Efficient Market Hypothesis: R.I.P.
By Elliott Wave International
Of all the belief systems of Wall Street, few can claim the devoted following of the Efficient Market Hypothesis, the idea that stock prices adhere to the same laws of supply-and-demand that govern retail products. Once coined the theoretical “Parthenon” of economics, this notion has consistently endured the test of time —– until now. Academics and advisors across the globe are currently exposing crack after crack in the “Efficient” model so deep as to bring the entire theory crashing to the ground.
“The EMH is not only dead,” writes a July 29, 2010 news source. “It’s really, most sincerely dead.” (Minyanville)
As to what caused the theory’s collapse — one recent business journal offers this insight:
“Financial markets do not operate the same way as those for other goods and services. When the price of a television set or software package goes up, demand for it generally falls. When the prices of a financial asset rises, demand generally rises.” (The Economist)
Here’s the thing. SIX years ago, Elliott Wave International president Bob Prechter pronounced the exact same finding in his April 2004 Elliott Wave Theorist. (Read that full-length publication today, absolutely free by clicking on the hyperlink) In that groundbreaking report, Bob presented the compelling picture below that shows how investors increase their percentage of stock holdings as prices rise, and decrease them as prices fall:
The next question is why? Answer: Motivation: i.e. the purchase of goods and services is about need; while the purchase of stocks is about desire. Here, Bob Prechter’s 2004 Theorist takes the rein:
“The fact is that everyday in finance, investors are uncertain. So they look to the herd for guidance. Because herds are ruled by the majority — financial market trends are based on little more than the shared mood of investors — how they feel — which is the province of the emotional areas of the brain (limbic system), not the rational ones (neocortex)… Buyers, in a rising market appear unconsciously to think, ‘The herd must know where the food is. Run with the herd and you will prosper.’ Sellers in a falling market appear to unconsciously think, ‘The herd must know that there’s a lion racing toward us. Run with the herd or you will die.‘”
Prechter and contributor Wayne Parker then expanded on his landmark observation in the 2007 Journal of Behavioral Finance. (Also available, absolutely free by clicking on the hyperlink)
In the end, it’s not enough to just tear down the long-standing EMH. One must build another, more accurate model up in its place. And in the 2004 Theorist, Bob Prechter does just that with the Wave Principle, which reconciles the technical and psychological sides of stock market behavior into this key point: Herding impulses, while not rational, are also NOT random. They unfold in clear and calculable wave patterns as reflected in the price action of financial markets.
As the mainstream media continues to jump on board Prechter’s Financial/Economic Dichotomy Theory, you can read both of Prechter’s original writings. Enjoy your complimentary access to the 2004 April 2004 Elliott Wave Theorist and the 2007 Journal of Behavioral Finance.
This article was syndicated by Elliott Wave International and was originally published under the headline Efficient Market Hypothesis: R.I.P.. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts lead by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
Slicing the Neckline: A Classic Technical Pattern Agrees with the Elliott Wave Count
By Elliott Wave International
In the August issue of his Elliott Wave Theorist, market forecaster Robert Prechter alerted readers that the U.S. stock market was slicing the neckline of a classic head-and-shoulders pattern in technical analysis, and that this may send the market into critical condition.
Prechter said that when the Elliott wave count and a head-and-shoulders pattern are saying the same thing about the stock market, it’s best to pay attention.
Read some of the latest nuggets directly from Robert Prechter’s desk — FREE. Click here to download a free report packed with recent quotes directly from Prechter’s Elliott Wave Theorist.
Here’s how the August issue of the Elliott Wave Financial Forecast, the sister publication to Prechter’s Theorist, described the head and shoulders pattern unfolding in the stock market:
“The weekly Dow chart [below] shows the development of an intermediate-term, head-and-shoulders pattern from the January high at 10,729.90 to the present. The January high marks the left shoulder, the April 26 high at 11,258 is the head, and the right shoulder is now ending. The April [Theorist] discussed the pertinent characteristics that Edwards and Magee used to define this technical pattern … all apply to the current formation. Observe how weekly stock trading volume has contracted during the development of the right shoulder, a necessary trait of this pattern. The downward-sloping neckline — exactly as on the big ten year pattern — displays market weakness, which is consistent with our interpretation of the wave structure.”
This chart shows the head-and-shoulders pattern.
Here’s what Robert Prechter himself said in a recent Elliott Wave Theorist:
“Generally, when the neckline slopes downward, the right shoulder does not rise to the level of the left shoulder …”
Please look at the chart again — then re-read Prechter’s quote.
