P034: Chasing Markets vs Making Markets

Today’s Apple Event saw the announcement of two new iPhones, a mobile payment system and a highly anticipated smartwatch. For geeks like me, announcement day is a chance to see the latest and greatest gadgets and begin to figure out how to rationalize their inevitable purchase. But for another class of tech enthusiasts, announcement day is a brief window into the famously secret world of Apple, and an opportunity to build a something out of nothing.

Historically, iPhone reveal day has been a mixed bag from a day trader perspective, with the exception of the announcement of the very first iPhone. Today’s announcement held true to form with each new product driving the price up, only to see those gains disappear with the acknowledgement that the Apple Watch would not be released until “early 2015.” The speculators saw the first sign of negativity and sold off immediately, profiting nicely from the collective enthusiasm while the stock dropped 0.37% overall.

Follow the Money

It should come as no surprise that the quick-hit, get rich mentality that contributes to wild swings in the market is born of equally shallow tech journalism. Nature abhors a pageview vacuum, so site after site rush to fill the web with their Hot Takes. The massive availability of the most esoteric pieces of information about a company feeds the delusion that an individual investor can have an edge and the cycle repeats itself ad infinitum.

An Iterative Approach

A responsible investment portfolio mirrors a responsible product development strategy. If you jump all over the place chasing features or picking winners, the end result is a tangled mess. Apple is clear-eyed about it’s objectives and alternates cycles of innovation and iteration while reviewing current performance and correcting course as necessary. A drop in stock price is a valuable data point, but if Apple responded every time the stock fell, they wouldn’t have time to build two iPhones, a payment system and a watch.

Periodically yours,

Bob Sherron