Apple's share price, market movers, and the latest market bubble

Two fragments that I like to consider together. One is an anonymous comment on an Irish Economy blog called out by Paul Krugman ...

What markets want ...

... The markets want money for cocaine and prostitutes. I am deadly serious.

Most people don’t realize that “the markets” are in reality 22-27 year old business school graduates, furiously concocting chaotic trading strategies on excel sheets and reporting to bosses perhaps 5 years senior to them. In addition, they generally possess the mentality and probably intelligence of junior cycle secondary school students. Without knowledge of these basic facts, nothing about the markets makes any sense—and with knowledge, everything does.

What the markets, bond and speculators, etc, want right now is for Ireland to give them a feel good feeling, nothing more. A single sharp, sweeping budget would do that; a four year budget plan will not. Remember that most of these guys won’t actually still be trading in four years. They’ll either have retired or will have been promoted to a position where they don’t care about Ireland anymore. Anyone that does will be a major speculator looking to short the country for massive profit.

In lieu of a proper budget, what the country can do—and what will work—is bribe senior ratings agencies owners and officials to give the country a better rating. Even a few millions spent on bumping up Ireland’s rating would save millions and possibly save the country.

Bread and circuses for the masses; cocaine and prostitutes for the markets. This can be looked on a unethical obviously, but since the entire system is unethical, unprincipled and chaotic anyway, why not just exploit that fact to do some good for the nation instead of bankrupting it in an effort to buy new BMWs for unmarried 25 year olds...

The second fragment comes from an analyst ...

asymco | Apple trading even with the S&P 500

if you had invested $100 in the S&P 500 in September 2005, you would have $103 now. If you invested $100 in Apple in September 2005, you would have $529 now....

... Although Apple received a premium valuation to the S&P prior to October 2008, it has traded at a discount or in-line with the S&P since then...

Another way of putting it is that the P/E ratio for large companies has returned to pre-recession levels. The P/E ratio for Apple has not...

However, in terms of reward for earnings ... For much of 2009 and early 2010, Apple was considered to have a far less promising future than the average large American company...

Asymco makes a persuasive case. Apple is valued as though it were a quite mediocre company.

Now consider this.

No publicly traded company in history is as studied and dissected as Apple. It is analyzed from a thousand directions. The "market", in the case of Apple, is not made up of "junior cycle secondary school students".

On the other hand, the share price of most companies, as best I can see, bear little resemblance to value delivered. I can believe those prices are largely determined by the hormones of young traders.

So perhaps it is misleading to say that Apple is undervalued compared to the average publicly traded company. It may be more enlightening to say that the average publicly traded company is now grossly overvalued. Apple is fairly priced.

Bubble.