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It’s Apple’s best Christmas ever. So why am I so nervous?
It’s the week before Christmas and everyone is rushing around doing their last minute shopping whether at the mall, online or in the most hallucinogenic marketplace of them all—the Nasdaq. Looks like a very merry holiday for everyone, except for small cap value investors… Fear and Gloating on Wall Street I am so awestruck by the ongoing technology orgy that I can barely type. Sure, I should have been prepared for something like this after two years of watching Internet stocks surge like a tsunami of wealth over the IPO landscape. But can anyone really prepare for revelation? Ironically, investors with the most market experience are the ones most likely to be paralyzed by visions of a coming fundamental analysis implosion raining down on the unbelievers like Old Testament hellfire. Meanwhile, frolicking Ameritrade pagans place market orders for Yahoo! at $250 and ride to $350 for a clueless $100 per share profit in mere days. Gee, Ma, the stock market is fun, I think I’ll quit my day job to join the priesthood of the Golden Calf. Yahoo! was up over 2 percent on Friday sporting a heretical PE ratio of 1364! Heck, that MBA you’re working on fits like a millstone around your neck. Today, a more appropriate education for an investor might be found at a poker table in Vegas. Fortunately as a trader, you don’t have to know why, only where, the momentum is to turn a profit. I trust only my paranoid heart, eagle eye and itchy return-key finger to keep me from early extinction in this meta-hyper-cyber-whatever market. Unfortunately, writing about it is a bit more difficult. Amusement park or freak show? The 40% altitude increase in the Nasdaq since mid-October came at a time when one might most expect investors to batten down the hatches for the anticipated Y2K storm. At least one of the most consistently right-on economists of the decade, Ed Yardeni, sees a recession coming because of Y2K chaotic perturbations to the system. Of course, being an expert is a disadvantage in this phase-shift market. You might imagine that after a one-for-the-history-books price run up, like we have seen in the tech stocks, that there would be a major bout of profit taking. But the only sell-off has been in the majority of non-techie stocks that have gone nowhere, or are even down for the year, prompting some analysts to call this a "stealth bear market." Ferris Wheel-like rotation keeps agile traders busy riding one tech stock up, bailing and moving on to the next momentum play ride as if the Nasdaq were a big amusement park instead of serious business. Whatever happened to "making money the old fashion way," wasn’t that a Salomon commercial from before the Internet IPO gold rush? Perhaps there’s an ocean of investors waiting for January to take profits, postponing taxes on those capital gains till 2001. It’s like borrowing money with no interest due. Maybe this hyper-rally is due to the largest ever M3 money supply increase in history thanks to a schizophrenic Federal Reserve. If so, maybe the tech rally is only halfway to where it’s going. There could be an ocean of cautious money that has been sidelined since the Dow turned south in late August that will flood the market in January once we’re safely past Y2K. Or, maybe, the so-called "January effect" of new money flows generated by year-end selling to create a tax loss has already sloshed back into this bloated market early and the new year will leave investors cold, high, and dry with an interest rate hike to boot. The uncertainty levels are at an all time high. No one has ever lived through a stock market like this before. Unless you were around in 1918 when the Dow was up over 80% for the year, but that was a bounce back from a recession. If the history books have any relevance at all to our current situation, it’s to point out that every other speculative market vertical take off has landed badly. Ultimately the "devil always takes the hindmost" investors. The Internet is Gaia’s Mind The quote at the start of this column notes that the invisible hand of language plays a central role in shaping the cognitive process. No one alive today was around for the invention of language 40,000 years ago, so we don’t know how it occurred. Yet the invention of language is the single event in human history that most closely approximates the scale of change the Information age confronts us with. The whole planet is waking up to a new state of global consciousness. It’s worth noting that the latest research suggests the Neanderthals quickly became extinct, for reasons forever shrouded in the mist of time, just after H. Sapiens developed the innovation of language, and with it, symbolic thought. Economic, ecological and governmental Neanderthals face a similar fate today. I thought this column was supposed to be about Apple. Yeah. What can I say? I already outlined the top ten things Apple might do in 2000 and how I think this mother of all tech rallies hails Apple’s ascendancy. Besides, Apple hasn’t been dishing out much material to work with lately. There hasn’t been a peep out of Cupertino in months, which might not be all bad since every time Apple has spoken in the last quarter it’s been a strategic error. Meanwhile, the recent AAPL price action is discouraging even while gaining another dose of momentum last week. Discouraging because the $27 difference between the high set ten trading sessions ago and the low last Wednesday seems indicative of investors’ lack of inspiration in Apple’s long term agenda. Not that any of us know what that agenda might be. Apple, like all tech stocks, has to make investors believe in the future. Moreover, a new investor cash flow consensus has placed open source Linux squarely in line as the heir to the Microsoft throne while dissing OS X by selling Apple off during the same mad rush to ID a Windows successor. In fact, in the world’s most hype-ridden stock market there is no hype about Apple, unless my minor contributions count. All we’ve had to think about for months now is a litany of emergent paradigms–open source codes, Internet appliances, embedded networking, network computers, and online applications. Change seems to be outpacing even Apple’s reknown ability to innovate. The iMac, which heralded the legacy free, post-beige era in PC hardware design will soon become a hackneyed cliche, even if it is today’s best selling computer model. The iBook and the AirPort are apparently seen by investors as merely well designed extensions of 20th century concepts. And new iMitators are launched at every PC trade show. What about tomorrow? I hope someone in Cupertino is reading this, shaking their head, thinking, "oh, ye of little faith." Now that we are entering the pre-MACWORLD, pre-earnings release quiet period we can expect the silence to continue till iCEO Steve Job’s keynote address on January 5th. The suspense is killing me! Happy holidays to you and your family. Wes George Your comments are welcomed. |