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  • Considering JPMorgan Chase? Buy Bank Of America Instead [View article]
    This is far and away the world’s premier banking institution. Estimates of the huge trading losses by the London “whale”, initially pegged at $2 billion, have since skyrocketed to $6 billion. I’ll ignore the Internet rumors that speculate about a $30 billion hickey. As you well know, almost everything on the net is not true, except what you read in my own newsletter.

    Back in the 1980’s when I was at Morgan Stanley, the inside joke was to look for nice office space for ourselves whenever we visited clients at (JPM). The expectation was that they would take us over when Glass-Steagle ended, as they were both the same institution before the Securities and Exchange Act broke them up in 933. When the separation of commercial and investment banking finally came in 1999, Morgan Stanley had grown far too big to swallow and the egos too big to manage.

    I’ll tell you another way to look at this trade. (JPM) lost 4.7% of its capital, so Mr. Market chewed 30% out of its capitalization. Sounds a bit overdone, no? The bad news is already in the price. A large part of the offending position has already been liquidated.

    I have analyzed the specific trade that got (JPM) into so much trouble, the now infamous “Investment Grade Series 9 Ten Year Index Credit Default Swap.” The chart of its recent performance and its hedge is posted below. It was in effect a $100 billion “RISK ON” trade that came to grief in early May.
    Few outside the industry are aware that this was a $6 billion gift to two dozen hedge funds who are now shouting about record performance. It is, after all, a zero sum game. Didn’t Bruno get the memo to “Sell in May and go away”? He obviously doesn’t read The Diary of a Mad Hedge Fund Trader either.

    Even if the worst case scenario is true and the $6 billion numbers proves good, that only takes a 4.7% bite out of the bank’s $127 billion in capital. It is in no way life threatening, nor requiring any bailouts. These shares at this price are showing an eye popping low multiple of 7X earnings, and have already been punished enough. Getting shares this cheap in this company is a once in a lifetime gift, and twice in a lifetime if you count the 2009 crash low.

    You don’t have to run out and bet the farm right here. Scale in instead, and if the market drops, you can always cost average down. If Greece forces us into major meltdown mode, we can also hedge this “RISK ON” trade through taking more aggressive “RISK OFF” positions, like selling short the (FXE), (SPX), (IWM), (GLD), or the (SLV) by buying puts.
    -
    Mad Hedge Fund Trader
    Jun 1 08:13 PM | 1 Like Like |Link to Comment
  • Why You Need To Buy JPMorgan [View article]
    This is far and away the world’s premier banking institution. Estimates of the huge trading losses by the London “whale”, initially pegged at $2 billion, have since skyrocketed to $6 billion. I’ll ignore the Internet rumors that speculate about a $30 billion hickey. As you well know, almost everything on the net is not true, except what you read in my own newsletter.

    Back in the 1980’s when I was at Morgan Stanley, the inside joke was to look for nice office space for ourselves whenever we visited clients at (JPM). The expectation was that they would take us over when Glass-Steagle ended, as they were both the same institution before the Securities and Exchange Act broke them up in 933. When the separation of commercial and investment banking finally came in 1999, Morgan Stanley had grown far too big to swallow and the egos too big to manage.

    I’ll tell you another way to look at this trade. (JPM) lost 4.7% of its capital, so Mr. Market chewed 30% out of its capitalization. Sounds a bit overdone, no? The bad news is already in the price. A large part of the offending position has already been liquidated.

    I have analyzed the specific trade that got (JPM) into so much trouble, the now infamous “Investment Grade Series 9 Ten Year Index Credit Default Swap.” The chart of its recent performance and its hedge is posted below. It was in effect a $100 billion “RISK ON” trade that came to grief in early May.
    Few outside the industry are aware that this was a $6 billion gift to two dozen hedge funds who are now shouting about record performance. It is, after all, a zero sum game. Didn’t Bruno get the memo to “Sell in May and go away”? He obviously doesn’t read The Diary of a Mad Hedge Fund Trader either.

    Even if the worst case scenario is true and the $6 billion numbers proves good, that only takes a 4.7% bite out of the bank’s $127 billion in capital. It is in no way life threatening, nor requiring any bailouts. These shares at this price are showing an eye popping low multiple of 7X earnings, and have already been punished enough. Getting shares this cheap in this company is a once in a lifetime gift, and twice in a lifetime if you count the 2009 crash low.

