Wednesday, February 27, 2008

Who's drinking the Kool-Aid?

For any of those who think that the depressing, dispirited and negative financial and housing environment will never turn around, just read this story two months ago on Bloomberg about Apple Computer:

Here is just a bit of the article:

There's so much growth to look forward to for the iPhone,'' said Stephen Coleman, chief investment officer at St. Louis-based Daedalus Capital LLC, which owns about $7 million of Apple shares. He projects the stock will hit $600 in 18 months. Apple gets about 30 percent of the iPhone fees charged by carriers, Coleman said. Wall Street analysts' estimates range between 5 percent and 20 percent, he said.

The iPhone has helped Apple evolve from ``a company dependent on one hit product to one with multiple growth engines,'' Andy Neff, an analyst with Bear Stearns & Co. in New York, wrote in a Dec. 6 note. He raised his share-price estimate to $249 from $243 and his earnings projection for the year ending in September by 2.9 percent to $5.40 a share.

Raising Price Estimates: Neff was among at least 10 analysts who raised their price estimates for Apple above $200 in October. That month, the company gave a quarterly forecast that uncharacteristically topped analysts' expectations and said holiday sales would be the highest in its 31-year history.

Now that Apple needs to be bought, the same bullish analysts are hiding. What a difference two months makes!

But now, we can find the same bearishness by analysts who are enamored with their spreadsheets and predictions of doom and gloom for all things financial. The FDIC re-hires 25 people, who used to do bank bailouts 15 years ago, and this news gets pinged around by every hedge fund and bear on the street.

25 hires and now we are going to melt down? The financials have already melted down. The Kool Aid has just changed hands. The bears, instead of recognizing that their payday is in front of their face, are at the trough waiting for more. They believe their own bunk!

Did anyone suggest two months ago, that Apple would be completely re-appraised by the street? And now is anyone even skeptically looking at some of the nonsense the unrepentant bears throw up? Even Goldman got in the act, by downgrading Costco today, to stop the momentum in retail. Why don't they say that the rich are just going to shop at Dollar Tree?

One of the bears suggested that they should just bulldoze the condos being built in South Beach, like they did to homes Texas, with the RTC's blessing in the 90's. Humidity causes mold-bulldoze the places! It gets rid of inventory and stabilizes prices. What if these guys were the 25 hires? Maybe I should ping this spin?

When all this nonsense is being thrown around, it means we are at a serious inflection point in the market. I'm surprised some quant hasn't suggested buying Caterpillar as the hedge for bulldozing. It will probably come from the same quant who had the pair spread of being long Goldman Sachs, and short Lehman as the perfect hedge to play the financials.

How did that work out?

It's the same question, that will be asked to those who are staying short at these prices.

Eventually, the bears will get bull-dozed!

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