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John Lounsbury, Managing Editor and Co-founder of Global Economic Intersection, provides comprehensive financial planning and investment advisory services to a small number of families on a fee only basis. He has a background which includes 34 years with a major international corporation, 25... More
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  • Is This A Bubble? What Is It? 20 comments
    Aug 22, 2012 7:33 PM

    Original post Tuesday 21 August.

    I'm posting the graph below without labels or any other identification. Those details will be added in approximately 24 hours.

    In the meantime, if you think you know what this might be please leave a comment. Also, please let us know if you think this is a bubble.

    Updated Wednesday 22 August.

    Okay, there are a bunch of pretty well informed readers here. The chart is for Apple (NASDAQ:AAPLY) 1986 to date. It appeared yesterday (21 August 2012) in the 5 Min. Forecast. Below is the graph they posted (same except the source is identified) followed by the excerpt from their post of the day.

    OK, the chart picks up in early 1986 at essentially zero and ends in the present day at $664… and the stock is Apple. As of yesterday, AAPL became the biggest publicly traded company ever, with a market cap of $623.14 billion.

    I find the comparison of Apple 2012 to Microsoft 2000 very interesting. I hope to do a piece that discusses the similarities and the differences.

    Thanks for participating in this little exercise.

    PS: The guesses that were wrong were, for the most part, pretty darned good!

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Comments (20)
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  • Hungry for Knowledge
    , contributor
    Comments (733) | Send Message
     
    It's the M2 money supply!
    21 Aug 2012, 03:48 PM Reply Like
  • BrokenClock
    , contributor
    Comments (9) | Send Message
     
    AAPL
    21 Aug 2012, 04:20 PM Reply Like
  • GreenRiver
    , contributor
    Comments (3846) | Send Message
     
    Looks a lot like RIMM, from their IPO to their highwater mark around June, 2008. But I think BrokenClock nailed it. Or MSFT up to around 2000.

     

    First bump, I-Pod / tech bubble.

     

    Second bump, I-Phone / housing bubble.

     

    Third bump, I-Pad / ???? bubble.

     

    Bubble? No, AAPL has become a technology leader in mobile devices, as well as a marketing and retail behemoth. But the law of large numbers dictates that this curve levels off, and fairly soon. Or, perhaps, when the pace of AAPL growth levels off, the stock price comes back to earth.

     

    If you look at MSFT, you see the same exponential growth up to 2000, but the PC era ended, and MSFT has traded at about 50% of their highwater mark for a decade.

     

    Or look at RIMM's chart. If you don't look at the period AFTER 2009, it looks EARILY similar to AAPL. But when AAPL introduced the I-Phone, RIMM was doomed.

     

    So is AAPL MSFT? or RIMM? Or something else?
    21 Aug 2012, 04:42 PM Reply Like
  • scott trader
    , contributor
    Comments (7091) | Send Message
     
    @Greeb River.....has Apple had delays over and over like Rimm...Did Jobs put a dancing monkey in charge like Gates...
    22 Aug 2012, 12:49 AM Reply Like
  • JohnnyO
    , contributor
    Comments (9) | Send Message
     
    It very clearly looks like Apple. In addition, as GreenRiver stated, it looks like MSFT prior to 2000
    21 Aug 2012, 09:44 PM Reply Like
  • Dialectical Materialist
    , contributor
    Comments (5080) | Send Message
     
    Could be Apple or it could be a population chart (e.g. world pop 0-2000 CE).

     

    A bubble is more than something growing really fast -- it is something growing really fast with the ability to sustain itself. So I am guessing that whatever this is, it is NOT a bubble, but without labels, it is impossible to know -- because it is impossible to know whether the growth can be sustained or is at risk of crashing back down.

     

    For an unusual example, imagine charting the height of your son each month (in millimeters) from the age of 10 to 20. There is likely to be a period in there where growth "takes off" but it would not be a bubble since it is very unlikely that it will reverse course. It may increase more slowly, but barring disease or amputation, it will not decline.
    21 Aug 2012, 10:53 PM Reply Like
  • Dialectical Materialist
    , contributor
    Comments (5080) | Send Message
     
    of course I meant *without* the ability to sustain itself. And I am now more convinced it is AAPL, although I remember the population charts from my demographics classes and it was amazing to see the divot that the plague took out of global population at the time.
    22 Aug 2012, 12:00 AM Reply Like
  • Ronin.
    , contributor
    Comments (1556) | Send Message
     
    I am sure that is AAPL, perhaps 10 yr chart.....

