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[quote author=“andyzaky”]Its time to buy Apple ...

Still buy or have bought or have changed your mind?

Re: This is my Second Buy Recommendation

[quote author=“Eric Landstrom”]

Andy, you’re mistaken in your understanding of the paradox of thrift. The paradox says that as economies falter people save more and spend less and less until the slowing spending bases on a sustenance level relative to the culture at which time the economy can then grow. The paradox of thrift does not state the death spiral is endless as you seem to presume. All to say you’ve got a false assumption and that you should realize that in a year or two economists will complain that Americans are saving too much and spending too little unless we get a tax break or an incentive to spend money.

FWIW, stimulus don’t work because they are a redistribution of wealth. Sure the money gets spent but the people from whom the money was taken will over time spend less that the total sum of the stimulus net loss in total spending.

That wasn’t my comment on the paradox of thirft and certainly not my understanding of it.  Notice, that I used the allusion of devil’s snag to describe how umployment and a slowdown in consumer spending should lead to further slowdown based on intuition.  That comment, had nothing to do with my understand of the paradox of thirft.  See my comment on the paradox which is in my response to you.  The comment that you quote comes from my general backing of my recommendation and has to do with general comments regarding the economy at large, and the connection between economic recovery and the injection of liquidity. 

But, on the issue of the paradox of thrift, I think the assumption of the paradox is faulty in and of itself.  It presumes that Americans are predisposed to save.  I disasgree.  Americans have never been good savers and this is part of the reason why our recessions are so short lived.  Even now, consumer spending is still fairing very well.  While consumer confidence is in the tank, consumer spending is still doing well by any comparable historical standard.
END COMMENT TO ERIC LANDSTROM

NEW COMMENT TO THE BOARD AT LARGE

Before you start to consider whehter we are entering a second great depression, consider the following facts:

1.  GDP (current dollars) declined exactly 45.6% in the four years between 1930 and 1933. 

2.  REAL GDP declined 26.5% in the four years between 1930 and 1933.

3.  Here are the unemployment rates year:
1929 - 3.2%
1930 - 8.7%
1931 - 15.9%
1932 - 23.6%
1933 - 24.9%

4.  Personal income, from those who still had their jobs, dropped 50% (FIFTY PERCENT - 50) during the four years between 1930 and 1933. 

5.  REAL GDP 1930 - 1933 (in billions)
1929 - $865.2 (no data available from BEA)
1930 - $790.7 (-9.42% yoy)
1931 - $739.9 (-6.42% yoy)
1932 - $643.7 (-13.00% yoy)
1933 - $635.5 (-1.27% yoy)
Real GDP declined (-)26.5% between 1929-1933

6.  GDP Current Dollars 1930 - 1933 (in billions)
1929 - $103.6 (no data available from BEA)
1930 - $91.2 (-11.97% yoy)
1931 - $76.5 (-16.12% yoy)
1932 - $58.7 (-23.27% yoy)
1933 - $56.4 (-3.92% yoy)
Current Dollars GDP declined (-)45.6% between 1929-1933.

7.  GDP Real Dollars 2004 - 2008 (in Billions)
2004 - $10,675.8 (3.64%)
2005 - $10,989.5 (2.94%)
2006 - $11,294.8 (2.78%)
2007 - $11,523.9 (2.03%)
2008 - $11,720.0 (1.70%)*
Real GDP has increased (+)9.78% bewteen 2004 and 2008.  *Based on readings from Q3 data. 

8.  GDP Current Dollars 2004 - 2008 (in Billions)
2004 - $11,685.9 (6.62%)
2005 - $12,421.9 (6.30%)
2006 - $13,178.4 (6.10%)
2007 - $13,807.5 (4.77%)
2008 - $14,429.2 (4.50%)*
GDP Current Dollars increased (+)23.5% between 2004 and 2008.  Based on Q3 data.

