15 Sep 98
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For those of you who are having Apple Recon withdrawl, there's another place where you can "Get Some" if the public releases on Apple Recon are not as often as you like. The RFI Report debuts today on MacWEEK.com and is going to be a weekly feature. Yes, Robert Morgan has become a Contributing Editor for MacWEEK.com.
Here is the Update where we intimated to RFI's subscribers that it was in the making:
RFI has intimated of certain developments if which we're not currently free to speak about, but we can state that we're flattered over some of the offers that have been coming in the past several months. And, one or more might become publicly known sooner rather than later.
It's very hard for us to keep secrets from those whom we consider friends, but we gave our Word of Honor. Well, Robert Morgan gave his word so that bound us all.
And because of RFI's structure and nature, any honors we may receive have been achieved by you as well. Remember, you're always our first priority.
With that said, read the excerpted copy below. If and when you see it again you'll probably learn one of the secrets we've had to keep, even from you:
[Begin Excerpt]
I might as well lead off with several bangs. RFI has learned that "Person(s) Unknown" are either planning on, or are already, accumulating Adobe (ADBE.O) and/or Apple (AAPL.O) stock. And it's not because they feel that the stocks are undervalued and are good investments in a Bear Market or less than stellar Tech market.
RFI has also stumbled upon rumors and rumblings of an offshore investment fund whose purported goal is to totally shake-up or transform the Tech Sector and/or Internet. Yes, we've got the details locked down but it's not even ready for RFI, let alone this column. Maybe the cabal will recruit us in an effort to maintain secrecy.
Suffice it to say that it's so "insane" that it qualifies for the "Truth is Sometimes Stranger Than Fiction" category. It's like something straight out of a LeCarrČ novel. Or, maybe we should call it "Milkenesque." As I said, we've got the details locked down but we're still digging.
And whether the first is related to the second, we don't know. It's probably different groups with different agendas, but we're trying to find out.
There's also been speculation that Apple is taking this "Two Track" idea very seriously. So seriously that it might even split into Pro and Consumer companies with Mr. Jobs overseeing it all. But it's just speculation and definitely not "official."
As an end to the first digest, I might as well address Apple's 4Q earnings, since the report is only a month away. Right after the 3Q earnings RFI pegged the 4Q estimates in the 66-72¢ Fully Diluted EPS range. Currently, we wouldn't be surprised if they came in at 70¢ fully diluted. But, we're also expecting to be "pleasantly surprised" in October.
Bottom Line?:
So, "did I do good?" Since it was "My First Time," I felt it to be special enough that I mentioned more than I should have. And unlike the Starr Report, the juicy and salacious details will remain under seal in RFI.
As always -- Working.....
[End Excerpt]
If we weren't bound by Word of Honor, we'd lay it all out. Not just that which is to come sooner rather than later, but all of it. There will be no changes in RFI, or our modus operandi, as we're not going to "Mess With the Brand" as it's too important to us.
And, as people told us several years ago: "Since you can write your own ticket, only do what you want to...." There was more, but as we're writing our tickets we're making sure that no harm comes to you. When it's all said and done, we do RFI because we love to do it, not because we have to. Simple as that. It's the answer we always give and always will.
Working....
Did you miss Apple Recon? Well, a lot of content has been backing up in the channel as the markets have been more than a mite crazy. The last Update to Apple Recon was just before the feces hit the air circulation unit and just after RFI's Indicator issued the first Bear Market Signal.
As some have been complaining about the lack of updates on Apple Recon, we decided to post an Update that we're aware of the concerns but there's no a heck of a lot we can do about it. And, we've been telling those who were "complaining" that they really didn't want to know what RFI had been saying in its Updates of late.
Thankfully, as we hoped, AAPL.O is so far holding the 28 - 32 support range in this uncertain market environment. It looked touch and go for a while on Monday but it held. RFI expected AAPL to "get a pop" today or Wednesday because of the Seybold announcements.
Furthermore, since 14 Aug 98 RFI has been in "Full Don't Rock the Boat" mode as far as our public statements go. Why? Because of the market environment. Not because of anything "bad" pertaining to Apple but the exact opposite.
The good news is that we'll be addressing the update issue as soon as we can reallocate resources from the fast market conditions. Remember, RFI's subscribers are interested in a lot more than just AAPL.O. When we have market conditions shaping up as they were, we had to address them.
Since some portions of the RFI "Bear Market Signal" Special Report have already been publicly discussed, we'll give you that to chew on:
In the initial Update for 05 Aug 98 RFI related that the Indicator issued an initial Bear Market Signal; one that could be negated as it was in July 96. To be candid, RFI does not believe that this signal will be negated for several reasons. Even if Abby Joseph Cohen says that the correction has bottomed and we're heading higher from here. There are a lot of reasons why even a rally attempt to the Old Highs, or New Highs, will probably end in a nasty reversal. Especially since the Indicator issued a 10% Median Rally Signal on Friday 07 Aug 98.
A lot of the technicians were looking for a doubling of put buying Tuesday 04 Aug 98, as well as higher premiums for puts versus calls but that did not occur. In other words, the options buyers weren't rushing out to buy puts yesterday but were actually buying calls as well as being willing to pay higher premiums for calls versus puts. That is a "Bearish Sign."
