(AAPL) Archives - Page 110 of 111 - Mad Hedge Fund Trader

Old Tech?s Big Comeback

Apple blew away the bears today with the issuance of $17 billion in bonds, the largest such corporate debt issue in history. Spread over two, five, ten, and 30 years, the deal was oversubscribed by more than 3:1, with $40 billion in demand left unfilled.

Foreign investors took down a major part of the deal, which explains Deutsche Bank?s senior role in the syndicate. The yield on the ten-year bonds came in at 2.40%, a mere 70 basis points over equivalent US Treasury paper.

The mega deal, dubbed ?iBonds? by traders, underlies the tremendous shortage of high-grade fixed income securities worldwide. Since 2007, the amount of double ?A? or better rated paper has declined by 60%, thanks to widespread downgrades inspired by the newfound religion of the ratings agencies.

As I never tire of pointing out at my strategy luncheons and lectures, the principal sin of governments is not that they are borrowing too much money, but not enough. This has given us a global bond shortage that has taken returns to insanely low levels. Look no further than the ten-year yield of 1.68% in the US, 1.20 % in Germany, and a pitiful 0.60% in Japan.

The issue also highlights the sudden fascination of all things Apple since its better than expected calendar Q1 earnings report last week, with $43 billion in revenues spinning off $9.5 billion in profits. Since then, we learned that the richest man in Russia, Alisher Usmanov, soaked up some $100 million of stock close to the $392 bottom. This is a man who?s proven track record of market timing is uncanny.

It doesn?t require a lot of imagination to figure out what this deal is all about. With $145 billion in cash on the balance sheet, why borrow another $17 billion? The reality is that this is a way of repatriating, through the back door and tax-free, some of the estimated $100 billion in cash the company has parked in offshore bank accounts.

What will it do with the money? How about buying back $17 billion worth of stock? Buy borrowing at 2.4% and retiring 3.2% dividend stock, the yield pick up on the transaction comes to $136 million a year. That goes straight to the bottom line. The deal reminds me of the kind of financial engineering that dominated Japanese finance during the late 1980?s. When I was a director of Morgan Stanley, I signed many of these multi billion dollar deals as a co-manager.

It wasn?t just Apple that has returned from the grave, which saw its stock rise by 14% since last week?s two year low. Look at many of the old tech warhorses, like Microsoft (MSFT), Applied Materials (AMAT), Hewlett Packard (HPQ), and Intel (INTC), which have blasted forth from long moribund levels in recent weeks.

Which raises an interesting possibility. What if the long predicted selloff in May does a no show? What if, instead of the usual 10%-25% swan dive, we only get the 2.5% that has been the pattern for 2013? The possibilities boggle the mind.

In that case where will the money flood into next? Stocks that have been going up like a rocket for the past eight months, or shares that have either fallen like a stone during this time, or barely budged? Stocks that are trading at double the market multiple, or at half the market multiple? Hmmmm. Let me think about this one.

There are two major categories of the latter, commodity related shares and technology ones. China is still slowing, placing a monkey on the back of most commodities related companies. So I vote for technology, which by the way, is the cheapest it has ever been on an earnings multiple basis.

In that case, the strength in old tech will develop into far more than a one-week wonder. It could provide the rocket fuel that will power the major indexes for the rest of the year. That would take the S&P 500 up to 1,700 where it can flaunt a glitzy earnings multiple of 17.

Don?t get too giddy. This is definitely a best-case scenario. But then lately, the best-case scenarios have been happening, thanks to the reflationary efforts of our friend, Ben Bernanke.

That would be fantastic news for Apple?s long-suffering shareholders. Now that its stock has clearly broken through the 50-day moving average on the upside, the eventual target of this leg could be as high as the 200-day moving average at $541. One can only hope.

Old Tech is Rising From the Dead

Steve Jobs? Last Laugh

Diary, Newsletter

Nothing beats instant gratification. Bragging rights are nice too.

On Monday, when I strapped on this trade, angry readers emailed me to tell me that I was truly out of my mind. Apple was an ex-growth company, had lost its ability to innovate, shed its ?cool? factor, and had fallen behind Samsung with its large screen smart phone. The shares were clearly in a free fall to under $300, and I had to be ?Mad? to urge people into the stock at $395.

