Apple Investors' Delusion Sets In

NEW YORK ( TheStreet) -- The most bullish of Apple ( AAPL) bulls have lost it. There's no other way to say it.

Over at Seeking Alpha, the usually analytical Jason Schwarz tried -- and failed -- to counter my long-term Apple bearishness:

His Tim Cook's only innovative need is to continue to come up with new pieces of hardware to leverage the app store model. Will we get an iPad mini? Of course we will. It's just another piece of hardware for people to buy. If they'll buy it, Tim Cook will sell it. The underlying truth of it is, this isn't rocket science. Amazing things happen when a company is built upon a sure foundation.

If that's not wholesale simplification, sprinkled with misunderstanding, of how Apple rolls, I am not sure what is.

Here's the simplification: His only innovative need is to continue to come up with new pieces of hardware to leverage the app store model.

Here's the misunderstanding of why Apple is not only great, but dominant: If they'll buy it, Tim Cook will sell it. And this is supposed to be a good thing?

Here's where Schwarz got it right: Amazing things happen when a company is built upon a sure foundation.

If he only had opened up his article with that sentence, the rest of the piece might have been persuasive.

This Is Not About Tim Cook

Whenever I express long-term Apple-related bearishness, I stress two things:

¿ The company will not implode minus Steve Jobs; it will just fade from being great and dominant to being good and competitive.

¿ I feel bad for Tim Cook because he is an accomplished and competent person (obviously), but he finds himself in a next-to-impossible situation. It's a bit like the Edmonton Oilers without Wayne Gretzky. You can muster another Stanley Cup championship, but you become just a face in the crowd -- or worse -- shortly thereafter.

Schwarz is correct: Steve Jobs deserves the genius tag for building the Apple iTunes/App Store ecosystem. No doubt about it. From there, however, Schwarz takes the leap to what is really just shocking oversimplification.

Even an ecosystem as incredible as the one Steve Jobs built cannot achieve dominance in and of itself. You must attach significant "value adds" to it. Amazon.com ( AMZN), though in a different way, does this well.

Amazon provides features and an overall experience that keeps people coming back to its site to consume everything from the staples to digital content. Free shipping, Subscribe & Save, Amazon Prime, the best user review database in the business, a one-stop shop -- you succumb to the Amazon cult for these reasons and others. It does not begin and end with the mere presence of a smart ecosystem. You need some series of value adds to tie it all together and make it sparkle.

Apple's ecosystem would not be nearly as valuable as it is without the best hardware money can buy. Hardware that creates a cult of Mac and, more importantly, iPod, iPhone and iPad fanatics.

You do not see MacBooks lining tables in coffeehouses because of iTunes. White cords attached to ear buds do not dangle from people's ears as they listen to music and make phone calls because of iTunes or the App Store. You do not see folks effectively posing in the middle of the sidewalk with an iPad because of the Apps. These "gadgets" attain high social status and become aspirational items because they work well.

They're intuitive to the touch. They're beautiful. There's something about them that's simply better. To argue that Tim Cook's only innovative need is to continue to come up with new pieces of hardware is patently absurd.

Apple bulls don't think about the possibility that the party will stop. Wholesale ignorance of the pivotal things Jobs did at Apple does not change how history inevitably impacts the future.

When Steve Jobs came to Apple, he cut the fat out of the product line. He remained committed to that approach right up to the very end. How quickly we forget seminal words from the man who changed the world:

And it comes from saying no to 1,000 things to make sure we don't get on the wrong track or try to do too much. We're always thinking about new markets we could enter, but it's only by saying no that you can concentrate on the things that are really important.

At Apple, Jobs shot down plenty of good ideas. He understood that you have to put great products in front of people to make repeat customers and generate new ones. But he never allowed the consumer to dictate his next move. Certainly, he could have produced quite a few products that people would have purchased, but he passed on them in favor of dictating the flow of events to the customer. He had the knack of being able to tell people what they want. It did not work in the reverse. It's that approach that made Apple great and dominant.

A mini-iPad might sell, but it kicks off a dangerous trend. It introduces the marketplace and the corporate world to an Apple that responds to what others are doing. An Apple that no longer sets style, but gives the masses too much power.

Apple bulls must, at the very least, acknowledge that if Tim Cook continues the trend of reacting as opposed to acting (e.g., dividend/buyback, mini-iPad and $799 MacBook Air likelihood), the glory days will fade fast. While the pullback in Apple stock might represent a buying opportunity today, it could just as easily become dead money if Cook continues to erode the culture only Steve Jobs could have instilled and maintained at Apple.

I'm not a Tim Cook hater. It's just recognition of a reality that a considerable faction of increasingly delusional Apple bulls refuse to face.

At the time of publication, the author does not own a position in any of the stocks mentioned in this article.