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The Apple bubble
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turtle777
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Apr 11, 2012, 12:42 PM
 
Apple's market cap is larger than the combined market cap of companies in Spain, Portugal, and Greece.


Apple Is Now Larger Than... | ZeroHedge

While I think that the valuation of Greek, Portugese and Spanish companies is depressed due to the debt issues those countries are facing, I still have a hard time seeing how Apple could possibly be worth that much.

Let's ask yourself:
What would you rather own: ALL Greek, Portugese and Spanish companies, or ALL of Apple.

Sure, Apple would be more fun and less work, but where is more value, more upside potential in the long run ?

-t
     
subego
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Apr 11, 2012, 01:35 PM
 
I'd rather own Apple, because then I could just buy Spain, Portugal, and Greece, and I'd still have Apple.
     
turtle777  (op)
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Apr 11, 2012, 01:41 PM
 
This is confusing. If you own Spain, you also own their apple orchards.

-t
     
Eug
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Apr 11, 2012, 01:49 PM
 
If I had the guts, and some extra cash (and I have neither), I'd short Apple now.
     
mduell
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Apr 11, 2012, 01:53 PM
 
It looks like they're only counting publicly traded companies. Some of the most valuable are not.
     
Big Mac
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Apr 11, 2012, 01:56 PM
 
Apple is cheap these days even with such a large market cap, unless someone can persuade me that revenues and profits are suddenly going to hit the wall and flat line or decline. It trades at 12.46 foward P/E. FFS. That's a huge and in my mind unjustifiable discount compared to other high flying companies that trade in the 30s or higher. Do you own Priceline stock? (Gee, I certainly wish I had bought and held it a few years ago.) Now that's a stock that would worry me to own. Look at what multiple it trades at.

We need more Apple shorts and doubters though, that's great. I'd like to make my mother another $300,000 this quarter.
( Last edited by Big Mac; Apr 11, 2012 at 02:05 PM. )

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turtle777  (op)
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Apr 11, 2012, 02:08 PM
 
Originally Posted by Big Mac View Post
Apple is cheap these days even with such a large market cap, unless someone can persuade me that revenues and profits are suddenly going to hit the wall and flat line or decline.
I think Karl's thinking that the "$199" subsidy model is unsustainable in the long-run has some merit.

Blow-Off Bubbles: You've Been Warned (AAPL) in [Market-Ticker]

A lot of things can kick-off that trend.

-t
     
subego
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Apr 11, 2012, 02:11 PM
 
Is he a friend of yours?
     
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Apr 11, 2012, 02:12 PM
 
I blame Obama.
     
Big Mac
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Apr 11, 2012, 03:13 PM
 
We'll have to agree to disagree at least right now on this one, turtle, and we don't often disagree. Apple has been taking share back from Android land. People can speculate all they want about Apple raping the carriers with the iPhone, but unless and until something concrete changes, it's all speculation. And until then, Apple's cash pile just grows larger and larger and make even greater gains in the international markets. Want another reason why I don't buy iPhone revenue scares? The subsidy model isn't in place in Europe, but Apple has no trouble selling iPhones there. The US is already hooked, and once you go iPhone you don't go back.

This is not the time to short Apple even though that's the inclination many will have. I'll be the first to report here once I see substantive proof that it's time to go bearish, if and when that day comes.

"The natural progress of things is for liberty to yield and government to gain ground." TJ
     
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Apr 11, 2012, 03:17 PM
 
So Big Mac is an AAPL owner, hence his slant on things.

The problem with such measures such as current profits, is that these things can be inherently volatile. Apple has been scorching, but as soon as ideas diminish and profits start to diminish, lots of AAPL investors may just flee. Stock investors are characteristically fickle.

It's not a matter of if the shine will disappear, it's just a matter of when. It could be by next year, or it could be five or ten years from now.
     