Secondly, "The Volume Wasn't There." While the volume was "heavy" for a summer Tuesday, or a summer day for that matter, the volume wasn't there. Yes, the volume on the NYSE and NASDAQ spiked and came close to 1 billion but it did not hit the 1 billion mark. The volume number that most Traders were looking for to see that the selling was over. We still don't have it, so saying that "it's all over" is probably very premature.
Third. "Lack of Bears." The people who were Bullish are still basically Bullish, with a few noted exceptions. In other words, the Investment Advisors haven't had a measurable increase in the number of Bears or a measurable decrease in the number of Bulls who turn into Bears or "Rabbits." Rabbits are defined as those people who are neither Bull nor Bear and are caught like frightened rabbits stuck out in the middle of a field as a ravenous hawk flies overhead. Too frightened to run for cover and too frightened to "fight." Therefore freezing right where they are in the hopes that the danger will pass and they will go unnoticed.
Four. "The Windshield Wiper Effect." RFI is still uncertain whether The Street and the financial media will allow those "Darlings" to engage "The Windshield Wiper Effect;" in other words, ignoring / forgetting their previous pronouncements regarding the markets and then making totally contradictory statements from the prior comments. If the "limited hazing" Ralph Acampora received over his "flip flop" is any indication, it looks like The Street and the financial media is going to allow them to get away with it with limited accountability. It will get worse if that 10% Median Rally Signal is fulfilled and they flip flop again.
Five. Birinyi. Laszlo Birinyi; one of the few financial managers that Robert Morgan personally recommends to people; is still Bullish on the markets for several reasons. But, his case is mainly based on the fact that a lot of the Indicators that technicians and others use are "outdated" and shouldn't be trusted. To that statement, RFI replies that our Indicator and analysis has been fairly "on target" as far as the market moves go. And even still, with a "clear signal" from the Indicator RFI is still not prepared to pronounce the beginning of a Bear Market. The July 96 signal negation memory is still fresh. The probability is "extremely high" that we are in a Bear Market and have been in the initial stages since the RFI Weekly Update in June that discussed this. But, as long as Birinyi isn't a "Bear," the question is still open to debate. And yes, we do put a lot of credence into what Mr. Birinyi says.
Six. "Arthur." He's "the other guy" whom we personally recommend as a money manager for family and friends. Yesterday Arthur was very busy on the phones and was jokingly telling people that he was busy buying funeral companies, casket makers, etc. because there are going to be a lot of people jumping out windows so those companies earnings will get a boost. Arthur has been cautious on the markets and those people who didn't listen to him when he told them to sell some things and "tweak" their portfolios were calling him to cry over their losses. Others were calling to thank him for getting them out of harm's way before this all started. Arthur doesn't really agree with Birinyi, as he points to what happened in Japan and believes that what happened there will happen here. "Stocks go down and bubbles eventually burst" is his belief. His goal is to make sure his clients don't get burned either on the upside or the down. So, five and six have two different views, but both are right in their own way.
Seven. "The Rally." Even as RFI signaled the "10% Median Rally" that took the markets to those "July Highs" we knew that the rally would probably be extremely narrow as each of the rallies were getting ever more narrow. That's on the record as far as what RFI had been saying in the Updates and Reports. But, we said we'd take what we could get and hopped on. We also hopped off "just in time." We knew that it was something that would probably experience a sudden reversal and it did. It wasn't "A Broad Based Quality Rally" but it was a rally to profit fom nevertheless. The quality of that rally wasn't mentioned by most as they were hoping that it would broaden out into the general markets. It didn't. That the Indicator issued another 10% Median Rally signal on Friday 07 Aug 98 means that we're of the same opinion as the previous rally signal and hop on yet again. But, take a gander at what the "broader markets" and "average investor" were experiencing during that rally. Yes, we're talking about....
Eight. Mutual Funds and the Mutual Fund Index. This is the "trickiest" of them all. RFI made a strategic call in our "Mutual Fund Net Zero" Special Report in 1996 for very clear reasons. And, we still stand behind those reasons. It's insane to be exposed to investment instruments that are basically "derivatives" as well as anything that you can't sell at market prices but have to rely on "settlement" prices. Anyone looking to "sell" mutual fund shares had to "sell the low." In a Bear Market, that could get pretty expensive as far as losses go. And, mutual fund managers, and investors, can't react quickly because of their sheer size and structure.
RFI had been mentioning the Mutual Fund Index and also mentioned the fact that some fund managers were getting that glazed look in their eyes as they watched what was happening to the Mutual Fund Index. There were some on The Street that also had that dazed look in their eyes as the watched what was happening even as the markets were hitting New Highs. The "Average Investor" wasn't seeing those returns in their mutual funds and portfolios. They were thinking: "What's wrong with my stocks and funds? How come they're not rallying too?" You've got your answer. Not only were the broader markets taking hits, but had been for some time. The Mutual Fund index "peaked" on 20 Jul 98 and then headed south with a vengeance. But, that doesn't tell the entire tale. The Mutual Fund Index peaked because of the Index and Bond funds. The average fund was underperforming.
On Tuesday, Fidelity publicly admitted that it experienced "net outflows" from equity funds through redemptions and/or switching, but they called it "negligible." Problem is, spread that across the entire Mutual Fund Complex (whose cash reserves are at extrmeley low levels) and it could become problematic. Yes, they have "loan agreements" to cover redemptions, etc., in case of a market rout but those loans eventually have to be repaid. And given the fact that most of the loan agreements are "short term," they have to be paid back sooner rather than later. And they have to be repaid from the cash coming in which means they either have to "not buy" (buying strikes) more stocks to repay those loans, or they have to sell stocks to raise the cash to repay the principal and interest. You see what impacts that could have on the markets.
