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Why earnings contractions are coming for Apple in 2013

This is another of my ten surprises for 2013. Apple is down 50 points today, well below its shoulder line on a topping head and shoulders pattern. The stock is breaking down. But there is a lot more pain to come. I have been increasingly negative on Apple since March of last year. While I warned you in March about margin compression, I made no mention then of stock price impact because Apple had enough momentum to ride out a miss or two. Now that Apple has begun to miss and the stock has cratered, earnings declines and larger share price declines are what we should expect in 2013.

Usually I don’t get into specific stocks, but Apple is such a bellwether and so widely owned, I have made an exception here. Let me walk you through the timetable since March because it gives you a history of how we have come here.

First, the thesis in March 2012 was margin compression generally in 2012, with Apple a prominent example:

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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.