“A bubble is a bubble. People can see them clearly in retrospect but seem unable to see them before they implode,” Clem Chambers writes for Forbes. “Apple’s stock price is a bubble.”
Chambers writes, “As far as I can see Apple is valued by a logic all of its own, where the upsides are valued to the max and the downsides are written off–this is classic bubble thinking.”
5 reasons to sell Apple:
1. Apple is Apple because of Steve Jobs. Steve Jobs is gone… Great men do not have great successors.
2. It’s a toy company. A toy company can’t be the U.S.’ most valuable company for long…
3. You have too much of Apple… If you have your only fortune tied up in Apple, because you have ridden this amazing stock up to these crazy levels, you should top slice your position at the very least (that is to say sell half). Think of it as taking your retirement early.
4. The chart says so. If it looks like a bubble and acts like a bubble, it’s a bubble.
5. The cab driver is tipping Apple. When cabbies are talking about taking out Ninja loans to buy Las Vegas property, you know the real estate boom is over.
Chambers writes, “Let me be clear: I wish the best for the NY cabbie with his Apple stock. I hope Apple bounces back and smashes its way to $1 trillion of market cap, but gravity and hope are not best friends.”
Read more in the full article here.
[Thanks to MacDailyNews readers too numerous to mention individually for the heads up.]
Related articles:
Mr. Cook’s Wild Ride: Options market sees big earnings move for Apple – April 23, 2012
The Mighty Fall: Five cautions for Apple stock enthusiasts – April 23, 2012
All eyes on Apple as Cupertino powerhouse reports Q212 earnings tomorrow – April 23, 2012
Remember: Apple’s quarter is 13 weeks vs. holiday quarter’s extra 14th week – April 23, 2012
Apple to webcast Q212 earnings release conference call on April 24 – April 20, 2012
Concerning his item 5, it’s not an original thought…
WHEN THE SHOESHINE BOYS TALK STOCKS IT WAS A GREAT SELL SIGNAL IN 1929. SO WHAT ARE THE SHOESHINE BOYS TALKING ABOUT NOW?
By JOHN ROTHCHILD
April 15, 1996
(FORTUNE Magazine) – JOE KENNEDY, a famous rich guy in his day, exited the stock market in timely fashion after a shoeshine boy gave him some stock tips. He figured that when the shoeshine boys have tips, the market is too popular for its own good, a theory also advanced by Bernard Baruch, another vested interest who described the scene before the big Crash:
“Taxi drivers told you what to buy. The shoeshine boy could give you a summary of the day’s financial news as he worked with rag and polish. An old beggar who regularly patrolled the street in front of my office now gave me tips and, I suppose, spent the money I and others gave him in the market. My cook had a brokerage account and followed the ticker closely. Her paper profits were quickly blown away in the gale of 1929.”
http://money.cnn.com/magazines/fortune/fortune_archive/1996/04/15/211503/index.htm
@ Thelonious Mac: You sir are in the wrong business by posting such intelligent comments on MDN. No sarcasm intended. You ought to be writing your own blog or column somewhere. I’d be among the first to subscribe.
Oh wait! You already do and I just subscribed.
Thanks for the above quote and link.
TMac’s post is well written. It expresses a simple contrarian concept. When everyone is gung-ho about a stock, then the stock price will tend to become overinflated. If investors are leveraging themselves to buy the stock, then the asset pool supporting that stock will soon become exhausted and the fear factor will increase. At some point fear will overcome greed and people will begin to take profits. Leveraged investors will bail as quickly as possible and the stock price will tank. But no rule of thumb should be followed blindly. An investor needs to reason, and not just react.
The reverse is often true, too. When everyone is dissing a stock its price will be depressed, very possibly below fair value. But it is wise to remember that not every cheap stock is a good value. Even a cheap stock can be overpriced.
You are describing a scenario where the whole market was overinflated. Of course a macro economic failure could bring down AAPL but Apple itself is in no way a bubble. If Apple crashes then everything crashes.
