Over the last month, the S&P is off 2% and Apple (AAPL) is down 10%. Wall St. would think that in a bad market, AAPL would be one place to put money. The company has almost $14 billion in cash and short-term investments. Last quarter, AAPL has over $1 billion in operating income.

News about the company’s products has been good. Most analsyts feel that sales of Macs have been strong during the back-to-school season. Rumor is that the company will introduce a new line of iPods at its big September 5 developer meeting. And, AAPL ssems to be signing extremely profitable deals for the iPhone in Europe. These partnerships appear to give Apple a cut of the fees that the carriers charge customers for call volume.

What gives?

1. AAPL has become too expensive. The company has a forward PE of 29. and trades for almost 5x sales. Hewlett-Packard (HPQ) has a forward PE of 14 and trades at 1.2 times sales.

2. What can go wrong, will go wrong. AAPL has been so astonishingly successful that the law of averages says that even a well-managed company with outstanding products will run into some trouble. This increasing probability pushes up risk.

3. Is there another killer product? Expectations, high ones, are built into the assumptions for the Mac, iPode, and iPhone. AAPL does not have a new product, at least one that the market can see, the will drive a wave of earnings expectations two to three years out.

There’s nothing wrong with AAPL. Wall St. just expects too much.

Douglas A. McIntyre

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