Tuesday, April 3, 2012

Disagreeing with Karl. Again.

I hope Karl doesn't get too mad at me, but he's gone all irrational on Apple again.
Apple: $300 Or Less, Not $1,000 Or More

And maybe $100 or less.
Update: Karl didn't get mad. He just banned me. Oops.

I had to comment about that.
$1000 per share is insane. IMHO $500 per share was sky-high, much less whatever it is now. Apple has to correct here, and IMHO it will overcorrect. It will also take the Nasdaq with it when it blows. I understand why the market is desperate for an Apple: they want actual profits. HP is a zombie lurching towards a chop-shop takeover. Dell is a finance company pushing "fleeces" on hardware. Lenovo is forecasting 3% profit margins. Acer is longingly looking back towards its previous 3% profit margins and is wondering what happened. Samsung hasn't created a single dominant idea, and would be more profitable if it quit wasting its Apple-given profits competing with its best customer. Nokia couldn't find a clue with 4 committees and one supervisory committee of executives (and 5 different OS development teams).

Apple landed right in a perfect storm. Jobs believed in ultimate simplicity. Do it one way, the Right Way (TM). Offer the minimum possible number of choices, and make it easy. It worked for Saturn and for McDonalds. The iPad works because there are 2 choices: wi-fi only or cellular, and then 3 memory choices. For the Apple computers, it's portable or desktop, and then screen size (and processor, but I don't know any consumer that's cared about that for the last 3-5 years). Try ordering a computer from Dell: they have 6 different kinds of computers on the first page, and that's a distinct improvement from the multiples they used to offer.

There is a limit to the "just make it easy" market. Apple can saturate this market, and probably will soon if the economy downturns. Eventually, the cool side will get broken off by some other gee-whiz phone or tablet with a built-in blender and frappachino maker, and the low end will get squeezed by some toy making a $5 profit for their Indian or Chinese manufacturer. 

However, $100 a share is silly. Even if we shave off the parabola and say they go 0 growth. They still have a loyal core customer base buying what they produce, and have a lot of profit margin to give. They could live well just supporting their current market for a foreseeable future, barring Apple's new "one more thing".

Karl, you're generating a Cassandra problem here: if you were putting your money where your mouth was the whole way up the parabola, you'd be long past broke. I understand that you have an irrational hatred for all things Jobs, but I think peeing on Jobs' grave would be more emotionally healthy and cathartic than railing against the irrationality of the market on Apple.

IMHO, everything you've ever forecasted about Apple can be applied to BMW and Mercedes equally. They sell luxury brands into a market dominated by low-cost options. Granted, neither has faced Apple's parabolic stock rise recently; but they have the same fundamental position. They both have loyal buyers in markets that traditionally run towards commodity status in bad times. So, why aren't you short BMW or Mercedes?

If I had money to spare, I could be talked into buying Apple at $300. Apple at $100 is IMHO just projection.

1 comment:

Anonymous said...

You should be thankful that you got banned by the Ticker******. Why do you even care what he has to say? This guy has been on the wrong side of almost every trade since 2007. There is a whole forum dedicated to using KD as a contrarian signal. They call it Fade The F****** Dong (FTFD). These guys have made some great trades by using FTFD.


KYPackrat says: I edited the comment for language.

Also, I'll let it slide this time, but I don't like fully anonymous comments. I obviously don't mind pseudonyms, but pick a name and stick to it.

Thanks for the comment.