The problem with all of this is how many weeks ago did RFI mention the forces that were building in the Mutual Fund Index? The warnings? Mentioning the Mutual Fund Index as an "imperfect" leading indicator?
The signs were all there but no one really bothered to pay much attention to all of the warning signs. They still aren't. They are hoping that things will reverse and the masses that are exposed to the markets via mutual funds won't "react" by stampeding to "safer" places. If Fidelity, the juggernaut of the Mutual Fund Complex, is reporting "net outflows" from equity funds, then if the markets head lower those outflows will probably increase. Spread that across the entire complex and what happens? That why there are a lot of "Bond Bulls" even though it means creating a bubble in the Bond market that will pop. There already is a bubble in the Bond market, but that would only make it worse.
With the Mutual Fund Index well below its 200 Day Moving Average, and even with the change to its momentum pattern, it's still an imperfect leading indicator as far as the general markets are concerned. But, it's also a damn good indicator of what the average mutual fund investor is experiencing. Balanced, International and Income funds took the smallest hits but they are all below 6% returns for 1998. The Mutual Fund Index is only up 4.7% since 01 Jan 98. It won't take much more for the "Average Mutual Fund Investor" to see their 1998 gains evaporate and go negative. Technology is up 17.3% but those numbers are mainly due to the fact that neither Intel or Microsoft have taken hits like the rest of the markets. Things are "ugly" out there in the eyes of Mutual Fund shareholders. But, we warned people. We truly did. We tried and tried.
Given this "performance" in the Mutual Fund Index, a lot more people are looking at it and groaning. They see what's going on and are wondering when "enough is enough" for the masses who are seeing "net losses" in their funds for 1998. The "buy and hold for the long term" isn't going to wash with them as they've been led to believe that mutual funds beat bank accounts. And, there's a lot of misconceptions out there in the general public. Remember what RFI was saying about people believing that their funds and portfolios were "insured" so they weren't worried about market downturns? Yes folks, a lot of the public believes that. Still think "mutual funds" are a "great idea?" We don't. And we haven't for a while. And if Barron's is saying they've "peaked" then it's time for people to reassess their exposure to them. But, things can always turn around, right? The thing is, do you want to bet on it? It is your money after all.
Nine. "Goosing the Markets." On Tuesday there were several attempts to "goose the markets" by futures buying, but the effects were only temporary. RFI is accusing no one but those attempts at "goosing" smelled more like trying to induce an "orderly retreat" rather than letting a rout take place. Failing to reverse the tide, they only hoped to decelerate the decline. FWIW, whoever "they" were threw in the towel between 1520 -1525 EDT. God Bless whoever tried to step up to the plate on Tuesday. We wish we had their money to throw away. Maybe it was "our money" if it was "The Plunge Protection Team" at work.
Which brings up the question "why?" The answer is simple. Call it intervention attempts as well as trying to prevent those percentage collars from being triggered. Like with any intervention attempt, the "goosing" was bound to fail if the markets are bound and determined to head lower. Just as the Bears tried to hammer the markets down on "Turnaround Tuesday" in October '97 with failure against the "intervention," the Bulls trying to prop the markets up were on a fools errand if they were trying to buck momentum. "Fight the Tape" at your own peril.
They were "scared witless" over the prospects of those new percentage collars getting triggered. That's why. They still are. They know full well that if the 10% collar was triggered the public would "go apeshit" once trading was resumed. Then, once trading was resumed the 20% collar would most likely get triggered as the "Sell Everything" options/buttons would get hit. Followed soon thereafter the 30% collar getting triggered. That's "why."
Remember, back when those percentage collars were adopted; which RFI supported; RFI stated that there was never a limit that was instituted that wasn't tested sooner or later. Whether to the upside or the downside. Guess what? We're still of that opinion. It doesn't matter, really, which direction in which they're tested. They will be tested all the same. Currently, the probabilities are to the downside as far as the testing goes.
Ten. Microsoft and Intel. Until and unless both Microsoft and Intel take a severe beating, the "correction" really isn't over. Both of those stocks; and we're discounting the Internet and other "tulip bulb" stocks; need to "get whacked and whacked good" before we'd be comfortable saying that the bottom had been reached. RFI knows that this is "heresy" as far as most are concerned but it needs to occur. Both of these stocks are "Safe Havens" for the majority of investors and mutual funds as no one really expects them to tank as they are the two engines that are driving the technology sector and the economy. They are also about 10% of the capitalization of the NASDAQ. Both of these stocks have to take their medicine before RFI would even feel comfortable in saying that it's over. That they haven't is more telling than anything.
Why are we saying this? Wouldn't it only cause further damage to the markets and accelerate the declines and the severity. Yes, it would. However, it's a necessity. If people become convinced that both of these stocks are "the only safe havens" they will totally distort the markets and continue the complacency. Not to mention the effects that it would have on those companies. Currently, both stocks are overvalued and unless the technology sector turns around then they are accidents waiting to happen. So, until they take their licking like the rest then RFI isn't comfortable is stating that it's over. That they probably won't take their licking is problematic as it will only delay the inevitable.