The Tuesday Q1, 2013 earnings changed everything. Revenues blew out to the upside at $43 billion, profits surprised at $9.5 billion, and earnings shocked, coming in at $10.09. Analyst forecasts minutes earlier ran as low as $8. The company sold a stunning 37.4 million iPhones and 19.5 million iPads.

Best of all, it returned a wad of cash to shareholders; increasing the dividend by 15% and boosting its share buyback program to $60 billion. It can afford to do so because it has an unprecedented $145 billion in cash on its balance sheet.

Not only is Apple now a value stock, it is a high yield value stock, offering investors a 3% annual yield at these prices, compared to only 2% for the S&P 500. Pension funds will not ignore this for long.

All of a sudden, Apple has recovered its ?cool? factor and is back at the forefront of innovation. Its dominance in apps and iTunes gives it a huge sinecure in risk free income. The six or so new products it will launch in the fourth quarter of this year, like a low end smart phone for emerging markets, Apple TV, the iPhone 5s, a deal with China Mobile, and new generations of iPods and iPads, all look incredibly interesting. What a difference three days makes!

So it is time for me to take profits on my (AAPL) May, 2013 $320-$350 Call spread. I?m really doing this so I can print out the confirm and carry it around in my wallet next to my spare condom. That way I can whip it out and prove any bar challengers that I made money in Apple on the long side this year, no easy task.

I am also encouraged to take profits here because I have captured 95% of the potential profit in the call spread. Why bother carrying a position in one of the most volatile stocks in the market for three more weeks for an extra 2 basis points?

For options traders, there was something really interesting that happened to Apple this week. Although the shares have risen only $15, or 3.8% in three days, the value of my deep out-of-the-money call spread has soared by 11.4%. That is because implied volatilities on the options have completely crashed. This suggests that the last bottom in Apple shares at $392 is the final one.

I think there is a high probability that the final bottom is in for Apple shares. Sure, the Q2, 2013 revenue forecast was dire at only $33.5-35.5 billion, but everyone expected this. We will know for sure if the stock can break the 50-day moving average at $435. If it does, then it is off to the races once again, and $500 becomes a chip shot. That means flipping from selling rallies to buying dips, possibly for years. But it will take years to breach the old high of $706 once more.

Let me tell you how they could get there. What if the Federal Reserve normalizes interest rates and raises overnight rates from zero to 2%? Apple?s $145 billion cash mountain would throw off an extra $3 billion in interest income a year, boosting the company?s profits, and possibly its share price, by a third. Imagine that? Steve Jobs? ghost must be laughing!

Looks Like Steve Will Have the Last Laugh

Is This the Final Bottom for Apple?

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Apple has been one of the great conundrums of the investment industry this year, the stock falling through the floor of any standard valuation model. With the shares at $395 the stock is discounting a 12% drop in earnings per year for the next several years. Either something terrible is about to happen at Steve Jobs? creation, or it is the ?BUY? of the century. I believe it is the later.

This is a company that continues to earn $200 million per hour! It also has $150 billion in cash on the balance sheet, which works out to about $120 per share. Ex-cash, you are buying the operating company at a price earnings multiple of seven times, less than half the 15.5 multiple for the S&P 500, a level one normally associates with an imminent bankruptcy. Apple is essentially has a Google (GOOG) type income statement with a JC Penny (JCP) valuation.

The reasons for the 45% plunge in Apple shares are really quite simple. This is a company that is notorious for its lack of concern about shareholders and its general antipathy towards Wall Street. While other companies carefully manage earnings expectations to reliably beat forecasts by a penny, you never see this with Apple. The earnings are what they are, take it or leave it.

This attitude allows Apple to bunch together new product releases without regard for the impact on the share price. When they deliver a series of rapid, successful product launches, the stock soars. This happened last September after the introduction of the iPhone 5, new iPads, and a new iMac, taking the stock up to an all time high of $706.

Then you get nothing for nearly a year and the stock crashes by a third. To see what I mean, look at the long-term chart below, where we have seen four corrections like this over the past decade. The pullback is bigger this time because it started from Apple?s position as the largest company in the world when everyone owned it.

There also is a compelling technical argument here. At $360 you hit a support level on the longer-term charts that stretches back two years.

