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Kass: The Bear Case for Apple (NASDAQ:AAPL)

This column originally appeared on Real Money Pro at 8:32 a.m. EDT on Sept. 24.
Pride goeth before a fall -- also publicity, handshakes and celebrity. The biblical injunction about the first and the last trading places often has literal truth. Thus, stocks and bonds, which fared poorly in the inflationary 1970s, excelled in the disinflationary 1980s. The country's most admired companies (as listed annually in the glossy business magazines ) are frequently on their way to becoming among the country's least admired investments. When a cynical investor hears that there are too many optimists in the market, he will begin to worry. By the same token, an over-abundance of pessimists will give him courage. After all, he may ask, if everyone is already bearish, who is left to sell?

-- James Grant, Minding Mister Market: Ten Years on Wall Street With Grant's Interest Rate Observer

Apple (NASDAQ:AAPL) has been a once-in-a-century profit dynamo that has prospered and has expanded its market share by delivering innovative products and expanding its self-sustaining ecosystem.

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Here is the remarkable chart of Apple's shares since 1985.

In the 1960s and 1970s, the stock market was inhabited by the "nifty fifty," a small subset of one-decision stocks that had strong balance sheets, solid franchises (typically leaders in their field), relatively superior profit prospects, and were generally credited with the bull market of that era. Some examples of the nifty fifty included Wal-Mart (NYSE:WMT), Avon Products (NYSE:AVP), Disney (NYSE:DIS), McDonald's (NYSE:MCD), Polaroid, and Xerox (NYSE:XRX). The stocks flourished for a while, but ultimately became overvalued and were weighed down by the bear market that continued until 1982.

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