I got a question the other day, well it was more of a comment and I did not respond to it immediately. I wanted to think about it for a while then answer it in a blog post, so here it is. Below is the question this person asked me, throughout the whole thing he was referring to APPLE:
--------------------------
I never understand the logic/POV behind "all powers come to and end?"
What happened to real research instead of cherry picking a few misleading metrics.
What happened to knowing the products that Apple sells still have sustained growth for the next 5 years.
What happened to knowing that Apple already makes more profits then the almost all other media and consumer electronics combined and CONTINUE to grow those profits.
What happened to knowing that Apple has investment/cash that know one has ever seen in the history of the markets.
Yes, the stock is disconnected from the actually company at this time but its very, very foolish to assume that disconnect simply continues.
We all agree short term irrational stock price movement happens but at some point REAL FACTS take over.
This does not mean that price movement can not go much lower...again short term irrational markets happen.
My point is a simple one......there is not a valid metric that agrees with anyone thinking Apple's real world domination is coming to an end. Nadda, Nothing.....the $$$ profits, sales, retention rates are as strong as they have ever been.
Apple's 2013 profits alone could sustain Amazon profit growth for the next 10+ years ;)
----------------------------
We will go in order and I will number them according to the different "paragraphs" this person wrote in.
1. I believe all "powers" do come to an end, at least in the world we currently live in. For example, one president doesn't rule forever, a country has not and will not last forever, you do not live forever, and the list goes on. I view this as the same in the financial markets, nothing goes straight up (in this case $AAPL) , and nothing can go straight down. If you thought Apple was invincible and would always go up, I am sorry but you are mistaken - as we just saw, all "powers" come to an end or start something else.
2.Misleading metrics? This person was not clear enough with his question but I assume he means the technical indicators? Well, many people have had success with technical analysis, so obviously it is not misleading (if you know how to read it). This person also says "real research", I believe that this is real research, technicals may be different than the way you do it but that doesn't make it invalid.
3.HOW do you know that Apple will have sustained growth for the next five years? I didn't know anyone had a crystal ball but if you do, PLEASE contact me! I want to use it too! In other words, there is no way of knowing what the company will produce or be like in five years, it is all expectations and word of mouth, no one truly knows. Therefore, I follow the price action.
4.Again, I am not sure if they are "continuing" to grow this profits or not but either way, does this mean they cannot stop making a profit? There have been many companies that have gone down after in the past making profits.
5. So what? Apple has cash? Great. Again, just cause they have "cash" doesn't make them a great investment. If you only base your buying off that then you would have obviously lost A LOT of money in the past couple months because they have about the same amount of cash at 700 as they do now at 530...
6. How do you know it is "disconnected" have you thought of the chance that someone else may know something you do not and that is the reason for the "sell off". I do not think anyone has the authority or ability to call something "disconnected".
7. REAL FACTS? What are the real facts? The fundamentals are the real facts, that is obvious because if they were (according to the fundamentalists) we would be going higher and higher now, not lower and lower. Therefore the technicals must be the REAL FACTS, the technicals help interpret price action (which is the most important thing in a stock). Currently the "REAL FACTS" (technicals) are telling us a different story than the "IRRELEVANT FACTS" (fundamentals) and sense price action is what you are really putting your money in, you need to respect the technicals.
8. There it is, you saved yourself. "it can move much lower". My response to that is - at what point will be too low for you? Will you wait for $50 a share (way extreme at this point) before saying it is not a good investment anymore because finally their "cash" balance has fallen, or whatever else the fundamentalists look at?
9.Valid metric? There is again. Technicals are a valid way of viewing stocks, if it weren't do you think ANYONE would ever talk about them?
10. Finally, so what Amazon growth is smaller? What does that have anything to do with Apple? Amazon is heading higher, do you think it will just sell off to the extremes that some fundamentalists claim overnight or something? It has proven it is a strong stock and wants to go higher repeatably and I predict that once the fundamentalists realize that Amazon is a good "investment" according to them - the majority of the move will be over.
