Tuesday, August 28, 2012

Apple and Location Tracking: This Is Not 1984

I hesitate to accept as authentic this apparent email exchange between "One MacRumors reader" and Apple (AAPL) CEO Steve Jobs. The question comes off as just a bit too contrived (see the part about switching to a 'Droid). And the emailer offers such a tidy answer, in Jobs' "usual style," complete with the Sent from my iPhone signature line.

Source: MacRumors.com, 4/25/2011

I am not sure which is more of a potential setup, that email or a Netflix (NFLX) conference call. In any case, I agree with the sentiment supposedly expressed by Jobs. Because the people at Apple are hardly idiots, there's likely much more to the story. I am sure Apple will release a clarification when it's good and ready. Washington be damned! The government can wait. Apple has done more for the country than Congressmen like Al Franken and Barack Obama have.

If you are a citizen of most nations, you probably should have some concern about privacy. Before you get all riled up, however, consider the source and shoot for some context. Whatever Apple, or Google (GOOG) does, for that matter should be the least of your concerns. Remember, while capitalists, the guys that started these companies and run them today understand why it is in the public's best interest for them not to cooperate with the government. What's apparently going on with Apple does not resemble 1984.

It was terribly dangerous to let your thoughts wander when you were in any public place or within range of a telescreen. The smallest thing could give you away. A nervous tic, an unconscious look of anxiety, a habit of muttering to yourself—anything that carried with it the suggestion of abnormality, of having something to hide. In any case, to wear an improper expression on your face… was itself a punishable offense. There was even a word for it in Newspeak: facecrime…

-From George Orwell's 1984

I fully understand the trajectory of concern. I have marched in the streets of San Francisco to fight it. While I have tired of tipping over newspaper dispensers and trust the fuzz (or at least policemen as individuals) a bit more than I did back then, I still get it. The government tells Google it needs records to combat child pornography or "protect our national security" and this leads to encroachments on your non-perverted, non-terroristic self just because the government realizes it can encroach. It's about the slow erosion of our privacy and, in some cases, our civil liberties. It's about surveillance on the streets. And public space becoming increasingly private.

Apple has absolutely nothing to do with any of this. It never will. Assuming it does anything, Apple does nothing with your information that should concern you unless you are an overly-anxious grandparent flirting with dementia, incredibly paranoid, wholly misguided, or involved in some type of illegal activity. First, I think companies like Apple and Google have high standards, plus they could care less where you are outside of selling you something else you don't need. And don't forget, it's in their best interest to appear "cool" to a generation of hipsters who fashion themselves on being anti-everything, particularly government.

To top it all off, anything Apple or Google does to you, it probably does with your consent. You're not a victim. You're just part of an amazingly lazy society. Lazy because the terms of service and registration documents are way too long to spend fifteen minutes reading. And lazy because it's easier to moan about Apple's and Google's minutia than it is to actually do something, as a society, about the real threats to privacy we all face.

This whole story is little more than another piece of noise, even if the government ends up administering a slap on Apple's wrist. It should accompany the token fine with a tax break to thank Apple for producing products and an entire culture Americans can actually be proud of. We export little more than the ingenuity of about thirteen people who all live in Silicon Valley to the rest of the world. Without those cats, we're pretty much irrelevant. Put that in your next State of the Union, Barrack.

This non-story proves instructive to investors, though. We've been going back and forth about the manipulation of Apple for a while. It's even served as a reason for some to sell their shares. Here's an example of investors reacting to noise rationally. Apple's blowout earnings report has, thus far, overshadowed the concern over location tracking. Maybe it's an aberration, but this could also be a real sign of some sanity returning to the stock. It seemed that in the past, no matter how well America's Company's products were reportedly selling, just about any bit of negativity could take the shares down. Even after a solid earnings report, AAPL tended to retreat. That has not happened in the face of the most recent farce.

If you are long, you clearly have no reason to change your stance, other than taking some profits off of the table. I will continue to keep my options open and, possibly, swing trade APPL via options. If you watch the chart long enough, you'll see that you can play AAPL this way quite successfully, if you are patient and disciplined. In fact, I think it's a solid way to complement a down-sized long position.

Consider action in the stock, as of 12:30 p.m., on Monday. AAPL traded in a range of $350.30 to $353.24. I created a clean grid, showing AAPL option contracts, last trade, change, volume, and the days' highs and lows in my Schwab StreetSmart Edge platform. It's pretty clear how you could day or swing trade these options. Selling options presents a relatively safer strategy. As Seeking Alpha contributor Paul Zimbardo shows us, with consistency, you could make a profitable habit of selling AAPL calls using buy-writes. If you have no problem being "forced" to buy 100 shares of AAPL stock at the strike price you select, you could also sell weekly or monthly puts and pocket the rich premiums involved with doing so.

Disclosure: I am short NFLX via a long position in NFLX put options. I may initiate a long or short position in AAPL, possibly through options, at any time.

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