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Apple. Buy, Sell or Hold

Apple Inc.(NASDAQ:AAPL) gapped up close to $27 at the opening bell on Monday to close +$23.23 (+4.97%) higher for the day.  The jump was due to a better than expected iPhone 5S and iPhone 5C opening weekend sales. Over 9 million units were sold since the September 20th release date and according to numerous reports the demand for the new devices have exceeded initial supply. In comparison, last year Apple was able to sell only 5 million iPhone5 units in the first 3 days on the market.  With the Apple Inc stock up close to 9% in just 5 trading days, does it make it a buy, sell or hold?

gold iphone investwithalex

While the initial sales estimate are impressive to say the least, they must be put in perspective as in comparison to the last years release of iPhone5. For instance, current release was synchronized with foreign markets release. Most importantly, iPhone 5S and iPhone 5C were made available over the weekend in China. In the past Apple Inc has released iPhones in China 2-3 weeks after the initial US release date. Plus, since Apple Inc is not breaking down sales number by phone there is still a lot of confusion if the consumers are gravitating towards the iPhone 5S or the cheaper iPhone 5C version. Understanding this little data point could give an important insight into consumers mindset and predict the near term future of the smart phone market.

Still, either way you look at it, Apple’s initial iPhone sales numbers were incredible. Given the sales surge over the weekend Apple Inc filled an 8-K form with the Securities and Exchange Commission today stating that they expect its next quarter’s sales to come in at the high end of the estimated $34 to $37 Billion made in July. Further, the company estimated that the gross margins will be at the higher end of the previously provided range of 36% to 37%. These record breaking numbers are sure to put an exclamation mark on what has been a record breaking fiscal year for Apple Inc, ending on September 30th, 2013.

While Apple Inc is surging forward, its old rival BlackBerry Ltd (NASDAQ: BBBY) announced that it has received an offer to be acquired by Fairfax Financial Holdings Ltd at $9.00 a share. Once a smart phone market leader BlackBerry is now a shell of its former glory days. The company has failed miserably to maintain its innovation lead against both Apple and Samsung (OTCMRKTS: SSNLF) since the first iPhone introduction back in 2007.

When you think Apple Inc standing couldn’t get any better, it actually does. Since release of its iOS 7, over 200 million users switched to the latest operating system. As part of the upgrade Apple Inc has introduced a new product called iTunes Radio, which now has over 11Million users.  That spelled disaster for the stock price of Pandora Media Inc (NYSE: P) whose stock declined by more than 10% since Apple’s iTunes Radio introduction.

Will Apple Inc eat Pandora’s lunch as well? It certainly looks like that. With over 11 Million listeners in just a few days, direct to consumer infrastructure (iPhone/iPad/iPod and iTunes) and top of the line brand name, I believe Apple’s entrance spells serious trouble for Pandora Media’s future.

Given this overwhelmingly positive fundamental picture Apple’s stock still trades well below its all time high of around $700 set exactly a year ago. What does this all mean? Fundamentally speaking and given its growth rate Apple Inc stock is not that expensive. At the same time investors might be a little bit confused in regards to just how much longer Apple Inc can maintain its growth rates and leadership position.

Technical picture represents a much more exciting opportunity. Apple Inc stock has been stuck in what can be described as a trading range between $390-550 for close to 9 months. Now there are signs that the stock has bottomed and is ready to go up again. We are approaching an important point here. If the stock breaks above $500 over the next few weeks, it might be a good idea to start building a long position. Should the stock break above $550, it would be a technical confirmation that the bull market in Apple Inc stock has resumed.

At the same time, Monday’s gap from $470 up to $490 must be closed before any full on bull move can resume. As such and given overwhelming positive news for the Apple Inc I would anticipate a short term pullback before resumption of the possible bull move.

Recommendation:  Hold If Own. If not, wait for either Bullish or Bearish confirmation. 

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America Will Eat Its Own Young

Business Insider Writes: Go-Nowhere Generation: Why Young People Are Stuck

drunk americans 

At a time when young Americans have never been more connected, they sure have gotten used to staying put.

The chance that 20-somethings would pack up and move to another state has fallen by more than 40% since the 1980s, according to U.S. Census data. At the same time, young people are increasingly choosing to move back home with their parents and, in some cases, never leave in the first place.

