Saturday, March 02, 2013

A deliberately provocative thought on Apple

This will no doubt cause much wailing and gnashing of teeth from Apple lovers and those who own the stock. However, I believe this is worth posting. From Larry Hite's interview in Market Wizards:

"In 1637, tulips in Holland traded for 5,000 florins and then crashed to 50, a 99 percent loss. Well, you might say, "Trading was relatively new then; these people were primitive; capitalism was still in its infancy. Today, we are much more sophisticated". so you go to 1929 and find a stock like Air Reduction which traded at a high of $233 and after the crash fell to $31, a decline of 87 percent. OK, you might say, "The roaring '20's were crazy times, but things are surely different". Move ahead to 1961 and you find a stock called Texas Instruments trading at $207. It eventually dropped to $49, a decline of 77 percent. If you think we have gotten more sophisticated in the 1980's, all you have to do is look at silver prices, which in 1980 reached a peak of $50 and subsequently fell to $5, a 90 percent decline.

The point is is that because people are the same, if you use sufficiently rigorous methods to avoid hindsight, you can test a system and see how it would have done in the past and get a fairly good idea of how that system will perform in the future. That is our edge."

So, how does this affect Apple? Well, in 2012, Apple traded at a high of over $700. It eventually dropped to.... $?

The last long signal on Apple I had was stopped out at $660.

Of course, this time its different...

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