Big Mac
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Apr 11, 2012, 03:31 PM
 
I am long Apple and bullish right now. I have an overall long bias with Apple, always have (I bought my first handful of shares in the mid-1990s), and most likely always will - if the Intel defection couldn't kill my devotion, I doubt anything else could. I've also made a lot of money off Apple for my family and (to a lesser extent) me personally this year, particularly.

But with that said, I'm not married to being long indefinitely and without justification. I'd love to see a nice Apple pullback for a while. I'd love to be able to pick up cheap shares of many great companies including Apple in the future, like people had the opportunity to do during the 2008 Wall Street crisis. If I see concretely negative fundamental (financial) news and/or a sustained technical (chart) downtrend in Apple, I'll go heavily short - I'll be buying a lot of speculative puts. But if you had the money to go short Apple, Eug, I'd tell you to short RIMMjob or Best (sic) Buy instead. Shorting Apple right now is, I'd say, like shorting a rocket ship. Sure, it could come crashing down to earth, or it could be going to Mars.

Could the shine on Apple be diminished, especially in the short term? Sure, that could happen. Will the shine disappear though? That language to me implies the company sliding back toward pre-iCEO irrelevance, which I seriously doubt could ever happen. I think we long term Apple fanatics still think of ourselves as an exclusive club, but while we've been devoted for much longer, we're not an exclusive club anymore. Apple is deeply, deeply embedded in the world's popular culture. Look at China where owning Apple products is an absolute status symbol of the wealthy. China has the largest middle class population on earth, and its population loves Apple. Even Korea loves Apple despite Samsung owning a huge part of that country. Apple's growth overseas is tremendous, and I don't see any slackening of demand here at home at Apple stores, either. Plus, we all know that once you become an Apple person, it's very unlikely that you're ever going to fully switch to alternative platforms. Sure, we may dabble in them, but I'm seriously considering a MBP when in the recent past I would have gone with a PC laptop (I guess that's also a function of my growing income, though). With phones and tablets, other platforms may interest me a bit, but at the end of the day I love my iPhone and have also had negative experiences in Android land, so I don't think I'm going that direction any time soon.
( Last edited by Big Mac; Apr 11, 2012 at 04:12 PM. )

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Apr 11, 2012, 03:54 PM
 
Lion was the one OS X version (besides 10.1 and 10.2) that I find really annoying, whereas I actually find Windows 7 less annoying in some ways. Neither is perfect, and I do prefer Lion over Windows 7 overall, but Windows 7 is surprisingly decent. Not great, but decent... sort of like Lion.

I own an iPad, and I think the iPad has a long future in front of it, but ironically my next tablet may just be a 7" Android machine.

And no, I don't think Apple is an exclusive club. That ended about 5 years ago. That's a good thing for Apple, but your statement doesn't make sense.

The time to short RIMM was last year or earlier. It will probably still go down, but I've been saying RIMM should be shorted since about 5 years ago. I'm gonna go check out how good my prediction was.

[EDIT]

So, my RIMM prediction was both good and bad. If we say exactly 5 years ago, it was around $44. It peaked at about $144 a year later. However, it's now at $13.

Perhaps my prediction will be like for AAPL. It's got some life left in it, but eventually I see it dropping below current levels.

P.S. Like I said I don't have the guts to put my money where my mouth is at this time, cuz it's all going into the mortgage. However, once this mortgage is paid off in a few years and if AAPL is still riding high, maybe I'll short it then.

P.P.S. Back when AAPL was in the 20s was when I told people to buy AAPL. However, I stopped telling people to buy AAPL when it was in the several hundred $ range.
( Last edited by Eug; Apr 11, 2012 at 04:10 PM. )
     
mduell
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Apr 11, 2012, 04:37 PM
 
Originally Posted by turtle777 View Post
I think Karl's thinking that the "$199" subsidy model is unsustainable in the long-run has some merit.
I think the carrier subsidy will soften and AAPL will have to choose between lower profit per unit or fewer units. Deals like Sprint can't go on.
     