“Sometime in the past 30 years, someone has hit the brakes and Americans — particularly young Americans — have become risk-averse and sedentary ,” Todd G. Buchholz, author of “Rush: Why You Need and Love the Rat Race,” wrote in a controversial NY Times piece. ” Today’s generation is literally going nowhere. This  is the Occupy movement we should really be worried about.” 

Read The Rest Of The Article Here

Interesting article and I highly recommend everyone to read it.

I am not sure what to think of it.  Is American youth staying put due to latest technological advances that make it easier to communicate -OR-  have years of what I call “You Are The Best” generation and narcissism finally catching up to the American youth?

Are they too scared to leave their homes and face failure? If so, that is not a good trend for the health of the US Economy or the Nation overall. It is too early to say, but it is definitely a good trend to watch closely.

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Federal Reserve Pledges More Stupidity

The Washington Post Writes: Federal Reserve considers explicit pledge: Low rates if inflation stays down

bernanke meme

The Federal Reserve is leaning toward an explicit commitment to keep interest rates at rock-bottom levels, as long as inflation remains low.

The pledge would be an attempt to strengthen assurance that the central bank will not tap the brakes on the recovery until it is certain that the momentum can be sustained. The Fed already has vowed not to raise rates — a move that would slow economic growth — at least until the unemployment rate falls to 6.5 percent or inflation rises above 2.5 percent.

Read The Rest Of The Article Here

There are a couple of things in this article that drive me up the wall.

  • We are not in an inflationary environment,  we are in a deflationary environment. The only reason you we are seeing inflation in certain parts of the economy is due to the FED printing a massive amounts of money ($85 Billion/monthly) and dumping it into the financial system by keeping interest rates artificially low. If that wasn’t happening we would already see clear signs of deflation.
  • The FED is punishing savers and true economic growth by keeping interest rates too low for far too long. All while developing significant economic imbalances that will have to be deflated at a later date.  The situation is made worse by creating an environment where only people with access to cheap financing benefit. At the same time the US poverty rate is at all time high or close to 50 Million people. 
  • The article assumes that the FED is in complete control of interest rates. At least for now everyone believes that. Yet, nothing could be further from the truth. While the FED can influence the rates, it cannot control it. The market controls the rates. 

This in return presents a trading opportunity for those who think otherwise. Eventually the interest rates will move independent of the FED and destroy the whole scheme in the process.

When will it happen?

Actually, it might be already happening as interest rates already up 100% over the last 12 months. Is the FED finally losing control? I hope so. In the long run it would be great for the US Economy. 

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Real Estate Watch, September 24, 2013

Reuters Writes: Citigroup to cut 1,000 mortgage jobs, mostly in Las Vegas

real estate cracks

(Reuters) – Citigroup Inc (NYS:C) said it is eliminating about 1,000 jobs in its U.S. home mortgage business, making it the latest bank to lay off staff as higher interest rates cut into demand for new loans and refinancing.

The bank is cutting about 8 percent of the 13,000 jobs in its mortgage division, with most of the cuts – about 760 – taking place in Las Vegas.

With mortgage rates having risen to their highest in two years, applications to refinance home loans plunged in early September to their lowest in nearly four years.

Roughly 800 of the jobs being eliminated are in sales, underwriting and fulfillment and reflect reduced demand for loans. Another 200 jobs are being cut because the company has less work to do on defaults because of higher house prices and fewer delinquencies, a person familiar with the matter said.

The 100% increase in interest rates over the last 12 month is having its effect.  We are beginning to see cracks in the real estate market develop all over the place. Citigroup eliminating about 1,000 jobs in its mortgage division is a clear sign of that.

So, is the plunge in September loan applications for refinancing an indication that the real estate market has topped and is starting to roll over?

It’s too soon to tell at this stage.  Plus, the real estate market is highly local. As I have mentioned before there is no doubt that the real estate market will go down hard. However, the timing of any such decline is a little bit more complicated. There are too many crosscurrents in the market to identify the exact top for the Nationwide market. 

However, if you are involved in transactional real estate, right now would be a good time to start unwinding all of your position. 