This article was syndicated by Elliott Wave International and was originally published under the headline Slicing the Neckline: When the Market May Go into “Critical Condition”. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts lead by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
Deflation: First Step, Understand It
There is still time to prepare if deflation is indeed in our future.
By Elliott Wave International
“Fed’s Bullard Raises Specter of Japanese-Style Deflation,” read a July 29 Washington Post headline.
When the St. Louis Fed Chief speaks, people listen. Now that deflation — something that EWI’s president Robert Prechter has been warning about for several years — is making mainstream news headlines, is it too late to prepare?
It’s not too late.
There are still steps you can take if deflation is indeed in our future. The first step is to understand what it is. So we’ve put together a special, free, 60-page Club EWI resource, “The Guide to Understanding Deflation: Robert Prechter’s most important warnings about deflation.” Enjoy this quick excerpt. (For details on how to read this important report free, look below.)
When Does Deflation Occur?
By Robert Prechter
To understand inflation and deflation, we have to understand the terms money and credit.
Money is a socially accepted medium of exchange, value storage and final payment; credit may be summarized as a right to access money. In today’s economy, most credit is lent, so people often use the terms “credit” and “debt” interchangeably, as money lent by one entity is simultaneously money borrowed by another.
Deflation requires a precondition: a major societal buildup in the extension of credit (and its flip side, the assumption of debt). Austrian economists Ludwig von Mises and Friedrich Hayek warned of the consequences of credit expansion, as have a handful of other economists, who today are mostly ignored. Bank credit and Elliott wave expert Hamilton Bolton, in a 1957 letter, summarized his observations this way:
In reading a history of major depressions in the U.S. from 1830 on, I was impressed with the following:
(a) All were set off by a deflation of excess credit. This was the one factor in common.
(b) Sometimes the excess-of-credit situation seemed to last years before the bubble broke.
(c) Some outside event, such as a major failure, brought the thing to a head, but the signs were visible many months, and in some cases years, in advance.
(d) None was ever quite like the last, so that the public was always fooled thereby.
(e) Some panics occurred under great government surpluses of revenue (1837, for instance) and some under great government deficits.
Near the end of a major expansion, few creditors expect default, which is why they lend freely to weak borrowers. Few borrowers expect their fortunes to change, which is why they borrow freely. The psychological aspect of deflation and depression cannot be overstated. …
Read the rest of this important 60-page Robert Prechter’s report online now, free! Here’s what else you’ll learn:
- What Makes Deflation Likely Today?
- How Big a Deflation?
- Why Falling Interest Rates in This Environment Will Be Bearish
- Myth: “Deflation Will Cause a Run on the Dollar, Which Will Make Prices Rise”
- Myth: “Debt Is Not as High as It Seems”
- Myth: “War Will Bail Out the Economy”
- Myth: “The Fed Will Stop Deflation”
This article was syndicated by Elliott Wave International and was originally published under the headline Deflation: First Step, Understand It. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts lead by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
7 Ways to Become an Unsuccessful Trader
Q&A with an experienced Elliott wave trader reveals seven common trading mistakes.
By Elliott Wave International
To be a successful trader demands knowledge.
If you’d prefer to become an unsuccessful trader, you can start by making the following common trading mistakes, detailed by a professional who spent 25 years in portfolio management, trading and forecasting in the financial capital of the world, New York City.
In 2002, Wayne Gorman, long-time Elliott wave trader and current head of trader education at Elliott Wave International, left his 35th floor Manhattan apartment and moved to the quiet of North Georgia. He’s been sharing his knowledge and skills with aspiring traders ever since — in both online seminars and before live audiences around the world.
Wayne graciously agreed to a Q&A about trading mistakes. In his interview, Wayne reveals seven common mistakes traders make.
——–
EWI: Could you name two mistakes frequently made by stock traders?
Wayne Gorman: (mistake 1) The first big mistake is the flawed logic of extrapolation. Many traders and investors assume that a trend will remain in force until an “event” comes along to change it. But market trends are not like billiard balls on a pool table. This false assumption will put you on the wrong side of the market more times than not, especially at major turning points.
(mistake 2) The second big mistake is to suppose that news events drive market trends. In fact, the opposite is true: economic, political and social events lag market trends.
EWI: What are two common mistakes among options traders?
WG: (mistake 3) One common mistake is to buy puts or calls that are way “out of the money,” with no other transactions to compliment them. Unless your timing is absolutely perfect — and who has perfect timing? — your chance of success is low. It’s like buying a lottery ticket.