9.  Unemployment rate at the end of each calander year between 2004 and 2008.
2004 - 5.40%
2005 - 4.90%
2006 - 4.50%
2007 - 5.00%
2008 - 6.40%

10.  Personal income has yet to fall on the year.  Personal income increased $24.5 billion in September in the midst of the financial crisis.  Personal disposible income also increased $25.7 billion for the month of September.  We’ve seldom seen personal income, personal disposable income and personal consumption expenditures fall in 2008 and when it does in any onre month, its usually quite minor and is followed with a rebound in the following month. 

So compare the economic conditions between the great depression and the current environment.  While historical data doesn’t mean shit, you could compare the most recent umployment data, personal income and expenditures data and GDP to the environment of the great depression to understand how much worse things would have to get in order for the U.S. to experience anything close to what happened in the depression.

So.  Lets see what would have to happen for a Second Great Depression to occur.  Personally, I think that even trying to compare our environment to the great depression severely minimizes or belittles the real tragety faced by those who actually experienced true economic hardship.  The modern financial markets, the media, analysts and economists, are being “little bitches” as it were.  Its like trying to compare 911 to the Holocaust.  That being said, lets just take a look at how bad things would have to get to see a depression.

1.  Personal income would have to be cut in half for those who are employed. 

2.  We’d have to see more than 15 million job losses to even begin to enter the employment situation seen heading into the depression.

3.  Real GDP would have to decline $3.106 trillion dollars as opposed to the $100 billion decline that is expected for 2008 if Q4 GDP falls on the worst end of the spectrum in terms of the estimates.

4. Real GDP declined 9.42% YoY in the first year of the depression (1930).  Real GDP would have to fall over $1.1 trillion in 2009 to see a similar start to this economic downturn.  This is opposed to the $100 billion drop seen in the “2008 recession.”  So, just to start this depression, we need to see economic activity fall 11 times what they did in 2008.  Unemployment would have to skyrocket to 13% next year.  Personal income and expenditures would need to drop some 10% by the end of 2009.  Government spending would have to go negative as well despite all the stimulus packages and spending plans that Obama is anticipated to put in place.   

Personally, I think its way too early to talk depression.  We could start talking depression once GDP falls more than 6% on the year, once unemployment skyrockets above 10% and once personal income and expenditures start to see some major collapse.  Saying that these things are going to happen means absolutely DICK!  The data doesn’t support anything the markets, the media and economists are telling us.  The Federal Reserve still expects growth in 2009 for fuck sake.  And we’re talking depression?  Please. 

This is exactly why I stand beside my buy recommendation.  Buy on all weakness.  If the DJIA enters 6,000 and Apple goes to the low 70’s, buy with two fists.  That’s my take on the issue.  I’d rather bet against a depression than labor under the delusions presented by a stock market, media, and group of economists who have known to be wrong 77% of the time.  I’ll bet against a $1.1 trillion decline in real GDP next year.  And if I’m wrong, its priced into the markets already. 

The DJIA being at 7,500 today is like the DJIA being at 6,000 in 2003.  Remember, read GDP and personal expenditures increased dramatically (some 20%) in the years after 2003.  That means the markets are more undervalued today at these levels than they were in the previous bear market.  These companies, who are seeing 11 year lows, are more fundamentally sound today than they were in 2003.  They also earned a lot more in net income meaning their valuations are more attractive. 

When economic data starts to come in better than expected, which I expect to happen some time in 2009 as sentiment gets more and more unrealistically bearish, money will start to come off of the sidelines.  Those who bought at these disasterous prices, will benefit the greatest.  The greatest wealth creation is made when others are fearful.

Market is anticipatory

[quote author=“andyzaky”] ... Personally, I think its way too early to talk depression.  We could start talking depression once GDP falls more than 6% on the year, once unemployment skyrockets above 10% and once personal income and expenditures start to see some major collapse ...

Market is anticipatory.  By the time these numbers surface, market has tanked severely.  Market collectively knows more than anyone.  Is not too early to talk about depression.  You’ve concluded that depression is unlikely is a separate issue.

