DID APPLE COMPUTER STOCK JUST TOP AGAIN ON TUESDAY?
I promised to keep readers up-dated on Apple Computer. Is it topping, bottoming, expiring, drunk with too much attention...?
The big news recently was a BIG MONEY PLAYER named David Einhorn (hedge funder) sued Apple Computer to try to extort from Apple's cash hoarde a special payment to shareholders. I don't really understand the logic of his argument -- it seems to be that the stock has gone down, and Apple had to find some way to pay shareholders back for this decline. A kind of corporate bailout of its own shareholders. Of course, shareholders are not held captive by under-performing companies. Shareholders can sell shares and buy shares back. Einhorn says Apple "has a depression mentality". Does he mean that Apple thinks we are in a Depression, and that, because of this, 'cash is king'? Aren't we in a Depression? Einhorn wants some of that $137 billion Apple holds in cash for himself; and he is apparently going to have a tantrum until Apple issues him some preferred stock. Hold your breath and scream, David! Act like a spoiled hedge fund executive. You time may be running out -- and I think you understand that too, which makes you a bit desperate.
If corporations and hedge funds can extort money from Washington, why not from each other too?
This is the same David Einhorn who said essentially that Ben Bernanke is 'ruining America' -- with which I agree. This is definitely worth a read, for those who don't understand how Bernanke is ruining America.
Apple shrugged off Einhorn: 'much ado about nothing'. Apple also tried to regenerate excitement for new Apple products by announcing they were working on a I-Watch. Do people need both an IPhone that acts like a watch, and an I-Watch that acts like a phone?
Apple's new magician, Tim Cook, says Einhorn's tantrum is a sideshow. Apple stock fell 1% after shareholders realized there may not be a payout announced to shut Einhorn up.
Where is Apple in a technical sense? In a word, Apple is overbought, and a pullback is due. The chart below shows Apple is still a short-sell -- although the main pane with the price data and the moving average indicators -- CGTS 112 Prebasic (red) and M5 (blue) -- are showing Apple bulding a bottom here. Or at least attempting to build a bottom.
In terms of trend, Apple has resistance at 549.03 and support at 439.88 -- but these levels will change shortly when Apple turns down again. If the red trend line turns down again with this coming decline, below 549.03, then resistance begins to compact the stock a bit more. The real key is if Apple's subsequent rally begins ABOVE the 439.88 support line. This will be the sign of a probably trading bottom. Should the 439.88 support break, this would be very negative again. A compacting resistance/support picture is a picture of a stock's bottoming process.
The two bottom panes show indicators which have not been positive since October 2012. These need to turn positive before I will buy. I do want to buy Apple here -- but I am being patient.
Speaking of a global depression, friends in Vietnam are VERY CONCERNED about the deepening depression here. Each day the television reports steep drops in real estate prices -- shows millions of unfinished housing units -- and a report last night said 4500 Vietnamese companies went bankrupt in 2012. Last night a local television special even exhorted Vietnamese to 'simplify and restructure' -- and used the Korean musical hit "Gangnam Style' (I originally wrote "Gangman Style") as an example of how this song had simplified and restructured the world of music. Then we took a guided tour of unfinished construction projects throughout the country, hollowed out structures gaping in the wind, home of weeds now and rats.
Our friends are quite desperate. They owe money; and they got swept up in the flipping real estate game that never was supposed to end. When we first arrived here in 2008, friends proudly told us that land in Hanoi was the most expensive in the world. How can that be, we asked? American average household income is between $40-60,000 per year. Vietnamese is $1,000-3,000 per year. Who is the buyer of housing that is as expensive as in America? Foreigners were coming. Foreigners with money. Then the foreigners began leaving. The global boom was over.
One of our friends explained how the boom had begun in 1990. We live in West Lake, a lovely overbuilt area, with hundreds of brand new houses that are empty. He said there was nothing in West Lake in 1990 -- and then the building started, the boom began, money came flooding in from Vietnamese living in America, Australia, Europe...
My mind began to calculate: 36-year cycles. 18 up; 18 down. 1990 + 18 = 2008, top. In fact, when we arrived in Vietnam there was a housing fever. There was all kinds of lying and cheating. Rumors that the government was going to relocate all the Hanoi universities to Ba Vi, outside of Hanoi. Suddenly all the land in Ba Vi exploded. Our friends kicked themselves because they had no money to invest in Ba Vi, the new city that was coming. They even though of buying land along the Cambodia border. They needed to buy land somewhere....
I warned them that we were at the top of the mountain, not at the bottom. HOARDING anything is the sign of a top. HOARDING was a sign of madness. They dismissed my warning. Now they come to me and say: "It is terrible this year. But it will be better soon." Not so soon, I tell them. America is scheduled to hit bottom in 2019. Vietnam should hit bottom in (2008 + 18 =) 2026. Of course, they do not want to hear this.
Greed is one of the Seven Deadly Sins. The 18 years of deconstruction provide man with the opportunity to get on his knees and ask God to forgive his Greed. Also, the Earth needs to rest. Greed is a fever, and signals an illness in the land.
I'm bearish on the economy, and also on Ben Bernanke. Don't miss the Seeking Alpha article just posted: 'STOCKS ARE MORE OVERVALUED THAN IN 1929."
He's right. You can't fool Mother Nature.
John Early writes:
When you overestimate earnings by 20% and the growth rate of earnings by two or three times, it is easy to make stock prices look reasonable. Using measures of valuation that have stood the test of time shows stocks are overvalued and the best measure of valuation I have found says they are more overvalued than at the peak in 1929.
Michael J. Clark, Hanoi