(mistake 4) Another common mistake is to buy options with too little time left to expiration. With less than one month to expiration, the time decay begins to accelerate and the chances of success diminish.
EWI: Please name a frequent mistake among traders who aim to catch the beginning of a particular Elliott wave.
WG: (mistake 5) In the middle of a corrective pattern, it’s common to run out of patience while waiting for confirmation of a trend change. You have to give corrective patterns time to unfold before you jump in. This requires discipline, and a solid understanding of the many ways corrective patterns can unfold.
EWI: What’s the biggest misconception among traders about using Elliott waves?
WG: (mistake 6) Too many traders think Elliott wave is a trading system that tells you exactly where to enter and exit a particular market. That’s the biggest misconception. The reality is that it’s an analytical and forecasting tool, which helps you develop and use your own trading system, based on your own personal risk tolerance.
EWI: What technical indicators do you believe traders over-rely on, and why?
WG: (mistake 7) Traders tend to over-rely on momentum indicators such as RSI, Stochastics and MACD to precisely spot turning points. But to paraphrase Mark Twain, markets can stay overbought or oversold a lot longer than either you or I can remain solvent.
EWI: How would you characterize today’s market action, and do you teach courses that address this environment?
WG: This is a difficult stock market in the near term. Prices haven’t strayed far from where they began in January. The action has yet to break out significantly to the downside or upside. This situation may not last much longer. I can suggest these online courses to deal with the current situation, and to prepare for the next big move:
- How to Spot Trading Opportunities, Parts 1 and 2
- How to Trade Choppy, Sideways Markets
- 5 Options Strategies Every Elliott Wave Trader Should Know
- Trading the Line – How to Use Trendlines to Spot Reversals and Ride Trends
This article was syndicated by Elliott Wave International and was originally published under the headline Do You Recognize These Six Common Trading Mistakes?. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts lead by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
How to Invest in a Zero-Interest-Rate Market
Written by Sara Nunnally, Senior Research Director, Taipan Publishing Group
Contributing guest Taipan Daily editor Sara Nunnally explains how to invest in a zero-interest-rate market.
We all know the economy has a tough row to hoe… We’re facing severe unemployment. Almost 50% of those unemployed have not been able to find a job in six months. We’ve also seen huge bankruptcies over the past two years, such as General Motors, CIT Group and Lehman Brothers, and more than 100 banks have either closed their doors or have been seized by the FDIC in the past year alone!
That’s why the Fed has kept rates at near zero for more than a year and a half, and supported all types of stimulus measures.
We’re nowhere near out of the woods yet, and that leaves us to contemplate a “new market.”
With all the doom and gloom talk on the financial news wires of a possible double-dip recession, I think it’s time to examine what our markets would look like if the Feds kept interest rates effectively at zero.
Let me be more specific…
Will Keeping Rates Low Do Anyone Any Good?
If economy and market analysts are honest, they’d tell you these low interest rates scare the heck out of them. And why not? If we were in a true organic recovery, the government and the Fed would be dealing with skyrocketing inflation. We’d be using dollars to mop up floors and other unsavory things.
That aside, low rates may have some benefits. I wouldn’t go so far as to call it a silver lining, but it might be a hint of light in all this doom and gloom. And if our economic situation isn’t going to change much in the near term, we’re all going to have to learn how to invest in these new market parameters.
What’s the first thing investors and economists think of when they see a cheap currency? Exports…
A falling dollar, or a really cheap dollar, looks more attractive to international markets. That means our goods look cheaper, and more people buy them.
Manufacturing, Maybe… Moving Goods, Yes
In these situations, most investors’ eyes go directly to manufacturing. And they’d be right… for the most part. According to a BusinessWeek report from back in October 2007, however, big U.S. manufacturers spread their plants around the globe. That means they’re not really taking advantage of a cheaper dollar.
(If you recall, the U.S. dollar was experiencing a really sharp decline back in the second half of 2007, which precipitated the global economic crisis…)
That doesn’t mean they’ve stopped exporting, though. And that is where we may find an opportunity.
The moving of goods throughout the country and into international markets is an interesting way to play both recovering global demand and the over printed U.S. dollar. It’s also one where we find a couple of companies boasting zero debt.
(By the way, if you’d like more financial analysis, sign up for regular Taipan Daily editors Adam Lass and Justice Litle’s investment commentary.)