You won?t have to wait long to see if this Trade Alerts works. Apple earnings come out after the Tuesday close. My bet is that the stock rallies, no matter what they say, as there is already so much bad news in prices. And for good measure, I went out and bought another iPad last weekend.

Ready for Another Bite

Japanese Cash Tsunami Hits US

Diary, Newsletter

When Japanese central bank governor, Haruhiko Kuroda, announced the most aggressive monetary stimulus program in history last week, he no doubt expected Tokyo share prices to head for the moon. In that, he has succeeded admirably, the yen hedged Japanese equity ETF (DXJ) soaring by 13.4% in the five trading days since he lobbed his bombshell.

What the bespectacled bureaucrat did not anticipate was that his action would send American shares through the roof as well. Both the Dow average and the S&P 500 surged to new all time highs today, much of the move powered by new Japanese cash. Just when American traders were wringing their hands over the potential loss of quantitative easing, they instead were handed a second campaign of ultra monetary easing.

Until last week, the Fed was pumping $85 billion a month into the financial system. From this week, the Fed plus the BOJ monthly total doubles to $170 billion. I don?t have to draw pictures for you to explain what this means for stock prices.

Indeed, the BOJ?s fingerprints could be found daily on securities of almost every imaginable description. What they have been buying is size exchange traded funds of equities (ETF?s) and bonds of every maturity. Imagine the Fed coming in one morning, calling all the major brokers, and placing orders for a billion dollars each of the (SPX) and the (IWM). That is what?s happening in Japan now.

The problem is that domestic investors in Japan have been unloading positions they have been lugging for years to the central bank, and then reinvesting the cash into better quality, higher yielding US stocks. Notice how well the big cap dividend yielders have been trading, favorite targets of foreign investors. Notice, also, that technology appears to be staging a turnaround on the back of the international money, with recent pariah, Apple (AAPL) actually showing signs of life.

It?s easy to see why this is happening. If you were a Japanese investor, would you want to buy a low growth, low yielding stock in a depreciating currency? Or buy a share in a faster growing company with a much higher dividend an appreciating currency. I rest my case. God bless America!

Needless to say, beyond the sunset made a complete hash of my few remaining short positions in the S&P 500, which only had seven days left to run into expiration. Thank you, Mr. Market for my biggest loss of the year.

Fortunately, that hickey was more than generously offset by profits on shorts I harvested last week, in addition to remaining longs in Bank of America (BAC), Apple (AAPL), and hefty shorts in the yen. As of this writing, I am up a breathtaking 37% so far in 2013.

Where does this party end? Now that we have two QE?s, instead of just one, I think it is safe to say that risk assets everywhere are going much higher. How high is anyone?s guess. It also means that the ?RISK OFF? assets of gold (GLD), silver (SLV), and Treasury bonds (TLT) are headed lower. That?s why I added a long in the leverage short Treasury bond ETF (TBT) this week for the first time in years. The punch bowl just got topped up again, and I don?t have to be asked twice to refill my glass.

The Punch Bowl Has Just Been Refilled

Buy Every Black Swan

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At least that?s what Ben Bernanke thinks. He said as much in his press conference yesterday in the wake of the latest Fed statement. He might as well have waved a red Flag at a bull.

The central bank took the opportunity to downgrade its US growth forecasts going forward as a result of sequestration imposed government spending cuts. What is impressive is how minimal the impact will be, each year only pared back 0.1%. Armageddon, not! Here are the new GDP numbers:

2013? +2.55%
2014? +3.15%
2015? +3.30%

These are at the high end of most private sector predictions. Does Uncle Ben know something that he is not telling us? If the Fed is anywhere close to being right on these predictions, it justifies the meteoric rise in share prices we have seen so far this year. It also suggests we have more upside to go.

Let me throw out a theory here. Ben Bernanke is so fearful of repeating the Federal Reserve mistakes of 1938 that he is going to ere on the side of caution on the monetary easing front. That is when the government tightened too soon, triggering the second leg of the Great Depression and another 50% fall in the Dow average. He certainly is getting a free pass on the inflation front. When is the last time you heard of a worker getting a pay increase?

All of this paints an outlook for stocks that is pretty bullish. We could well continue on up for the rest of 2013, save for a 5%-10% correction in the summer. In the meantime, I added more longs to my model-trading portfolio this morning, using the Oracle (ORCL) inspired dip to tack on positions in United Continental Holdings (UAL) and Apple (AAPL).

