I might humbly suggest that those journalists and reporters in both the traditional and financial media are largely missing the grander point on Apple the company and Apple the stock.  Running businesses is a lot more than seeing what ratios look like on financial numbers and saying whether something is undervalued, fairly valued or overvalued.

Fundamentally, and whether it is said this way or not, Apple has a monopoly position in digital music.  It’s easy, it’s fun, it’s cool and nobody I know anywhere has any desire to forklift upgrade their digital music, throw away their investment in purchases and ripping CDs in to iTunes or ever starting over again on another platform.  There may be an exception to every rule, but ever since Apple launched the iPod and “got it right” on MP3 players, nobody has even dreamed of challenging them in this area … not Dell with their media player, not Microsoft with Zune … no one.

As part of iTunes, Apple has made photos, videos, music, movies and now mobile applications simple, easy and bundled under one roof.  The anchor to this roof is most definitely music, and this anchor is something that no other smart phone manufacturer has anywhere.  Google and Android, Palm and Pre and Research in Motion and Blackberry just don’t have this natural anchor and draw to their application stores like Apple … so don’t expect them to be able to make the in-roads that people believe in the smart phone mobile application world.  Unfortunately there is just no other compelling reason to go to their mobile application stores as there is with Apple.  Sorry, but there just isn’t.

Ultimately, a pre-existing and trusted billing relationship exists with Apple’s consumers and the loyalty to the brand now goes way, way, way beyond the religious cult that it used to be.  As a result, Apple isn’t just winning the battle for mobile devices, but it’s also beginning to get people to shift from their Wintel PCs back to the Mac platform in meaningful numbers.  I expect that this trend will not only continue, but that it will also accelerate.  I’m not suggesting that Macs are suddenly going to be back on top in terms of market share, but I am saying that the “halo effect” of Apple’s mobile dominance is paying dividends on their Mac desktop and laptop numbers.  Plus, the next great battle of the larger PC war is going to be when the smart phones fundamentally become the PC of the future.

In parallel, Apple has a massively deep managerial bench of talent and it is my contention that most of the iPhone and iPod product and services designs and offerings were created during the period that Steve Jobs was completely out of the company.  My understanding from some detailed research and discussions with many inside Apple was that Jobs wasn’t even around day to day when the iPhone was created internally as his medical issues were already well underway … just not publicly known.  Steve Jobs might get credit for everything great at Apple, but the reality is a far, far different story and the number of fantastic individuals that are involved and responsible for the success of these mobile platforms at Apple goes way, way beyond any one person.

The fundamental aggregate talent in engineering, management and operational execution is what has driven Apple to greatness … not any one man … and not even Steve Jobs.  Apple didn’t miss a beat when he was out and won’t now that he’s back or if he’s out again.  The rich multiples Apple’s stock gets are a result of this dominance, not a cause of it.  The multiples will also look modest with the penetration of the world’s next large computing platform: the smart phone.  While Apple, Palm, Google and Research in Motion will alll have a market share, Apple owns 75% of all application downloads in the world and has an even larger dominance in music.  These market shares are like GOOG and search, MSFT and Windows, CSCO and routers/switches, EBAY and auctions.  Said another way … nobody can challenge this any time soon.

I will personally admit to having a great respect and admiration for Steve Jobs.  I think that he’s a great visionary and leader and wish him well with his health and most recent recovery.  I believe that he and Larry Ellison of Oracle should get much more credit for what they’ve done in the 2000s than Michael Dell at Dell, John Chambers at Cisco, Bill Gates at Microsoft and others of that decade as they grew their businesses in novel, unique and meaningful new ways after the decade of “a rising tide lifting all boats” was over and the penetration rates of PCs, cell phones and the Internet (broadband connections) rose from virtually nothing to more than 100%.  Said another way, from no market to a mature market … all in a single decade.  That penetration rate is about to be replicated again in the coming decade, but this time with the migration from cell phones to smart phones instead of the migration from circuit switching to packet switching from a decade ago.  Steve Jobs will remain an icon and a brilliant visionary.  However, with or without him Apple is strong, deep and well positioned to dominate as the monopoly that it is … even if most people don’t realize it just yet.  As a result, I like LEAP call options and/or core common stock holdings for Apple as it is clearly already a winner and will continue to be one through 2020 very, very easily.

