Professor Elam

Tuesday Feb 2 2010

Each year Barrons begins with their Roundtable Discussion by various market experts. I read Installment Three in the Feb 1 2010 edition yesterday. While widely respected Bill Gross continues to talk about the New Normal, PIMCO's term for an era of reduced expeectations, what struck me was the nonchalance of all the participants. No one talked about the possibility of yet another market meltdown. The 1930s were marked by three market swoons to the downside as were the 1970s. We are now at two and counting in my book for this era. And these nonchalant comments come amid daily reports of states and cities that are literally bankrupt and will certainly continue to lay people off. Verizon, WMT, and other companies have announced tens of thousands of layoffs. Entire states sport double digit unemployment, with numbers difficult to calculate given the number of people who have given up looking for work. States are borrowing from the deficit ridden federal government to pay people not to work, what is referred to as unemployment benefits. 

But since Apple and Goldman are in the news let's take a look. 

  to listen to the experts, Apple is the new EDS from the 1960s, Dell from the 1990s, IBM from the 1950s, you name it. Apple just anounced all time record profits and sales, as Jobs says it is a $50 billion company. Apple has sold, gasp, 250 million iPods. The Apple iTouch app store alone has 140,000 applications. For a stock that traded below $5 in 1998, this is a heady experience. That by the way is when Jobs came back on board. But…all the expectations in the world are now baked in this cake. One of the Roundtable experts wants to buy the stock on a pullback, it is surely going to $250 he said.

I suggested an Elliott Wave  Count that shows Apple is now in if not finished with five waves up from net to nothing. The difference between its price and its 200 bar moving average is at a maximum. Seems to me that all the buyers are IN!  I would not short it but surely there are other stocks with more compelling reasons to be bought. 

And to be fair, worst call of all time in the tech sector was Mike Dell's comment in 1999 that Apple might as well sell the assets and distribute the cash to shareholders. Apple became a niche gotta have product eschewing dog eat dog minimal corporate sector profit margins. Dell HP Accer Gateway are selling commodities. Sony, inventor of the Walkman, the pre-iPod, is still trying to find itself. These comments are being written on a Macbook. 

CEO Lloyd Blankenfein is apparently planning to pay himself a $100 M bonus for this past year. Other bonuses have been paid in cash amidst a public outcry over such lavish compensation. Basically GS is a gambling casino armed with our TARP money and inside information from folks like Stephen Friedman formerly of the NY Fed. Mr. Friedman knew GS would get TARP money,l bought GS stock below $100, and handily made over $1 M for himself. Gee if only the rest of us had known!  Friedman quit the FED post but of course not the GS board. At any rate, this one looks topped out to me. If the markets sink again this fall, expect the public to act well rather French, off with their heads, and the Goldman heads will be front and center in the public angst.