Schwarz: George Soros’ irrational pessimism vs. Apple

Invisible Shield for Apple iPhone 4!“George Soros is in heaven. He has created the perception of unquantifiable risk. By using Greece as his starting point, he has captivated the imagination of global investors to believe that European debt contagion is a real threat that could lead us into a double dip. Contagion can’t be calculated. Confidence in contagion produces unbridled fear,” Jason Schwarz writes for Seeking Alpha. “Few understand how sovereign debt actually manifests itself in real economic terms and Soros becomes the one who creates the threatening perception. Yes, Grandpa George is in heaven, or to put it more accurately, hell.”

“The man is out preaching his gospel of destruction to the media, declaring that Europe faces almost inevitable recession next year as eurozone countries pass austerity measures aimed at balancing budgets. He mentions that this is ‘eerily reminiscent’ of the 1930’s situation when governments were pressured to narrow their budget deficits when economies were still weak. As if comparisons with the Great Depression aren’t enough, Soros goes on to forecast that the current climate in Europe is ‘liable to give rise to social unrest,'” Schwarz writes.

“Don’t let the irrational pessimism of Grandpa George and his hedge fund gang cause you to miss the the biggest investable cycle in the history of mankind. As we hover at Dow 10,000 and Nasdaq 2,300 after climbing a little ways from the depth of March 2009, the mobile tech revolution is beginning to show signs that it will far surpass even the wildest predictions of the dot-com bubble,” Schwarz writes. “Grown men are taking off work to stand in line just to pre order the iPhone 4 (AAPL). We have never seen anything like this. Morgan Stanley analyst Katy Huberty is forecasting that up to 50% of current iPhone users will upgrade to this new phone which will lead to 48 million units sold in 2010 and the installed base will rise to 100 million by the end of 2011. The acceleration of tech evolution predicts that 10 billion mobile Internet devices will be sold in this cycle that is just beginning with Apple.”

Schwarz writes, “Apple has $50 billion in cash on its balance sheet. Corporate profits in general are surging with an average of 11% cash compared to assets on US corporate balance sheets. This is a 60 year high. Corporate profits are on pace to reach an all time high in Q3 2010. It’s only been one year since the depth of the recession and Real GDP is close to reaching its all time high. Manufacturing levels are showing the equivalent of 6% GDP growth. If you get caught up in Grandpa George’s heaven of pessimism you’ll miss the elephant in the room. Concrete data is proving abstract fear to be completely irrational.”

Full article here.

Part one, “Irrational Market Pessimism,” from June 8, 2010, is here.

[Thanks to MacDailyNews Readers too numerous to mention individually for the heads up.]


  1. Hmmm….so what is George’s motivation for such gloom and doom comments? Will his hedge funds make cash on people’s fears? If so then, why are we calling it irrational? Immoral perhaps, illegal maybe, but irrational? Nope.

  2. Cripes…I can’t remember that last time I had first post….must be a slow news day ” width=”19″ height=”19″ alt=”grin” style=”border:0;” />

    Do I win something?????

  3. George Soros is the scum puppet master who is always trying to tear this country and the world down. When he gets to Hell, he will be working to tear Hell down even more to make all those suffering with him suffer even more.

    Look closely and you can see the puppet strings manipulating those puppets in the Federal Government.

  4. Corporate profits are at a 60-year high because companies and small businesses have figured out how to run more efficiently at lower costs – they have divested themselves of several million non-essential employees.

    Not every company has insanely great products to sell.

  5. While not every company has insanely great products to sell, as the famous line in Caddyshack goes, the world needs ditch diggers too. Meaning not every company aspires to such.

  6. Geoge isn’t the only one; he’s saying the same thing that Paul Krugman’s been saying for months.

    Austerity in thr face of a deep recession doesn’t solve anything. Soros is absolutely right, this is exactly what happened in the late 30’s.

    And Schwarz is another huckster in the mold of Jim Cramer. What Soros is talking about has NOTHING to do with individual stocks like Apple.

  7. Finally, someone gets it! George is playing his own book. It’s unfair to the “little people,” because he is usually right. However, when Soros is wrong, he blows up significantly. Ask Victor Niederhoffer, his one time right hand man who blew up in 1997. It becomes inevitable that George starts panicking when the chips go south. What he always forgets is what Niederhoffer thinks: When the crowd is running for the hills, you bet against the crowd. It’s worked for Niederhoffer more times than not, but George is afraid to double down on anything. Just preach your book! If you’re short everything, then you must be right?

    Not this time George, this ain’t 1930 ! RCA is Dead!

  8. When discussing real world economics, irrational pessimism is no different than irrational optimism.

    They are a false dichotomy like that represented by asking the question, “is a glass half empty, or half full?”

    They are simply two sides of the same coin and both ignore reality.

  9. @Marian.

    Really Marian? Care to prove the point? Or is a 4 word dictum your lot in life?

    I really suggest that you look at the works of Victor Niederhoffer who worked for this strange man to see how Soros heads for the hills when there is a hint of negativity in the air and how he continues to preach his book holdings every time. It’s unfair to the little man, as I said before, because he is usually right. But more recently he has been wrong and I’m talking to the tune of billions of dollars.

    The old saying goes, ” Past performance…..”

  10. Apple will follow the market down or up – not exactly, but in large party. Which means if the market collapses generally, Apple’s share price will collapse also – no matter how good their business outlook, profits or revenues are…

    I believe Soros is quite right – though perhaps he still underestimates the extent or ferociousness of the coming collapse. The UK government and civil service are at least dimly aware – and are about to announce huge cuts in spending.

    The US is behaving like the roadrunner… Look down and you will find only a canyon beneath you… That’s what Soros and others see…

  11. If “past history” is any indication, following Soros’ lead is very profitable.

    On the other hand, following Grandpa Bush’s brand of fear (“Weapons of MASS Destruction!”) yields trillions in debt, makes allies question your motives, and drives foreign investors away from your markets.

    Apple is not invincible, and if the corporate boys in Cupertino build up too much hubris, they they too can fall like any other empire. Minding investors like Soros isn’t an unhealthy thing to do.

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