Top 5 Reasons Apple Stock Can’t Go Higher

Call me a pessimist.  But, if you’ve been following Apple closely (like we all do in this business), I’m sure you get the feeling that this relentless push to the upside has reached its upper limit.   As of this writing, Apple is trading at $305.29 per share and an analyst made a rather bold prediction that Apple’s stock price will reach $390.00 a year from now or sooner. 

Here are the reasons why this is wishful thinking.  And, to refrain from public humiliation, I will not name those brave Apple cultist-er…analysts.  By the way, I’m a certified Apple ‘Opinionator’ meaning, I have earned the right to criticize this company as I was a PC-turned-MAC convert and back to PC again (see why on number 2)!

1. Their products are too expensive.  Of course, I’m not just talking about the initial sticker shock of their new products for sale.  But, the used Apple product prices are beyond reason to me.  Case in point; found on Craigslist, a 2-year old iMac 24” (base model) listed for $1500.  For that amount, I can get my hands on a PC with four times the computation power and storage space.  Call me crazy, but sooner or later, consumers will wake up to the fact that “being cool” isn’t worth the price tag anymore.
2. Apple product life is too short (but maybe they designed it that way).  Three years ago I decided to see what all the hoopla was about and bought myself a brand new ($2,200) 24” iMac with the anodized aluminum trim and a cool factor of 11 out of 10.  When the thing won’t turn on anymore, I went to the local Apple store to get a repair diagnosis and cost estimate.  And, without writing the 4-letter word in all caps here, I will just say that having the extended warranty run out, a dead iMac and a 4-digit cost-to-repair estimate in my hands did not turn my frown upside down.  If I had given the okay to repair my iMac, my total 3-year cost to own would have been a whopping $3,400!  I asked myself, is being “cool” really worth it? 
3. The Mac OS is not as stable as the company claims them to be (it crashes just as frequently as Vista).   If their Mac OS Snow Leopard – or whatever cat they’re on now, is really rock solid as they claim them to be, then why do they only function under Apple hardware?  If what they produce is of true value, then it would work in a multitude of hardware and software environments.  Windows 7 64-bit and Ubuntu 10 are viable, feature-rich alternatives but best of all, they work with millions of hardware configurations so consumers are not locked in to Apple-specific (expensive) units.  And by the way, Ubuntu is FREE (it’s what CAM Trading relies on for file backups and redundancy).
4. iPad.  What is the point of this product?  My guess is, to look cool in public places!  I can tape three one-hundred dollar bills to my forehead and get more noticed in public than a $600 iPad.  What, the hundred dollar bills on my forehead can’t check email at a Starbucks you say?  You’re right, but who are you to think you’re so important that you can’t wait to get home to check your email on a 200 dollar PC?  Get a life!
5. Apple TV.  For years, Apple has been digging for gold to come up with a viable formula for ultimate sales success.  But, new LCD TVs are here with Netflix-ready and internet access.  This eliminates the need to buy a separate device for streaming movies and shows.  I believe Apple should cut their losses and exit out of that foolish product line. 

I realize that what I’m saying may offend a lot of people, but you can always put your money where your mouth is and prove me wrong by buying a few shares of Apple stock today to hold for a year!

This article should not be construed as financial advice.  In fact, anything written here should not be taken as financial advice and that you should seek the counsel of professionals before making changes to your investment portfolio. 

How Advertising Distorts the Need for Saving

The “branding” of America is the most insidious part of our culture.  Now, entire personalities are subsumed into brands.  Lebron James is a brand.  Jerry Bruckheimer is a brand.  Every supermodel and pop singer is a brand.  There are few places you can escape logos such as the Nike “swoosh” or Mickey Mouse ears.  The brands scream only two messages at us: “You’re not good enough,” and “Spend.”

Advertising is a huge reason why people don’t invest.  Advertising is a shell game that sets us up for the quick thrill, eternal youth in a bottle, sex at the beach by drinking a brand of beer and buying a lot of things that do absolutely nothing for us.  Instead of saving the money we would be spending on some gadget, vehicle, or wardrobe, we could be could be investing in our children and ourselves.  Advertising is the deep end of the ocean.  When we succumb and sink into it, there’s no bottom to the spending. 

Turn Off the TV and Start Saving

The more TV a person watches, the more he/she spends (based on the advertising they absorb).  Actual research by Dr. Juliet Schor from Harvard found that for every extra hour spend watching TV, the subjects spent an additional $208 per week.  On average they spent an additional $2,300 a year in unplanned expenditures. 

TV and Advertising distorts the view we have of ourselves.  Advertising is designed to make you feel uncomfortable about yourself, your possessions, and everything around you.  If you are perfectly secure and comfortable, then you won’t feel the need to buy the thousands of products being marketed. 

Be Careful When Browsing the Internet

Personally, I use the Firefox browser with an Add-on called Adblock.  What this does is prevent website ads from appearing when I visit sites online, thereby removing my temptation to buy some gadget I won’t have use for after two days of purchase. 

