
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  • Selling Apple Prior to Midterm Elections
    The most important variable for the market has temporarily

    changed from stock price valuation to politics.  All eyes are on Tuesday’s midterm

    elections with investors optimistic that the Tea Party movement can

    force gridlock in Washington.  The Tea Party movement is an

    interesting phenomenon.  If the Tea Party had been in control during

    the financial crisis then General Motors would be dissolved, the

    banking system would have been left on its own to collapse, and U.S.

    currency would probably have already returned to the gold standard.

    There is no question that this political movement is extreme if left

    to itself, however, a dose of Tea Party mixed into a Republican

    majority with President Obama at the head could produce a wonderful

    tonic for the stock market.  If Obama shifts his policy towards the

    right as Bill Clinton did in 1994 and is successful at stimulating the

    economy through a conservative agenda, the stock market should

    outperform the historical 21% average return for a 3rd year 1st term

    Democrat.  The current market is trading on this optimistic scenario.

     

    But what if all doesn’t go according to plan over the next few days?

    What if undecided voters rebel against the extremism of the Tea Party

    and Democrats overcome the odds to win both the House and the Senate?

    Although this scenario is unlikely, some within the Republican Party

    are a little nervous by what is happening in California with gubernatorial candidate Meg Whitman getting buried in the polls by Jerry Brown and Carly Fiorina not able to budge Barbara Boxer.  This negative momentum could

    possibly spread to the rest of the country as a vote signaling ‘we’re

    not happy with Washington but we don’t like the new alternative

    either’.  I’ll admit I would be much more comfortable with the

    projected outcomes of Republican victory if this Tea Party movement

    was a little more moderate.  I am not yet convinced this is a sure

    thing.  As an investor looking to protect some large gains, I find it

    prudent to watch the election play out before committing new capital.

    With the market at the upper end of its trading range and with Apple

    action looking worn out I think we could be in for a ‘sell on the

    news’ reaction even if the Republicans do win the majority.  And if

    Democrats maintain a majority it won’t be a ‘sell on the news’

    reaction, it will be a ‘sell the surprise’ overreaction!

     

    Let me clarify, I fully anticipate the Republicans will win a

    majority.  In fact, I think this Tea Party movement has as much

    political enthusiasm as the campaign of change that got Obama elected

    to the White House.  I think the Tea Party movement will open the door

    for a Republican candidate like Mitt Romney, Jeb Bush, or even the new

    superstar from Florida Marco Rubio to give Obama a run for his money

    in 2012 but as an investor I like to live in a world of certainties.

    I need to see that the Tea Party movement is legit before I risk my

    hard earned investment capital.  As soon as victory is assured, I will

    look to reinvest my cash in the first half of November.  As for today

    I am content to sell down positions and watch how this plays out.

     

    Since identifying the Apple August low our E Weather option LEAPS

    trades have generated gains worth holding on to.  It is a very special thing to be in tune with the action of a leadership stock like Apple.  Our 12 trades since

    August 25th have yielded 11 winners and 1 loser:

     

    14% allocation of AAPL January 2012 $280 calls 29.00-64.40 (122%, holding)

    6% allocation of AAPL January 2012 $300 calls 23.35-52.70 (126%, holding)

    5% allocation of AAPL April 2011 $230 calls 35.80-65.50 (83%, sold on 9/23)

    5% allocation of AAPL January 2011 $270 calls 23.50-31.00 (32%, sold on 9/23)

    2% allocation of NFLX March 2011 $120 calls 33.50-47.00 (40%, sold on 9/23)

    2% allocation of AAPL April 2011 $260 calls 26.60-43.00 (62%, sold on 9/23)

    5% allocation of AAPL April 2011 $290 calls 26.00-39.00 (50%, holding)

    5% allocation of NFLX March 2011 $150 calls 30.60-26.40 (-14%, sold on 10/1)

    5% allocation of AAPL November 2010 $270 calls 22.00-42.00 (91%, sold on 10/19)

    5% allocation of AAPL November 2010 $290 calls 15.00-25.00 (67%, sold on 10/19)

    5% allocation of AAPL January 2011 $290 calls 22.00-29.00 (32%, holding)

    5% allocation of BIDU January 2011 $100 calls 10.00-15.40 (54%, holding)

     

    Overall, the Economic Timing portfolio mix of ETF’s, stocks, options and

    cash is up 71.4% since August 25th.  We are in the process of

    finishing up the October newsletter and wanted to give a quick heads

    up as to current conditions.  Washington will determine the next move.  

