Can Apple Withstand the Fall of the Financials?
Will Lehman be the next bailout? Or will the Government let this big financial house just fail outright? The Treasury stepped in and took over Fannie and Freddie, making US Tax Payers the default caretakers of these two behemoths. Is Lehman next, seems everyone is concerned over Lehman, how about Wachovia? The sad thing is, you could ask that of just about any bank and identify them as a valid takeover target, with few exceptions.
So, Lehman lost 44 percent of its value today! And the Banking Index ($BKX) lost virtually all the gain it enjoyed yesterday (Monday, September 8), after the weekend seizing of Fannie and Freddie! The BKX also lost the support of its 20 day moving average, and plotted a Bearish Engulfing candlestick pattern. Very, very bad karma. The next stop is to slide down yesterdays gap up, which should provide little resistance at this point.
So, where does that leave AAPL? Can it withstand this onslaught of market turmoil in the shadow of it’s Let’s Rock event? The Bigger question is, can the anemic Tech Sector withstand this onslaught. I don’t think it can. Most Tech companies are growth companies, and thus heavily reliant on the financial sector for their stability and operations. Now, this is definitely not the case with Apple, it’s a big cap and has no debt. But Apple is not an island, it has suppliers and partners that are all part of that same sector, and I venture to guess that most are not debt free like Apple. Plus, this just puts a drag on the entire economy. That means there’s fewer people with 229 clams of disposable income, and thus fewer people to buy the sleek new iPod Touch with volume controls, extended battery life, built-in speaker, and Nike + built-in.
It’s all well and good that Apple came out with a refreshed iPod line up. And some nifty new features in a totally revamped iTunes 8, like the Genius Playlist from the cloud, and interface enhancements borrowed from iPhoto. Alas, no subscriptions. But this Rock out event will do Bo Diddley Squat to keep Apple’s share price from dropping. By the way, if you caught any of that event, Steve Jobs is not dead yet, and John Maher’s name was mentioned about a bazillion times.
So, what to do? The safe thing is to stand aside until it all shakes out. The brazen thing to do is ride debacle down into the ground. But do it on the cheap. You can purchase in the money puts and discount them by selling calls.
If you’re still unsure what to do, why don’t you visit the Wilderness Forums, where we talk about the markets and Apple all during the trading day. There’s hundreds of investors and enthusiasts to share your ideas with. Go here to check it out, then go here to register and become a contributor.
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September 9, 2008 at 7:08 pm
[...] Original Zach Bass [...]