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Apr 12, 2012, 05:31 AM
 
Apple still has legs as far as I'm concerned. The iPad is doing now what Windows did in the 80s, its going to be become the standard in schools and businesses and its only just getting started. The profits so far are mostly from consumers but once the app volume licensing goes worldwide its going to start to shift to business sales more.

Companies outside the US and the Fortune 500 or whatever are starting to realise the benefits and schools are starting to get the gist of what they can do too. There is still massive growth to be had for the iPad, make no mistake.

If MS released Office for iOS it would explode even more but it would deal a huge blow to Windows as a client I think.
I have plenty of more important things to do, if only I could bring myself to do them....
     
turtle777  (op)
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Apr 12, 2012, 08:20 AM
 
Originally Posted by mduell View Post
I think the carrier subsidy will soften and AAPL will have to choose between lower profit per unit or fewer units. Deals like Sprint can't go on.
Yep. And wait for the day that Apple has to present a lower margin quarter. The momentum crowd and trade-bots will kill Apple stock.

-t
     
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Apr 12, 2012, 01:27 PM
 
Everything that goes up will fall down. Apple is no exception to this. Its just a matter of when not if. It could be a very long time. But it will happen.
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Big Mac
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Apr 13, 2012, 11:48 AM
 
Excellent timing on the sell-off, turtle and Eug. I'd be really thrilled today if I had sold fully on Tuesday morning at the brief gap up to $640. However, I'm pretty confident we found a bottom at $603 today and would be very surprised if we ever dip much below $600 going forward (save for worldwide economic collapse). We're rallying nicely at $610 right now, and I'd like to see us close at least at $615.
( Last edited by Big Mac; Apr 13, 2012 at 12:01 PM. )

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Big Mac
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Apr 17, 2012, 04:15 PM
 
I hope anyone who was short took my advice and covered at yesterday's or today's lows. The rebound was inevitable albeit a couple of days later than I expected. I just wish I had had the agility to go short with puts on the way down because the top that formed was definitely noticeable. Next time, I vow, I'll get that next pullback right. It's just so psychologically hard going short against Apple though.

"The natural progress of things is for liberty to yield and government to gain ground." TJ
     
Patrick
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Apr 18, 2012, 02:56 AM
 
Originally Posted by Big Mac View Post
I hope anyone who was short took my advice and covered at yesterday's or today's lows. The rebound was inevitable albeit a couple of days later than I expected. I just wish I had had the agility to go short with puts on the way down because the top that formed was definitely noticeable. Next time, I vow, I'll get that next pullback right. It's just so psychologically hard going short against Apple though.
What was it that signaled the top? I don't know much about stock behavior, though I have been observing it day to day. I just figured it was the news of the DOJ that got people selling, since the decline started on the day the suit was filed.
     
Big Mac
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Apr 18, 2012, 06:17 AM
 
Roughly speaking, the day I should have seen the top was Tuesday when it gaped up to the 640 level and then closed much lower. In Technical Analysis that's often called an exhaustion bar, and it signals a reversal. My love for Apple (and the absence of any concrete negative news-that DOJ action is a joke) made me too long-biased and colored an assumption that it wasn't going to fall like it did.

WSJ commented today that AAPL has a ways to catch up to Apple's performance. Cramer said that Apple is dirt cheap here. People used to think long ago that Apple was going to go out of business. That was nearly so in the dark days. Now, when Apple is among the most highly valued corporations on earth, people think that Apple won't be able to sustain its mega business. But even if Apple's growth slows, or it loses subsidies and is therefore somewhat less profitable, it makes tons and tons of money and won't stop unless the whole world economy goes down the crapper. That means the share price has to naturally appreciate or AAPL shares become even cheaper even quicker. Those of us who see through that can capitalize on the disconnect between Apple corporate performance and AAPL stock prices.
( Last edited by Big Mac; Apr 18, 2012 at 10:17 AM. )

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Eug
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Apr 18, 2012, 10:18 AM
 
I hate this technical stock analysis gobbledygook.
     