I have posted before about RCA- the glamour stock of the 1920’s that at some point stopped going up because of sound fundamentals and kept inflating because people expected it to- amateurs in the market, not pros. There are more than a few parallels between RCA in the day and Apple today.
I was fortunate enough to buy into Apple in 2001 and kept buying through $320/share or so and have not added to my position since. I rang the register at $402 late last year and taken a chunk of money off of the table- my gains are locked in regardless what the balance of my Apple holdings do as the taxes are paid and the money is out of the market.
Some background on the market of the 1920’s can be found here:
http://eh.net/encyclopedia/article/Smiley.1920s.final
That’s just it.The amateurs are not in the market.
The so-called bubble is just a correction to AAPL stock value which has been held down for over a year. Some people assumed AAPL would follow a straight curve up, but in fact it should be going up by 55% a year as it has done for several years now.
OK, at 640 the correction was realized and there was even some overshoot, but 560-600 is what the current value should be.
One correction that is still due to happen is the undoing of the drop at the end of 2008, which happened for no reason at all (in contrast with other companies, who sold LESS), because Apple was doing business as usual, with quarterly results that trumped everything seen in the past.
So maybe AAPL may spring right back to 640 and more, to compensate for that. AAPL hasn’t suffered from the crisis… AT ALL. Why isn’t this reflected in the stock value?
Is that you, ZuneTang?
What? No MDN take on this one? Not even for the “it’s a toy company” thing?
LOL That was my first thought to.
When a writer ends his column by saying “Buy my book!” you know he’s a con artist!
How many times have we heard this story over the last 20 years?
What a dipshit. How does it look like a bubble? What does he think an appropriate PE would be for AAPL? These clowns keep uttering the same nonsense year after year on every Apple pullback. Will they ever wake up? Doubtful.
Apple certainly isn’t in the traditional bubble territory of the dot-com era. But compared to Hewlett-Packard or Dell, Apple could seem like a bubble based on P/E. However, Apple’s revenue and EPS seems rather solid. I guess everyone is entitled to his own opinion but I really amazes me that some people are so clueless in life. They have such strong beliefs in things that are so easily proven wrong.
I don’t get that “gravity and hope are not best friends” thing. I don’t see what one has to do with the other at all.
I would have to agree that if Apple crashes, likely everything crashes, but Apple would still seem to be in the best position to haul itself back up again faster than probably any other tech stock due to a loyal customer base and abundance of cash. I’m sure Apple could run on its cash reserve alone for a couple of years.
Where you should stand depends on a number of things and the same rules will not apply to everybody.
1- Some are playing short term on margin and could seriously get their asses kicked if a hard downdraft hits the market. If the market hits a downdraft, lots of Apple stock will get dumped for margin calls and/or panic selling regardless of how solid Apple’s position might be.
2- Long term Apple looks pretty good, but overpriced in light of the world economy and the spaces they operate in. Long term, I would be looking for a correction to bring the price down to more realistic levels and have taken some of my long term holdings off of the table.
HPQ and DELL deserve their respective PE’s. Would you buy them even at these low valuations?
People only see bubbles in retrospect? I see a couple right now.One is AMZN and the other is Facebook which hasn’t even gone public yet. Hows that for Prospect?
What a maroon!
Bubble, bubble, toil and trouble.
I’ll be happy 2 buy everyone’s shares that is scared to sell after reading this FUD article
I’m not sure the old person in the grocery/shoeshine adage applies anymore. Maybe in China. But in the US, the funds now own the bulk of the shares. The little individual investors generally are out of the market.
Also, he’s book seller.
Lastly, the PEs tell the tale here. If apple split its stock 5-1, the market would let it rise to a 100 PE (because the market is moronically manipulated and affected by psychology more than rational thought). Here’s the rub, it would still be a better bet than Amazon at 150ish PE. Apple will grow more year over year than Amazon. Has more marketshare growth opportunities (particularly abroad) than Amazon. Yet, weirdly, commands less of a multiple.
I know it’s stupid, but if Apple split the stock, 1-5, they would likely see a 4x ish PE in about a year or 2.
Toy company? B.S.!