Eleven. "Dear Abby" Joseph Cohen. RFI mentioned Ms. Cohen's statements that she believes the bottom is here and that the markets will head higher from here, but Ms. Cohen was not available for comment yesterday. The leaks of her statements to the Goldman sales force this morning were more to calm the markets than anything else. And, they might allay a lot of fears and pessimism. But, RFI points to all of the above, not just to disagree with her statements in a contrary way but to make the case that she might be wrong this time. Besides Alan Greenspan, she has the most influence on the markets. If "Dear Abby" says so, then it must be so. And, a lot of people follow whatever she says. Is 1250 on the S&P 500 still "doable" in '98? Yes. Could we then see a sudden reversal that would take out the 98 lows? Yes. But, RFI suspects that any run towards 1250 would end terribly. On Friday it did signal such an occurrence but it hasn't negated those Bear Market Signals either. So, we'll seize the opportunity.
Twelve. President Clinton's "Difficulties."
RFI has commented a lot on this, but the "biggest live mike comments" that we heard of late were both on CNBC. One had to do with President Clinton and the other did not. The one pertaining to President Clinton is more telling than anything as it happened on Rivera Live Monday evening.
The Monday episode was the "first" that he was able to "address the dress" and he tried to explain why he doubted the existence of the dress, the stain, etc. As he went to a break he didn't realize that the camera and mike hadn't been cut off and that it was still "Rivera Live." In other words, the audience could still hear what he was saying as well as seeing his expression. You could have missed it unless you were paying attention. Mr. Rivera looked down in disgust and uttered an exasperated "Damn It!" For he knew that a lot of the premises behind his contrarian stance vis-a-vis L'Affaire Lewinsky were evaporating right before his very eyes. His "salvation" would be that the dress stain yielded negative results. As of Tuesday afternoon, the test had been completed by the FBI and the results are being closely guarded.
That RFI mentions this is because this will remain in the background and ready to explode at any time. It's a real danger to the markets as it is something that could cause susbstantial declines on any "bad news" regarding this issue. And, we also gather that those who were taking issue with RFI over its "Bill's Zip Drive" and "L'Affaire Lewinsky" coverage aren't so critical anymore. Go back and read what RFI stated on this back when it all first broke. The financial markets were placed in extreme danger because of his irresponsible behavior. And boy did we get some backlash over that in January.
Twelve. Both "Dear Abby" and RFI are probably right. When the first part of this report was written, RFI stated that there was the potential that the markets would rally in a "Bear Market Rally" and attempt to reach the Old Highs or nominal "New Highs" before reversing and taking out the lows. On Friday the Indicator issued a 10% Median Rally Signal from inside the Bear Market Signal Pattern. While this does not negate the Bear Market Signals that were issued by the Indicator, it appears that the markets will have a "Bear Market Rally" to New Highs before reversing. In other words, Dear Abby will get her "S&P 1250 +/- and DJI 9300+/-;" while RFI will probably then "get" the reversal in the markets. In other words, the exact scenario that RFI laid out in June and again in late July and early August. Yes folks, as long as the erratics cooperate we're going to see the markets probably rally to New Highs. That is, if the erratics (Monica/Whitewater, China, Japan, etc.) cooperate. If they don't the markets will reverse before hitting those targets.
So, this is going to make the markets an extremely difficult place to play with any certainty and one can make the argument, as Ed Yardeni has, that the markets will rally to a New High and then get set up for a "Crash" in the fall. And, one can also make the case that the Bear Market Signals have been negated, but that case depends on what happens with the Indicator from here. The next signal generated by the Indicator will probably tell us what will occur next.
When is this rally probably going to kick off? As soon as Monday 10 Aug 98. When will it end? As long as the erratics cooperate, it will end when it comes within spitting distance of the 10% Median value. Theoretically, that's: SPX 1210, DJI 9460, NASDAQ 2030 (all numbers approximate).
The kicker is that this rally signal could be negated if any of the erratics do not cooperate. And, President Clinton's 17 Aug 98 testimony is the background noise looming large. So is Japan and China. China is "near panic" as far as its economy is concerned and the debate is no longer "if" but "when" they will devalue the yuan. Japan might "crater" if China devalues. And the U.S. ecomony might skid to a halt if China devalues. So, there's no "lock" on this "rally." We'll have to watch the Indicator as well as those erratics.
The Indicator issued two Bear Market Signals. First in the pattern and then with a clear signal. Then, it issued a "Clear Signal" for a 10% Median Rally that is slated to kick off almost immediately. Ergo, while those prior signals have not been negated, the rally is still set to go and could eventually negate those signals. But, RFI does not suspect that the Indicator will negate them. We'll have to see.
This could be the best of times for some and the worst of times for others. We're going to do our best that you're amongst those having the best of times. There have been Bear Market Signals issued. And, there's also a "New Highs" signal. RFI suspects that this 10% Median Rally Signal inside the Bear Market pattern will end with a nasty reversal as it will make people even more complacent than they have been. But, it'll also be an opportunity for those poor souls who have been getting "Creamed" to get out while they can; as long as they take advantage of the opportunity and not be lulled into further complacency. Remember, "Profits aren't profits until they are cash in your account.." And that goes especially for mutual fund shareholders.
"Dear Abby" will have been proven "right." RFI will have been proven "right." It's those poor souls (like Acampora) who will be whipsawed like a loose boom on a sailboat caught in a hurricane. The storm clouds are gathering. We'll see whether it's just a squall or a full fledged hurricane. The Indicator should let us know.
