How About Suing Wall Street Analysts Over Apple Snafu
September 10th, 2007All right, here’s the deal: When Steve Jobs announced last week that Apple was dropping the price of the iPhone by $200, the company’s stick took a dive. Indeed, even though this was supposed to be a good thing, some Wall Street analysts went out on the limb with ill-informed claims that this was some sort of fire sale, that the iPhone had tanked and Apple took a desperate move to reinvigorate the product to meet its sales goals.
Cut to July, where the same gang of alleged analysts claimed that Apple failed to meet its estimates of selling one million iPhones on the very first weekend, rather than 270,000, as indicated in their quarterly earnings report. Only Apple never many any such estimates, ever, anywhere, although this fiction was repeated over and over again online, in print and on the airwaves as if it were something truthful.
Clearly the initial sales figures also caused Apple’s stock price to drop and reduce the company’s market cap by billions of dollars. Now maybe a volatile stock price is a good thing if you’re hedging your bets and using your money as if it were Monopoly cash to eke as many profits as you can on back of the misfortunes of others. Don’t pass go, and don’t collect $200!
Now I understand the profit game. What I don’t understand is telling blatant lies to manipulate a company’s stock price. Isn’t that supposed to be illegal in some quarters?
Yes, I realize that mistakes can be made, too, but the foregoing erroneous reports were not based on any known facts whatever. There was no indication in the sales channels that the iPhone was in difficulty, and, as I already said, Apple never made a sales prediction on that first weekend.
On the contrary, AT&T jubilantly announced that no wireless phone had ever exhibited sales that high in the first 36 hours. Even the original Motorola RAZR, which the mobile phone provider formerly known as Cingular debuted, didn’t attain a similar milestone for a month.
In July, it was reported that the iPhone had beat out all comers in the smart phone market in the U.S., and matched the sales of the LG Chocolate, a popular if highly flawed feature phone.
Not to add fuel to the conspiracy theories, but it does seem as if certain Wall Street analysts and pundits ache to rain on Apple’s parade, and find bad news even where it doesn’t really exist.
Contrast that to the way Microsoft is treated. When they took an over one billion dollar charge to cover repairs of millions of defective Xbox 360’s, it doesn’t seem that their moribund stock price moved significantly one way or the other. I suppose they expect Microsoft to fail, or they have grown bored of the matter entirely, so there weren’t all that many complaints.
Surely, if Apple took even a few hundred million dollars in charges against a defective anything, you’d hear yowls aplenty from lots of sources.
Is Apple the victim of its own success? Does the image of Steve Jobs as the smug, mercurial CEO offend certain people so much that his company’s operations are given excessive scrutiny?
Perhaps Bill Gates and Steve Ballmer are imagined as flawed beings who might rant and rave about things, but can’t be taken seriously.
Except, of course, that Microsoft is notorious for embracing and then double-crossing its partners, and in promising products that it simply cannot deliver. Yes, Apple is also blamed for unsavory dealings with third parties, but Microsoft was there first, and acted in a far more blatant fashion. Just look at their history in the way they partnered and then competed against Apple, IBM and others for the full sordid story.
Now put yourself in the shoes of the person who invested a lot of hard-earned money in Apple Inc., or perhaps the manager of pension fund. Consider how they are hurt by the shenanigans of a small number of unscrupulous individuals who regard Apple has a plaything that they can spread fake stories about with a clear conscience.
Do they have a right to sue? Can they call the S.E.C. and demand an investigation of these possibly illegal practices? Sure, it’s the right of a journalist to report the news, even if they get it wrong. But can you do something about people who make a living on Wall Street and do it for financial gain?
Is anyone listening and does anyone care?
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If anyone is listening, then the idiots who listen to these clowns will buy near tops and sell near bottoms, and people who are smart enough to know that the analysts’ reports bear no relationship to reality (other than negative correlations) will see the dips as buying opportunities and/or the peaks as opportunities to cash out some profits.
Somehow it doesn’t occur to people that buying high and selling low is generally not a good long-term strategy for making money.
Well, if they can’t do it on Wall Street, there’s always the casinos in Las Vegas.
Peace,
Gene
Just use this to your advantage — as an Apple insider, whenever the pundits slam Apple and the stock plunges, buy more! If you have faith that the company will continue to innovate and profit, you should come out the winner.
I don’t know anybody who didn’t see the price reduction and say, “It must not be selling very well.” They pretty much all saw Jobs’ explanation as a rationalization and chuckled. If Apple handles these things looking to maximize the day to day stock price they’re crazy; but they’re not. They mostly care about the longer term.
Faith is for religion, not the stock market.
The bane of market stability are the short term investors whose speculative flights of fancy do no good whatsoever and only heighten market volatility. To the extent that nervous Nellie analysts cause all these ultra-short horizon investors to lose money, then I’m celebrating every panic call that the analysts make. I’m invested in Apple for the long term and all these gyrations caused by analysts who feel the need to manufacture a new vapid opinion about everything, every single day, does not affect my long term view at all. Every plunge in AAPL is a buying opportunity.
A number of years ago, I bought my wife five shares of Apple stock at $25/share. This was during the days of Apple’s “death spiral.” She let the investment ride. Today she has 20 shares at about $135/share. So, an investment of $125 is now worth $2700. Short term fluctuations are just that: short-term. The long term is what investment (as opposed to gambling) is all about.
My own personal wild-eyed conspiracy theory is that the analysts who make these “Apple fails expectations” announcements are the same ones who buy the stock the next day when it tanks, knowing full well that Apple did not fail to meet expectations and the stock will immediately rebound. Which, btw, is illegal, and not isolated to Apple stock. I’m certain that stock prices are manipulated all the time this way. Create a buzz (positive or negative) and cash in on the subsequent stock price movement.
But, like I said, it’s just a silly conspiracy theory.
It’s not wild-eyed, unfortunately. I fully expect that’s what is indeed going on in some cases. They just don’t tell lies to feel good — there have to be large figures involved to take this kind of chance.
Peace,
Gene
Ah, you can now buy a 17-inch MacBook Pro, for the original cost of $125. That’s worth it 🙂
Peace,
Gene
Can we name names? I have several in mind, especially one who admitted as much and hosts his own well-known TV show. I’m sure, as has already been mentioned, this practice isn’t limited to AAPL stock, but I would like someone to sue these frauds (I’m not an AAPL shareholder). After all, balancing the scales of justice has to begin somewhere.
Yes, if they admit it, let the chips fall. 😉
Peace,
Gene
This is what bugs me generally about investment. Those shares are not actually “worth” anything more than the paper they are printed on, until they are realised.
And more-over, their realisation value is only based on a perception of confidence, amongst a flock of hyper-active sheep who see shadows in the dark, in the company they are issued for.
Actually, when you really look at it, the whole monetary system is built purely on the perception that something is worth a silly little piece of paper, a token, or a lump of shiny yellow metal.
For those who may still be wondering, I’m referring to Jim Cramer. I’m sure a quick Google search on his name and “manipulate” will bring up the relevant information.
Read “Ten Fake Apple Scandals” from Roughly Drafted:
http://roughlydrafted.com/RD/RDM.Tech.Q3.07/28CE05EF-2E0F-4912-A62A-CBAB41E0D305.html
I’m always happy to give my friend, Daniel Eran Dilger, a plug. He is sometimes regarded as a little too pro-Apple, but his commentaries at Roughly Drafted are always well-researched, and incredibly accurate.
Peace,
Gene
Yep, Apple’s wildly fluctuating stock price is not for the faint of heart investor. 🙂