Both Sides Of The Market Fears On Apple, H-P & Tech (AAPL, HPQ, DELL, RIMM, PALM, CSCO)

In the latest market malaise, note this isn’t really a crash yet even if it feels like one, Apple (NASDAQ:AAPL) has seen shares slide in a short period of 13 trading days fall from an intraday high of $148.92 down to under $114.00.  That’s roughly 23%. So what gives?  We covered the 30.00+ VIX yesterday looking like an Omen or an inflection point.

The mortgage game tapped out some time ago for Joe Public using the house as an ATM.  The credit market has shut off the low-end completely, and it seems the high-end has to be able to commit enough funds and collateral to not really need the loan in the first place.  So what does this mean for Apple and Joe Public and Mac-lovers?  If we are entering a beer and hamburger economy, then Apple will feel it.  The public will doubtfully go without many of the creature comforts, but that doesn’t mean that the masses will continue to splurge on the ultra-ultra high-end.  And what about Cramer’s "New Four Horsemen of Tech" stock picks?

Will iPods continue to sell?  Yes, but maybe newer buyers will settle for the lower end models or even the Shuffle or Nano.  Will iPhones sell?  This is tough, particularly since the street showed mixed reactions to the sell-throughs.  So maybe the iPhone will be a goal for 2008 and consumers will opt in for the highly subsidized Blackberry phones R-I-M (NASDAQ:RIMM) or Palm (NASDAQ:PALM) discount to wireless carriers.  Will Macs sell?  Well, the Mac mini runs $599 without any screens, Macbooks start at $1099.00, and iMacs started as $1199.00.  Dell (NASDAQ:DELL) and Hewlett-Packard (NYSE:HPQ) are feeling selling pressure too, but Dell’s desktops start under $500.00 and H-P’s desktops also start under $500.00.  Their above low-end notebooks both can be nabbed for just under $700.00 and the basic lower-end items can be nabbed for roughly $500.00.  Apple TV starts at $299.00 and goes up to $399.00 and the company has already admitted that this is still almost a hobby or niche for the time being.

Does this mean that everyone is going to bail on the mighty Apple?  In short, hell no.  Apple is a game changer and has been leading the industry trends.  But many who are in a pinch will be priced out if we are going into a beer and hamburger economy and they may have to settle for the less-premium brands.  This credit crunch is closing out more than we can cover in one short story.  At $114.00+ we are seeing the earnings multiplepremium coming to something more in-line with the market just in case.  Apple  doesn’t need to trade at the same multiple as the general stock market, but at more than double there was plenty of air if you get investors that want to lock in gains that have huge winning positions.

We have H-P’s earnings after the close, and that is going to dictate more than anything we can tell you.  This is both sides of the coin.  Just three weeks ago we were reviewing what would have to unfold for Apple shares to hit $200.00.  That’s how fast sentiment changes.  Maybe the mere mention of this today will mark the other side of the inflection point.  Does it matter that Steve Jobs took some Apple share profits?  It shouldn’t, it’s chump change to him.

My partner just covered the "What Works" in the beer and hamburger economy.  There is also a consolidated list of the stocks that may at least be better insulated if the entire climate goes defensive.  If you see the selling in those 21 old picks of "Cramer’s Wild Bull Economy" today, you’ll see how the global growth trade stocks are being burst as well.

H-P (HPQ) is down today at $44.50, down from a recent high of $49.84.
R-I-M (RIMM) at $191.00-ish is down from recent highs of over $235.00.
Palm (PALM) at $13.90 has been a bad year anyway and they are potentially one of the victims of a leveraged financing package that may be at risk.
Cisco Systems (CSCO) shares are back under $30.00, and that is after that unbelievable strong conference call John Chambers just gave us.

H-P is expected to have a great past quarter, but all eyes and ears are going to be on how well Mark Hurd telegraphs the coming months.  If he says things aren’t as bad as the market is pricing in and the PC-upgrade cycle lives, then technology will probably be back to being a haven for investors again.  The flipside of that is obvious.

We’ll be watching the money center banks closely, because if those financials don’t totally break down then the wheels might not be coming off as fast or as easily as some may fear.

Jon C. Ogg
August 16, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.