Wednesday, October 19, 2011

Too big to miss

That's my take on the market's reaction to Apple's results.  Yes, it's likely a timing issue and yes, the iphone 4s will sell 14 quadrillion units, but the reality is that android is cutting into their market share pretty substantially and the lack of a stunning upgrade with an iphone 5 or something equally compelling has further slowed their growth.

However, remember when the banks were too big to fail?  Well, Apple is too big to miss.  Practically, EVERY hedge fund, mutual fund and pension has Apple as one of their top 10 holdings and for many it is their largest holding.  It's simply inconceivable to the herd that Apple can do anything but go up in value, so despite the huge sell-off last night after earnings the stock has rebounded some this morning. 

To be clear, I kind of like Apple products but I just think their quality is more Walmart/Aldi than Gucci/Hermes.  I've owned 3 Apple products - 2 broke in the first year (I ran in the rain with them - they failed to mention in the owners manual that 8 drops of water fries the electronics) and my current ipod doesn't hold a charge for more than a few hours (it's 15 mths old).  I contacted Apple and they're response was basically, "yeah, they do that."  

To review here's the reality of what's happened in the last 24 hrs:

* The Greeks are back on strike and rioting (there are live webcams if you are so inclined).

* The Euro bailout was refuted by many sources yesterday.

* Spain was downgraded.

* Apple missed estimates for the first time in practically forever.

And the markets are set to continue marching upward...huh?

Well, despite the fact that everyone is trying to talk down expectations for the European bailout, the random rumor mill keeps pumping out stories.  These rumors are leading to Euro strength and dollar weakness (notice how gas prices have stopped dropping - also tied to $ weakness) which means higher stock prices until it changes course.

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