Big Mac
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Apr 18, 2012, 10:37 AM
 
Many don't like TA, but like it or not, it's a major component of the way financial assets trade. I trade on fundamental and technical factors. Some trade only based on one or the other - I know traders like that. I think it's glaringly shortsighted, but some who swear buy TA believe that everything one needs to know about an asset's price is displayed in the real time technicals.

"The natural progress of things is for liberty to yield and government to gain ground." TJ
     
turtle777  (op)
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Apr 18, 2012, 12:10 PM
 
TA is almost worthless these days.

Markets are manipulated to no end by HFT, government medling, cheap money from teh Fed slushing around.
All those technical indicators of the past don't mean shit anymore if for instance the Fed can move markets up 5% by just spreading some rumors of QE3.

-t
     
Big Mac
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Apr 18, 2012, 12:21 PM
 
I understand your broader point, turtle. Government meddling introduces substantial additional volatility. But if you think TA is almost worthless, either we have very different concepts in mind associated with those two terms, or you're very much mistaken. Just because there's added volatility doesn't mean TA breaks down or becomes worthless. My main technical indicators are right a high percentage of the time, and I really wouldn't be able to effectively trade without them.

"The natural progress of things is for liberty to yield and government to gain ground." TJ
     
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Apr 18, 2012, 01:03 PM
 
Originally Posted by Eug View Post
The problem with such measures such as current profits, is that these things can be inherently volatile. Apple has been scorching, but as soon as ideas diminish and profits start to diminish, lots of AAPL investors may just flee. Stock investors are characteristically fickle.
Good! Here's to hoping! I'll happily pick up a few more of their shares at a discount.

Boy, if I only had a buck for every panicked play-trader that was busy dumping their shares of Apple based on Apple's latest "imminent demise", only to later go "Gee, I surrrrrrre wish I had held onto that..."

Oh, hang on a second...

I do.
     
turtle777  (op)
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Apr 18, 2012, 01:09 PM
 
Originally Posted by Big Mac View Post
I understand your broader point, turtle. Government meddling introduces substantial additional volatility. But if you think TA is almost worthless, either we have very different concepts in mind associated with those two terms, or you're very much mistaken. Just because there's added volatility doesn't mean TA breaks down or becomes worthless. My main technical indicators are right a high percentage of the time, and I really wouldn't be able to effectively trade without them.
In my (limited) understanding, TA looks at chart patterns, and compares that to historical chart patterns.
It's based on market data.

In the past, market data was primarily driven by investors (human beings), reflecting general market psychology and expectations.

Today, most market data is distorted and very different from historic market data.
Most trading today is NOT driven by investors.
So comparing a chart pattern today to a similar chart pattern in the past is not very telling.

I'm not saying it's worthless, but I would by far not pay attention to it as much as in the past.

-t
     
Big Mac
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Apr 19, 2012, 05:13 PM
 
Another pullback based on nearly meaningless leaked and extrapolated Verizon numbers that weren't even bad. The market is scared, and people are looking high and low for reasons to sell AAPL. I don't buy it.

I could be very wrong, but I'm going to make a bold forecast: I think 2nd Quarter 2012 may not be a good quarter. . .

I think it may be a great quarter. I think Apple may blow out the projections similar to 1st Quarter 2012. Plus, the comps from 2011 are really easy to beat. 2012 comps will be much harder to beat in 2013, but for now we have three more bites of the Apple to accumulate shares during pullbacks and rock the house when Apple beats big.

"The natural progress of things is for liberty to yield and government to gain ground." TJ
     
olePigeon
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Apr 19, 2012, 05:25 PM
 
Apple stock makes me depressed. I could have $4.5 million right now, but instead, I got a $120 cheque from a class action lawsuit over Merrill Lynch losing my roughly 2,000 Apple shares (which would be about 8,000 shares right now.)