By the way Ben, how much is a gallon of milk at the supermarket? Watch this space.

Something on Your Mind, Ben?

Has Apple Hit Bottom?

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No one has suffered more than I from my slavish devotion to Apple?s products, its performance, and, oops?. it?s stock. A long position in Steve Jobs? creation remains my only losing position of 2013 (remember the January $525-$575 call spread?).

Without the hit I took on that, my Trade Alert Service would be up 33.3% so far this year, instead of only 31%. By comparison, the average hedge fund is up a pitiful 4.5% in 2013. I can hear the pink slips flying already.

However, there seems to be a growing consensus that the long suffering stock is close to hitting bottom, and that we soon need to flip from selling rallies to buying dips. Word on the street is that some of the biggest value players are already starting to scale back in.

There is no doubt that the stock has gotten cheap, possibly becoming the least expensive issue in the entire market. Have you noticed how the number of analyst upgrades has suddenly started to keep pace with the downgrades?

The $137 billion the company carries in cash on its balance sheet is more than the entire market capitalization of rival Samsung. The market is currently putting the enterprise value of Apple at less than that of supermarket chain Safeway (SWY). What kind of crazy world is this?

As with all great trades gone awry, the reasons for Apple?s demise are screamingly obvious with the benefit of 20/20 hindsight. It was owned by just too many damn people! I should have seen the writing on the wall when my cleaning lady, Cecelia, asked me if she should buy more in the day Apple became the largest company in history.

Not only that, the stock has a long history of peaking around new product launches, as it did with the iPhone 5 in September. Compressing several product launches into a short period last fall led to a new product drought in the winter, which unjustly shined a spotlight on Samsung, and sent Apple?s shares tumbling. Blackberry?s (RIM) return from the grave was another contributing factor.

As I told my readers in my ?throw in the towel? piece in January, a different type of physics seems to apply to companies that exceed $500 billion in market capitalization. And even after being in the business for 45 years (50 years if you count the one share of IBM I bought with my paper route savings), I still make the same mistakes as a first year, wet behind the ears intern.

Using the product cycle argument again, now could be the time to buy. Apple will shortly begin gearing up for the late summer launch of its iPhone 5s. There will be other products on the way, as the company seeks to move down the value chain and exploit the market for prepaid, no contract phones, which accounts for about 70% of the global subscriber base. There is also Apple TV, which will probably deliver more hype than earnings, but will be good for the share price anyway.

Then there is the issue of what to do about that cash mountain. A partial return to shareholders could take the form of a higher dividend, a share buyback, or a surprise acquisition. Action on this could be imminent and could deliver an immediate 10% boost to the stock price.

Of course, timing is everything. Propitious may be the one year anniversary of the announcement of Apple?s first ever dividend, which is in the coming week. The last dip could come when the June guidance is doled out in April, which is expected to be horrible. That may give us our final flush. On the other hand, action on the cash surplus could be imminent cancelling out the final capitulation.

Here?s a real curve ball for you. What if a generalized market sell off in the late spring starts driving money into laggard Apple because it can?t go down any further. Could Apple become the new safety trade, the ?RISK OFF? trade? We shall see.

Is It Time to Buy Technology Stocks?

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Call it the shot heard round the world. David Einhorn?s lawsuit against tech goliath Apple (AAPL) has focused a giant spotlight on what has been one of the worst performing stock market sectors of 2013-- large old technology stocks. Could this be the set up for the biggest sector rotation of the year?

Most of the price action in this year can be divided into kinds: big cap banks and industrials, and what I call garbage. So the shares of Bank of America (BAC), JP Morgan (JPM), Caterpillar (CAT), Procter & Gamble (PG), and Exxon (XOM) have been going through the roof. Garbage stocks, best represented by Netflix (NFLX) have done even better, largely driven by the desperate short covering of big hedge funds.

The Einhorn suit resonated with many of the long suffering owners of Apple, which has seen the value of their holdings plunge 38% since the September $706 peak. His basic message is that the company?s many past near death experiences have fostered a depression mentality where there is no such thing as too much cash.

