Thoughts

I saw Nouriel Roubini on CNBC again, touting the same bearish stories that he says will tank the economy and hit the stock market. My take is that all of the bearish theses (tight bank credit, potential for higher taxes, continued housing malaise, strapped consumers, double-dip potential, etc., etc.) are already well known by investors, and thus they are well discounted by the market. It is the stories that come out of left field and surprise investors that usually take the market lower. Today's low P/E on the market is likely a reflection of the dour mood out there due to all of the bearish stories that seem rigorous. (They always sound that way.)

I think that the apathy toward Apple is symptomatic of this environment and the general apathy toward stocks.

One of my favorite stocks, still, is AAPL. I know this is already a favorite of many, but when I look at the number of funds that hold it, the number is still smaller than names such as CSCO and MSFT.

Fundamentally, the company's execution has been superb. Forget the "antenna-gate" issue, earnings growth has been stellar, as has profitability. Apple has a great streak going of topping estimates and seeing consistent upward revisions to earnings estimates. This is one of the important and overlooked factors that have kept the P/E multiple so low.

To that end, I am still surprised that a company that is this well-managed and that continues to innovate and come out with blockbuster products and that is growing at such a high rate for a large company is still trading at a P/E in the 14x range. I think that is symptomatic of this environment and the general apathy toward stocks. If this were a normal environment, I think this stock would be trading at 20x-25x forward earnings, and no one would be up in arms about its valuation. I would even argue that it might trade at 30x from time to time.

I think this holiday season is going to be huge for Apple. I consider myself a fairly normal consumer when it comes to tech products. I waited years before I bought my first iPod, and I still don't own a single Mac. I own an iPad. I am also growing more interested in the Apple TV product. So Apple's share in my household is growing, and I'm far from alone. Today, the company announced that it is easing restrictions for apps developers, which should help grow its already dominant applications store. This stuff is totally addictive, and in many ways replaces what people rely on their PCs for.

As for the stock, it often trades well in the fourth quarter, and currently, it has been consolidating for roughly six months and looks like it's ready to breakout to new highs again soon. Apple is my largest position, and I am very comfortable with that. The company will likely post EPS of $18 to $19 next year, which I think could get the stock as high as $375 or so over the next six to 18 months.

The Bank of England held its target interest rate at 0.5%.