AAPL: Think Different

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Overnight markets were a nonevent, although the same can't be said for Apple, as the white-hot speculation in its shares continues to intensify. To wit, preopening the stock traded north of $600 per share on no particular news that I could see.

This AAPL Doesn't Fall Far From the Tree

Quite frankly, since I have not been too interested in individual shorts (although I did take a stab at the Spooz), I haven't spent too much time focusing on Apple, but a question from Ask Fleck as to what I thought it might be worth caused me to examine it more closely. I am sort of embarrassed to admit how shocked I was to realize that Apple has gained almost 50% this year, and of course -- given its heavy weighting -- that is a big reason the Nasdaq has done as well as it has. And since the Nasdaq has been strong, Apple's appreciation has probably helped boost the price of other shares as well.

While I don't know what the price of AAPL ought to be, it does seem rather crazy that the company has added almost $200 billion to its market capitalization this year (it now stands at about $560 billion). To put those incomprehensibly gigantic numbers into perspective, the increase in the price of Apple shares alone is equal to two-thirds of the value of Microsoft.

I know Apple aficionados hate to hear this, but there is really no comparison between Apple and Microsoft in terms of sustainability of the enterprise. Apple is a consumer products company, and a damn good one at that, but consumers are notoriously fickle. There is no guarantee that people will want to continue to replace (or "refresh," if you prefer silly modern jargon) their hardware as often in the future as they have in the past, or even choose Apple products, for that matter.

Ripe for the Picking?

Probably some time in the next couple of quarters, if not sooner, Apple is much more likely to make a great short rather than a great investment from the long side. However, given the money-printing environment we have been in, I am not sure I will try to short it, but I think it is important to know just how momentum-oriented and speculative the stock has become, for the very reason that it exerts an undue influence on the tape. Thus, if Apple does roll over, that could precipitate a correction in the market that other fundamental bad news has been unable to produce. We will just have to see how it plays out, but I for one can't help but pay a little more attention to Apple prospectively than I have recently.

As for the market action itself, through midday the indices were 0.5% higher, even as Apple languished around unchanged ($590-ish), and they gained a bit of ground in the afternoon, even as Apple shares lost a few bucks. Away from stocks, the dollar was weaker, oil was a tad lower, and bonds had a pathetic little bounce. The metals gained 1% or so.

Positions in stocks mentioned: long MSFT.

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About Bill Fleckenstein