Planes, Trains and Ocean Freighter Ships
When you’re talking about moving manufactured goods, you’re talking about ocean bulk carriers, rail cars, air cargo services, inland barges, 18-wheelers and logistics, among a number of other freight and bulk services.
There is a wealth of companies to sift through… And these are just a handful.
Landstar Systems, Inc. (LSTR:NASDAQ) is mainly a trucking company, but also offers rail, air, and ocean services and logistics. The company operates these services between the U.S., Canada and Mexico, though it does have some other international capabilities.
Here’s what I like, though… For the company’s most recent quarter (ending June 26, 2010), it posted 30.6% revenue growth and 36.8% earnings growth!
Pretty fantastic, particularly when you note that Landstar’s P/E ratio is well below the industry average (25.53 versus 33.35).
Another company to take a look at is CH Robinson Worldwide (CHRW:NASDAQ). It’s an air freight delivery services company that has contracts with 47,000 transportation companies. That’s a huge customer base.
Though quarterly earnings slipped 1.6% in its most recent quarter, revenue climbed 22.9%, dwarfing the industry average of 4.3%. But here’s the best part: With $282.3 million in total cash, this company has zero debt…
It’s not the only one either.
Expediters International of Washington, Inc. (EXPD:NASDAQ) is also in the air delivery and freight services industry, but like CH Robinson, that’s not its only business. In fact, it runs rails and truck services between the U.S., Canada and Mexico, and also consolidates bulk shipping between the U.S. and China.
EXPD, as I mentioned, has zero debt on its balance sheet, and holds $1.04 billion in cash. It also boosted revenue by more than 31% in its most recent quarter, and enjoys a much higher operating margin than the industry on average.
The only thing is, you’ll be paying for it with its higher-than-industry-average P/E ratio at 37.47. That said, of these three, EXPD has climbed the most in the past year: more than 26% versus about 22% and 14% for CHRW and LSTR respectively.
As noted, these aren’t the only companies moving our “cheap” goods around the country and around the world, but with two with zero debt, they’re worth taking a hard look at when you’re investing in a zero-interest rate market.
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Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to original content or www.taipanpublishinggroup.com.
Three Ways to Capitalize the Axis’ Biggest Fail Ever
Meet Adam Lass in Las Vegas at our annual conference in September, and he’ll show you how to get around the latest Keynesian plot to destroy your family’s security.
We need to talk.
Seriously, things are really odd out there. I’ve got some specific ideas about how to capitalize on the starting to get market’s latest twists. And I think we need to sit down together in the same room, and work this out.
How odd is it?
So strange, so wildly volatile, even those perennial “smartest guys in the room” at Goldman Sachs, with their incestuous insider connections on corporate boards and in the halls of power, couldn’t make but so much money last quarter.
Turns out Goldman Sachs got slammed from both sides, with their “friends” in Washington punishing them with the largest SEC fine on record and the market they used to dominate them biting them as their trading bets on lowered volatility all went south.
Not that I am shedding any tears for Goldman Sachs, mind you. I really have no sympathy whatsoever for folks who bragged about taking the rubes for bad. I am just trying to point out that even the best connivers out there are being brought low right now (and how you can bend their magnificent failure to your own ends).
Don’t Get Fooled: Bad Is Never Good
So what the heck IS going on?
Just the other afternoon, the financial markets were running flat as could be, as investors tried to digest the implications of the previous week’s drubbing. Heck, we’d even seen a fresh low for the week. Didn’t seem like any good news could move the market off its duff.
But what about bad news?
Suddenly, word began to circulate that the Federal Reserve was really getting worried about the recovery in general and housing in particular, and might find a way to jigger mortgage rates even lower than they are now.
No real proof of this, mind, you. No real thought or analysis as to whether this might actually happen or would even be a good thing if it did.
Just some hints, an offhand comment or two and some wishful thinking.
Next thing you know the bulls are running with the story setting a fresh new weekly high at the close, and then running for their homes in Scarsdale and Greenwich before anyone can ask them what the hell they are doing.
Prudent Planning
It didn’t hold, mind you. Once investors stopped to think about it, they quickly realized that low mortgage rates have nothing whatsoever to do with the problems we are facing right now.
Rates are already at a historic low, and the housing market is still flopping about like a dying fish. Not that I mind the low rates – in fact, I’ve already used this gift from the Magi to refinance Seven Oaks Farm’s relatively modest mortgage. I even tapped a bit of equity to pay off some niggling little debts that were irritating me like sand in the wrong part of one’s bathing suit.