Goldman Sachs is not as optimistic as you .

Re: Market is anticipatory

[quote author=“Mace”]
Goldman Sachs is not as optimistic as you .

Its hard to believe anyone when the government is handing out bailouts. Companies are learning that it’s easy to scare them and get their sympathy.

and Apple goes to the low 70’s

That might not be too far away. Words mean things and some people use reading a couple forum posts as due diligence. Buy and sell recs have no place here. Just the facts. Let people make their own calls from that.

[quote author=“danthemason”]

and Apple goes to the low 70’s

That might not be too far away. Words mean things and some people use reading a couple forum posts as due diligence. Buy and sell recs have no place here. Just the facts. Let people make their own calls from that.

Nonsense.  Buy and sell recs with the reasons why is perfectly legit here.  Everyone knows the rules, risks.

We have recently read quite thorough analysis by Andy giving all the hard facts on Apple’s finance, markets and prospects. This piece and others were widely and justly praised for their content and clarity. And one can only assume that these boards were visited for the first time by visitors reading Andy’s article and attendant accolades.

When the buy now recommendation follows it is only natural that Andy would be viewed as an Apple expert whose advise carries some weight. We all engage in conversation of our own investments and comment on the prospects of others’. Seldom is a blanket buy now recommendation made Cramer stlyle in these forums. Andy did qualify his recommendation, in a subsequent post, some few points lower. Look, I like his attitude and persistence and generous use of time for the benefit of strangers.

That’s all.

Re: Market is anticipatory

[quote author=“Mace”]

Market is anticipatory.  By the time these numbers surface, market has tanked severely.  Market collectively knows more than anyone.  Is not too early to talk about depression.  You’ve concluded that depression is unlikely is a separate issue.

Goldman Sachs is not as optimistic as you .

Perhaps that is because they had to be bailed out by Buffet?  You think they would have been so smart as to know what was coming then if they know what is coming now.  But all this is nonsense.  We have no idea what is going to happen: we are placing bets of greater or less risk.  A lot depends on your timeframe for the return on your money.  With a one year time frame almost everything in the market , including Aapl, is a high risk investment and that is why we are seeing this type of crash (there I said it).  Long term investors of all sizes are getting fearful and pulling out as well, perpetuating the fall.

And in regard to the market knowing collectively more than anyone, well, in the long term yes, the facts are the facts and everyone knows them.  In the short term the knowledge (and actions) of the market (crowds) are not necessarily accurate or intelligent. That is why we get bubbles and crashes.

Apple may go to 60 Before this is Over

Andy, as much as I’d like to agree with you, I think the rationality has to be taken out of the equation. So long as we have a VIX above 50, there’s no way to predict price movement, bottoms, or any other level, because we have reached market entropy. Chaos.

The uncertainty principle will rule everything from herein. So long as there is uncertainty, there will be fear, with fear, anything can happen to the downside, but rarely to the upside.

-ernie

Re: Apple may go to 60 Before this is Over

[quote author=“erntheburn”]Andy, as much as I’d like to agree with you, I think the rationality has to be taken out of the equation. So long as we have a VIX above 50, there’s no way to predict price movement, bottoms, or any other level, because we have reached market entropy. Chaos.

The uncertainty principle will rule everything from herein. So long as there is uncertainty, there will be fear, with fear, anything can happen to the downside, but rarely to the upside.

-ernie

I tend to agree.  On the other hand, it would be nice to see conditions change in a pivotal way where fear of missing a definitive bottom produces a huge rally

What is your scaling in strategy?

[quote author=“andyzaky on Nov 17”] ... For the second time, I’m placing a buy recommendation on Apple for anything in the $90’s and a strong buy recommendation for anything in the $80 dollar range ...

[quote author=“andyzaky on Nov 20”] ... I stand beside my buy recommendation.  Buy on all weakness.  If the DJIA enters 6,000 and Apple goes to the low 70’s, buy with two fists ...