Sigh.
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Big Mac
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Apr 20, 2012, 03:40 AM
 
Say WHAT? When did this happen Pigeon? The 2008 financial crisis when Merrill Lynch went under and got purchased by Bank of America or at some other point in history? I have to pray you didn't accept $120 for 2,000 shares at Apple's price in 2008. If it happened earlier than 2008, what in the world could have happened to your account that would have caused Lynch to lose your shares? I've never, ever heard of that happening.

Heck, we still get proxy statements for a penny stock owned many years ago by a late family member of ours. None of us even knows what brokerage account holds the shares, but we get the proxy statements. If we're still getting those notices for a very marginal corporation, so much more so that Apple shares should never just disappear, no matter what happens to the broker they were purchased through. That's an horrendous breach of the integrity of our stock market system. Even if it was during the 2008 crisis, there's no excuse even if a broker goes under for you to lose your shares. Did you talk to a lawyer about suing when you heard your shares were lost? And are you sure you have no legal remedy at all to attempt to sue to restore your shares now? BofA has recovered very nicely. They can most certainly afford to give you back your shares if you have the records to prove you should still own them. If you truly have no legal remedy available, I'm so terrifically sorry for your extreme financial loss.
( Last edited by Big Mac; Apr 20, 2012 at 03:52 AM. )

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olePigeon
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Apr 20, 2012, 01:09 PM
 
He never bought the shares in the first place. The broker at Merrill Lynch was making "trades," but never actually bought any of the stock I told him to. The guy bought a bunch of high risk stock (junk) instead of the stock he was supposed to, then sent fake statements. Him and bunch of other people. Supposedly they all went to jail.

I don't know how to explain how the settlement work. It was a mixture of FDIC, FTC, SEC rules, and other crap. I was refunded the difference of the value of the stock at the time of purchase, which was about $8 a share, from the junk stocks that were actually purchased. Unfortunately that meant my $16,000 in Apple shares was now $0, and the difference was about $6,000. So I saw $10,000 go up in smoke because all the junk stocks had crashed by the time the settlement was over, and got a $120 cheque. Since I wasn't going to get rich off my stock anymore, I used my $6,000 to go back to school.

This happened to a ton of people, and no one got their money back. I can expect an occasional 3 cent cheque from the guy making license plates in prison at 25 cents an hour until he pays me back the $10,000 he owes me and hundreds of other people. Should only take a few hundred years.
( Last edited by olePigeon; Apr 20, 2012 at 01:17 PM. )
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turtle777  (op)
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Apr 21, 2012, 08:30 PM
 
How foocked up.

-t
     
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Apr 22, 2012, 07:30 AM
 
I watched Trading Places last night.
I have plenty of more important things to do, if only I could bring myself to do them....
     
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Apr 24, 2012, 11:42 AM
 
Originally Posted by Eug View Post
If I had the guts, and some extra cash (and I have neither), I'd short Apple now.
Closed at $626.20 on April 11, 2012.

Now it's dropped to about $560, with brief periods below that. That's a drop of over 10% since April 11. Too bad I didn't have the guts and cash to do a quick short.

It will be interesting to see what the numbers are at the call, and how the (after hours) market reacts.
     
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Apr 24, 2012, 03:16 PM
 
Back in at $555.90. Just missed day low of $555.

I'm expecting a great quarter call tonight and the stock will be back up to over $600 by morning.

Happens EVERY quarter before "The Call". People selling off like crazy, expecting the worst. Apple posts "Greatest Quarter Ever" and everyone jumps back on.
     
Eug
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Apr 24, 2012, 03:38 PM
 
Doesn't happen every quarter. I remember I kept my AAPL through a call. They announced their best quarter ever, and the stock dropped something like 7% because the guidance was only good. That was a while back though.