    You don’t have to run out and bet the farm right here. Scale in instead, and if the market drops, you can always cost average down. If Greece forces us into major meltdown mode, we can also hedge this “RISK ON” trade through taking more aggressive “RISK OFF” positions, like selling short the (FXE), (SPX), (IWM), (GLD), or the (SLV) by buying puts.

    Mad Hedge Fund Trader
    Jun 1 08:13 PM | 7 Likes Like |Link to Comment
  • Safe-Haven Currency ETFs Shine In Euro Crisis [View article]
    The Euro went through the old 2012 low at $1.260 like a hot knife through butter. On the breach, a lot of momentum programs automatically kicked in and doubled up their short positions. That is what has taken us all the way down to the high $124 handle in the cash. Let’s see how the market digests this breakdown. The commitment of traders report out on Friday should be exciting, as we already have all-time highs in short positions in the beleaguered European currency.

    The problem is that any good news whispers or accidental tweets on the sovereign debt crisis could trigger ferocious short covering and gap openings which the continental traders will get a head start on. So again, this is not the low risk trade that it was months ago.

    Still, the 2010 lows at $1.18 are now on the menu. I would sell all the “good news” rallies from here two cents higher. Aggressive traders might consider selling penny rallies, like the one we got today. Notice that the Euro is rallying into the US close every day. This is caused by American traders covering shorts, not wishing to run them into any overnight surprises.
    ----------------------...

    The Mad Hedge Fund Trader
    May 24 10:36 PM | 1 Like Like |Link to Comment
  • Euro: The Currency That Defies Supply And Demand? [View article]
    The Euro went through the old 2012 low at $1.260 like a hot knife through butter. On the breach, a lot of momentum programs automatically kicked in and doubled up their short positions. That is what has taken us all the way down to the high $124 handle in the cash. Let’s see how the market digests this breakdown. The commitment of traders report out on Friday should be exciting, as we already have all-time highs in short positions in the beleaguered European currency.

    The problem is that any good news whispers or accidental tweets on the sovereign debt crisis could trigger ferocious short covering and gap openings which the continental traders will get a head start on. So again, this is not the low risk trade that it was months ago.

    Still, the 2010 lows at $1.18 are now on the menu. I would sell all the “good news” rallies from here two cents higher. Aggressive traders might consider selling penny rallies, like the one we got today. Notice that the Euro is rallying into the US close every day. This is caused by American traders covering shorts, not wishing to run them into any overnight surprises.
    -
    The Mad Hedge Fund Trader
    May 24 10:35 PM | 1 Like Like |Link to Comment
  • Aussie & Euro Currency Forecasts For May / June [View instapost]
    The Euro went through the old 2012 low at $1.260 like a hot knife through butter. On the breach, a lot of momentum programs automatically kicked in and doubled up their short positions. That is what has taken us all the way down to the high $124 handle in the cash. Let’s see how the market digests this breakdown. The commitment of traders report out on Friday should be exciting, as we already have all-time highs in short positions in the beleaguered European currency.

    The problem is that any good news whispers or accidental tweets on the sovereign debt crisis could trigger ferocious short covering and gap openings which the continental traders will get a head start on. So again, this is not the low risk trade that it was months ago.

    Still, the 2010 lows at $1.18 are now on the menu. I would sell all the “good news” rallies from here two cents higher. Aggressive traders might consider selling penny rallies, like the one we got today. Notice that the Euro is rallying into the US close every day. This is caused by American traders covering shorts, not wishing to run them into any overnight surprises.

    The Mad Hedge Fund Trader
    May 24 10:35 PM | Likes Like |Link to Comment
  • Japanese Yen Likely To Lose Value Faster Than The Dollar [View article]
    The next step has been taken in the coming Japan crisis. American ratings agency, Fitch, has downgraded Japanese government debt to A+, with a negative outlook. The move cut the knees out from under the country’s dubious currency, sending it down sharply.

    Fitch expects the country’s debt to reach a nosebleeding 240% of GDP by year end, far and away the largest of any major country. That makes our own 100% debt to GDP look paltry by comparison. The Mandarins in Tokyo have been able to finance this enormous debt through a whole raft of financial regulations that limit local institutions to investing a large portion of their assets in Government bonds.

    Regular readers of this letter are well aware that the asset base of these institutions is about to shrink dramatically due to the death through old age of the country’s primary savings generation. The problem is that there is not another generation of savers to follow them. An average growth rate of 1% for the last 22 years, and a ten year government bond yield that has hovered around 1% since 1995 mean that no one has accumulated new savings for a very long time. It is just a matter of time before the country runs out of money. In the meantime, government borrowing for perennial stimulus packages continues to skyrocket.

