Here is Why Apple Inc. (AAPL) Could Fall Below $425

In early November, the dire predictions of one Apple Inc. (NASDAQ:AAPL) bear were making their way around the blogosphere with frenetic haste. That bear’s name is Jeff Gundlach, CEO of Doubleline Capital, who projected the stock to flirt with $425 next year, when he spoke on CNBC’s Fast Money segment. On the subject, Gundlach stated that he believes Apple is an “an overbelieved stock,” and that “the product innovator [Steve Jobs], as I’ve said over and over again, isn’t there anymore.”

Apple Inc. (AAPL)

In a new Bloomberg story, we’ve learned that Gundlach’s bearish predictions extend to the entire financial system, as he believes that a “kaboom” is coming, and breaks down how we got here, and where we’re headed in three phases. In the first phase, Gundlach explains that a “27-year buildup of corporate, personal and sovereign debt” inflated itself prior to the most recent financial crisis, and we’re currently in the second phase: a period when the public sector attempts to tackle slowing growth with expansionary monetary policy.

Though Gundlach doesn’t give specifics, he says that his third phase will come in existence if “[d]eeply indebted countries and companies” default on their outstanding obligations. The key, though, is the effects that this could have on not just Apple Inc. (NASDAQ:AAPL), but the entire stock market as a whole. His consensus period is “sometime after 2013,” but even that’s not certain, as he specifically states:

“I don’t believe you’re going to get some sort of an early warning [...] You should be moving now.”

It should be said that Gundlach isn’t even pushing his own asset class – Doubleline is a fixed income investment manager – in fact, he’s recommending that investors get into hard assets like real estate, precious gems, and even fine art.

Even though he can’t predict exactly when the next crisis will occur, that doesn’t matter to Gundlach; his argument is why should you be in stocks right now? In the Bloomberg feature, he says that “[i]f phase three takes two years, it’s worth waiting for. The markets don’t have lots of opportunity now.” This is a feeling that many Apple Inc. (NASDAQ:AAPL) investors are likely feeling, as the stock has been essentially flat over the past six months.

Thus, when Gundlach issued his $425 price prediction on shares of AAPL, he didn’t mention that his pessimism extended to the stock market as a whole, which allows us to understand his Cupertino bearishness a bit more. With a beta of 1.21, it goes without saying that there are reasons to be out of Apple Inc. (NASDAQ:AAPL) if you believe a big “kaboom” is coming, and the chart shows this reasoning quite nicely.

Apple Inc. (AAPL)

Between June 2008 and 2009, the S&P lost close to 32% while shares of Apple Inc. (NASDAQ:AAPL) lost a little over 25% in value, so it’s clear that Gundlach’s reasoning is justified, as long as you support his original macro hypothesis. In fact, when we take a quarter off of Apple’s present stock price, we come close to his original $425 number. The real question, though, is: why should we take Gundlach’s warnings seriously?

Despite not always getting the recognition he deserves for his foresight, Gundlach was one of the few canaries in the coal mine, so to speak, regarding the subprime mortgage meltdown. Moreover, his DoubleLine Total Return Bond I (MUTF:DBLTX) is considered by most investors to be one of the best bond funds on the market today.

While some will write off his predictions as sensationalism, investors must remember many were calling his bluff in 2006 and 2007, and we see how that worked out for Gundlach’s detractors. What are your thoughts on Jeff Gundlach’s bearish predictions for the global economy? Is it easier to understand his general pessimism over Apple because of this? Let us know in the comments section below, and be sure to check out how hedge funds have traded the stock recently.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!