The 10% Median Rally Signal that RFI mentioned in the Special Report was not negated but subsequent events kept the rally rockets from igniting.
As we said, the majority of you don't want to know what RFI has been saying in private these past few weeks. You really don't. And, RFI suggested to its subscribers (on 14 Aug 98; the last time we updated the Apple Recon site) that they should hedge the longs / calls with SPX put options. So, they were positioned before the markets broke to take advantage of both sides of the equation. On balance, it worked well.
Now you see why you probably don't want to know what RFI has been saying? Or what we've been saying about other things of late?
Working.....
This is going to be "quick and dirty" because we want to get it out.
There's a possibility that Mr. Jobs will discuss iMac as a "brand" in his CNBC interview slated for 1600EDT today, 14 Aug 98. And, that might mean a significant move as far as Apple's "Consumer Strategy" goes. What it might entail remains to be seen, but making "iMac" a "Brand" of Apple signifies the "two-track" approach the "Pro" and "Consumer" strategies Apple is taking. And, that also leaves open other things that are part of "The Promised Land." Some of which we will be able to elaborate upon once the "Down Time" is over. Already, there appears to be "cracks" in the walls surrounding it. You see, there are others "commenting" on certain developments. Maybe we're reading too much into their musings, but we think not.
The thing is, RFI suspects that those "cracks" won't widen and start spilling "secrets" until such time that the iMac Launch is well behind us and the "Q1 '99 Boxes" are fast approaching. But, even then, those are all "Exodus" boxes and not "The Promised Land."
Note: RFI does not expect AAPL to break out above 45 prior to options expiry. And, it is highly likely that it will close options expiry week between two strikes. The most likely are the 40 - 42 1/2 range. But, stranger things have happened.
Working.....
Well, it's just 2 days away from the much anticipated iMac launch. So, what better time than to release some things on Apple Recon. Not the things that we dare not utter in public, just some things that should be of interest to all.
So, with that said, here goes!
First, we'll tempt you with some "snippets from the RFI Apple Recon Weekly Update.
Next, we'll intrigue you with some more more iMacworld.com Recon.
Lastly, we'll leave you to wonder what in the heck it was that we left out!
Enjoy!
With the Apple's Release of the Macworld Co-Marketing Offers, as well as Macworld's Release of Special Developer Offers, RFI gathers we don't have to duck and cover anymore over some previous items we published in RFI. Whew! Just in time for the iMac launch!
Enjoy!
No, we weren't on vacation or testifying before Congress. The markets have been a mite crazy of late and we've got to concentrate on that. Not to mention the fact that we've been getting tons of Recon coming in and are trying to make sense of it all.
So, we've decided to "break a little news" and send some folks "ballistic" in certain places. Something new for something blue. Something borrowed just for you!
Well, we hope the folks at iMacworld aren't too flustered about this all. C'est la guerre. I also hear that iMacworld are going to have a swank iMac Mobile at an extravaganza on 15 Aug 98. And no, it's not an Isetta. Close but no banana.
Working....
RFI has decided to release the RFI Post MWNY Expo Special Report so you can see for yourselves why we might have had different views than others about the "success" of MWNY. And, as a clarification, when RFI stated that there was nothing for "The Creative World," we were referring to the hardware at the show, not the content of the seminars, conferences, etc.
And, you will also be able to read RFI's take on the issues that Mr. Jobs brought up in his keynote; especially in light of the most recent developments facing the entire Tech Sector.
Enjoy.
The HKNUG Online site reports the sighting of an Apple PDA running what appears to be Mac OS with some surprising features. If these reports are true then it appears that the long ago reported "Apple Network Remotes" have surfaced in testing in Hong Kong. Well, now we've got something to do between earnings and the iMac launch rather than reading and hearing all things iMac.
We weren't going to mention this publicly at all, just keep it under cover in RFI, but it's something to look into. And yes, this is "time delayed."
Working.....
Well, now we know that Apple's PR Department is going to have an interesting day with this talk of Apple Merger Talks. All to promote a new site. Here's what RFI sent to its subscribers this morning as part of a supplemental update:
Before you get all frenzied over that item that's on PR Newswire, and that we "missed" the alleged merger talks (ahem!) take a deep breath and relax.
As for the "Merger Talks Begin" item, it's a Public Relations piece for some new web site that is owned by a marketing firm, and we also "Smell" the "Corporate Development Firm" aroma there. We're talking they're heavily covering BBOTC stocks and most of them aren't even known names. In other words, they used it to get hits. The release didn't specifically state that Apple had entered merger talks, and if you read that release they were VERY careful about what they said. But, it worked. They probably got a heck of a lot of hits on their site.
As a test, we registered for their site using a throwaway e-mail address to see whether we get inundated with "spam" as well as postal junk mail. For what it's worth, after the registration was completed we were given "access" to a site that was promoting an AMEX sporting goods company.
The "Apple Connection" and "Merger Talks" was carefully worded and it did not intimate that Apple had entered merger talks. In fact, the site and the press release stated that "as soon as merger talk details become known..." In other words, there are no details as far as merger talk concerning Apple is concerned.
It's interesting that a lot of people hit the Buy Button before taking a step back and a deep breath. If they waited 5 minutes to check the press release and the site out, they would have seen that the entire press release and heading was targeted at getting people to visit their site as well as read the information on the company that they are currently promoting.