    How long it will take this house of cards to collapse is anyone’s guess. My old friend, retired Japanese Vice Minister of Finance, Eisuke Sakakibara, otherwise known as “Mr. Yen”, thinks that is still five years away. Hedge fund legend, Kyle Bass, says that it should have started in April. The timing of the onset of this looming financial crisis is now a subject of endless analysis by the hedge fund industry, and will be one of the big investment calls of the coming decade.

    This is why I am running a major short position in the yen through the (FXY), and frequently am involved in the double short yen ETF (YCS). When the sushi hits the fan, you can count on this beleaguered currency to fall to ¥90, then ¥100, then ¥120, and finally ¥150. This gets you 200% potential gain on the (YCS). Us the recent “RISK OFF” run to establish shorts in the yen at great prices.
    --
    The Mad Hedge Fund Trader
    May 22 11:52 PM | Likes Like |Link to Comment
  • Why Japanese Yen ETFs Are In Free-Fall [View article]
    The next step has been taken in the coming Japan crisis. American ratings agency, Fitch, has downgraded Japanese government debt to A+, with a negative outlook. The move cut the knees out from under the country’s dubious currency, sending it down sharply.

    Fitch expects the country’s debt to reach a nosebleeding 240% of GDP by year end, far and away the largest of any major country. That makes our own 100% debt to GDP look paltry by comparison. The Mandarins in Tokyo have been able to finance this enormous debt through a whole raft of financial regulations that limit local institutions to investing a large portion of their assets in Government bonds.

    Regular readers of this letter are well aware that the asset base of these institutions is about to shrink dramatically due to the death through old age of the country’s primary savings generation. The problem is that there is not another generation of savers to follow them. An average growth rate of 1% for the last 22 years, and a ten year government bond yield that has hovered around 1% since 1995 mean that no one has accumulated new savings for a very long time. It is just a matter of time before the country runs out of money. In the meantime, government borrowing for perennial stimulus packages continues to skyrocket.

    How long it will take this house of cards to collapse is anyone’s guess. My old friend, retired Japanese Vice Minister of Finance, Eisuke Sakakibara, otherwise known as “Mr. Yen”, thinks that is still five years away. Hedge fund legend, Kyle Bass, says that it should have started in April. The timing of the onset of this looming financial crisis is now a subject of endless analysis by the hedge fund industry, and will be one of the big investment calls of the coming decade.

    This is why I am running a major short position in the yen through the (FXY), and frequently am involved in the double short yen ETF (YCS). When the sushi hits the fan, you can count on this beleaguered currency to fall to ¥90, then ¥100, then ¥120, and finally ¥150. This gets you 200% potential gain on the (YCS). Us the recent “RISK OFF” run to establish shorts in the yen at great prices.
    -
    The Mad Hedge Fund Trader
    May 22 11:51 PM | Likes Like |Link to Comment
  • S&P Warns Of Possible Downgrade For Japan [View instapost]
    The next step has been taken in the coming Japan crisis. American ratings agency, Fitch, has downgraded Japanese government debt to A+, with a negative outlook. The move cut the knees out from under the country’s dubious currency, sending it down sharply.

    Fitch expects the country’s debt to reach a nosebleeding 240% of GDP by year end, far and away the largest of any major country. That makes our own 100% debt to GDP look paltry by comparison. The Mandarins in Tokyo have been able to finance this enormous debt through a whole raft of financial regulations that limit local institutions to investing a large portion of their assets in Government bonds.

    Regular readers of this letter are well aware that the asset base of these institutions is about to shrink dramatically due to the death through old age of the country’s primary savings generation. The problem is that there is not another generation of savers to follow them. An average growth rate of 1% for the last 22 years, and a ten year government bond yield that has hovered around 1% since 1995 mean that no one has accumulated new savings for a very long time. It is just a matter of time before the country runs out of money. In the meantime, government borrowing for perennial stimulus packages continues to skyrocket.

    How long it will take this house of cards to collapse is anyone’s guess. My old friend, retired Japanese Vice Minister of Finance, Eisuke Sakakibara, otherwise known as “Mr. Yen”, thinks that is still five years away. Hedge fund legend, Kyle Bass, says that it should have started in April. The timing of the onset of this looming financial crisis is now a subject of endless analysis by the hedge fund industry, and will be one of the big investment calls of the coming decade.

