This “NBA” Market

On February 19, 2012, in Market Perspective, by admin

Doug Kass calls this an “NBA Market.” Nothing But Apple. And the market loves Apple.


Subtract Apple’s earnings and the bounced back earnings from the ‘hated’ AIG & the earnings growth from the remaining S&P 500 stocks was only 1.1%.

Observing its momentum, it’s hard to see anything stopping Apple’s stock from taking out $525/share or even $550 before it’s anticipated announcement of the iPod 3 (just guessing & if things play out as usual, we’d have a temporary selloff after everyone has bought ahead of the announcement).

Despite Steve Jobs’ passing, Apple still has:

-the most popular products (with a cult following),

-the best management,

-approx $100 Billion in cash,

-extremely high gross margins

-the most profitable retail outlets with unheard of sales per square foot, and

-explosive new growth opportunities in the enterprise space (with some in business & government beginning to move away from Blackberry toward iPhones).


Other than that and only a modest P/E multiple in the face of a 100% last-year earnings growth rate, there may be few other reasons to buy their stock (or so someone might be tempted to say)! Of course, they depend on new product development and the law of large numbers could eventually catch up to them. Predictions that they’ll double to a trillion dollar company will obviously not happen overnight but its fun to watch a semi-parabolic move in the stock of the most valuable firm in the world. (FWIW, I’m personally no less bullish on Apple than when Steve Jobs was alive but recognize that a huge firm can face limits to growth. ).



PS: Apple just cleared $500 share & seems unlikely to look back any time soon. According to advisor analyst:


  • If Apple had Microsoft’s Price-Earnings Ratio, it would be worth $483/share
  • If Apple had Oracle’s Price earnings ratio, it would be worth $514/share.
  • If Apple had Amazon’s Price Earnings Ratio, it would be $3,347 a share.
  • If Apple had Netflix’s Price Earnings ratio, it would be worth $17,948 per share (which would give it a market capitalization of $17 Trillion)


PPS: Our Super Mario Brother in Europe will be doubling down on even more Long Term Financing Operation (LTRO). Facing a second Great Depression, Mario Draghi is arguably even more Super than “Easy” Al (Greenspan) or “Helicopter” Ben (Bernanke). The Piper may have to be paid in a few years, but for now let’s continue to eat drink and be merry … so long as we remain on Super Mario Brother’s chosen EZ Money Path (with more than a little help from the good ole USA)!

The market’s direction remains path dependent. For now, we remain on the path easy money financed in part by Helicopter Ben who is helping to shower Europe with fresh, electronically produced dollars exchanged for Super Mario’s Euros and available to bail out European Banks with 3 year, 1% loans courtesy of the LTRO! Helicopter Ben may not be far behind with more easy money while Obama promises another $1.3 Trillion deficit for 2012. Remember Marty Zweig’s old adage: “Don’t Fight the Fed.” Throw in the ECB & virtually all central banks around the world that are printing money like there’s no tomorrow!

What do we get for our unprecedented money printing, and huge deficits: 1.5% growth! What happens when we take away the sugar, caffeine & speed? We’ll find out after the election!

In all seriousness, we all have to hope that attempts to buy time allow players 2 insulate themselves from the effects of a Greek default. What we do during the respite may make all the difference in the world!



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