C'est la guerre.
Working....
Some have decided to join in the "pile on" of: Echo 4, Pelagius, RFI and Apple Recon because "it was and is the herd thing to do." Never mind the facts or results. Those are too troublesome to "the herd and hordes," as well as those who are egging them on.
Since RFI reiterated its Trading Buy of AAPL at 16 - 16 1/2 people have made at least 100% on their money. Those who went long AAPL at 19 are close to 100%. Those who went long the 20 - 25 calls in the Jul - Oct strikes before the "Columbus" story broke into the news made at least 300%, with the average being 600% and some making 1,000%. All in a few short months on just the AAPL plays. The last time RFI checked: One, Two, Three, Six and Ten "Bagger" plays were not something to sniff at or criticize. And even those who went long on the calls with RFI's "AAPL FLASH!" made "some money." If that play alone paid for the RFI subscription, you're ahead of the game. And, we're not hearing many complaints from RFI subscribers on that.
The funny thing is that we're not hearing many complaints from RFI subscribers at all. Quite the contrary. The AAPL plays alone are "Beating the S&P 500" handily and the S&P 500 plays (YTD) are making some returns "obscene." Exactly what RFI has been doing since Echo 4 was asked to start RFI rather than just giving private briefings. And it's returns like that which have caused repeated attempts for Echo 4 to start a hedge fund, etc. Don't hold your breath waiting for that to happen.
No, the sniping comes from those, as always, who are ignorant of RFI's "batting average," from those who either resent "the elitist" nature of the time delayed public recon releases; or who have another agenda altogether. Never mind the fact that some are just plain resentful about capitalism and the markets in general. Tough. RFI offers no apologies.
Yahoo! AAPL! Mainline Mac! Pile on "The Decadent Capitalist Pigs & Their Followers!" Sorry to disappoint them but they're on the wrong side. And we also hate to disappoint them over the fact that RFI has never considered you: drones, lemmings, a herd, etc. To us, you're sentient adults who can make their own decisions, even if they disagree with ours. But, it just goes to show their ignorance regarding both us and you.
What amuses us most about all of this "piling on" by so many is that it embodies the herd/mob mentality that they say they don't follow. It also belies their ignorance. Others have baser motives but that's another issue for another time. Overall we liken it to two types: Those Who Know and Those Who Don't. Those Who Know laugh at the critics. Those Who Don't can be swayed.
Let them attack. Attack all they want. They'll only howl all the more if RFI and Apple Recon pulls the plug on the public site except for "promo pieces" of extremely dated recon. Disappearing behind a gate and wall that they can't see over or even hear the muted sounds emanating from within. They'll scream bloody blue murder because even with that "Time Delayed Recon" they are still able to get positioned before the rest of the markets do. And that means money to them.
Already, since 17 Jul 98, we've been getting plaintive requests regarding the "public areas" and whether the information available will "degrade" now that the Restricted Areas are up.
Let them snipe all they want. RFI has a 90%+ renewal rate and Echo 4's "world" is not Apple Recon centric. And people don't renew if they're not making money. The public portion of Apple Recon could disappear tomorrow without bothering either us or you. We'll keep doing what we're doing and only the snipers and others will be impacted.
Enough said.
Working....
The link to the Wolpert & Adobe item should work as the file is there and has been for some time. Why there were "Broken Links" we don't know. Our apologies. Maybe it's.....
Never mind.
Working...
Well, we've been busy beavers in trying to run some information down and get it out. So, while everyone is busy with those tasks, we're going to give you some things to mull over. And, it looks like Mac The Knife heard the rumors about Adobe and GoLive! Does that shark miss anything? Guess not. It's amazing. Most people "hot on the trail" of whatever piece of information they seek, usually find themselves coming across some stray pilot fish that were separated from their host as it flashes through the waters of Macdom. C'est la guerre.
So, Apple's Earnings and the Wolpert, Adobe, et al news will have to suffice for the moment. The Report from MWNY will have to wait a spell, but it is interesting. Especially in light of the fact that our perception of the "Success" of MWNY is about 180 degrees from those who were complaining about it. Especially those who have been yammering about it in comparison to Boston '97. It's like comparing the launch of Win98 to Win95. But, that's in the report.
And remember, it's less than a month before the iMac comes to a reseller near you. Get ready for a late summer and fall of iMac saturation. Replete with ads , promo materials, coupons and everything else. Even "Joe Chardonnay" will be bombarded with all things iMac.
Working....
You will notice that the links to the RFI Updates, RFI Apple Recon Updates and Special Report Links are now available but are password protected. We have finally been able to get things going.
And, we might have a pleasant surprise in store for all of you next week. Depends on how things go. However, we will be placing updates on our analysis of the earnings, etc.
And RFI would like to offer congratulations to two people who "Came the Closest" in the Quarterly Guessing Game for Apple's earnings. Both MacWEEK's MTK (55¢ operational earnings) and Eric Yang of MacEvolution ($80-100MM Earnings) "Beat the Street" (and RFI!) and deserve a round of applause.
See? We give credit where credit is due.
Working....
