We had a plan to unload our longs (mostly Apple) in the pre-market or at the open. We were expecting some follow through from yesterday’s ramp but didn’t think it would hold. We were lucky enough to get Apple out with a 569 handle.
After opening at its high and hesitating a bit, Apple continued to trade down all day long. Should have been a sign for the overall market.
After the Facebook debacle, we believe Apple will be the poster boy of good behavior for stock investors. That is, the company has strong earnings potential, great execution, excellent management, and an attractive valuation.
This should be more than enough to attract money to the stock and make, if you will, a “safe haven” equity play. For those that have to be invested Apple is the place.
This is why we watch Apple so closely and believe it the indicator species of global equities, the economy, and investor sentiment. This doesn’t necessarily guarantee the stock will trade higher, however.
Watching home sales? Old school, dude. Do you really think the younger generation (non-baby boomers), many, of which, have college degrees but can’t find jobs and are moving back home, have any interest in a McMansion in the suburbs? Get freaking real.
Housing is going through a major structural and generational change and is never coming back in the form we once knew it. We wish the Fed would quit trying to revive this ghost of Christmas past and get focusing on structural economic reform. They can start by educating American politicians.
Our favorite economist and University of Chicago professor, Raghuram G. Rajan, couldn’t put it any better,
Rather than attempting to return to their artificially inflated GDP numbers from before the crisis, governments need to address the underlying flaws in their economies. In the United States, that means educating or retraining the workers who are falling behind, encouraging entrepreneurship and innovation, and harnessing the power of the financial sector to do good while preventing it from going off track. In southern Europe, by contrast, it means removing the regulations that protect firms and workers from competition and shrinking the government’s presence in a number of areas, in the process eliminating unnecessary, unproductive jobs.
Run, don’t walk, to his latest piece in Foreign Affairs, by the way.
Enough of the rant.
We turned a nice profit into a pretty good size loss today jumping back into and trying to trade a market that bucks around more than a stallion on steroids on Mare Island. We violated our discipline and to paraphrase the great golfer, Phil Mickelson, “We’re such idiots!”
Not a lot of expectations about tomorrow’s Eurozone summit and lots of skeptical traders. Could be set up for an offsides rally but not willing to risk capital betting on it. We will fade it, however.
(click here if chart is not observable)