Apple, employment, weird science haunt Friday's markets

VP debate doesn't help either way.

WASHINGTON, October 12, 2012 – The market has again opened confusedly and mixed this morning. At the opening bell, the averages dropped mildly. Then the Dow picked up and the other averages have tried to follow suit, but there’s no conviction here as of 10 a.m. EDT. No volume either, it appears.

Maybe investors, eager to buy early yesterday—based on apparently greatly improved unemployment application numbers—are wary this morning after having wasted considerable buying power on Thursday. As it turns out, the day’s early optimistic numbers were misoverestimated (to use the antonym of one of our favorite Bushisms) due to an accidental or on-purpose underreporting of numbers by the People’s Republic of California. Oh well, guess that’s what we all pay the big bucks to our bureaucrats for—punctuality, professionalism, and accuracy.

(Read our column from yesterday for more on this, as we updated it twice when the apparent good news did a 180.)

It’s unlikely that last night’s VP debate fiasco is having much of an effect on this morning’s activity. The main buzz from last night revolves around current Veep Joe Biden’s bizarre stage antics. Apparently everything that either the moderator or Republican VP candidate Ryan said caused Mr. Biden to erupt into cascades of mirth. From Iraq, to the Libyan and Syrian fiascos, to the Administration’s fiduciary irresponsibility, to abortion and beyond was just too funny for words.

The Veep’s entire appalling performance seemed like a YouTube compilation of Best of New Yorker cartoons. Or maybe, like a particularly bad Wednesday night amateur show at the Apollo.

But we digress. As we’ve already said, last night’s dubious entertainment has probably not influenced the market one whit, so it looks like we’ll head into another Friday close with mixed results.

One thing is clear, at least at the moment. Mr. Market is in a grumpy mood. If the meandering averages decide to get decisive at this point, best bet is that they’ll be going down. But it’s confusing.

The Euro seems to have strengthened a bit this morning as the dollar weakens. But gold (and sometimes silver), which usually moves up on dollar weakness also remains anemic today, which is starting to make mincemeat of our leveraged ETF positions in the precious metals. We’d hate to have to bail with modest losses, but we rarely fight the tape when it’s made up its erratic mind.

Part of the confusion here, too, is the horrendous action in Apple (AAPL). Its heavy representation both in the popular broad tech ETF (QQQ, often known as “the Qs”), in other tech ETFs, and in the S&P averages has been pulling these markets upwards in recent months as excitement over the new iPhone5 has built and peaked. But, arguably over-owned and over-hyped, the stock apparently has become too heavy a weighting in mutual funds, hedge funds, and individual portfolios—those that are still trading in this incredibly corrupt market.

Ergo, in balancing portfolios for year-end, many of these Apple holders are no doubt scooping up their considerable profits and lightening up on their holdings, probably giving the stock a downward bias for the indefinite future. And since the entire market in many ways has been going the way of APPL up or down, this has markedly altered the market’s tone toward the dark side.

At some point in its corporate history, it’s more than likely that APPL will go the way of “Mister Softy” (the Street’s nickname for Microsoft, based on its ticker symbol MSFT), becoming a reliably profitable, mature company whose growth levels off while its dividend grows, thus removing it from the go-go growth category to the grandpa retirement graveyard of income investment vehicles.

However, Apple’s imminent death in the growth category is probably greatly exaggerated, at least for the moment. iPhone revenues will probably still carry it to lofty earnings land for at least another year or two even if the company doesn’t invent anything new and earth shattering. So the stock—grossly undervalued from a PE standpoint—is probably still worth buying on the dips even now. Except which dip do you buy? There’ve been so many lately.

Technicians are starting to think AAPL may be a buy here, as it’s corrected a whopping 10% from its $705 peak in a very short period of time. But since QE3, the Middle East, the Eurozone, and Washington itself are throwing wild variables into the technical soup each day, most market trading systems have been tending not to work very well these days, puzzling even the professionals.

But again, back to our main point—if Apple is a bellwether for the market, the averages are unlikely to recover unless AAPL does first. The undercurrent of thought, if there is one, seems to be that if this company—the greatest company in the world at the moment—is starting to stall, what does that say about all those lesser beings that populate the market.

Everyone needs a leader, including the free world. And if there is no leader, the universe wanders and tends toward surliness, negativity, and anarchy. Reflecting the world in which we currently live—one dominated negatively by the feckless Obama Administration—the stock market is apparently picking up the nasty vibes. QE3 aside, this is leading many institutions and investors to the sidelines for the balance of 2012.

On the other hand, there’s always that possibility of an existential surprise one way or another. And keep an eye on those disappointing precious metals positions, like the ones we’re holding. They are starting to suck, frankly (that’s a technical market term), but we’re not quite ready to bail just yet.

One optimistic report on all that glitters (we can’t find a good link) tells us that “Credit Suisse (NYSE: CS) raised its 2013 forecast for precious metals. It sees gold at $1840 per ounce in 2013 and silver at $33.10 per ounce. At present gold trades at $1767 and silver trades at $33.75…. ‘The Fed is not finished: QE 3.5 is likely, possibly as soon as December in the form of on-going purchases of treasuries after Operation Twist expires,’ said Credit Suisse analysts.” That’s great, Swiss dudes. But what do we do in the meantime?

But we’re waxing too technical and too philosophical for a boring Friday morning. Let’s wrap it here, stay on the sidelines, and then enjoy what looks to be a lovely fall weekend. Just perfect for heading out to Loudoun County, Virginia, about 15 miles from here, to indulge in an afternoon of wine tastings and oblivion.

See you Monday.

Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate. He currently owns, among other investments, positions in DGP, IAU, ACQ, SLV.

Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.

Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.

References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.

Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.

Follow Terry on Twitter @terryp17


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Terry Ponick

Now writing on investing, politics, music, movies and theater for the Washington Times Communities, Terry was formerly the longtime music and culture critic for the Washington Times print edition (1994-2009) before moving online with Communities in 2010.  



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