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June 29th, 2008Clearly, the US consumer and economy are in trouble. Inflation in food and oil costs are sucking real money out of consumer pockets, re-financing homes is no longer an option and the markets had their worst June since the Great Depression. All of this adds up to a 28-year low in US consumer sentiment.
In this environment, it doesn’t take a rocket scientist to conclude that discretionary spending is going to get hit hard in 2008 and I can’t think of a company with more discretionary products than Apple. Consumers may still want to buy MP3 players and smart phones but there are plenty of cheap alternatives to the iPod, iTunes and iPhone in the marketplace.
I am going to exercise PYMWYMI (Put Your Money Where Your Mouth Is) and call for Apple to revisit $110 - $120 over the next 3-6 months. To capitalize on this, I am going to buy October puts in AAPL.
I’ll let you know how it goes.
Regards,
George
June 29th, 2008 at 11:12 pm
Good job. Now you’re thinking. You’ve clearly picked every reason not to buy Apple products. To complete your equation you’ve got to consider the multiplicative inverse or what happens if everything you’ve employed to support your argument is incorrect . What happens then? My friend consumer sentiment is one of the worst indicators in regard to stock picking. Would you let most consumers manage your finances? Many of those same consumers are the very folks who made all of the bad choices in the first place. Computers are no longer that discretionary (education/business) and IPods aren’t that expensive. You act as if they’re trips to Europe. The cheap alternatives are really not that much cheaper. If you’re going to buy an IPod you have many from which to choose and you don’t have to buy as many songs. I think you’re looking for some type of six sigma event and your suffering from the dreaded hindsight bias based on the recent earnings miss from RIMM. Actually, that really wasn’t such a miss and I think folks overreacted a bit. The IPhone is going global in less than two weeks and its doing massive business before its even on sale through the pre-orders and lest we ignore the last two quarters.
A better strategy would be to buy puts on RIG and anything related to oil. When the story is written ten years from today it will tell a tale of how sovereign wealth funds (Kuwait/Qatar/Singapore/etc.) manipulated the futures markets for oil.
Why buy puts? Short Apple and turn off the computer until Dec. 31, 2008. On that day, gunslinger, you can buy back the shares and reap your reward.
Beltway Greg
$260 Dec. 31, 2008.
July 1st, 2008 at 9:15 am
Greg, thanks for the input. Can’t argue with you, just have to let the market decide. FWIW, I am making the call based on macro market factors. Those same factors led to AAPL hitting $120 just a couple of months ago.
I love AAPL and think it is a great and refreshing company but it can’t fight the market and investors will take their hefty profits if things turn south….which is a high possibility.
Puts vs shorting - You know the answer to that. I’d like to limit my losses if I am wrong.
Best,
George
July 22nd, 2008 at 8:22 am
[...] that’s right, I did back on June 29th (”Apple Puts Are A Good Bet”) when Apple was trading at $170. I took some heat from Beltway Greg who was calling for $260 but I [...]
July 22nd, 2008 at 8:23 am
Beltway, Apple off 10% to $150. What say you now?
http://blog.agoracom.com/2008/07/22/apple-drops-10-to-150-on-weaker-margins-outlookhmmm-who-called-that/
George
July 22nd, 2008 at 2:24 pm
Steak diner to whoever gets closest to SP.
AAPL | Oct 16, 2008:
GT says $120
BG says $260
I say it goes to $145 - Apple will get hit over next couple months (down to $110 - $120), but will announce something juicy in time for Christmas shoppers and optimistic market sentiment will bump it up from $120 to $145.
August 17th, 2008 at 9:24 pm
Apple is at $175 boys far from $120. Come on you’ve got to be kidding me. BTW, did you follow my advice on oil. One of my better calls in this life. Eat steak, why when I can afford the entire farm?
All I keep hearing is IPhone, IPod, cancer scares, exploding IPods, bad chips, bad network..
All we are saying is give Steve a chance.
Beltway Greg