(For What It’s Worth)
The other day I opined on a conversation I was having with a friend, and how that conversation came about. I also described in a follow up, although Amazon™ shares had fallen precipitously, I had also lost the gentleman’s bet for breakfast because, at that moment, technically, they were yet to go negative. Then, the following day, they did just that, where I now declared “Next time, it’s on you!”
All of it is pure harmless banter. Albeit, for those who currently hold Amazon shares, it’s no laughing matter.
However, the reason why I’m, once again, bringing all this up. Is for a follow-up I received later that day, where he asked a very important question pertaining directly to all this.
I believe it is worthy as to possibly help others that may have the same kind of “things just don’t seem to sit correctly with that answer…” as to finish up this discussion. For, it’s not like you’re going to get this type of summation from today’s media outlets.
So, with the above for context. Here it is in conversation form…
Him: “You know, you basically said the same thing regarding Apple™ a few months back, and their share prices rebounded to make new highs. Can’t this be a similar situation, and it’s just a pause before another new high to make up for all of it?”
Me: “It’s a fair point. However, what you’re failing to account for is the real impetus behind Apple’s share price going higher into earnings, which is (all my conjecture): Apple’s massive $90Billion share buy back program now being deployed at around $20Billion+ per Qrtr. Amazon does not have one.”
“What this means is, that not only is Apple supporting its own share price but, as it reduces outstanding shares through this process. i.e., Its EPS (earnings per share) metrics remain not only artificially elevated, but rather, poised for next Qrts ‘Blow out!’ comparisons. Amazon would be considered, today, ‘as good as it gets.'”
“Remember: Apple has had to increase its share buy back program nearly every Qrtr over the last year or two, for if not, the stock has been immediately pounded much like Amazon is currently. The only thing that’s propelled Apple’s share price higher (again, my conjecture) from its recent lows, back to the highs – is a massive $20Billon+ buy back during said Qrtr, and its continuation for the rest of year. If it didn’t? Apple shares would be looking more like Amazon’s than where they are, currently.”
“One more point: Apple’s buy back program has also been the main recipient of Fed largess and confidence to its own detriment that I feel will be consequential in the very near future. Here’s why…”
“Apple is having to pay top dollar for its shares. The more confidence there is in the Fed, combined with its buy back schedule, the longer shares stay elevated at its highs. What a lot of people seem to no longer take into account is, for all that Cook & Crew are spending in share buy backs – it has far under-performed the very index it is helping to drive higher. That should be a clear warning signal but, no one cares. i.e., It’s higher therefore ‘everything is awesome!'”
“Amazon’s current stock machinations should be scaring the crap out of everyone. It’s a clear warning signal that would have been all over the business/financial media pages a few years back. Today? No. One. Cares. Think of it as a peer-vs-peer version of what used to be called, ‘a non-confirmation indicator.’ When you have new all time highs being printed on a daily basis – and some of the ones that supposedly ‘got you there’ are no longer participating? It would be making news. Yet, again, today: No. One. Cares.”
“Maybe they’ll be proven correct, but that’s still one heck of a warning sign in my book, still.”
I’ve included below two charts that show what I’m addressing, for those that think I’m trying to do some form of CYA here. All I can say is: You be the judge, as it should be. To wit:
To finish up this exercise, I just want to reiterate something I have said from the very beginning regarding Mr. Cook’s use of Apple’s resources…
Today, it makes his tutelage for Apple after Jobs look spectacular. If there’s any serious “market” turmoil? It will be the very reason they’ll call for his replacement.
As always, we shall see.
© 2021 Mark St.Cyr
Note: This is not trading or investing advice of any sort. This commentary is for “big picture” discussion purposes only. Please read, or re-read the “About This Site” page for any questions or clarifications.