The Indicator moved to an area where the markets are at a pivot point. Yes, the markets could leap higher still but they can also whipsaw. And after yesterday's market activity people were asking if we headed to the sidelines too soon. Don't worry, we were asking that same question. Yet, the risk / reward ratio was tipping into the territory where the risk was outweighing the potential reward. And, we still have "Turnaround Tuesday," after "Gray Monday," fresh in our minds. That's something that tipped the scales in favor of heading towards the sidelines. There might be another 30+ S&P 500 points to gain, even after yesterday's close, but at what risk? Intel, as we previously reported did not pre-announce their earnings shortfall and came in 2 cents under those much lowered consensus estimates after the markets closed. And if the analysts hadn't started spinning the reports as soon as it was released the markets would be getting slaughtered today. Remember what happened in July 95?
We're sitting on the sidelines and watching the show. Better to be flat with profits in the cash account instead of taking some hefty risks as to which way the markets will break as expiry approaches.
As far as AAPL.O is concerned, RFI is as frustrated as those other analysts, traders and market makers who listened to the "decrease expectations" information that was being bandied about. And, if the Market Makers, traders and others know what's good for them they will have those series above 35 opened today. We'll elaborate further below. Last night was a very late night around here.
Intel (INTC.O) missed the lowered and downward revised consensus estimates by 2¢ and as soon as the report was issued there were analysts spinning the numbers and disappointing earnings even before the conference call had started. Excuse us while we degrade into "I Told You So" mode. Intel was not even able to clear the lowered estimates for the reporting period and Intel forecast that the current quarter's earnings would be flat to slightly lower than the earnings reported yesterday after the close. Yet, Intel held out the glimmer of hope to the Semi Bulls and Hope Scenarists by stating that they expected CY 4Q revenues to be up.
The "culprit" for the shortfall? No, it's not Apple. Intel cited declining PC sales and demand as well as the stiff competition from the sub $1K PC market which not only nailed their sales and margins but is also impacting its sales in the high end chips. As RFI stated, Intel is suffering from the "Good Enough" Syndrome. Surprise! What RFI opined about AMP is finally being proven. AMD and Cyrix chips are "Good Enough" for a lot of people who are looking at cost versus "The Latest and Greatest."
As for Intel's forecast that CY 4Q would improve, upon what are they basing this on? Win 98 Upgrades? NT5? End of year purchases? Apple truly starts getting its "Revenge" as "Good Enough" starts to impact Intel. And, "Good Enough" might also "whack" Microsoft as people aren't rushing to upgrade to Win98. Win95 is "Good Enough."
And, you can see why RFI said we'd start buying Intel and Microsoft when the company and insiders start buying. If Intel rallies today we're tempted to tell people to wait for the top to near and sell everything they own. Not that we will but we'd be tempted to. Intel should decline today, as well as the General Tech Sector. If it doesn't then you know that the insanity continues.
The 66 - 72¢ EPS earnings might or might not be true, but something is definitely brewing at Apple after the markets close on Wednesday. RFI is expecting an announcement, possibly major, from Apple after the markets close. And we're not just talking the earnings report. And even if Apple's 3Q Earnings don't "Beat The Street (By a Factor of Two)" there will be other news; almost guaranteed. And Apple will have a hell of a lot of: Analysts, Market Makers, Traders and others madder than a wet hen.
Why? Real simple. For the past several weeks Apple has made a concerted effort to decrease expectations regarding their earnings. Apple was doing so even as late as MWNY; which is why some were saying that Mr. Jobs' earnings mention was possibly "a warning" over the earnings. Some were saying: "Don't expect us to beat consensus. Look for flat or slightly lower earnings than Q2.." It was the mantra that Mr. Anderson started at the last conference call. And it hadn't changed.
So, the: analysts, market makers and traders took Apple at its word and they didn't bother opening options series above 35 as they didn't think that AAPL would break above 35 prior to July expiry. And, a lot of analysts didn't bother to up their estimates so they wouldn't look too bad if Apple "Blew The Street Away." The Market Makers and Traders did not "hedge" above 35 because they saw no need. So, they're at a lot of risk exposure if they had been trying to maintain an "orderly market" in AAPL. Today and tomorrow might be "Market Maker and Trader Hell" if this shapes up like RFI suspects.
All of them dismissed the whispers of "Much Better Than Expected Earnings" as balderdash, RFI included. Yes, AAPL might "Beat The Street" but not by a huge amount. That's why RFI is still sticking within its "Comfort Range" of 38 - 42¢ EPS (diluted), and we're on the higher end of the scale.
If the "Beat The Street Times Two" reports are "True," then a lot of the: Market Makers, Traders, Options Writers, etc. are going to "get burned bad" by AAPL. Not a good thing. Good for those who are long but bad for those who took the guidance as Gospel. Some might get "creamed." There was no way for them to "hedge" their positions and limit their risks.
If RFI totally discounts the "last minute whispers" as false, RFI still has to take into consideration Apple's purported plans vis-a-vis the "after earnings activities" that are "unusual" to say the least. RFI doesn't know whether Mr. Jobs will be on the conference call, but something is allegedly cooking in Cupertino for Wednesday evening.
If these reports are "true," a lot of people put their necks in the guillotine for AAPL in the belief that they could "trust" Apple not to pull the cord and trigger the blade. And if the blade comes down on them after the markets close on Wednesday, a lot of them might curse Apple with: "A Pox on both your houses." Hitting them in the pocket book is personal to them.
Thank God RFI got enough notice to pull our heads out of the guillotine and were also able to give you fair warning.