    This is why I am running a major short position in the yen through the (FXY), and frequently am involved in the double short yen ETF (YCS). When the sushi hits the fan, you can count on this beleaguered currency to fall to ¥90, then ¥100, then ¥120, and finally ¥150. This gets you 200% potential gain on the (YCS). Us the recent “RISK OFF” run to establish shorts in the yen at great prices.

    The Mad Hedge Fund Trader
    May 22 11:50 PM | Likes Like |Link to Comment
  • Facebook Looks To Be A Great Candidate For Options Trading, Not As An Investment [View article]
    This had to be one of the greatest change of life weekends in human history, endured by one Mark Zuckerberg. On Friday, he earned $9.2 billion with the flawed Facebook (FB) flotation. On Saturday, he married a Chinese doctor and longtime girlfriend, Pricilla Chan. Then on Monday, oops honey, I lost $1.2 billion. Talk about a rocky start! Never mind that the precise timing was intended to undercut any future divorce claims, hence no prenuptial. Her cost basis is $38 a share, his is zero.

    I knew that when the stock closed pennies above the $38 syndicate bid on Friday that there would be a Monday MORNING massacre. I warned away people from this issue at every opportunity. When Wall Street starts drinking its own Kool-Aid you, can count on a mass murder to follow.

    Brokers we urging clients to apply for 100 times the shares they really wanted in the expectation that that would get only 1% of their request. That paved the way for the ugliest broker confirm of the year, that you received the entire allocation that of Facebook shares that you applied for, and they were now down 13%.

    By Monday, some hapless investors still had not received notice of the allocation. At least they are faring better than the suckers lured into the aftermarket to buy stock at $43, now down 30%. Think of the entire flotation as a full employment act for the legal profession.

    There was enough mud on lead underwriter, Morgan Stanley’s face to fill Yankee Stadium. It is sad to see how low the standards and competence have fallen at this once great firm. I am now seriously thinking of taking this sullied name off of my resume, even though it is an ancient entry. Don’t worry, they’ll get their just punishment. The losses on their Facebook Stabilization fund is thought to be as high as $100 million, wiping out any underwriting fees earned. Expect investors to defriend (MS) post haste. What was expected to be the biggest payday of the year for Wall Street turned out to become the largest bill due.

    I made a killing on Facebook, not through any direct participation, but from the market timing it clarified. When the (FB) was down $5, the Dow should have been off 300. They fact that it wasn’t flashed a huge “BUY” signal to me, enough to cause me to rush to cover all of my profitable shorts and flip my model trading portfolio from a big “RISK OFF” stance to a moderate “RISK ON”. So far, it’s working, with Apple (AAPL) up $25 since my call, and (IWM) rocketing two full points.
    -
    The Mad Hedge Fund Trader
    May 21 09:21 PM | Likes Like |Link to Comment
  • Should You Invest In Facebook? [View article]
    This had to be one of the greatest change of life weekends in human history, endured by one Mark Zuckerberg. On Friday, he earned $9.2 billion with the flawed Facebook (FB) flotation. On Saturday, he married a Chinese doctor and longtime girlfriend, Pricilla Chan. Then on Monday, oops honey, I lost $1.2 billion. Talk about a rocky start! Never mind that the precise timing was intended to undercut any future divorce claims, hence no prenuptial. Her cost basis is $38 a share, his is zero.

    I knew that when the stock closed pennies above the $38 syndicate bid on Friday that there would be a Monday MORNING massacre. I warned away people from this issue at every opportunity. When Wall Street starts drinking its own Kool-Aid you, can count on a mass murder to follow.

    Brokers we urging clients to apply for 100 times the shares they really wanted in the expectation that that would get only 1% of their request. That paved the way for the ugliest broker confirm of the year, that you received the entire allocation that of Facebook shares that you applied for, and they were now down 13%.

    By Monday, some hapless investors still had not received notice of the allocation. At least they are faring better than the suckers lured into the aftermarket to buy stock at $43, now down 30%. Think of the entire flotation as a full employment act for the legal profession.

    There was enough mud on lead underwriter, Morgan Stanley’s face to fill Yankee Stadium. It is sad to see how low the standards and competence have fallen at this once great firm. I am now seriously thinking of taking this sullied name off of my resume, even though it is an ancient entry. Don’t worry, they’ll get their just punishment. The losses on their Facebook Stabilization fund is thought to be as high as $100 million, wiping out any underwriting fees earned. Expect investors to defriend (MS) post haste. What was expected to be the biggest payday of the year for Wall Street turned out to become the largest bill due.

