After a somewhat surprising and somewhat predictable day stock wise for Apple post earnings, the Tech.pinions team share their thoughts on Apple’s earnings. We hit topics like why Wall Street is so backward, what this means for Apple going forward, whether or not Apple is doomed, and the greater picture of the PC industry at large.
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What a bunch of half baked analysis. “Sentiment” has nothing to do with what happens with Apple stock and share price. Apple has the largest number of Hedge-funds “invested” in it, by a huge margin. Apple is owned by them, it is their plaything and money tree. Retail investor are so small a piece of the pie as to be completely irrelevant. Therefore Apples share price moves according to the dictates of the Big-Money “Traders”.
Also, just in general – small scale and retail investors have fled the whole stock market over the last 4 years. The people who are left are the Hedge Funds.
These are the same people who are the High-Frequency-Traders, and the Computer-Algorithm Traders. These people don’t trade on “Fundimentals” They trade on what is going to happen to the casino stock price in the next five minutes, or even the next five seconds.
Therefore, it doesn’t matter to them if the price is going up or down, they will trade the volatility and make a profit on that. And they will exacerbate the swings as well if they can manage to manipulate it – and they can. In fact, they don’t want price stability, they can’t trade that. They need and require the price oscillations, it is their life blood. And they will front run it, and you, in the process. You CANNOT win in this game.
They look for an over weighting in the market, either short or long, then use their mass to move the market in the other direction, and burn everyone on the wrong side of the move they manufactured. Seriously people, what do you think “HFT” and “Hedging” mean…???
And then you hear people say – it doesn’t make any sense… What planet are you living on? It makes perfect sense, but… only if you can do maths. Otherwise, sure it’s “incomprehensible”.
These hedgefund guys are super smart at maths. They know that if they buy at (for instance) $100. Then sell and drive the market down, and make a loss as they continue to sell down to $80, then buy back at $70 as the selling momentum continues to carry the price down. They actually net out ahead when the price finally rebounds to, say, $90. Or if they are lucky, +$100. They know how to stagger their selling to create the desired effect, and how to buy back to capitalize on the swings and counterswings.
if you don’t understand how this works, then that says more about you than it does about them. Coz they are making money. And the market is “moving”, because they are “working” it.
Understand now? Clear as mud???
We didn’t say anything that would disagree with you. In fact I was very clear it was a bet with or bet against the market game dynamic at play. And of course its all hedge managers the stock is way to high of a price to be largely accessible or volatile due to small investors.
The rebalancing of large portfolios is in my opinion what is making the quick swings possible. It will just as easy go back up as quickly as it dropped when they get news they like, assuming they do. Apple is positioned to be a long term company, this I am certain about. Not so sure about many other companies in the space who have some serious dysfunction, internally and market wise.
I would add that those automated high-speed trading programs are, in factor, driven by sentiment. The algorithms parse news coming across the Bloomberg wire and buy or sell based on the machine’s reading of sentiment. But of course, somewhere in the background a human is involved in setting the parameters.
Perhaps we just had a different definition of “sentiment” then. If we are talking about how people are “feeling” about a company, then I don’t think that has any effect on these markets. If sentiment means analyzing and trading the trend lines for gradient/velocity/patterns, then yes they are all about sentiment. I would call that rather, projection.
However, there may be some small element mixed into the algorithms of actual human current opinion… 😉
Yes, that whole Rebalancing of Portfolio’s is another seriously large part of the equation. And it creates a series of domino effects in the buy, selling and holding Calculus.
I agree with your comment that Apple is positioned to be a long term company, ironically because of the Hedge Funds. They love how Apple is being run, and have no concerns about price volatility (that’s for the dumb money to worry about). And are happy to stay well out of the way of management while they continue to put up such great numbers.
The Chattering masses going on about shareholders being burnt by the price moves – and firing management because of it – simply don’t know what they are talking about.
5-10% swings in the price of a $300 Billion company give the HF’s hugely greater opportunities to make a trading profit, than on a $10 billion dollar company. So that’s why they are are in on Apple. They know it is a huge stable institution that’s in for the long haul, has great prospects, and wont fall over due to a bit of price volatility. Unlike a bunch of other companies we could name… 🙂 lol
(Btw, sorry Ben, some of my comments were rather more directed at comments and commentators in the wider bloggersphere, than directly at you.)
I’m with you Peter. I get frustrated with the broader media sphere as well. Thanks for you thoughts.
Also keep in mind Warren Buffett’s notion that in the short term the market is a voting machine, but in the long term it is a weighing machine. The hedge funds may have lots of short-term votes, but the main trump card an individual investor has is the ability to buy and hold a company’s stock for a long period of time. Eventually any stock will gravitate towards a reasonable valuation.
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