As a result, $130 billion sits in T bills and money market funds earning nothing, the largest such accumulation in history. Just this hoard, alone, would rank as America?s 19^th largest company by market capitalization.

Such conservatism in management is laudable. But Einhorn argues that it has been taken to such extremes at Apple that it has crossed the boundary into mismanagement and malfeasance. The activist shareholder wants the company to return money to shareholders in the form of high dividends and stock buybacks. Such action could trigger a rapid doubling in the value of the stock.

The litigation was enough to ignite a 10% in Apple stock last week. I think David is interested in far more than just this. Is this the final bottom for the beleaguered company? Is it time to buy? The NASDAQ Index certainly things so. Check out the chart below and you?ll see that the action in Apple enabled it to bust out of its recent torpor to the upside.

The really interesting possibility is that the rebirth of Apple could have major implications for the market as a whole. Survey the landscape these days, and you find shares that are either extremely overbought, or extremely oversold. If money shifts from the leaders to the laggards, it could give the indexes enough juice to take another, and possibly final leg upward.

I just thought you?d like to know.

Apple: More Than Just a Bounce?

The Debt Ceiling Crisis is Cancelled

Diary, Newsletter

I am sitting here in front of a crackling hot fire at my lakeshore estate in Nevada?s Incline Village. It is a brilliantly clear day, with mallard ducks skimming the surface of Lake Tahoe, and the Canadian geese flying in formation overhead. Snow covered Mount Tallac, some 30 miles to the South, looks so close I feel I can almost grab it and take out a bite.

I am on my way to Washington DC for the inauguration, and had the jet touch down in nearby Truckee for a day of reading and rest. My staff greeted me like I was some kind of conquering hero. One of the perks of working for me is that they get a free subscription to my newsletter, and they all invest their 401k?s, IRA,?s pensions, and profit sharing plans accordingly. When they?re doing well, I feel it. My performance shows in those little chocolate truffles that get placed on my pillow at night.

In fact, it has been the hottest start to a year for me in a long time. The model- trading portfolio is up 8% so far in 2013, which is more than half of what I made during all of last year. With the way my positions are currently structured, I stand to make an additional 50 basis points a day until the next options expiration on February 15. All the market has to do until then is to trade up, sideways, or down small,and I get to keep it all. Right now, that is looking like a pretty good bet.

I completely nailed everything. On day one, I went aggressively long the S&P 500 (SPY) and the Russell 2000 (IWM). I averaged up with more equity positions, a financial, American Insurance Group (AIG), and copper producer Freeport McMoRan (FCX) as a China play. Sensing that it was pedal to the metal for a falling yen (FXY), (YCS), I put a major chink of the portfolio into a short position there. In effect, I am long US equities in Japanese yen.

On top of that, I have a massively short volatility position embedded in all of this, not a bad thing to have when the Volatility Index (VIX) is plumbing new six year lows at the 12% handle. Since then, the data has been released showing that the biggest cash flows into equity mutual in a decade came hot on the heels of my Trade Alerts. Things only went awry with Apple (AAPL), which continued to weaken beyond all belief, as if to prove that I was only human.

It looks like my numbers are going to get a further boost this week from no less a fan than the Republican Party. Former vice presidential candidate, Paul Ryan, from Wisconsin, has indicated that the coming debt ceiling crisis, due on March 31, will be postponed for three months.

Having covered Washington politics for 40 years, I can tell you that he is speaking in code. For ?postponed?, read ?cancelled?. I think they figured out it was a lame idea anyway. Certainly, the markets came to the conclusion two months ago that all of these media constructed ?crises? were a bunch of baloney. That is why I have been pounding the table with readers to pile on the long positions, and ?go commando? on their short positions. Risk markets can only go ballistic in response to this ?aha? moment.

All of this encourages me to stick with the strategy outlined in my 2013 Annual Asset Class Review (click here). Look for a hot first quarter, to be followed by two scary ones, and then a strong finish. This means that all good things will be coming to an end in the not too distant future. In fact, we have probably already started some sort of topping process in the markets that will take a couple of months to unfold. Then look out below.

I just got a call from the airport that the flight plan has been filed, clearance obtained, and the jet is fueled up. Got to go.

Life is good.

Nice Long!

Nice Short!

Party Pooper!

Life is Good!

Raising My Apple Target to $1,600.