As for tonite, they need to be beyond good to keep people in the stock IMO. If they are merely good, I wouldn't be surprised to see AAPL fall some more.

However, if you're buying for a short ride, expecting it to go up tonite, then $555.90 is timing it near perfectly for today, as I suspect it will cost closer to $560, and as you said the intraday low was $555.

P.S. I want to see AAPL hit $666 one day, and close there, just like they closed at $80.86 the day of the Intel switch.
( Last edited by Eug; Apr 24, 2012 at 03:46 PM. )
     
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Apr 24, 2012, 03:47 PM
 
Nah, not in for short ride. I'm in again long term again.

OK, maybe not "every" call, but for the past couple years APPL has dropped off in the days preceding the call (and maybe a couple days after) and then rebounds in the following days/weeks after the call. That's my recollection anyway as I comment about this to my broker every quarter.
     
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Apr 25, 2012, 05:39 AM
 
Originally Posted by Eug View Post
P.S. I want to see AAPL hit $666 one day, and close there, just like they closed at $80.86 the day of the Intel switch.
Did it really? That's hilarious and awesome.

Congrats to you again Eug for calling this short term dip, and my hats off to turtle once again as well for reinforcing it. The trend was strongly with both of you. I'm frustrated at myself for not taking better advantage of it, as I said. But I hope everyone covered. Looks like it's going to be a great day to be long today with early morning trade printing at $612.25.

"The natural progress of things is for liberty to yield and government to gain ground." TJ
     
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Apr 25, 2012, 08:20 AM
 
January 10, 2006: MWSF: Intel-powered MacBook Pro laptop unveiled

Apple expanded its laptop offerings beyond the venerable PowerBook line Tuesday, with the release of the MacBook Pro portable computer. Announced by Steve Jobs during his Macworld Expo keynote, the MacBook Pro is the first laptop from Apple to use an Intel-built chip, the Intel Core Duo processor.

Apple claims the MacBook Pro delivers up to four times the performance of a PowerBook G4, with Apple CEO Steve Jobs hailing it as the fastest notebook ever. The 5.6-pound system is housed in a one-inch thick aluminum enclosure and features a 15.4-inch LCD screen that’s 67 percent brighter than the PowerBook’s screen; Apple says the MacBook Pro’s display is as bright as the company’s desktop Cinema Displays.




Apple's share price an in-joke for Intelites

In a bit of unintended humor, Wall Street closed Apple's stock Tuesday, the day the company unveiled its first Intel processor-based computers at Macworld, at $80.86.

That may mean nothing to the average person, but techies will no doubt catch the accidental reference to Intel's 8086, the 1978 processor that spawned the x86 architecture that PC users are so familiar with.




Here is the stock price chart that posted on my blog 6 years ago.
     
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Apr 25, 2012, 09:24 PM
 
What's the price to earnings ratio?
     
Eug
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May 17, 2012, 10:12 PM
 
AAPL based closed barely over $530 today.

BTW, if you go by P/E, AAPL so far is doing OK. However, the problem here IMO is that AAPL has a not so broad profit-generating product mix in the context of a notoriously fickle customer base. Basically Apple has to hit one out of the park every time in order to keep these types of earnings increases going forward.

OTOH, Facebook's IPO values the company at over $100 billion despite their less than stellar earnings. This should prove interesting in the coming months.
     
turtle777  (op)
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May 18, 2012, 12:25 AM
 
BTFD AAPL, anyone ?

Not me.

FB is a guaranteed value destroyer.

-t
     
Big Mac
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May 18, 2012, 10:12 AM
 
It looks like the hedgies have finally relented in selling their most valuable holding down $100+. If you want back in this is the day to start going back long. I think we could get back to new highs very, very quickly, especially if someone gets the Euro-dopes in line.

AAPL could double here and still be considerably undervalued. The stock sold off over the last month only because hedge funds needed to lock in AAPL profits.

