First, in an article
Wednesday, I said:"Apple Talk is officially back. And this appears to be morethan noise.
"Oppenheimer analyst Yair Reiner, one of the mostrespected Apple analysts, has issued a research note that suggestsApple manufacturing will hit mass market production on the 10.1-inchtouchscreen Tablet by February.
"This means that the unveiling of theTablet could come as soon as January and the product could be for saleas soon as April. Reiner also mentions that Apple is offeringpublishers a 30/70 split, which is far more attractive that the typicalsplit at Amazon.
" I maintain my view that the Tablet will becomeApple's flagship product as it redefines the way users access theInternet and consume media. I agree with Rupert Murdoch that theTablet will save the newspaper industry.
"As an analyst, Reiner has a solid track record, in contrast to thequestionable commentary coming out of well-known analysts GeneMunster and Shawn Wu. Reiner uncovered the truesubsidy that AT&T pays for the 3G iPhone, and he has produced terrificresearch about how the accounting changes from FASB will eventuallyboost Apple stock, and about the importance of software over hardwarein the iPhone's success.
" In May 2009 he sat down with Appleexecutives and reported a series of strategic measures that they mayemploy to help grow iPhone market share in the booming smartphonemarket. Such access is highly uncharacteristic of Apple executivesand shows the respect they have for Reiner. The fact that he istelling us that the Tablet is coming is legitimate."What does this mean for Apple stock? It means that the momentum goinginto January's earnings report will be doubled by Tablet anticipation. Because of these two catalysts, we might be in the final stages ofseeing Apple stock below $200.
My second insight that was
Tuesday has to do with the the technical analysis gurus who were telling investorsyesterday that Apple was broken and that the uptrend was over.
"Thisis a stock driven by big money investors who like to buy low and sellhigh. This selloff began eight trading days ago with the market up andApple down.
"Perhaps today is the beginning of a reversal with Appleup and the market down. So far, today's Apple action is textbookhedge-fund buying. I feel bad for all the individual investors whosold into yesterday's weakness.
"Too many lose money because they selllow and buy high. The only reason why Apple would suffer asignificant drop is if the fundamental picture significantly changedfor the company or the economy. As of today, both fundamentals areimproving.
"For those of you who saw Meredith Whitney on
this morning talkingabout a probable double dip for the market, my response is that shedoesn't understand the power of economic cycles. It is so difficultto fight the cycle. During the past two years of worsening economicconditions there wasn't a stock on Wall Street that could overcome thecycle. Investors need to be willing to adapt in this day and age ofvolatility.
In an article
published Monday, I said that day marked the seventh day of the Apple selloff.
"You can tell that mainstream investors are getting nervous. Numerous blog posts arefloating around discussing the negative technical picture and tryingto tie some kind of news item with the fall.
" Little do they realize,this is the Apple pattern. Last month was the exact same, only worse.Last month's selloff lasted eight trading days and the stock dropped to$185. Are the hedge funds selling today? No way.
" They sold at $205and began the snowball that is now infecting mainstream Appleinvestors. E Weather is beginning our 20% buying this week with Appleat $190 and possibly lower.
"Keep in mind that buying at the low isnever an easy thing to do as the stock usually drops below your risktolerance. However, take solace in the fact that you are averaginginto the best company on the planet in a stock with incrediblevaluation.
"As for gold, it is becoming more and more obvious that it is the newinvestment vehicle of fear. Without fear, gold goes down as it hassince the better-than-expected jobs report. Gold has replaced oil asthis vehicle of fear.
"Ask 10 gold investors why they are in and theywill give you ten different answers: all related to fear of inflation,Obama, healthcare, the dollar, international currency issues, etc...
"Each news outlet has multiple articles about gold, just like they usedto have about oil. What does this mean? It means as long as fear canbe manufactured in an improving economy gold will go up, if fearcannot be manufactured gold will go down. As such, it is the perfecthedge for the portfolio. It should never become a huge holding but itcan be used as a hedge.
"Because gold has no real fundamentals and isthe ultimate 'emperor without clothes,' it's important to stay verycautious. We averaged into a small position in the
LD and might look to add some LEAPS in January. It's much safer to make money on theway down than it is on the way up in a bubble."
At the time of publication, Schwarz was long Apple, SPDR Gold.
Jason Schwarz is an option strategist for Lone Peak Asset Management in Westlake Village, Calif. He is also the founder of the popular investment newsletter available at www.economictiming.com. Over the past few years, Schwarz has gained acclaim for his market calls on the price of oil, Bank of America, Apple, E*Trade, and his precision investing in S&P 500 option LEAPS. His book, The Alpha Hunter, is set to be released by McGraw Hill in December 2009.