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Long-term readers of this letter are well aware of my pleadings with them a couple of years ago to buy Apple (AAPL) stock at $250 with a target of $1,000. Certainly, the 200 readers who work for Apple noticed. ?That was back when the main concern about the company was that Steve Jobs would die young.

In view of the upgrades present in the iPhone 5 announced today, I am going to have to raise my long term target for the shares to $1,600. ?And it could achieve that lofty price in as little as two years.

First, the specs: The new iPhone will be thinner, faster, and lighter, with a longer battery life. ?The new phone is a paper thin 7.6 mm thick and weighs 112 grams, 18% thinner and 20% lighter than the model 4s. ?The screen gains ? inch to 4 inches in able to accommodate a full HD format.? The new A6 processor is twice as fast as the old one. ?It offers full 4G LTE connectivity to handle wireless video. Talk time is extended to 8 hours, and 10 hours for web surfing. ?The camera jumps to a near professional 8 megapixels. ?In short, it is head-and-shoulders above any potential competitor.

You can preorder the phone from Friday. ?Some analysts see 50 million phones shipping in the next quarter and 170 million in all of 2013, generating 85% of the company?s total revenues. ?The order flow is expected to be so massive that economists think it could add as much as 0.3% to US Q4 GDP.

Apple is the ultimate value play. ?Looking at the forward financials, the stock is still astoundingly cheap, despite a 70% gain so far this year. ?It is selling at a bargain basement 11X 2013 earnings ex-cash. It has a dividend yield of 2%, no debt, and is growing at 15% a year.

By comparison, the S&P 500 is growing at 5% a year at best, offers a dividend yield of less than 2%, has debt of 35% of capital and sells at a 14X multiple. ?In other words, it is more expensive, slower growing, yielding less, with fewer assets backing the shares. ?Why anyone looks at other stocks than Apple is beyond me.

On top of this, Apple has a cash mountain of $120 billion which is growing at a prolific rate, and it has a fantastic lineup of new products in the pipeline. ?The recent Samsung patent win will do a lot to scare away potential competitors. ?The franchise value of the company is huge.

You can also throw in the longer term arguments for the company that I have made before. ?After being shunned for decades, Apple products are now in the process of going mainstream corporate. ?A future China deal will give it access to 600 million new subscribers there. ?Any other new products on top of the iPhone 5, like Apple TV, an iPad mini, or enhanced iPods, will just be cream on the cake.

The trick is how to buy the stock, as it has been all year. ?We seem to get one 20% dip a year, as we saw in April this year and October, 2011 ? usually around an earnings disappointment or a generalized market selloff. ?Use the next one of these to load the boat. ?This is the stock you sock away for your kids? college educations or your own retirement, as I have done.

Steve Jobs would be smiling.

Nice Job, Steve!

Here Comes the Next Peace Dividend.

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When communications between intelligence agencies suddenly spike, as has recently been the case, I sit up and take note. Hey, you don't think I talk to all of those generals because I like their snappy uniforms, do you?

The word is that the despotic, authoritarian regime in Syria is on the verge of collapse, and is unlikely to survive more than a few more months. The body count is mounting, and the only question now is whether Bashar al-Assad will flee to an undisclosed African country or get dragged out of a storm drain to take a bullet in his head a la Gaddafy. It couldn?t happen to a nicer guy.

The geopolitical implications for the U.S. are enormous.? With Syria gone, Iran will be the last rogue state hostile to the U.S. in the Middle East, and it is teetering. The next and final domino of the Arab spring falls squarely at the gates of Tehran.

Remember that the first real revolution in the region was the street uprising there in 2009. That revolt was successfully suppressed with an iron fist by fanatical and pitiless Revolutionary Guards. The true death toll will never be known, but is thought to be in the thousands. The antigovernment sentiments that provided the spark never went away and they continue to percolate just under the surface.

At the end of the day, the majority of the Persian population wants to join the tide of globalization. They want to buy IPods and blue jeans, communicate freely through their Facebook pages and Twitter accounts, and have the jobs to pay for it all. Since 1979, when the Shah was deposed, a succession of extremist, ultraconservative governments ruled by a religious minority, have failed to cater to these desires

When Syria collapses, the Iranian ?street? will figure out that if they spill enough of their own blood that regime change is possible and the revolution there will reignite. The Obama administration is now pulling out all the stops to accelerate the process. Secretary of State Hillary Clinton has stiffened her rhetoric and worked tirelessly behind the scenes to bring about the collapse of the Iranian economy.

