I know it is heresy to short the Bank of Apple (AAPL) at 179-180 but that is exactly what I mused about on Monday morning. AAPL is now mauled by Mr. Market to 169.80 and my target to cover remains 158-160. AAPL is a cult headed by King Cook but no EPS growth, slowing services/software revenues and limit up hardware should not be trading at 26 times forward earnings, no matter how big the share buyback from free cash flow the size of the Milky Way.The bloodbath in chip stocks continues and does not portend bullish omens for the global business cycle. So the shorts on Micron (savaged 5% to 65) and ARM IPO are still potential money gushers. Semi/software is one of the most globalized niches of Big Tech and 8% rise in the US dollar index since mid-July is not exactly an augury of good tidings for businesses that generate 50-60% of their EPS outside the United States. Even though the index has now lost 7% from its mid-summer peak and the VIX is at 19, I see no reason why the Pavlovian, buy on dips mantra should magically stabilize the S&P 500 as long as UST-10 yield goes berserk at 4.61% and the bear steepener/inverted yield curve afflicts the debt markets.Apart from bond yields and the deflation big chill of King Dollar, China’s property crisis has triggered contagion in its shadow banking system. Germany’s economic model is broken and the industrial colossus of the EU is mired in a property slump/credit crunch while dozens of emerging market countries have sovereign debts that trade at default levels. I really do not see value in the S&P 500 at 18.4X forward earnings when 3Q earnings forecasts are on the eve of a downward revision by invariably uber optimistic sell side Street analysts. If this is a trick or treat market, I prefer my six month, risk free, 5.6% Treasury bill yield and strategic shorts.Milton Friedman won his Nobel Prize in economics because he demonstrated that monetary policy works with long and variable lags. It has now been 18 months since Powell began the most draconian monetary policy U-turn and interest rate shock since the Volcker Fed and the impact of monetary tightening has begun to hit Main Street/Joe Sixpack as credit card delinquencies and used car loan hits prove. Yet when President Biden and Trump both join the UAW picket line and fawn/appease the unions in their quest for the White House in ’24, all I can think about are the unions that destroyed Harold Wilson, Ted Heath and Big Jim (Brrrr) until the Iron Lady broke Arthur Scargill’s miners strike in 1984 and returned Excalibur to Xanadu. The 40% wage hikes that airline pilots and trucker unions won, do not exactly make me confident that the Powell Fed will meet its 2% dual mandate inflation target anytime soon. Au contraire, I will not be surprised to see core PCE surge above 5% as Brent crude goes ballistic at $95. This will force the American central bank into a new spasm of interest rate shock therapy. Jamie Dimon even predicted a 7% Fed funds rate. Ouch!