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The United States Of Europe

Bloomberg Writes: The U.S. Economy Is Turning European

United States Of Europe Investwithalex

The U.S. economy is getting as bad as Europe at bouncing back from recessions and generating jobs, and a decrease in societal trust may be a big factor, according to a research paper presented today at the Brookings Institution.

The paper is called “Amerisclerosis? The Puzzle of Rising U.S. Unemployment Persistence,” and it’s by Olivier Coibion of the University of Texas at Austin and Yuriy Gorodnichenko and Dmitri Koustas of the University of California at Berkeley.

Amerisclerosis is the economic version of atherosclerosis, also known as hardening of the arteries—a disease that contributes to heart attacks and strokes. In the 1980s, economists coined the term Eurosclerosis to describe Europe’s malfunctioning jobs market. The U.S. is going the same direction, the authors say.

Read The Full Article Here

Amerisclerosis.  Seriously??? Is that the best US Economist can come up with?

I am not sure why so many smart people find it so difficult to understand our current economic environment and/or lack of economic growth/improvement. It is as easy as 1-2-3.

1. We exist in an artificial Credit Finance Economy:  Meaning that whatever recovery we have seen was financed not by real money, but “out of thin air” printed money to sustain the US Economy and to prevent a collapse/recession. The velocity of that money is slowing down now and the US Economy will soon roll over into a recession.

2. Robotics and Outsourcing: Brace yourself over the next 10-20 years. Whatever jobs robots can do or that can be outsourced  will disappear over that time frame. Nothing can be done about it. With real unemployment/underemployment already as high as 15-20% in the US, it doesn’t bode well for the overall economy.

3. Structural Problems: There are so many that I will just mention a few. Attempted currency debasement, healthcare, artificially low interest rates, unemployment, housing bubble, cost of education, car sales bubble, etc….  Of course most of these can be directly tied to issue #1 above.

Until these 3 issues are dealt with, the US Economy is not going anywhere. The only way to deal with it is to stop insane fiscal policies by the FED and the Federal Government and let the US Economy go through a severe recession and defaults.

Unfortunately, no one in the US Government has the balls to do just that as they all practice their can kicking ability. Since that is the case I would expect the US Economy to slowly decline over the next decade to further deteriorate the American standard of living.

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What Are You Smoking Mr.Buffett?

Bloomberg Writes: Buffett Calls Fed History’s Greatest Hedge Fund

buffett what are you smoking investwithalex

Billionaire investor Warren Buffett compared the U.S. Federal Reserve to a hedge fund because of the central bank’s ability to profit from bond purchases while accumulating a balance sheet of more than $3 trillion.

 

“The Fed is the greatest hedge fund in history,” Buffett told students yesterday at Georgetown University in Washington. It’s generating “$80 billion or $90 billion a year probably” in revenue for the U.S. government, he said. “And that wasn’t the case a few years back.”

The central bank has been buying $85 billion of bonds a month to help the U.S. recover as it emerges from the deepest slump since the Great Depression. Chairman Ben S. Bernanke and other Fed policy makers unexpectedly opted this week to sustain that pace of asset purchases instead of tapering it, saying they need to see more signs of lasting improvement in the economy.

The Fed remitted $88.4 billion to the U.S. Treasury Department last year. The payments have ballooned as the central bank built its balance sheet during the past five years.

The Fed “is under no pressure, none whatsoever to have to deleverage,” Buffett said. “So it can pick its time, and if you have somebody wise there — and I think Bernanke is wise, and I certainly expect his successor to be — it can be handled. But it is something that’s never quite been done on this scale. It will be interesting to watch.”

Read The Rest Of The Article Here.

 

This article is a must read for everyone. If it doesn’t illustrate to you that our credit finance depended US Economy is nothing more than a huge FRAUD, nothing will.

Here is how the FRAUD works.

  1. Mr. Bernanke sits in his comfortable leather chair at the FED, pushes a computer button on his keyboard and BOOM, about $85 Billion (yes, billion) appear out of thin air. That happens every month.
  2. Mr. Bernanke then pushes another button on the keyboard and buys $85 Billion worth of US Treasury. Every month. (AKA. Lending to the US Government)
  3. The US Government then proceeds to pay interest on such “out of thin air” money and that goes to the FED.
  4. The FED then turns around and pays the interest money back to the US Government. Net of fees of course(which I don’t even want to go in here).

Does anyone know how I can get into this free money business?