    I made a killing on Facebook, not through any direct participation, but from the market timing it clarified. When the (FB) was down $5, the Dow should have been off 300. They fact that it wasn’t flashed a huge “BUY” signal to me, enough to cause me to rush to cover all of my profitable shorts and flip my model trading portfolio from a big “RISK OFF” stance to a moderate “RISK ON”. So far, it’s working, with Apple (AAPL) up $25 since my call, and (IWM) rocketing two full points.
    The Mad Hedge Fund Trader _
    May 21 09:21 PM | Likes Like |Link to Comment
  • Morgan Stanley's $2.4 Billion Facebook Short [View article]
    This had to be one of the greatest change of life weekends in human history, endured by one Mark Zuckerberg. On Friday, he earned $9.2 billion with the flawed Facebook (FB) flotation. On Saturday, he married a Chinese doctor and longtime girlfriend, Pricilla Chan. Then on Monday, oops honey, I lost $1.2 billion. Talk about a rocky start! Never mind that the precise timing was intended to undercut any future divorce claims, hence no prenuptial. Her cost basis is $38 a share, his is zero.

    I knew that when the stock closed pennies above the $38 syndicate bid on Friday that there would be a Monday MORNING massacre. I warned away people from this issue at every opportunity. When Wall Street starts drinking its own Kool-Aid you, can count on a mass murder to follow.

    Brokers we urging clients to apply for 100 times the shares they really wanted in the expectation that that would get only 1% of their request. That paved the way for the ugliest broker confirm of the year, that you received the entire allocation that of Facebook shares that you applied for, and they were now down 13%.

    By Monday, some hapless investors still had not received notice of the allocation. At least they are faring better than the suckers lured into the aftermarket to buy stock at $43, now down 30%. Think of the entire flotation as a full employment act for the legal profession.

    There was enough mud on lead underwriter, Morgan Stanley’s face to fill Yankee Stadium. It is sad to see how low the standards and competence have fallen at this once great firm. I am now seriously thinking of taking this sullied name off of my resume, even though it is an ancient entry. Don’t worry, they’ll get their just punishment. The losses on their Facebook Stabilization fund is thought to be as high as $100 million, wiping out any underwriting fees earned. Expect investors to defriend (MS) post haste. What was expected to be the biggest payday of the year for Wall Street turned out to become the largest bill due.

    I made a killing on Facebook, not through any direct participation, but from the market timing it clarified. When the (FB) was down $5, the Dow should have been off 300. They fact that it wasn’t flashed a huge “BUY” signal to me, enough to cause me to rush to cover all of my profitable shorts and flip my model trading portfolio from a big “RISK OFF” stance to a moderate “RISK ON”. So far, it’s working, with Apple (AAPL) up $25 since my call, and (IWM) rocketing two full points.

    The Mad Hedge Fund Trader
    May 21 09:20 PM | 2 Likes Like |Link to Comment
  • Whistleblower-Based Actions Contribute to Ramped Up Enforcement of Anti-Bribery Statute [View instapost]
    Buried in the recently passed Dodd-Frank financial reform bill are massive financial rewards for turning in your crooked boss. The SEC is hoping that multimillion dollar rewards amounting to 10%-30% of sanction amounts will drive a stampede of whistleblowers to their doors with evidence of malfeasance and fraud by their employers.
    If such rules were in place at the time of the settlement with Goldman Sachs (GS), the bonus, in theory, could have been worth up to $500 million. Wall Street firms are bracing themselves for an onslaught of claims, legitimate and otherwise, by droves of hungry gold diggers looking for an early retirement.
    Don't count on this as a get rich quick scheme. Government hurdles to meet the requirement of a true stoolie can be daunting. The standard of evidence demanded is high, and must be matched with the violation of specific federal laws. Idle chit chat at the water cooler won't do. Litigation can stretch out over five years, involve substantial legal costs, and often lead to a non-financial settlement with no reward. For those who do deliver the goods, death threats from defendants are not unheard of.
    Having 'rat' on your resume doesn't exactly look inviting either. Just ask Sherron Watkins, the in-house CPA who turned in energy giant Enron's Ken Lay, Andy Fastow, and Jeffrey Skilling just before it crashed in flames. Nearly a decade later, Sherron earns a modest living on the lecture circuit warning of the risks of false accounting, and whistleblowing. There have been no job offers.

