Wall Street Wrap & Apple Computer On Tap

Several topics are covered within this article, including discussion of (Nasdaq: AAPL, NYSE: MOT, NYSE: AAI, NYSE: T, Nasdaq: RIMM). Be sure to see our discussion of APPL, where we wrote, "the bonehead analyst who downgraded Apple forgot one thing, on any given earnings day Steve Jobs could announce he's invented teleportation!"



Stock Market Wrap

This is where you need a man with a sharp tongue at the head of the Federal Reserve, and not the soft-spoken Ben Bernanke. It's about time good old American muscle flexing came back to fore, because the reckless Europeans are about to send global markets into spin cycle. I mean, what was that comment? Was that a weak attempt at signaling to the market that the ECB might actually raise rates in the future, or was it just pure recklessness. We think it was the latter.

Come on Bush! Don't you have any Texans to place at the head of the Fed? We need some good ole gun toting cowboys to issue some threats at this point. What strong dollar policy is this? Blow up Geneva or something; that would be a strong dollar policy! Well, actually it would send gold soaring and everything else into hell. Still, Bernanke has to take his focus off putting fires out, and start cutting off some of the fuel, including the ECB. Otherwise, get ready for headlines reading "Euro Tops $2" and "Oil Reaches $175!" The market has been resilient, but if we do not stop the ECB from either a dangerous move or reckless commentary (you decide what it was), I'm not sure she'll hold captain.

I must share a meaningless aside about George Bush at this point. Last night, I had a dream, in a series of such dreams, in which George Bush and I are good buddies. Last time, he offered me a ride in his limo. This time around, after an exclusive Wall Street Greek interview, he offered me a position in his administration. And then he also asked me if his wife was right that his shorts and 20-year old worn out pink t-shirt with some kind of lewd cartoon on it were appropriate dress for his trip back to Washington. I said, "you're the President, stand at your height! Wear whatever you want." Then I reflected and said, "but that might concern a lot of people and lead to impeachment..."

Greek Prescience

If you read our piece last night entitled "Stock Market Wrap & Airlines on Tap," you were not surprised by the airline industry's collapse today. We very clearly warned of it, and pointed out specific weakness in AirTran Holdings (NYSE: AAI), which by the way collapsed 21%. Good job Markos, now here's another dime to buy a potato. So what's up for tomorrow then oh prescient one...? (I'm good when I'm tired eh?)

Apple Computer (Nasdaq: AAPL) on Tap

Today some fool analyst downgraded Apple Computer (Nasdaq: AAPL) and it fell 4.7%. We have not derided him here because of his downgrade, but due to his premise. He said Apple would likely beat estimates, but that he was concerned they might not beat their number by enough to appease the market. This is an example of nearsighted behavior from either an unseasoned analyst or a negligent one; actually, there's another scenario I'm well aware of. He may have been pressured into it by his boss and used a lame reason to vent his frustration. Here's why he's wrong:

Stocks behave the way he described during bull markets, when their valuations are extended and extra reasoning beyond normal is needed to support further rise. In bear markets, when sentiment is as poor as it is now, stocks that beat their number have no such requirement to beat by excess. Companies that beat estimates are a rarity in such market environments, and thus draw capital, as long as their outlook is still solid.

AT&T (NYSE: T) today posted decent numbers, but what was noteworthy to us was that they noted solid iPhone sales. Early reports indicated iPhone sales were strong, but later nosing around seemed to uncover less than clear disclosure. Still, Apple clearly has itself the hottest thing since slice bread, or at least Motorola's (NYSE: MOT) old Razor, before everyone discovered how fragile they are, in my estimation. My wife's first Razor busted on a single fall, and the second died because of a touch of water. Mine broke because I wiped it with a wet cloth. Never again Motorola! Never again! Unless of course you want to send The Greek a new one (or something else); then there will be no hard feelings my dear friends.

Anyway, Apple may fall tomorrow, but it would not be because of the analyst's premise. The most likely catalyst in such a cataclysmic scenario would be some kind of warning about the outlook, or if Steve Jobs just came out and said he was out of new ideas. God forbid! If that happened, the poles might shift sending the world into complete catastrophe. The iPhone has proven so strong a product that it has given renewed energy to like-competitor Research in Motion (Nasdaq: RIMM) and forced plane vanilla phone-maker Motorola out of the cell phone business. I've taken some liberty here, so you techies don't get all nuts on me. I can use writers liberties after 11 p.m., when I'm on my third article for the day, okay?!!!

Let's look at the valuation, at a quick glance. A P/E of 33 is not favorable in this kind of environment, except for titans like Apple. Results have beaten estimates over the last three quarters, and each quarter at a declining rate. So, he's probably right in saying the number will beat by less this time around. But, he's forgotten about the wild card in the deck, the intangible... Steve Jobs. On any given earnings day he could say, "we've discovered the teleport," and bang, AAPL $1,000!

Listen folks, I really want to discuss the ICSC figures and State Street sentiment numbers, but I'll have to include that in tomorrow's bit if you don't mind. Zzzzzz See our disclosure at Wall Street Greek.