“It it looks like a bubble…” Hey fool, it doesn’t, bubble means WAY over priced relative to book value. That is NOT the case.
“The Bubble” was when AAPL was over $200, and then dipped below $80, during the financial crisis (08-09) when everyone’s “bubble” burst. Now that AAPL is in the $600 range, the recent price drop is not a big deal. It’s about 10%.
Still, the AAPL “manipulators” make money because there are plenty of stupid investors who get all excited and buy near the short-term top, and then panic sell because “the bubble” is popping. Long term investors can ignore the fluctuations, and even take advantage of them (to buy more AAPL lower and eventually sell higher than “average”).
Look at the AAPL price chart since early 2008 (when it dipped below $80). You could draw a perfectly straight line on the steady climb (averaging out the fluctuations) until early 2012, when the upward movement accelerated. Even after the recent drop, we are still WELL ABOVE where that “steady line” would have been.
Most of the easy money was made in Apple a long time ago. From $10 to over $600 is a long pull and I wouldn’t hold my breath waiting for a sequel.
It took about 15 years of hard work and good fortune to bring Apple from life support to the top market cap. The likelihood of a sequel of the same scale is very low- and will have to be done without Steve Jobs.
Of course we will never see 1000% growth from here but another 50% to 150% is likely. Eventually AAPL will become just a dividend play like MSFT.
What you are seeing is the standard doom and gloom in attempting to get the stock to drop.
The brokers bought in at 400 or less, let it ride up to 640, sold and now want to get it back down to buy in again.
For someone to say sell a stock with a PE of 16, more profit than any company in the world and products that no one can beat really is in the wrong job. What a con artist.
Listening to that sort of talk sounds downright scary. Either there are very ignorant people in this world or he’s right that Apple and many other companies are trading in a bubble. I’m long 2004 and even with Apple at this level, I’m well ahead, but I also well remember Apple’s drop well below $100 in 2008/2009 or so for almost no reason at all except for possibly misinformation and panic selling. With this economy and market FUD you just never know what’s going to happen next.
I’ve heard that Apple is a “toy” company forever and I don’t know why Apple can’t lose that moniker even as a top seller of smartphones in which it has done even better than RIM. If corporations seriously use Apple products why are they still labeled as toys? Would the FAA honestly recommend a “toy” for navigation when hundreds of lives are at stake.
Normally, great men don’t have great successors, but they can certainly have good successors. Even if Apple doesn’t stay a great company, being a good company still counts for something in a world full of crap companies.
Most certainly an indication the profit taking by the powers that be is over… new macbook pro is going to kill, bumps for iMac and Mac Pro notwithstanding, just the iPhone 5 is guaranteed mid $700’s to $800.
“Toy Company”?
Simply put, I disagree with the statement of Apple being over valued as a company. We can argue the rate at which the company’s stock has risen but I believe the PE ratio and stock price does in fact reflect the innovation, quality of product and overall strategic character of a well run, highly valued, business.
Apple continues to innovate and lead the product category – in fact they invent new ones that competing firms attempt to follow. Apple leads in quality of product manufacturing, e.g. single extrusion process for Macs and the forthcoming “liquid metal” process for iPhones. Apple shows no lack of vision or plans for growth and executing to that strategy. These are all hallmarks of companies of great value and future growth.
What I find completely absurd is the statement that Apple is a “TOY COMPANY”. Really? So, does this make every other phone company like Nokia, HTC, etc. a toy company? Does it make Samsung, Lenovo, HP etc. a toy company? Does it make Adobe a toy company?
Is it the magic blend of Apple products that somehow make it a toy company? Apple is about ready to enter the financial services space with its own payments services – just look at the US patents filings and recent awards. So, then I guess we are to assume that all the banks are toy companies.
Just because Apple has found great success in investing thought, pride and innovation into its products doesn’t make it a TOY COMPANY. It makes it a very successful consumer-centric electronics company and an American icon.
People who make such comments are ridiculous and are attempting to diminish Apple’s success and efforts in the comparison. Envy and jealousy are never flattering qualities regardless of message. Anyone who makes such absurd statements should never be taken seriously.