     



    Disclosure: long AAPL, BIDU, NFLX
    Tags: AAPL, BIDU, NFLX
    Oct 26 6:55 PM | Link | Comment!
  • The Exponential Value of Steve Jobs in iPhone 4
    In honor of the successful release of Pixar’s Toy Story 3 as well as the announcement of 3 million iPads sold, I think it’s appropriate to write a few words about Steve Jobs in this week’s column.  Steve Jobs see’s things that nobody else does.  Any one of us would have assumed the great George Lucas to be the man to determine the future of film but he sold his computer animation studio to Steve Jobs for $10 million back in 1986.  Twenty years later Steve Jobs sold Pixar to Disney for $7.4 billion.  Not a bad investment!  The idea that Jobs could one up the great George Lucas on such a scale is unimaginable.  Sometimes truth is stranger than fiction.  In an era where film studios prefer to produce quantity rather than quality, Pixar has taken the opposite approach.  Toy Story 3 is Pixar's 11th feature film and its 11th number one hit at the box office.  The reason why other studios can’t emulate such success is simple; they don’t know which movies will stick.  It's the same as a phone company that doesn't know which phone will stick so they come out with multiple models.  Why?  Because they lack vision.  They’re blind to what happens next.  
     
    There is no greater gift.  Athleticism? No way. Intelligence?  Sorry.  The greatest God-given gift is the ability to see life as it really is and to know of things yet to come.  Steve Jobs is a committee of one.  Compare his results to the hundreds and thousands of focus groups at Palm or Microsoft.  The difference between seeing and not seeing is exponential.  I’ll bet Steve Jobs rarely works up a sweat.  We know very little about his personal life but we do know he has time to go out for coffee with Eric Schmidt, he has time to rehearse keynote speeches, he has time to email customers, and he has time to negotiate with the media industry;  he has time to do these things because his forecasting decisions are so sure.  One Steve Jobs is worth a million tech executives.  He releases a single iPhone in black or white.  He releases one iPad.  His gift is extraordinarily sure.  
     
    The one man who has revolutionized the tech industry recently made a statement about iPhone 4 and the FaceTime capability built into the iOS.  At the WWDC he introduced it by saying “Back in 2007 when we launched the iPhone, it was my privilege to make the first phone call on it to Jony Ive...and I’d like to do the same on this occasion...I grew up with ‘The Jetsons’ and ‘Star Trek’ dreaming about stuff like this, and here it is...This is the biggest leap forward since the original iPhone.  We’re bringing video chat to the world and it’s going to change the way we communicate forever.”  
     
    Keep this in mind as you watch lines form around the globe over the next few months.  This generation has never seen anything like this.  What other product launch causes grown men and women to stand in line for hours in hopes of securing one on the first day?  AT&T had over 13 million hits on its website during the first day of pre orders here in the United States.  What’s going to happen when iPhone 4 is available in 88 countries this fall?  Anybody know Apple’s global cellphone market share?  It’s still under 2%.  Now let me tell you what I see.  I see decade 2010 turning into a Steve Jobs revolution of market share euphoria.  Apple has hit a tipping point.  The acceleration of tech evolution has entered its mobile Internet phase that will witness at least 10 billion devices sold.  At economictiming.com we’ve come up with a winning strategy that balances the short term volatility of Apple with its long term potential to create a powerfully diversified portfolio with Apple LEAPS as the foundation.  Apple has become the undisputed market leader and investors need a sophisticated understanding of the stock action if they want to outperform.  You can’t allow the irrational pessimism of this market to blind you to the fact that Apple will surpass even the highest expectations on the iPad as well as the iPhone.  Without a holiday shopping season Apple would beat estimates and sell 10 million iPads this year.  With a holiday shopping season they’ll sell 20 million in 2010 alone.  The growth is relentless thanks to the gift of Steve Jobs.  The Apple story is essential for all investors to comprehend.  



    Disclosure: long aapl
    Tags: AAPL, MSFT, DIS
    Jun 22 5:54 PM | Link | Comment!
  • Apple's FaceTime and China: The Perfect Marriage

    Chinese trends show that instant messaging is replacing the more conventional communication methods of text messaging, email, and social networking. "Young Chinese people don't ask one another for email addresses. They ask for QQ numbers" says Kaiser Kuo, group director for digital strategy for Ogilvy & Mather in Beijing.

    The winner in this space has been Tencent Holdings (TCEHF.PK), IM provides users with real-time communication, something that the Chinese people demand from their online experience. As reported by the Wall Street Journal's Juliet Ye, "Those habits have helped turn IM into a social-networking medium in China, despite the availability of proper social-networking sites such as Xiaonei.com." Apple's new video messaging application, FaceTime, could propel this phenomenon to a new level.

    Chinese web surfers don't own their own computers. Only 12 out of every 100 households in Beijing reports computer ownership (paulnoll.com). Instead, they access the web through Internet cafe's where they download video and music to their cellphones.  What would happen if video IM was available on a mobile phone? That's exactly what Apple CEO Steve Jobs is ready to deliver to the Chinese people; welcome to the era of FaceTime.  

    Steve Jobs went out on a limb and declared this technology will change everything...all over again.  The possibility of Apple being able to bring mobile video chatting to the masses is yet another reason to own the stock.  Add this upgraded iPhone to the list of iPad, iAds, and the future devices like Apple TV that will further leverage the success of the App Store as reasons to buy and hold Apple stock.  The cheaper price of the new iPhone at China Unicom later this year will cause a buying wave similar to what we witnessed in Japan.  The Apple China bonanza is just beginning.   

    Disclosure: long aapl
    Tags: AAPL
    Jun 07 7:00 PM | Link | Comment!
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