Folks like you and me, we can do that whenever we please because we have coddled and protected our equity for decades – because we DO think in terms of decades at a time, and even about the generations to come.
And that’s exactly why none of us are planning on refinancing again anytime soon. To quote President Bush the Elder (who is, quite frankly, looking more and more patrician and “presidential” with each passing year): “It’s just not prudent.”
Why Lowering Rates Won’t Work
Speaking of old adages, ever heard the phrase “pushing on a string”? They can lower rates till the cows come home, and it won’t help a bit. Prudent folks simply aren’t looking to buy cars or houses right now, because the risk is just too high.
I have demonstrated the economic theories driving this reticence a hundred ways over the past weeks. Today, I will simply draw on personal experience.
According to our Labor Department, “unemployment” is supposedly down in some 39 states. Unfortunately, this is only because a vast number of folks have been written off the rolls. In point of fact, 27 states, including some of the most populous like New York and California, have seen their aggregate payrolls fall during the same reporting period.
Even Us “Smart Guys” Are Still in Washington’s Crosshairs
I would like to think that my job is relatively secure, and I know for a fact that my debts are modest compared to my cash flow and assets. So what? I am still sitting in the crosshairs, just like all the rest of us.
Technically, my eldest daughter is not “unemployed.” She has a degree in assistive technology from a fancy New England college and co-owns a design and machining company. For the better part of the past six months, she has been trying to find a job in Boston as a secretary, just to keep up with the bills.
She’d love to buy a house. However, lowering mortgage rates isn’t going to do her a bit of good, as no bank in their right mind would lend to her right now. And so long as I stand a good chance of getting hung with the rent for her shop space, I sure as heck am not about to go on any sort of spending spree.
A Decade of Decline IS the Good News
Keynesians think in terms of pushing cash down pipelines in the hope of creating a self-sustaining current. All I see is string – a big old knotted ball of string.
No shock then, that a day after those rumors of more Federal Reserve money started, the financial markets are already retreating from their Fed-induced euphoria.
The problems we are facing have been building up for decades. It would take years of good decision-making to fix them, and frankly I don’t see anyone on Wall Street or in Washington making good decisions right now.
And that’s why we need to talk, and sooner rather than later.
Time to Take the Reins
Just because Washington and Wall Street have dropped the ball is no reason to sit down and quit. In fact, just the opposite is true: You simply must secure your family’s future on your own.
And so, for a few brief days this September, I will trade the soft beauty of autumn in rural Maryland for the stark desert sun of Las Vegas. I am not particularly pleased about this. Folks who know me, know that I am NOT a big traveler anymore. (My fellow editor Justice Litle will also be in Vegas with me. Don’t forget to sign up for Taipan Daily to get our investment commentary delivered to your inbox each morning.)
But the times are just too damn volatile for me to stay home.
Three Ways to Capitalize the Axis’ Massive Failure
I spoke earlier of specific ideas I wanted to relate to you, ideas – well, three assets, really – that actually utilize Washington’s willful ignorance of economic principles and Wall Street’s lack of moral principles (if you work in either of those places, forgive me, I obviously mean the guys sitting next to you).
One of them is an option contract that has already offered my readers more than 160% gains. But the underlying stock – a “successful” retailer – has yet to set a bottom! In fact, the market’s “viral infection” could plague this stock for the rest of the year, giving option traders the chance to double the gains already in pocket by Christmas.
Another “viral” asset you must own now is keyed to the Keynesian’s plan to pump an endless flow of new dollars into the system in a vain attempt to jump-start the economy before the November election. As word of this plan spreads around the globe, this asset will more than double in value.
Finally, I will show you a universal cure to the disease that is plaguing the market, a 10-digit “position code” that takes specific advantage of this virus’ “DNA” to undo its damage.
As tempting as it might be, now is NOT the time to throw your hands up in the air in disgust.
Please, meet with me in Las Vegas in September for our Global Opportunities Summit, and we will figure out how to get past this.
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Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to original content or www.taipanpublishinggroup.com.
The Price of Propaganda
What price will Apple and Toyota pay for their endless denials?
Forgive me if the two things I want to write about today are old hat by the time you read this, but I was struck by several eerie similarities between them.
If you are any sort of technophile, then you have undoubtedly been following the whole Apple iPhone 4 story as if it were your favorite soap opera.
