Apple Capitulation
When there is blood on the streets….
Shorting Apple here is most likely unwise. Time to buy some as the hedge funds are now puking the darling.
Chart Bloomberg
Time to Think
Guest post by Peter Tchir.
Last week was a feeding frenzy for algos and a disaster for those who were poorly positioned. Crowded complacent trades were pummeled, including, or especially, investment grade CDS. But now we have had some time to think about what happened and the markets seem calmer. On this bond market holiday, let’s just take a look at 5 simple things. These will be the drivers for the market.
Apple
If there was ever a case of people lamenting now owning a stock, swearing they would buy more if it ever came down, then dumping en masse when it did come down, this is it. Apple is unique in that it isn’t just a huge component of the indices (which it is) but it has become such an indicator of sentiment, that guessing Apple correctly is very important, if not critical. I like AAPL here. Sadly I started liking it at $570 but added some Friday morning. The sell-off seems overdone, at least for now. All those worried about paying taxes on their “big” gains, now need to worry about the gains. While everyone else was “amazed” by the great Apple products, I went to stores and found the iPhone 5 available on launch date, and remain confused about why the iPad mini which is either a small iPad or a big iPhone with no voice capabilities was such a big deal. But that was at $650 and above. Here I like it and it is oversold by many measures, including my personal favorite – RSI. I am also encouraged how many people were talking about the 200 day moving average. Many were investors who normally would demand you wash your mouth out with soap for saying such a naughty word. Finally, if they finally do something big with their cash, the multiple should look very attractive.
Whew what a week
Guest post by Peter Tchir.
First, today’s move seemed bullish to me. Yes we failed to hold the highs of the days. That isn’t good. But we didn’t break to new lows as we closed and that’s not bad given all the concerns about Europe. Even more importantly we didn’t completely give up when Obama made his sheech. I can’t be bothered to correct that typo because Obama was so disappointing.
I’m not sure that I would consider the election a strong endorsement of his policies. If anything I viewed the election as reasonably split and indicative of a divisive country. He definitely won, so he shouldn’t capitulate but seriously, isn’t it time for some for cooperation? Not that the republicans were any better. I can’t tell whether they are behaving as sore losers, or arrogant winners that somehow haven’t accepted they lost.
We need to do a few things. Work together to create a reasonable plan forward. It won’t make everyone happy but we need to do what is best for the economy, and to some extent, the market. I don’t agree with everything that Ben does, but while he is out there trying to promote growth through liquidity the politicians have been messing it up. I didn’t expect hugs and kisses on day 1 but the politicians need to understand the people aren’t happy, and the only real mandate, from those in the center, is to figure out some useful compromise.
Apple´s show
Guest post by Peter Tchir.
At 1,410 I am much more nervous about a big rally than I was earlier in the week. But this has been a great week to be a nimble bear.
Last Thursday, exactly a week ago, futures were higher overnight, only to fade once $GOOG rained on the parade.
Then on Friday, they creeped up a bit, only to take a big hit.
On Monday, up for awhile, and didn’t finish a lot worse as market rallied into the close PPT style.
Tuesday, tried to go higher, then sold off hard as there wasn’t a buyer.
Yesterday, up early again, before taking it on the chin.
So who knows what today will holds, but making the call that we hold early gains seems too bold.
All about the mighty Apple, or?
Moore’s Law Meets Murphy’s Law & Milken
Guest post by Peter Tchir.
Let’s Get Europe Out of the Way
I would love to be able to say that Europe is fixed. It isn’t and this particular summit was particularly disappointing. They announced some vague plan to plan a bank supervisor. I still don’t understand why people really think a bank supervisor would change anything. Just think about the Spanish bank bailout. Money was supposed to be available in July, then August, then September and as far as I can tell, not a single distribution has been made. This problem is even more complex than other ones, because Germany is part of the problem. Germany may be the land of luxury automobiles and industrial efficiency but it is also fertile ground for state sponsored Zombie Banks.
Spain is not asking for a bailout yet, and allegedly it wasn’t even discussed. I cannot tell whether it would be worse if it wasn’t discussed or that they are lying to us and it was discussed but no conclusion was reached.
Talk about various ways to manipulate the Greek debt problem. Plans range from further punishing the PSI bonds which I think would meet with incredible resistance and accomplishes nothing, to ways to get the ECB off the hook and dump losses on ESM. I am not sure there is any particularly good solution to the official sector problem because owning 10’s of billions of mismarked bonds and loans is a difficult problem to overcome.
Ex Darlings Apple and Google – new dogs?
When darlings start giving up on you…
Consensus trades have now really started to underperform.
Without Google and Apple, this market will have a hard time…Charts below.
Mythbusters on BLS, Treasuries, Apple & HY
Guest post by Peter Tchir.
I don’t think the BLS is nefarious or did anything wrong with last week’s numbers. I’m frankly surprised by the disbelief many have with the numbers, though it is part of what seems to be a growing trend – frustration at manipulated markets.
The household survey is flawed in its methodology. It is a survey of 60,000 households in a nation of 310,000,000 people. A very small sample size which explains why +/- 436,000 is a “statistically significant movement”. For the actual NFP, the number is +/- 90,900. So clearly the room for error in the household survey is large.
Then the household survey actually has a broader definition of “employment” than the NFP. The BLS tracks something called “Adjusted household survey employment” which attempts to make the household survey conform better to the NFP. That number was only 294,000, so good, but more in line with the NFP of 114,000.
What is more striking is that people are ignoring that in July and August, the household survey said there were job losses rather than job gains. So the three month total of NFP is 437 compared to 559 for the household survey and 507 for the much maligned ADP.
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