Stick to the facts.
Goodness, calm down. He didn’t attack your mother he just made observations about a company. Take a Valium or two. Then take a nice long nap. Maybe AAPL will be back over 600 by the time you get up Wednesday afternoon. But I doubt it. And I want it to be over 600. But I have a bad feeling. Anyway worry about something you can control like your local school board or the clover in your yard. Chill.
Well, calling Apple a Toy Company certainly is a ridiculous exaggeration. So the writer deserves to be called on that.
I’m not sure about that but readers here rail against anything that is not gushing with praise about Apple. That my friend smacks of not being objective. As in immature. Adults can understand criticism wether its deserved or not. But to go into a rage because somebody says something negative about Apple is simply childish. As in fanboys worshiping Apple and never looking at it as a company. I love my Apple stuff but as an investor you never fall in love with a stock. You just don’t do that. Besides, most who claim to be invested in AAPL are fanboys bullshitting their way through the day.
Clover control is a pretty stressful thing. And then there’s the issue of the crabgrass
Weed B Gone.
“Toy Company”?
…A now ancient troll trick pulled in order to FUD Apple. I’ve seen a million of ’em. And DARN! Apple became the #1 company on the planet anyway.
UNIX continues to run rings around every other computer OS. And Mac OS X is real, world certified UNIX. Some ‘toy’. 😆
Buying the opposite side of analysts always make u win a lot , trust me !!
ANALysts? Or stock manipulators? I can tell.
see !! What I said proved correct .
My apologies to any inbred, backwoods rednecks here, (that also, can miraculously read) – However, this guy’s first name is ‘Clem’… wasn’t that a character name in the movie “Deliverance”? (well, technically no… because most of the characters had names like “old man”, “second Griner”, “toothless man”, etc.. But probably if they had speaking roles where the SAG required higher salaries – One of them surely would have been named ‘Clem’!)
Now, I don’t know about you, but I’m a little skiddish on taking financial advise from a man named ‘Clem’, hence my above reference to “Deliverance”… (please note, I am not homophobic or have fears of being buggered, it’s just the first movie that popped into my head when I saw ‘Clem’ in print… Please don’t make me go back and re-setup my intro and change the movie name reference to something like the episode of “X-Files” , where Scully & Mulder happen upon the ‘Peacock’ family…) [please don’t call my analyst].
I’m sure this guys formal name is something from the victorian era like ‘Clement’ or ‘Clemmons’ or even ‘Clementine’ if she’s one of those writers who inexplicably don’t want you to know she’s a ‘she’ the first time you read the article… (ahem, “Harry Potter”, ahem). This is all fine and well, but ‘Clem’ ?? I think you get my point.
I agree with most of the other posters who go back to Apples solid PE ratio, etc. Yes, Steve is dead, we know…thanks. Many great corporations do go on after it’s juggernaut like founder sheds his/her mortal coil. (ref.: IBM, GE, Tupperware, whatever).
I would bottom line it that this guy would be happy you sold your Apple stock before it goes up much more causing a demand shortage whereby the price will actually get inflated.
Toy company?
Lost all credibility right there.
What “toy” was this article written on when he was “playing” financial analyst?
5 REASONS TO FUD APPLE STOCK WITH A ‘BUBBLE’ SCARE:
1) To drive the price down so you can buy Buy BUY BUY BUY!!!
2-5) There are no numbers 2-5.
What would be a REAL AAPL price correction?
$701
Smart investors buy stock for the long haul. The tablet and smartphone markets represent the future of computing. We are at a transitional period in which the desktop continues to diminish in importance. The smartphone/tablet markets are at the same nascent point today as the desktop computer was in the early 80’s. Granted, Apple faces fierce competition from Google, Samsung and others in the market, but it is poised to do very, very well in those markets for the next 15-20 years. And now it’s shares will pay a dividend, to boot.
The Apple bears have to ask themselves this question — will it be worth holding on to Apple stock for the next 15-20 years? The answer is a resounding “yes.”