Streetwise for Sunday, April 1, 2018
Sometime back a marquee outside of a local restaurant caught my attention. It said, “Be careful about following the masses for sometimes the letter m is silent.” Those words succinctly describe the recent trading activity on Wall Street. In fact, they describe what happens every time the market swoons.
We recently saw share prices rise sharply during the day only to end in negative territory…just one day after the Street saw its best daily gain in 2-1/2 years as trade war fears eased.
So, let me ask a question. Each time the Street vents its frustration, sending share prices into a temporary tailspin, should you react, or is this simply ludicrousness on the part of investors?
Let’s look at the issue from a more macro perspective. Whenever there is a market downturn the Chicken Little syndrome comes into play. Every financial Paul Revere shouts, the correction is coming, the correction is coming. The fear of impending doom is simply a promulgation of indefensible assumptions based on questionable data.
Regardless of the veracity of a rising stock market, having a combination of patience and fortitude when you invest remains a necessity. Moreover, financial prophets do not exist. If you utilize the recommendations of media-oriented prognosticators, remember they are not going to keep you abreast of current developments.
One major investment house was given to state that it is delusional to think you can expect to increase your wealth by investing long term. Such comments are often followed by the often incorrectly sourced quotation from John Maynard Keynes, “In the long run we are all dead.”
Thanks to the First Amendment you can, without recrimination, go off half-cocked blathering prose that is tantamount to carrying a sign saying, “Repent now, the world is coming to an end,” or worse be blatantly wrong in your comments to those who trust your expertise.
Niall Ferguson, the distinguished historian whose brand of conservative punditry colors his rhetoric on historic events, once commented that Keynes’ famous long run statement stemmed from the fact that he was gay, had no intention of having children and was thus blinded to the importance of long-run considerations.
Interestingly, Keynes’ statement appears not in his meteoric work, “The General Theory of Employment, Interest and Money,” as many mistakenly state but rather in his 1923’s “Tract on Monetary Reform.” Discussing the fallacy of returning to a gold standard, Keynes wrote, “…the long run is a misleading guide to current affairs. In the long run we are all dead.”
And speaking of dead, I can remember when much of the world had pretty much given Apple up for dead. In 1968, Stan Dolberg of Forrester Research wrote, “Whether they stand alone or are acquired, Apple, as we know it is cooked.” (Article found through David Pogue’s column “The Desktop Critic: Reality Check 2000” in Macworld Magazine, where the quote still resides)
Apple has been pronounced dead 68 times to be exact since 1995, according to the Mac Observer commenting on The Apple Death Knell Counter indicator.
A little over a year ago when I was writing about the future of Apple, I read that the German investment firm Berenberg set a price target for Apple at $60. Berenberg believed that Apple’s financial model was too reliant on the iPhone and predicted at the time that the company’s shares would plummet more than 50 percent. See what I mean about diviners of Wall Street.
Apple’s incredible past success has resulted in brand recognition, desirable products, and a loyal consumer base willing to pay a premium. At the same time, the market expects, even demands, both innovative products and continually rising revenues and earnings.
There is no dearth of naysayers who are convinced that Apple will be incapable of continuing its strong pipeline of new and innovative product launches.
As you read Apple’s financials, and I will again analyze them in an upcoming column, keep in mind Sir Isaac Newton’s third law of motion that for every action, there is an equal and opposite reaction.
Lauren Rudd is a financial writer and columnist. You can write to him at LVERudd@aol.com. Phone calls accepted between 9 AM and 3 PM at (941) 706-3449. For back columns please go to www.RuddReport.com.