    - The Mad Hedge Fund Trader -
    Feb 8 09:16 PM | Likes Like |Link to Comment
  • A 'Game Changing' Ruling for Pharma Whistleblowers [View article]
    Buried in the recently passed Dodd-Frank financial reform bill are massive financial rewards for turning in your crooked boss. The SEC is hoping that multimillion dollar rewards amounting to 10%-30% of sanction amounts will drive a stampede of whistleblowers to their doors with evidence of malfeasance and fraud by their employers.
    If such rules were in place at the time of the settlement with Goldman Sachs (GS), the bonus, in theory, could have been worth up to $500 million. Wall Street firms are bracing themselves for an onslaught of claims, legitimate and otherwise, by droves of hungry gold diggers looking for an early retirement.
    Don't count on this as a get rich quick scheme. Government hurdles to meet the requirement of a true stoolie can be daunting. The standard of evidence demanded is high, and must be matched with the violation of specific federal laws. Idle chit chat at the water cooler won't do. Litigation can stretch out over five years, involve substantial legal costs, and often lead to a non-financial settlement with no reward. For those who do deliver the goods, death threats from defendants are not unheard of.
    Having 'rat' on your resume doesn't exactly look inviting either. Just ask Sherron Watkins, the in-house CPA who turned in energy giant Enron's Ken Lay, Andy Fastow, and Jeffrey Skilling just before it crashed in flames. Nearly a decade later, Sherron earns a modest living on the lecture circuit warning of the risks of false accounting, and whistleblowing. There have been no job offers.

    - The Mad Hedge Fund Trader
    Feb 8 09:15 PM | Likes Like |Link to Comment
  • The S.E.C.’s New Whistleblower Program, Which Takes Effect August 12th, Should Help it Get Ahead of Scandals Rather than Playing Catch-up. But Will Budget Cuts Impair its Ability to Follow up on Tips? [View instapost]
    Buried in the recently passed Dodd-Frank financial reform bill are massive financial rewards for turning in your crooked boss. The SEC is hoping that multimillion dollar rewards amounting to 10%-30% of sanction amounts will drive a stampede of whistleblowers to their doors with evidence of malfeasance and fraud by their employers.
    If such rules were in place at the time of the settlement with Goldman Sachs (GS), the bonus, in theory, could have been worth up to $500 million. Wall Street firms are bracing themselves for an onslaught of claims, legitimate and otherwise, by droves of hungry gold diggers looking for an early retirement.
    Don't count on this as a get rich quick scheme. Government hurdles to meet the requirement of a true stoolie can be daunting. The standard of evidence demanded is high, and must be matched with the violation of specific federal laws. Idle chit chat at the water cooler won't do. Litigation can stretch out over five years, involve substantial legal costs, and often lead to a non-financial settlement with no reward. For those who do deliver the goods, death threats from defendants are not unheard of.
    Having 'rat' on your resume doesn't exactly look inviting either. Just ask Sherron Watkins, the in-house CPA who turned in energy giant Enron's Ken Lay, Andy Fastow, and Jeffrey Skilling just before it crashed in flames. Nearly a decade later, Sherron earns a modest living on the lecture circuit warning of the risks of false accounting, and whistleblowing. There have been no job offers.
    The Mad Hedge Fund Trader
    Feb 8 09:15 PM | Likes Like |Link to Comment
  • Apple's Foreign Cash Hoard [View article]
    Apple has become a monster cash flow generator. Apple now has the envious problem in that sales of several of its products are going hyperbolic at the same time.
    Apple announced net profits of $13.06 billion, or $13.87 per share, up 11% from the previous year. If the company just maintains that rate for the rest of the year, it will generate $55.48 in earnings, which at the current 11.5 multiple should take the stock up to $638, up 40%. If Apple makes it up to a market multiple, the stock should rise to $721, a gain from here of 58%.

    If the multiple expands to its pre-crash average of 35 X, that would take the stock to a positively nose bleeding $1,941, giving you a 424% return from current levels. Then the company would be worth $2.8 trillion and rank 5th in the world in GDP, more than France, and just behind Germany. Wow!
    It all reinforces my view that Apple shares will reach my long term target of $1,000 sooner than anyone thinks. Long term readers are well aware that I have been making this call for the past two years back when it was trading at a lowly $240. More recent subscribers will also recall that I predicted that Apple would be the top performing technology stock in my 2012 Annual Asset Class Review.
    I'm not saying that you should rush out and load up on stock today. But it might be worth taking a stake on the next wave of fear that strikes the market. _

    The Mad Hedge Fund Trader
    Feb 2 09:41 PM | Likes Like |Link to Comment
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