Happy New Year everyone!  Glad that 2008 is *over* and hope to see 2009 to bring a lot more enjoyment and happiness than we experienced in the last 3 months of last year.  Other than the holiday break, it was all pretty much YUK out there!  At least I think that’s the official word for it.

In any event, with the new year comes some brand new challenges.  The macroeconomic and market backdrops remain ugly, and the underlying data and earnings continue to look bleak, but the changing of the guard in Washington D.C. is now less than 2 weeks away.  While the Santa Claus rally failed to materialize and the largely anticipated Obama pre-inaguration rally is looking “iffy”, it has been good to see that 30 year fixed interest rates have continued to drop towards 5% and may ultimately end up getting “forced” down by the new administration to 4.5% with or without points. 

As a result, we are beginning to see massive amounts of applications being submitted for residential refinancings.  At first blush, this would seem to be great for putting a floor under domestic housing and stabilizing the amount of late and delinquent mortgages out there that ultimately end up leading to more foreclosures.  Unfortunately, however, someone appears to have missed the e-mail and it’s not so obvious right now that the new low rates and huge surge of refinancing applications are going to have the desired effect that most people were expecting. 

Why?  Well, for some strange (and stupid) reason, many people attempting to refinance their option ARMs or higher fixed interest rate mortgage loans are getting turned away because they are somehow “not qualified” to pull off the refinancings.  Huh?  So let me get this straight.  Someone who has never missed a mortgage payment and is sitting in a 30 year mortgage at a fixed 6.5% interest rate cannot refinance to a new 30 year mortgage at a much lower fixed interest rate … say 5%?  Huh?  What? 

Well it appears that all of those same banks that took the TARP money over the past few months to the tune of $350 billion and also previously created the “ninja” liar loans in the first place to create this mess are now trying to deny many homeowners their right to refinance by saying that they “no longer qualify”.  Apparently they’ve finally decided to “enforce the integrity of the full doc loan process”.  For giggles, let’s take an example of someone currently paying (and successfully continuing to pay) $2,000 per month on their existing 30 year home mortgage.  Let’s say that with the new lower 5% interest rate on their 30 year fixed mortgage that they now would be paying just $1,800 per month to keep the math simple.

Well, in this “brave new world” we find that the same person currently qualified and successfully paying $2,000 per month on their exisitng mortgage is now *not* qualified to pay $1,800 per month on their new mortgage … even though that would cost them $200 per month *less* than they are already paying without incident.  Can you believe that?  CRAZY stupid is what that is!  It’s about as rational and logical as the good old Internet bubble days when Wall Street told retail investors that they could not participate in the next great technology IPO because they were neither accredited nor sophisticated and that they had to reserve their most “risky investments” for the institutional investors that could afford to stomach the losses should they occur.  But, we all know how that game worked now don’t we?

In the good old days, that was Wall Street code for “we’re going to enrich ourselves, those we want favors from and our institutional friends that will feed us more business and fees to pad our wallets and bonus checks from the post opening IPO *pop* that we all know is about to happen”.  What it also meant to the individual retail investor (the “bag holder” as we like to call them) was that they could not invest in that $20 per share technology IPO because of the “risk” … but that they were *welcome* to invest in the after market after the stock opened at $100 per share because clearly there must have been a *lot* less risk for the individual investor at 5 times the IPO price at $100 per share than an 80% discount at the $20 per share pricing.  Yeah, OK, right.  I get it.

So here we sit.  The country has a grand opportunity to let the little guy and girl out there … the common person … the American homeowner … get a do-over on their option ARM sins of the past, or simply a better fixed rate deal on the 30 year mortgage that they already have, and are SUCCESSFULLY paying every month WITHOUT INCIDENT … *but* we refuse to do it because they now “don’t qualify” for the refinancing.  Great, just great (and please insert sarcasm here).