The Real Truth about Saving and Spending

If you take away nothing else from this on cutting out the influence advertising has on your life, know this: If you spend less, you’ll quickly save more.  I know this sounds like a big “duh,” but there is a powerful spiritual component to savings as well.  Being in deep debt is a form of slavery-to your creditors.  If you are working just to pay bills, you are shackled to what you owe.  It’s a lonely impoverishing situation. 

Mother Teresa noticed it when she visited the United States:

“There are many kinds of poverty. Even in countries where the economic situation seems to be a good one, there are expressions of poverty hidden in a deep place, such as the tremendous loneliness of people who have been abandoned and who are suffering.”  

Nine Questions to Determine If a Business is Truly an Excellent One

When we think of investing in great businesses we normally try to put on a famous investor’s hat to go with our line of thinking.  Maybe it helps us make better decisions, or maybe, it’s just fun to pretend like we’re Warren Buffett and we’re making investing decisions that will alter the course of history.

I have found that it is easier break this part of the analysis into a series of questions.  Warren Buffett uses a similar approach when he is trying to determine the presence of the consumer monopoly, exceptional business economics, and shareholder-oriented management.

Let’s ask the following questions:

1. Does the business have an identifiable consumer monopoly? 
2. Are the earnings of the company strong and showing an upward trend?
3. Is the company conservatively financed?
4. Does the business consistently earn a high rate of return on shareholder’s equity?
5. Does the business get to retain its earnings?
6. How much does the business have to spend on maintaining current operations?
7. Is the company free to invest retained earnings in new business opportunities, expansion of operations, or share repurchases?  How good a job does the management do at this?
8. Is the company free to adjust prices to inflation?
9. Will the value added by retained earnings increase the market value of the company?

These nine thoughts should spark revelation.  Kind of like trying to figure out if your blind date is a hopeful for the altar.  Ever been married?  Been to college?  Has a good job?  Does he or she snore?

We should do the same thing when we allocate capital to investment. 

As Warren says, “it is better that one act like a Catholic and marry for life.”

Be Proactive Instead of Reactive

We’re probably the only firm in the investment business who doesn’t have CNBC blaring in the background of the office.  We do have computers that can stream live TV but usually it’s to keep up with shows like The Office or World Cup (when they were showing it).  But we rarely tune into CNBC.  One reason is that I’m afraid of what I’ll do if I’m inundated with news all day.

I can see why people get caught up in short-term thinking watching CNBC.  One day feels like a lifetime given all the stuff that is reported each day.  This company’s earnings.  That company’s lawsuit. This new CEO.  That new product.  This hot new IPO.  That new technology.

And the opinions.  Everybody has an opinion on Wall Street, and CNBC makes sure you know everyone’s opinion.  Every minute of every day. 

It’s enough to drive you nuts.  Or at the very least, enough to make you do things in your investment program that you shouldn’t. 

If you asked the reporters at CNBC if what they’re reporting has lasting significance, I doubt they could say yes, and mean it.  So why do they report it?  Because they have a bunch of time to fill.  So they tell you what the producer price index did this month.  They tell you that payrolls declined 2% for the month.  They tell you of analysts downgrades, upgrades, and opinions.  Does any of this truly matter in the long run?  No.

Reacting to news on CNBC or any other financial media outlet is a loser’s game simply because this information may be “news” only to you.  You are not first on the information food chain.  If you read about something in the Wall Street Journal, you’re not alone.  Millions of other investors also read it, and millions more investors knew about it 24 hours earlier when the “news” actually took place.  It’s silly to think that what you hear on CNBC gives you a leg up in the information game.  Chances are, the stock already is reflecting the information by the time you decide to move on the “news.”

Don’t get chased out of stocks (or any financial instrument) simply because of a single news event that the financial media trumpets as being important.  Chances are, that news event is some trivial piece of data whose primary value is to fill air time.

Overcoming Investing Hurdles

I’m sure you have many reasons for not starting an investment program.

• No money.
• No knowledge.
• No time.
• No broker.
• Too old.
• Too young.

I’m sure you think these are legitimate reasons.  They are not. 

There are no good excuses for not investing.  I don’t care how young or not so young you are.  How rich or not so rich you are.  How much you know or don’t know.  It has never been easier or cheaper to invest. 

If you have just $50, there are literally hundreds of investment opportunities awaiting for you, including with our own firm, CAM Trading.  If your employer offers a 401(k) plan, you can invest as little as 1% of your salary.  That means if you make $400 a week, you can invest as little as $4.00. 

Four bucks.

And you don’t need a broker to invest.  You can buy some of the best companies in the world without a broker and for little or no fees.  Nor do you need a broker to buy some of the best mutual funds in the business. 

In short, there are no excuses for not investing.  So, start now and get in the habit of it, you’ll appreciate the results in the future!