It's not a "lock" until the earnings announcement and any other "news" is reported. So, we're holding our fire. Problem is, not everyone is as "forgiving" as RFI. We put our neck in a guillotine for Monday and Tuesday. Having it allegedly tripped after the markets closed on Tuesday is something we didn't appreciate. But we're not "hacked."
If the "Surprises" (plural) pan out after the markets close then watch the reactions in the markets and amongst the analysts. Outwardly they will be congratulatory. Privately, RFI suspects that the language used wouldn't be for mixed or polite company.
FWIW, we're going to "break this" on Apple Recon after 1200 EDT 15 Jul 98.
Working.....
More after 1200 EDT.....
The MWNY Expo Special Report is completed. It should be available on 15 Jul 98.
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Well, we're back from MWNY and working on the Post Macworld Expo Special Report for RFI's subscribers. We also updated the contact information for Echo 4 and RFI in the Subscription Information as it has been pointed out that there were some problems in reaching us. Mea culpa.
Once RFI finishes the Post Macworld Expo Special Report, we'll post information that will be of interest to all on Apple Recon. And contrary to what a lot of others have been saying, RFI considered MWNY a "Success" and any comparison to Macworld Expo Boston '97 is totally off base. Sorry, it's true. Boston '97 was unique in many aspects and comparing MWNY to Boston '96 or '95 is more appropriate.
As far as AAPL.O is concerned, it will have a difficult time breaking above 35 in the near term and the answer is in the Options. There are no series, save the 40 Jan 99 LEAPS, above 35. The Market Makers and Traders need to hedge their positions to mitigate their risk and exposure. Without those options above 35 they can't. It's as simple as that. So, every time AAPL tries to break out above 35, or even near it, people hit the bid to take it back. But try and tell the "experts" that.
It was this same factor that limited the upside move in AAPL when the "Columbus" story broke. There were no series above 30 and AAPL had a hard time breaking that resistance until the new options series were opened.
Furthermore, some of the earnings estimates ( 80 - 110MM+) are totally out of whack as well as the "Fair Market Value Estimations" for AAPL in the 50 - 100 range; depending on whom you talk to. These numbers border on the insane.
Yesterday, a friend (it doesn't matter who) asked Robert Morgan to go to the Yahoo! Boards to try and talk some sense to some of those fueling the speculative fires lest they get too far ahead of themselves and wind up getting run over. He didn't think it would work but agreed to try. It didn't. About all it did was generate attacks and questioning of his motives. C'est la guerre.
And while we're on earnings, etc., there are whispers (albeit muted) that AAPL might come in flat or a little under the 2Q earnings, but RFI is holding to its "Comfortable Range" of 38 - 42¢ (diluted) EPS. And while we hope to be surprised by Mac The Knife's rumored 55¢ EPS we'll be content with the consensus in the 33 - 34¢ range.
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RFI is releasing an edited version of its RFI Update Week of 6 Jul 98 as a "giftie" in honor of MWNY. Enjoy!
And, by the by, Disney (Online) does have a major presence at MWNY. Not to mention the fact that "The Apple might show up on the mouse." What do we mean? Ah! Another mystery!
Oops! Almost forgot. Nice rally in AAPL today, no? Especially on "slightly less than average daily volume?" Must have been MacWEEK's MTK's item on Apple's earnings! Good Guns MTK!
Some are having technical difficulties "reading" the Special Report file as it is a stuffed Adobe Acrobat file. Our apologies for those having difficulties reading the report but the Adobe Acrobat is the most portable version. Yes, we could make it HTML, but....
On related fronts, some people can thank that close confidant of ours who stated that it's more important to be on the right side of things than being proven right. So, there's not going to be a full scale launch as it would only cloud the more important issues. So, we'll let the EE Times item stand as those who know Mr. Lewis' reputation is all they needed as corroboration. Never mind the News.com story that also cited credible evidence. But, with the "MS Media Player," that "Different Strokes for Different Folks from Those Other Folks," makes it all moot. "Good Enough Set Top Boxes" will become the standard. It's as simple as that.
And, these past seven or so days distracted us from being all aglow over Apple's and Macworld's great build up to MWNY as the pre-marketing (Oops! Nasty term!) has been wonderful. Too bad we couldn't comment on the seamless campaign with all manner of things that made it a great build up effort.
C'est la guerre. We'll move on. Besides the items pertaining to the iMac, et al, we're also prereleasing items on AAPL.O before MWNY - "The Creative World" as well as other juicy content. And, contrary to our Friday "Warning Shot," a lot of the items are "Good News!" Amazing!
Enjoy!
While "Reason" won out over "Right," some people can thank a "Close Confidant" for that, RFI is still going to release the AMP Special Report as the first part of the "Independence Day" content. That should suffice for more than enough reading for the rest of the weekend, as well as while we prepare the rest.
And, contrary to some rumors circulating, no we're not trying to "ruin" Macworld Expo or make Apple / AAPL.O go into the tank. But, those who..... Forget it. It's not worth it.
In fact, just ick back and relax while you read the AMP Special Report. Enjoy. More's to follow. It might just not be as fast as you want......
A friend sent us this picture with the speculation that it was the "inspiration" behind the design of the iMac. The similarities are chilling.....
Coincidence? Accident? By Design? The Truth is Out There....
©1997,
1998 Echo 4 Communications / Recon For Investors. All Rights Reserved.