     

    Is it a bubble? Chart price/earnings or price/sales and it'll be easy for you to answer your own question...
    21 Aug 2012, 11:27 PM Reply Like
  • mds5375
    , contributor
    Comments (176) | Send Message
     
    Obviously it's something specific (AAPL?, MSFT?), but it is a classic logarithmic graph. Per Dialectic, above could be population, use of energy, use of metals, use of water, etc. Whatever it is, it will eventually be resource-restrained. (Unless the universe keeps expanding) :-)
    22 Aug 2012, 07:41 AM Reply Like
  • Dialectical Materialist
    , contributor
    Comments (5080) | Send Message
     
    Yeah, if you go to yahoo finance and select the AAPL chart for "max" and choose linear instead of logarithmic, you can see it is definitely AAPL.
    22 Aug 2012, 11:21 AM Reply Like
  • lower98th
    , contributor
    Comments (1411) | Send Message
     
    Debt/credit
    22 Aug 2012, 09:44 AM Reply Like
  • TeresaE
    , contributor
    Comments (3041) | Send Message
     
    I think it's US government debt.

     

    The small bubble towards the right, before the take off, was the Reagan years, then you get the Y2K/dotcom instant wealth drop in debt, then boom, the '00s shoot us too the moon.

     

    Too bad neither side is doing anything to change that trajectory, rhetoric to the contrary, notwithstanding.

     

    Of course, I could be totally off on the chart.
    22 Aug 2012, 02:30 PM Reply Like
  • Ronin.
    , contributor
    Comments (1556) | Send Message
     
    It's Lounsbury's wife's spending habits.....he better buy some AAPL stock to keep up.....
    22 Aug 2012, 02:41 PM Reply Like
  • John Lounsbury
    , contributor
    Comments (4050) | Send Message
     
    Author’s reply » Ronin - - -

     

    If this contest had a prize you would win it.
    22 Aug 2012, 07:29 PM Reply Like
  • John Lounsbury
    , contributor
    Comments (4050) | Send Message
     
    Author’s reply » I am posting a couple of comments to allow those who partook of the "contest" to be notified of new comments, prompting a comeback for the update.
    22 Aug 2012, 07:31 PM Reply Like
  • marketquant
    , contributor
    Comments (1269) | Send Message
     
    > AAPL... with a market cap of $623.14 billion

     

    ...and with a world population of (fudging a little) about 6.23 billion people -- that is $100 bucks for every man, woman, and child.
    22 Aug 2012, 07:36 PM Reply Like
  • John Lounsbury
    , contributor
    Comments (4050) | Send Message
     
    Author’s reply » marketquant - - -

     

    Interesting.

     

    Actually, to one significant figure it is $90.
    22 Aug 2012, 07:49 PM Reply Like
  • GreenRiver
    , contributor
    Comments (3846) | Send Message
     
    That's a nice bookend to FB's market valuation (shortly after their IPO) of $100 per registered user - users who pay FB absolute nothing for the service FB provides.
    23 Aug 2012, 01:13 PM Reply Like
  • marketquant
    , contributor
    Comments (1269) | Send Message
     
    > Interesting.

     

    I have a habit of trying to find "normalization" values to gain perspective. Interesting, but not necessarily useful.

     

    I wonder how many people have *shorted* AAPL during that graph's timeframe? I have twice, and made money both times. But I'm afraid to try it again even though the price is even higher! I now *have* an iPad, and my wife wants an iPhone!

     

    Another one, from a few months back, was to compare the value of all gold stored in vaults against the valuation of entire stock markets -- I think that stored gold was worth the total of several major stock markets added together at its peak. (The comparison may have been in Barron's, not sure).
    23 Aug 2012, 03:27 PM Reply Like
  • Michael Clark
    , contributor
    Comments (11834) | Send Message
     
    John: Looks to me like asset loans more than 60 days late on monthly payments.

     

    Lower interest rates during an Business Cycle Growth Period lift all boats. Lower rates during a Business Cycle Non-Growth Period create cancers.
    23 Aug 2012, 03:24 AM Reply Like
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