Wow, well sorry if that seemed a little offensive in some parts, I just am really proud of my technicals and do like it when people think it is not a "valid" way of trading/investing. Thanks for reading.
--------------------------
I never understand the logic/POV behind "all powers come to and end?"
What happened to real research instead of cherry picking a few misleading metrics.
What happened to knowing the products that Apple sells still have sustained growth for the next 5 years.
What happened to knowing that Apple already makes more profits then the almost all other media and consumer electronics combined and CONTINUE to grow those profits.
What happened to knowing that Apple has investment/cash that know one has ever seen in the history of the markets.
Yes, the stock is disconnected from the actually company at this time but its very, very foolish to assume that disconnect simply continues.
We all agree short term irrational stock price movement happens but at some point REAL FACTS take over.
This does not mean that price movement can not go much lower...again short term irrational markets happen.
My point is a simple one......there is not a valid metric that agrees with anyone thinking Apple's real world domination is coming to an end. Nadda, Nothing.....the $$$ profits, sales, retention rates are as strong as they have ever been.
Apple's 2013 profits alone could sustain Amazon profit growth for the next 10+ years ;)
----------------------------
We will go in order and I will number them according to the different "paragraphs" this person wrote in.
1. I believe all "powers" do come to an end, at least in the world we currently live in. For example, one president doesn't rule forever, a country has not and will not last forever, you do not live forever, and the list goes on. I view this as the same in the financial markets, nothing goes straight up (in this case $AAPL) , and nothing can go straight down. If you thought Apple was invincible and would always go up, I am sorry but you are mistaken - as we just saw, all "powers" come to an end or start something else.
2.Misleading metrics? This person was not clear enough with his question but I assume he means the technical indicators? Well, many people have had success with technical analysis, so obviously it is not misleading (if you know how to read it). This person also says "real research", I believe that this is real research, technicals may be different than the way you do it but that doesn't make it invalid.
3.HOW do you know that Apple will have sustained growth for the next five years? I didn't know anyone had a crystal ball but if you do, PLEASE contact me! I want to use it too! In other words, there is no way of knowing what the company will produce or be like in five years, it is all expectations and word of mouth, no one truly knows. Therefore, I follow the price action.
4.Again, I am not sure if they are "continuing" to grow this profits or not but either way, does this mean they cannot stop making a profit? There have been many companies that have gone down after in the past making profits.
5. So what? Apple has cash? Great. Again, just cause they have "cash" doesn't make them a great investment. If you only base your buying off that then you would have obviously lost A LOT of money in the past couple months because they have about the same amount of cash at 700 as they do now at 530...
6. How do you know it is "disconnected" have you thought of the chance that someone else may know something you do not and that is the reason for the "sell off". I do not think anyone has the authority or ability to call something "disconnected".
7. REAL FACTS? What are the real facts? The fundamentals are the real facts, that is obvious because if they were (according to the fundamentalists) we would be going higher and higher now, not lower and lower. Therefore the technicals must be the REAL FACTS, the technicals help interpret price action (which is the most important thing in a stock). Currently the "REAL FACTS" (technicals) are telling us a different story than the "IRRELEVANT FACTS" (fundamentals) and sense price action is what you are really putting your money in, you need to respect the technicals.
8. There it is, you saved yourself. "it can move much lower". My response to that is - at what point will be too low for you? Will you wait for $50 a share (way extreme at this point) before saying it is not a good investment anymore because finally their "cash" balance has fallen, or whatever else the fundamentalists look at?
9.Valid metric? There is again. Technicals are a valid way of viewing stocks, if it weren't do you think ANYONE would ever talk about them?
10. Finally, so what Amazon growth is smaller? What does that have anything to do with Apple? Amazon is heading higher, do you think it will just sell off to the extremes that some fundamentalists claim overnight or something? It has proven it is a strong stock and wants to go higher repeatably and I predict that once the fundamentalists realize that Amazon is a good "investment" according to them - the majority of the move will be over.
Wow, well sorry if that seemed a little offensive in some parts, I just am really proud of my technicals and do like it when people think it is not a "valid" way of trading/investing. Thanks for reading.