First there was that incident wherein an unfortunate Apple engineer accidentally left his prototype at a bar. When a curious tech blog immediately bought up the stray and threatened to expose its guts to the world, Apple, which used to be run by such nice young folks, got positively Stalinist in their demands that their property be returned immediately.
Strange…
At the time, it struck some of us as strange that Cupertino should be so hostile, as the publicity only seemed to stoke the Apple Heads’ lust for the new toy.
Indeed, so many folks attempted to preorder new phones, they managed to crash both Apple’s and AT&T’s servers, and on launch day, whole cadres of loyal early adopters lined up for blocks and waited as long as 48 hours to get their hands on a new, as yet untested phone. In the end, the iPhone 4 was the most successful new product launch in Apple’s history.
And now it gets odd.
Stranger…
Within hours, thousands of complaints began to crop up that you would lose your call if you allowed your palm to contact the bottom corner of the phone.
This was a particular sore point with the loyalists, because poor connectivity and erratic throughput are perhaps the only major flaw in the whole iPhone story, and the new “i4″ was pitched specifically as the rather expensive cure for same.
At first, Apple denied the troubles outright. Then they conceded that if you touched an I4 “improperly” it might drop a call, but suggested that owners hold it more gingerly, or perhaps drop another $20 on a bulky protective cover for the poor thing.
And then things went from odd to Kafkaesque.
And Positively Bizarre
In an open letter, Apple noted that it has apparently been miscalculating signal strength for the entire lifetime of the product line – not just for the i4, but every single iteration.
When your phone was indicating “5 bars,” – perfect reception – perhaps you had only two bars, or maybe even just one. So when you touched the phone while dialing, they tell us, you didn’t actually degrade reception quality at all.
Because you never actually had any reception in the first place.
It’s All YOUR Fault
But wait: This was not a confession!
Rather, Apple views it as a perfectly logical response that shifts the entire issue onto clumsy phone-clutching consumers, who, Apple points out, are free to return an undamaged phone at anytime. When pressed, they proposed a software patch that will increase the displayed size of your two or three remaining “bars” of reception.
The fact that they have just conceded to years of fraudulent representation – wherein millions of buyers were enticed to buy products based on critical presented abilities the phones simply did not ever have – hasn’t even dawned on them yet.
As I sit to write to you, once invulnerable AAPL shares, which had just set a new all-time high, are putting in their 13th red candlestick in the past 15 trading days. If they continue this trend for another 15 trading days, they will move below the 200-day moving average for only the second time since April of 2009.
(Apple may be in the news, but it’s not the only headline moving the market. Be sure to sign up for my fellow editor Justice Litle’s investment commentary.)
The Ultimate Fail
Is Apple about to join Toyota (currently “enjoying” its umpteenth recall) as a former icon of quality now firmly associated with failure and denial?
While I suspect so, I don’t know for sure, and to be frank, this is not the point of today’s column.
I mentioned at the beginning that I saw a rather creepy parallel to Apple’s story lurking out there. I am referring to the latest news on unemployment that is dragging the market into the doldrums.
The Prop Job…
The details of this second story are as follows: Washington had promised that the jobs situation would improve – soonest if possible but certainly prior to the mid-term elections come November.
When this did not appear to be happening, the folks at Census were apparently tasked with propping up the numbers to the extent where they represented some 95% of hiring that month.
Now I must confess that I was not a fly on the wall at the meeting where this was dreamed up. Perhaps the fact that the Census department claimed to have hired the same temp workers over and over (and over) again – as revealed by investigative reporters at the New York Daily News – was mere coincidence.
And the Price
That’s just as likely as the idea that absolutely no one at Apple knew anything about the false reception readings on all iPhones until last Friday.
But here’s my real point: Eventually, the truth gets out, and if these guys thought it was bad before they obscured and obfuscated and denied (and perhaps, just perhaps, even fabricated?) then they surely underestimated the price of such propaganda.
In my master chart of the OEX, I have a name for the bundle of thoughts that has repeatedly tanked the U.S. stock market.
Forget Trust – Just Verify
I call it “the loss of trust” meme.
Folks used to trust Apple and Toyota to deliver worthy innovative products, just as they used to trust the U.S. stock market to “always go up eventually.”
Now we are seeing the cost paid when that trust evaporates.
Please understand that I am not saying that no stock or bond will ever again be worth buying. Rather, I am warning that the days of throwing a dart, and trusting that eventually you would make money are long gone.
Forget “the Dow.” Forget “set and forget”. Forget “investing.”
It’s an analyst’s market, a trader’s market now – and perhaps forever.
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