The oil embargo she organized is steadily tightening the noose, with heating oil and gasoline becoming hard to obtain. Yes, Russia and China are doing what they can to slow the process, but conducting international trade through the back door is expensive, and prices are rocketing. The unemployment rate is 25%.? Iranian banks are about to get kicked out of the SWIFT international settlements system, which would be a deathblow to their trade.

Let?s see how docile these people remain when the air conditioning quits running this summer because of power shortages. Iran is a rotten piece of fruit ready to fall off its own accord and go splat. Hillary is doing everything she can to shake the tree. No military action of any kind is required on America?s part.

The geopolitical payoff of such an event for the U.S. would be almost incalculable. A successful revolution will almost certainly produce a secular, pro-Western regime whose first priority will be to rejoin the international community and use its oil wealth to rebuild an economy now in tatters.

Oil will lose its risk premium, now believed by the oil industry to be $30 a barrel. A looming supply could cause prices to drop to as low as $30 a barrel. This would amount to a gigantic $1.66 trillion tax cut for not just the U.S., but the entire global economy as well (87 million barrels a day X 365 days a year X $100 dollars a barrel X 50%). Almost all funding of terrorist organizations will immediately dry up. I might point out here that this has always been the oil industry?s worst nightmare.

At that point, the US will be without enemies, save for North Korea, and even the Hermit Kingdom could change with a new leader in place. A long Pax Americana will settle over the planet.

The implications for the financial markets will be enormous. The U.S. will reap a peace dividend as large, or larger, than the one we enjoyed after the fall of the Soviet Union in 1992. As you may recall, that black swan caused the Dow Average to soar from 2,000 to 10,000 in less than eight years, also partly fueled by the technology boom. A collapse in oil imports will cause the U.S. dollar to rocket.? An immediate halving of our defense spending to $400 billion or less and burgeoning new tax revenues would cause the budget deficit to collapse. With the U.S. government gone as a major new borrower, interest rates across the yield curve will fall further.

A peace dividend will also cause U.S. GDP growth to reaccelerate from 2% to 4%. Risk assets of every description will soar to multiples of their current levels, including stocks, junk bonds, commodities, precious metals, and food. The Dow will soar to 20,000, the Euro collapses to parity, gold rockets to $2,300 an ounce, silver flies to $100 an ounce, copper leaps to $6 a pound, and corn recovers $8 a bushel. The 60-year bull market in bonds ends.

Some 1 million of the armed forces will get dumped on the job market as our manpower requirements shrink to peacetime levels. But a strong economy should be able to soak these well-trained and motivated people right up. We will enter a new Golden Age, not just at home, but for civilization as a whole.

Wait, you ask, what if Iran develops an atomic bomb and holds the U.S. at bay? Don?t worry. There is no Iranian nuclear device. There is no real Iranian nuclear program. The entire concept is an invention of Israeli and American intelligence agencies as a means to put pressure on the regime. The head of the miniscule effort they have was assassinated by Israeli intelligence two weeks ago (a magnetic bomb, placed on a moving car, by a team on a motorcycle, nice!).

If Iran had anything substantial in the works, the Israeli planes would have taken off a long time ago. There is no plan to close the Straits of Hormuz, either. The training exercises in small rubber boats we have seen are done for CNN?s benefit, and comprise no credible threat.

I am a firm believer in the wisdom of markets, and that the marketplace becomes aware of major history changing events well before we mere individual mortals do. The Dow began a 25-year bull market the day after American forces defeated the Japanese in the Battle of Midway in May of 1942, even though the true outcome of that confrontation was kept top secret for years.

If the collapse of Iran was going to lead to a global multi-decade economic boom and the end of history, how would the stock markets behave now? They would rise virtually every day, led by the technology sector, offering no substantial pullbacks for latecomers to get in. That is exactly what they have been doing since mid-December. If you think I?m ?Mad?, just check out Apple?s chart below.

Tag Archive for: (AAPL)

Old Tech is Rising From the Dead

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Something on Your Mind, Ben?