Mark Twain was a pretty good stock pundit, which is why I named one of my thrillers, “The Twain Maxim” after him. In that case the Twain Maxim was about mining stocks, “Mines are holes in the ground with a fool at the bottom and a crook at the top.”
Mark Twain also said, “History doesn’t repeat itself but it does rhyme,” which I take to mean you can use the past as a reasonable steer to the future will pan out but not as an exact road map.
I’ve stuck it out calling Apple a bubble for quite a time now and I can wag my finger at the “Apple will be $1000 a share” fan-boys and say “told ya so” but shouting sell is not what I’ve been doing.
What I kept saying is not “SELL APPLE” but do not have too much Apple in your portfolio. Be diversified. This is still the case. Holding Apple is fine if you have your reasons and can afford to be wrong. It’s not foolish to hold Apple, just foolish to be undiversified.
However I’m over the past, what does the future hold for Apple. What will the company’s future look like?
Firstly Apple is a bubble. It looks like a bubble, acted like a bubble and is falling like a bubble.
A bubble doesn’t have to be created by total fantasy, a bubble is just something inflated by circumstances real or otherwise, that must deflate to some kind of “normality.”
Bonds are a bubble at the moment and that bubble will burst too.
Human population is probably a bubble and it might burst as I postulate in my latest science fiction medical thriller, The First Horseman.
Bubbles have their reasons but the law of averages when combined with the Law of large numbers means that bubbles go pop!
Microsoft was a bubble.
In fact this is the likely shape the future of apple.
So take a look at this chart.
Apple has fragility but it still has such a strong market position it should be able to stabilize itself in the same way as an ex-Bill Gates Microsoft has stabilised.
An ultra-bear would imagine this. Apple as Research in Motion. This Icarus decent could happen. Apple – Jobs = Dell? If this is the case this is how the bubble goes bad.
Amazon was a bubble, way back in the dotcom boom. It burst then reflated. This is the dream of the “Apple as the trillion dollar corporation” believers. It is possible to make a comeback. Even so if the Apple comeback was like the Amazon resurrection it is going to take a long time.
It seems unlikely that an Apple iWatch is going to levitate Apple hundreds of billions of dollars in market cap, so the question is, where is the equilibrium point to this downward move.
If Apple breaks its recent lows the equilibrium point is going to be in the mid 300s.
If it can stay in its long term channel instead and confirm that the recent huge rally was just a detour, then the market will be telling us that the best can be yet to come.
However unless Apple can amaze again with something great this year, like Microsoft its ascendancy will be over.