Keep in mind that most if not all financial institutions (including banks) in the US are currently making money off of this scheme.

So, what’s the problem?

Well, all of this happens on the money that never actually existed in the first place. We can talk about structural problems that this action leads to, such as currency debasement and inflation, but for our purpose lets concentrate on something else.

This does, in fact, make the FED the largest hedge fund in the world. Excuse me, not a hedge fund, but a Ponzi Scheme (since they are creating money out of thin air). Usually this goes uninterrupted until and unless the confidence goes away. At that point, the Ponzi Scheme collapses within a very short period of time.   

As of the right now the FED has an substantial amount of confidence from both domestic and international investors. Will that continue? Probably, until one day it doesn’t. When will that day come? No one knows, but when it does the whole thing will collapse within a short period of time. No doubt about it.

The only problem is, instead of these fraudsters playing with just your retirement account, these guys play with the entire US Economy. When it goes…and it will….everything will collapse.

And they put Bernie Madoff and Martha Steward in jail? These guys are not even on the same planet when it comes to defrauding the American people.

So, is Mr. Buffett smoking something and doesn’t see this? Of course he sees and fully understands the stated above. However, he owns/runs a huge conglomerate that depends on growth and stability of the overall US Economy. For him to say anything else but what he said would be foolish. But not for me. 

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German People, You Have Chosen Poorly

Bloomberg Writes: Merkel Records Biggest Victory Since Kohl’s Reunification Vote

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Angela Merkel won an overwhelming endorsement from German voters, putting the country’s first female chancellor on course for the biggest election tally since Helmut Kohl’s post-reunification victory of 1990.  Merkel’s Christian Democratic bloc took 41.8 percent to 25.6 percent for the Social Democratsof Peer Steinbrueck in yesterday’s election, projections on ZDF television showed at 12:02 a.m. in Berlin. That leaves her short of a majority and needing a coalition partner to govern Europe’s biggest economy.

 “This is a super result,” Merkel, who is now set to become the fourth chancellor since the war to win a third term, told supporters at her party’s headquarters in Berlin. “To the voters, I promise that we will handle it responsibly and with care. We will do everything we can in the next four years to ensure that they’re once again successful years for Germany.”

Read The Rest Of The Article Here

 

In one of my previous posts Germany Should Leave The European Union. Like Now  I have argued that German people have a wonderful opportunity to shift the direction of their country towards economic prosperity.   Unfortunately that did not happen on September 22nd as Merkel and her party won re-election.  While seemingly unimportant, this decision will have severe consequences on the overall global economy.

Germany is an economic powerhouse and is the only thing that’s keeping “fiscal mental hospital” that is European Union together. I strongly believe that without Germany, European Union has no chance for a very long survival.  German people had a wonderful opportunity to set their country on the path to eventually leave the EU by voting for AfD, but they let it slip away.

So, what now?

Unfortunately, for Germany nothing will change going forward. Germany will continue to support Greece, Italy, Spain and the rest of the freeloaders for the foreseeable future at the expense of the German people. That will put a significant drag on the overall German economy and any chance of loosening up the shackles that could have set Germany on the path to economic prosperity they haven’t seen before.

In summary, more of the same as fiscal insanity that is EU continues uninterrupted.

 

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Timing The Real Estate Market Crash

So, do you want to know when the real estate market will start heading south, way south? Read on.

Las-vegas-real-estate-investwithalex

As of right now,  the real estate market in the US is anything but clear. Here is just a few articles from today’s paper to prove my point.

 

Confusing at best, isn’t it?

The reason real estate data is all over the place is because the real estate market is undergoing a topping process. As I have mentioned earlier,  that is the way the bear market in anything works. It sucks investors back in before slamming the door and resuming it’s decline. Once again, this stage of the decline should at least 2X the magnitude of the previous one between 2007-2011.

The million dollar question is….when will it happen? Thanks to our friends at Doctor Housing Bubble we might have an answer.

They have correctly identified Las Vegas Real Estate Market as the one to watch for the first signs that the overall (nationwide) real estate market is about to roll over and start it’s decline. Here is why…

las-vegas-housing-market-invest-with-alex

Reason #1: Las Vegas market has seen the fastest real estate appreciation in the nation over the last year. Up 34% in just the last year alone. That is a stunning pace of appreciation.

