WASHINGTON, April 24, 2014 – Apple stock (AAPL) is on a tear this morning. Pummeled mercilessly all winter through late Wednesday, the company’s shares are up over 42 point in heavy trading today as we approach the noon hour, borne skyward by yesterday’s slew of good numbers reported after the bell.
Not only did the onetime tech darling post earnings substantially above analysts’ limp estimates. The company also announced an 8% dividend boost and an increased share buyback program, which will further boost earnings per share as the company works to perfect its much-anticipated iPhone 6 for likely release later this year.
As we reported here last night, none of this stopped CNBC from mindlessly trumpeting the dizzying head fake offered by perennial Apple naysayer, Global Equities research analyst Trip Chowdhry. He quickly diverted attention away from the company’s headline-grabbing numbers, changing the topic to complain about Apple’s lack of “innovative new products.” Seriously? How many other tech companies have been firing up brand new, never-before-heard-of product lines?
CNBC contributor Katie Little piled on yesterday with yet another negative article headlined “Apple to get bruised tomorrow?” This hit piece predicted a high likelihood that AAPL would get hammered this morning at the opening bell.
“Apple’s quarterly report following the closing bell could send shares sharply lower Thursday even if the company hits earnings estimates—if history is any guide,” she wrote with a weirdly smug confidence.
As of noon today, though, it’s Katie’s call that’s looking a little bruised, while Apple’s numbers and the action of its stock look good enough to eat.
Little cites flimsy evidence to support her case, noting that the company’s stock has gone down in fairly recent history even when the company records an earnings beat. She cleverly (or cluelessly) omits the fact that AAPL is a special case stock, one of those companies for which a mere earnings beat is never enough for the pundits. It has to be an “unexpected” or “unexpectedly large” earnings beat. But who gets to define exactly what that is in a given quarter?
Funnier still is the non-stop snarking cited in yet another CNBC Apple report this morning.
“It’s a company that’s trying to please Wall Street,” Max Wolff, chief economist and strategist at Citizen VC told CNBC’s “Closing Bell.” “It didn’t used to have to. Now it does. I think it’s a huge milestone that they’ve realized they do and they’re throwing meat on that. I don’t know how transformative it is.”
“Some meat on that.” “I don’t know how transformative it is.” What kind of analysis is this? Who the heck is Citizen VC? And why should an offhanded, unsubstantiated, uninformed Frisbee-toss opinion like this be believed by anyone?
Funnier still, CNBC also snagged a wise and worldly sound bite from none other than John Scully, the former brilliant Apple CEO whose most notable management decision was to fire Steve Jobs not long after the launch of the Macintosh in the mid-1980s. According to this same report, the former Coke head (KO CEO, that is) opined
The technology darling needs to prove it can still wow shoppers with “creative leaps” in its mobile phone business…. “What’s interesting is we’re coming up this fall on three years of Tim Cook serving as CEO since Steve Jobs died, and this may be the time … for his first creative leap with a product that is truly different from something he inherited from Steve.”
Take it from a high tech genius like John Scully. He sure proved he knew what to do “different from something he inherited from Steve.” Who knows? Maybe Scully was the only guy this article’s nameless writer could get on the phone last night.
For many in the lemming-like world of financial analysts and blow-dried financial TV pundits—the showiest of whom cluster around fast-fading CNBC like an aging flock of molting puffer pigeons—it will take a few more factual Daisy Cutters like last night’s Apple report before they’ll switch back to the kind of AAPL cheerleading that was in vogue prior to the death of the company’s co-founder, leader and product guru Steve Jobs.
The current narrative has it that Tim Cook, the less colorful supply-line genius now in charge of the computing and entertainment giant, is presiding over the company’s inevitable post-Jobs decline and fall. But, as evidenced by yesterday’s numbers, that old saw—likely meant to protect substantial short stock and option positions and keep them in profit city—is starting to get a little bit dull.
The reality is that AAPL has historically been such a volatile stock that the stock’s day-before and day-after earnings action tends to be highly unpredictable whatever the news. Trading is likely also heavily influenced by the usual fun and games the algos and HFTs play with both the stock and with its heavily traded options contracts.
In all likelihood, the only thing tall tales like Chowdhry’s and Little’s generally accomplish is that they support the short positions of the tiresomely predictable and often wrong touts (like Peter Schiff and Dennis Gartman) that CNBC typically interviews. They are taking the time out of their busy trading days not to help you find the right investment but to talk their own book.
Like the self-serving, corrupt politicians who run Washington these days, these one-percenters are often out to direct positive PR toward their current positions in order to suck mom and pop investors in, thus boosting the value of these established positions. Once that’s accomplished, it’s exit stage left for the touts. The hapless small investors are left holding the bag while the big boys take some time off to buy a much-larger yacht. (That’s why the late Joe Granville typically referred to these little guys as “the bag-holders.”)
Routine and obvious nonsense like this was a major reason behind the Maven’s decision to leave the brokerage business back in the 1980s. No matter how hard he tried, a bread-and-butter full service broker like the Maven simply couldn’t protect his retail investors from Wall Street’s super-predators. To this day, these impeccably groomed thieves or their offspring flout the rules, running rings around the government’s overpaid, asleep-at-the-switch regulators.
But for a change, the laugh is on the wise guys this morning. In spite of their valiant attempts to maintain their negative Apple narrative last night and this morning, touts and pundits alike were gobsmacked as the company’s stock took off like a rocket today.
At least part of this huge move was an understandably positive reaction to the company’s bucket of good news. But we also suspect that a great deal of the power propelling the stock relentlessly higher was desperate short covering by some of the usual suspects who were trying, perhaps by proxy, to defend their positions via the compliant media.
Frankly, nothing makes the Maven happier than to see at least some of Wall Street’s financial parasites crushed by a likely short-squeeze like this one. It clears a stock like AAPL, at least in part, for more constructive action in the future rather than forcing longer-term investors to endure the painful, relentless waves of short-selling and mindless mass-dumping that’s frequently been the stock’s post-Jobs lot in life.
As we advised last night, as good as this new earnings story is, and as much promise as the future holds, we’d probably steer clear of AAPL short term. Those who caught part of the wave this morning, fine.
But if you caught 10% in an hour or two just this morning, getting back out of at least part of your position might be well advised here. A move like this should always be regarded as a gift. Having been badly burned this morning, the naysayers, shorts and HFTs will almost certainly try to take some of today’s gains back in late afternoon trading today. They certainly won’t want to go away without a fight. But why let them help themselves to some of your well-earned profit?
Meanwhile, beware of any consensus achieved by CNBC’s usual suspects. When you find most of them agreeing on any investment or strategy, it’s probably time for you to look for the nearest exit. You can bet they’re trying to get there before you, the better to leave you holding the bag.