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Bart Simpson
Asks: Are We There Yet? |
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I was in a bad mood Friday morning.
Why?- I'll tell you. I woke up Friday morning to the news the FED
had lowered interest rates by a full 1/2 point in an unprecedented
intra FED meeting move.
The market had been selling off hard
all week as fund managers were forced to sell stocks in order to raise
cash. Why? If you think the sub prime fall out was causing the brutal market
conditions, think again. It's partly to blame, and that's all about liquidity.
Banks are simply not loaning as there is a lack of capital around. The
FED
has been pumping tons of liquidity into the system in order to get the
commerce flowing again (this is the real solution).
The market's cataclysmic collapse
this week was more about the Yen Carry trade. It's the big fund manager
trade of 2007. Here's how it works. Gigantic funds get capital out of Japan
by either shorting the Yen or simply borrowing at near zero interest rates.
They then take the capital and invest it anywhere they can get a safe return-
i.e. Large Cap US Equities and Bonds. They wait for some appreciation,
liquidate, and then buy back their Yen, which in theory has gone down in
the interim. They make money on both sides of the trade.
This past week, the Yen hit a one
year high against the Euro, and these funds were getting killed. The sharks,
knowing all the funds were short Yen, were buying. Someone's loss is someone
else's gain. This further exacerbated the problem, forcing massive liquidations
in US securities.
Friday morning when the FED
intervened, the market did an about face, and rocketed back up. It delivered
one of the largest one day gains in recent memory. The Yen headed back
down.
So, you might ask- why was I in a
bad mood? Seems like the world had righted itself and I was in position
to look forward to a great post Labor Day market environment? I'll tell
you why. Because at about 11:00 Pacific time on Thursday I was looking
at investing about $10k into some QQQQ calls as the market was completely
drowning. The phone rang, and by the time I got back to the trading software,
it was 1:15 and we had closed. I figured I'd see what happened in the AM
and make a choice from there. I did go ahead and pick up 50 Sept 45 calls
at $2.19, and I am up nicely late Friday, but if I had acted Thursday when
I was ready, I probably would have doubled my money.
As I think back on this past week,
I am reminded of one of my children's toys. It's a small electronic talking
device. When you push the button, you hear Bart Simpson say: "Are
We There Yet?". He repeats the question three times. Sounds just like
your kids in the back seat on a long car ride. About every five minutes
you hear: "Are We There Yet?".
Yes Bart- we are there. Bull
markets are characterized violent corrective phases that can take you down
as much as 10%. August high on the DOW? - 14,000- a 10% correction
would be 12,600. Guess what Thursday low was? 12,500- 100
points off a perfect 10% correction.
The big August correction was just
what the doctor ordered for the next leg of the bull market. Stocks will
be much higher at the end of the year in my view, and the micros will pick
up in September. The trip down is over.
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Apple
Computer (NASDAQ: AAPL): Pounce While the Pouncing Is Good |
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AAPL- my call at about $95
in March, should be jumped on right now. In the March 31st edition I called
it for $140 (a 50% move), and the stock has since seen a high of
$149.
I was expecting a big pull back after
the hi profile iPhone introduction, but no such luck. It took a
market free fall to give us the long overdue correction in the stock.
I believe AAPL is going to
$200,
and I have been saying so since the end of March. Here's why. The early
customer satisfaction numbers on the iPhone are very strong as compared
to other revolutionary hand set introductions. The iPhone will be
a great success.
Later this year, after AAPL
introduces the next generation of Macs with the new Leopard Operating
System, the iPhone will actually push Mac sales at the expense of
Dell and Gateway. Who wants to integrate their fancy new iPhone
with the creaky old Windows Operating System. As a bonus, the new Leopard
operating system will cross platform with Windows Vista. Therefore, you
will finally be able to run all the PC software on your Mac. I'm thinking
of getting one.
Then, in 2008, watch out for iTV.
That's AAPL's next big move into the digital entertainment space.
Since they revolutionized the way we all listen to music, I can't understand
why people don't realize they will revolutionize the way we watch movies.
Their set top box is pictured here.
This is how it works. You hook it up to your hi speed internet connection.
It has 40 gigs of storage, and will download hi-def movies right off the
internet for a fee- just like iTunes. Then, the movies remain stored
on the hard drive, and you can watch them again.
Here's a little bonus technology
feature: this baby will integrate with your iPod, iPhone, or Mac
wirelessly. Transfer directly into those devices- no wires needed. Wow.
I am referring to this set top box
as AAPL's Trojan Horse. It will open the door for AAPL
into the heart of our entertainment world- the TV in your den. The hub
of family entertainment. This strikes right into the heart of the American
consumer- consider the market size vs the iPod, iPhone, or Mac-
it boggles the mind.
Oh yeah- and one more thing. If you
integrate it with the next generation of reasonably priced 40" to 60"
Apple hi def LCD TVs, it will connect wirelessly. Fantastic. Here's
your chart:
See that big move fueled by iPhone
madness? There will be two more of those in the future. The first one will
be fueled by improving Mac sales at the expense of Dell. The second will
be fueled by iTV in 2008, and that could be the biggest one of all.
As you can see, the stock has been
hit with a big correction. The 61.8% retracement for the whole March to
July move from $90 to $150 takes us to about $112.50. The stock traded
down there for a nano second, then the FED sabotaged the absolutely
perfect entry level.
The rebound phase has started. I
own long term options at $130- out to January of '08. I don't have enough
capital to take a worthwhile position in the common stock, and I am a risk
taker by nature. Now is the time to get into AAPL if you don't own
it already. Just own the stock if you are a little more conservative. Look
at a long term option if you want more bang for the buck.
I will have one more larger cap idea
for you before Labor Day. I picked up my first shares in the new one Friday.
And, yes Bart- We are there- Finally.
The runaway downhill train ride is over.
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