"The natural progress of things is for liberty to yield and government to gain ground." TJ
     
Big Mac
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May 23, 2012, 12:47 PM
 
Selling is over in AAPL, unless you believe we're heading for 1929. Bernanke has pledged he will never let that happen. The iPad growth is bankrupting Dell and to a lesser extent HP. And we know Apple's pipeline is very strong. I think next year we see iPhone take back ill gotten gains from Android, especially when we get to China Mobile.

I'm long and strong here. Actually I'm leveraged long when everyone is panicking. Genius or madness? Others are buying puts against AAPL, but I think that trade is dead and they're going to take a baseball bat to the head if they stay with that trade. How bout you? Eug, turtle?

"The natural progress of things is for liberty to yield and government to gain ground." TJ
     
turtle777  (op)
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May 23, 2012, 01:27 PM
 
Originally Posted by Big Mac View Post
How bout you? Eug, turtle?
I'm not touching tech stocks. Too dependent on the economy.

All my money goes into gold, silver, and miners. The miners are tremendously undervalued after being clobebred for the past 6 months.
Some miners now pay a dividend, Newmont pays 3%, Gold Resources 3%, Agnico and Barrick above 2%. That's the best of both worlds - pays more than Treasuries, and will benefit from the fool at the Fed.

As you said, we can trust that the Chairsatan is going to print, so PMs is where it's at.

-t
     
Big Mac
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May 23, 2012, 03:13 PM
 
You have all your money in miners though. They haven't been doing well even compared to spot, but if it works for you it works.

"The natural progress of things is for liberty to yield and government to gain ground." TJ
     
turtle777  (op)
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May 23, 2012, 03:58 PM
 
Originally Posted by Big Mac View Post
You have all your money in miners though. They haven't been doing well even compared to spot, but if it works for you it works.
It worked well for me. I sold all my mining shares last April, and switched from Silver to Gold (at a ratio of about 1:33).
In the last months, I have been steadily buying back the depressed mining shares, and exchanging Gold for Silver (now at ratio of 1:50 or so).



-t
     
Eug
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May 23, 2012, 08:11 PM
 
Gold is something I do not really understand. It's way overvalued in relation to its industrial use. Gold is valued mainly because countries hoard it, and because historically it's used to back money. But as an actual commodity, its price makes no sense.

Almost like diamonds at retail (although industrial use diamonds can be very cheap).
     
el chupacabra
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May 23, 2012, 10:01 PM
 
Sometimes I used to ask my investment partners "do I really want to be in gold, I mean when everything comes crashing down it's not like you can eat it to save your life." And their response was "unless the world societies crash to the point where there is no more status or wealthy people gold won't go away, gold has been consistently valuable for thousands of years from the middle east to Africa, to the Aztecs and it will continue to be valuable... as a world currency and a status symbol." In times when world paper currencies are shaking, and the world economy is shaking, people with a lot of wealth need a place to transfer their investments/savings in order to protect them. They look to commodities; food is perishable, copper, steel, oil etc takes up too much space, hard to store (though not a bad investment). They look to the most valuable easy to protect commodities; the precious metals.
     
Eug
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May 23, 2012, 10:50 PM
 
That's kind of a circular argument though. Gold is a precious metal because thousands of years ago people prized it because it's shiny and doesn't tarnish, and it's easy to mold into jewelry. So why is it worth so much in 2012? Because it's a precious metal?

I mean I understand their argument, but ultimately it's one that doesn't really have a lot of innate logic to it. If countries were to stop hoarding it, the price of gold would drop like a shiny soft rock, as it's not exactly rare compared to platinum, which costs less than gold per ounce now.

To put it another way, in the past, platinum usually cost more than gold, because of its rarity and because of its industrial uses. However, more recently, gold has surpassed platinum in cost, because people hoard it as a hedge against inflation or whatever. IOW, people buy gold just because other people and governments bought gold to back their currencies, not because they're actually going to use it for anything.
     
 
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