Reason #2: The majority of buyers in the Las Vegas market are investors/speculators.  The number is estimated to be at 50-70%.   With about 60% of buyers paying in cash.

las-vegas-home-buyers-with-cash-investwithalex

What does it all mean? 

Las Vegas market is experiencing a speculator frenzy with 50-70% in cash buying from investors. There are no fundamental reasons for that to happen in Las Vegas. One can argue that real estate there was especially depressed but I don’t find that argument valid based on the median price and median income at the time of 2010-11 bottom.  Plus, there is no housing shortage.

Either way you slice it,  Las Vegas real estate market is driven by pure speculation and hot money. As such, it could be the first market to cool down and reverse itself  -OR-  it could just blow up.  

Therefore,  if you are interested in timing the real estate market with great precision it might be a good idea to start watching Las Vegas real estate like a hawk.   

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Jim Rogers On Gold

Daily Ticker Writes: Jim Rogers Forecasts a Drop to $900

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Commodities investor Jim Rogers tells The Daily Ticker that gold, having lost its luster as a safe haven, could drop to $900 or $1,000 in the next 1-2 years. Longer term, he has a very different forecast. Gold will soar to “well beyond $1,900 an ounce,” topping its record $1,920 high reached in September 2011, says Rogers, author of Street Smarts: Adventures on the Road and in the Markets. The reason: “massive currency debasement” around the world. “Every major central bank in the world is printing a lot of money plus war, chaos, riots in the street, governments failing,” says Rogers.

Despite that forecast, Rogers warns investments not to consider gold – or any other investment — safe. “I would never use the word ‘safe’ when I’m speaking about investing.”

There are only a few investors that I listen to when they speak. Jim Rogers is one of them. A brilliant and very interesting guy.  So, when he says something you better listen. I highly recommend that you click on the link and listen what he has to say. The video is just 2 minutes long. 

My stock market timing work kind of confirms his thesis on gold. I already talked about gold in one of my previous posts CLICK HERE and the fact that I don’t really understand it or know how to value it properly.

Jim mentions that he anticipates gold to decline further over the next few years to shake out the bulls before resuming its bull market due to currency debasement and inflation. My work confirms this as a highly probably scenario. 

As the markets and the economy decline over the next few years in a deflationary environment, so should the gold.  As we bottom in 2016 and begin the inflation cycle I talked about before, gold should start appreciating. Perhaps significantly. Just my two cents. 

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Buffett Can’t Find Any Stocks

Reuters Writes: Buffett lauds Bernanke but laments lack of investment bargains

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(Reuters) – Warren Buffett said on Thursday he would recommend reappointing Ben Bernanke as Federal Reserve chairman, while adding that low interest rates have inflated asset values and complicated his hunt for investments at his company Berkshire Hathaway Inc.

The billionaire investor spoke one day after the central bank surprised investors by postponing its expected wind-down of monetary stimulus, which has in five years more than tripled the Fed’s balance sheet to above $3.6 trillion.

“Since the panic of five years ago, he’s done a terrific job,” Buffett said on CNBC television in a joint interview with Brian Moynihan, chief executive of Bank of America Corp.

Asked if he would reappoint Bernanke when his term expires, Buffett said: “That’s what I would do.”

Nevertheless, at an event later Thursday afternoon at Georgetown University, Buffett said that the Fed’s eventual exit from its monthly bond-buying program will carry unforeseen risks.

“We are in an experiment which hasn’t really been tried before,” he said, adding that “buying securities is usually easier than selling securities.”

Read The Rest Of The Article Here

As the article indicates Mr. Buffett  claims not to be able to find any bargains or value stocks. I second that sentiment.   As of right now I am unable to find any worthwhile value stocks at all. There are some special situations here and there, but overall everything is either fairly priced or overpriced.

That in itself is not necessary a problem.  It is the nature of the stock market to cycle up and down to provide trading opportunities. However, when you combine the current macro economic backdrop with the fact that most stocks are too expensive, the situation is not pretty.

Can they get even more expensive? Of course they can, but as my stock market timing work indicates that shouldn’t last for long. The stock market is in the topping process and when complete we should receive a number of confirmations that the bear market is back. Once again, I don’t believe we have to wait too much longer now.  

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