I sure hope that someone wakes up to this, and wakes up soon, so the next $350 billion of TARP money doesn’t just get handed out again to all of those fine banks out there that are happily taking the money … and then doing nothing at all with it to lend out to businesses or consumers alike.  Oh yeah, the other bank party line right now is that loan applications are down right now in other traditional loan areas outside of mortgages because they “just aren’t getting enough applications submitted”.  Yeah, sure.  And what have we been smoking today Mr. “Too Big Too Fail” Bank CEO Man (insert Bud Light Real Men of Genius music here for effect)?

Hell, at least a few bank CEOs opted out of their bonuses “after careful thought and much deliberation”.  Nice way to kick off the year now isn’t it!?!?  More to come and be on the look out for my 2009 predictions … coming soon … or at least before this time next year.  Seriously! 

Just a quick reminder to everyone out there to make sure that you are taking full advantage of the new record low mortgage interest rates to refinance yourselves in to new 30 year fixed interest rate mortgages.  While the rates will be changing daily, the Fed has stated that they intend to keep rates at 0% - 0.25% on the Fed fund rates for quite some time to come.  As a result, this should bode well for providing a long enough window for everyone to take action and take advantage of recent developments.  The net-net is that you can now probably find rates as low as 4.5% fixed for 30 years with 1 point in fees or 4.875% fixed for 30 years with no points or fees. 

Clearly these new low rates will not solve many of the potential foreclosure issues that still exist out there, but these new rates will definitely provide a great backdrop for both new home purchases and refinancings alike.  On top of that, the new wave of coming refinancings will absolutely help consumers keep more money in their pockets each month and will also allow virtually anyone out there that made a BIG mistake in the past to get a major league *do-over*.  Just remember … DON’T buy any more teaser rate option ARMs with 1, 3, 5 or 7 year interest rate mortgage resets!

For most people I know that they will take advantage of this situation all on their own.  However, *please* make sure that you let your friends, family and neighbors know about this as well.  We all know of way too many stories where parents, grandparents or others have simply sat on the sidelines and done nothing in these types of situations.  Now is not that time and everyone needs to take advantage of this situation to cleanse themselves of their past real estate sins (and vow to never do it again if you yourself are GUILTY) … and make sure to help out those that tend not to know better themselves.

P.S. Home Equity Lines of Credit (HELOCs) are also now resetting alongside the Fed funds rate cuts to as little as 3.x% and *lower*.  Nice!

Another day and another vast expansion of the bubble in US Treasuries.  The TLT, or iShares Lehman 20+ Year Treaury Bond ETF, has broken $120 per share and the yield on 30 Year Treasuries has dropped to a tiny 2.64%.  Look at this chart!  

When you see such hyperbolic (or vertical) moves in a stock or ETF, you pretty much know that it’s only a matter of time before the laws of gravity kick in.  It may not be next week, next month or next quarter, but it is very, very likely that when the Treasury bubble pops, it will be swift, severe and extreme and as the prices plummet, the paltry yield will spike straight up.  I also think that it’s a matter of when and not if and because I don’t know exactly when this is likely to occur, I play it by buying LEAP puts on the TLT for no earlier than 2010 expiration dates.

More ominously, China today announced that lending to the United States will not go on forever and we had better take advantage of this brief time allowed to clean up our house.  Separate from the link provided for the article, the quotes that jumped out at me the most were:

“China’s increased purchase of US Treasury securities should not be interpreted as an endorsement of the assumption that the US can borrow its way out of the current financial crisis.”  

“Given the global economic crisis , the consequences would be serious if China and other nations stopped channelling money into the US economy.”

“The current strong foreign appetite should not be taken by the US government as solid proof of the long-term value of its Treasury bonds.  Instead, it [the United States] should race against time to undertake painful but critical reforms to revive its economy before such demand peaks any time soon.”

All I can say is uh oh.

Meanwhile, the US dollar continues to fall and gold continues to rise.  UDN is the bearish play on the dollar and DGP is the bullish play on gold.  With the Fed cutting rates to effectively 0% and $8 trillion in new money being printed, there is very little choice but for the US dollar to fall against other currencies and gold and other commodities to rise in parallel.