You’ve said you would sell your house and allocate 40% to AAPL.  What is your scaling in strategy?  Obviously, you’re not all-in yet otherwise how to buy with two fists if AAPL is in low $70s or below $60 (if erntheburn is right)?  My take is you’ve not bought any yet.

Lastly, buying is a lot easier than selling.  Just ask those longs who’re still holding AAPL because they perceive that Apple business is fundamentally strong.  In fact, Apple business is growing from strength to strength and has not shown any weakness even though AAPL has declined by about 60% from ATH.  Reason for this is because market is anticipatory.  That is Mr Market expects Apple business would suffer some time in the future.  Whether Mr Market is right or wrong is not the point.  The point is AAPL moves in the direction of what Mr Market perceives.

Re: What is your scaling in strategy?

[quote author=“Mace”]Lastly, buying is a lot easier than selling.  Just ask those longs who’re still holding AAPL because they perceive that Apple business is fundamentally strong.  In fact, Apple business is growing from strength to strength and has not shown any weakness even though AAPL has declined by about 60% from ATH.  Reason for this is because market is anticipatory.  That is Mr Market expects Apple business would suffer some time in the future.  Whether Mr Market is right or wrong is not the point.  The point is AAPL moves in the direction of what Mr Market perceives.

Mace,

The problem is your definition of Mr. Market is different from mine.  I am a long AAPL guy, as people on this board knows.  As far as I am concerned, my definition of Mr. Market is the behavior over at least three years.  Your Mr. Market is current, looking out at the most six months.

For longs like me, the discount on AAPL (and any other number of stocks of well run companies) presents an unprecedented opportunity to buy in, slowly.  If you can’t stand the short term volatility, this is not the time to get in.  That is OK, there will be other times over the next six months to a year.  May be at a lower price, maybe not.  That is NOT the point Andy is trying to make, if I read him correctly.

You are disagreeing with Andy’s long term view with you shorter term perspective.  I think you are both right, but you two are talking about apples and oranges.  Not the same thing.

Re: What is your scaling in strategy?

[quote author=“oldmac”]

Mace,

The problem is your definition of Mr. Market is different from mine.  I am a long AAPL guy, as people on this board knows.  As far as I am concerned, my definition of Mr. Market is the behavior over at least three years.  Your Mr. Market is current, looking out at the most six months.

For longs like me, the discount on AAPL (and any other number of stocks of well run companies) presents an unprecedented opportunity to buy in, slowly.  If you can’t stand the short term volatility, this is not the time to get in.  That is OK, there will be other times over the next six months to a year.  May be at a lower price, maybe not.  That is NOT the point Andy is trying to make, if I read him correctly.

You are disagreeing with Andy’s long term view with you shorter term perspective.  I think you are both right, but you two are talking about apples and oranges.  Not the same thing.

The problem with your position is the assumption that this market is a short-term phenomenon. I don’t think it is. I think we’re going to be in this turbulent market for quite some time. Not to the intensity we are experiencing right now, but turbulent nonetheless.

This market (Mr Market) can be compared to the great depression in many ways, and in some ways it’s actually worse. The Great Depression sent the markets in turmoil for many years after. And so it will be with this market. I expect that we’ll be moving in whipsaw fashion, and sideways for at least a few years.

So, unless your time horizon is more then 3-5 years, I would not think of what most would consider long-term 1 to 2 years. I think the building a core position on dips might be a good strategy, and then trade around that position. But I don’t agree with the bet the house strategy, because no one knows when it will pay off.

-ernie

Another AAPL is cheap article:
http://www.alleyinsider.com/2008/11/buy-apple-now-get-company-free-in-7-years-aapl-

But with comments like this, is it any wonder why the stock continues to nose dive?
“$80 is not cheap. Look at Citibank stock! $3.75 a share!!!”

This reflects the depth of thinking and research of many hedge fund managers. That, I am sure of.

Oh God help us.. the Bass is Back… someone skewer that old fish and send it back to the wilderness from whence it came.