It did everything right for decades, making itself the first company in the history of the world to be worth one trillion dollars.
Then it fell off analysts’ conviction buy lists, and Apple’s stock got hammered good and hard.
What suddenly happened to the most valuable company in the world? How could it lose almost $300 billion in value in a matter of weeks?
Truthfully, what happened to Apple was mostly its own fault. Sure enough, it got caught up (or down as the case may be) in the market’s October selloff, but that wasn’t unexpected.
In hindsight, Apple held up better than the market last October and better than its FAANG family members did.
What took the shine right off the most valuable company in the world, after its all-time high of $233.47 in October, was the company’s announcement on November 1, 2018, not a month after its high water score, that it would no longer breakout iPhone sales in its earnings.
The stock got hammered – hard.
That self-inflicted wound, some say death knell, happened just as the Dow Jones Industrial Average, which had traded down close to 24,000 at the end of October, began a robust rally.
Only a week and a half into November, the Dow got back above 26,000.
Apple, not so much. In fact, not at all. Apple stock continued to slide, like it was falling off Everest.
The stock traded down to $142, just shy of a 40% dump off its high-flying act.
It’s back up around $155 today.
Is Apple at $155 or just below there a “value” stock? Is it a bargain down by more than 33%?
Or, is Apple too full of worms and worth betting against?
Last week, the investing world lost a man of conviction, and, for sure, contradictions – a true luminary, a pioneer, an advocate for “Mom-and-Pop” investors, a generous man, and a legend in his own time.
John Clifton Bogle, who preferred to be called Jack, died at the age of 89, leaving behind a lot.
That’s because Jack, who started The Vanguard Group, the $5.3 trillion asset management company that specializes in indexed products for passive investors, left behind an estate worth $80 million.
That’s after giving away half of his Vanguard salary for most of his working career.
But, the legend himself began criticizing the passive investing boom he’s credited with pioneering.
Whether his accumulated apprehensions and market fears will lay the myth of passive investing to rest, he won’t get to see – but we better be watching if the myth turns into a monster.
And, later, I have a special message for you about another hot topic in investing.
Besides the U.S. and China saber-rattling over control of the South China Sea (see last week’s article), the reason the U.S. will never get what it really wants in a trade deal is because Chinese “trade” is how China plays its foreign policy game.
And they’re very dirty players.
What the U.S. needs to get out of a trade deal is for China to stop playing dirty, which it will never do.
Last Thursday, three former Credit Suisse bankers were arrested in London in connection with a fishing fraud aided and abetted by Mozambique government officials and other characters.
Indictments handed down by the United States District Court for the Eastern District of New York charged the bankers and their accomplices with bribery, money laundering, and securities fraud in connection with raising more than $2 billion for three suspect companies, including a tuna fishing business marketed as guaranteed by the government of Mozambique.
The companies, with proceeds from bond sales, allegedly generated cash to pay bribes and kickbacks by overpaying $713 million for equipment they bought from an accomplice.
Corporate investigations and risk consulting firm Kroll says $500 million of the money raised is missing.
More than $50 million was paid to the bankers and their cohorts in the form of kickbacks.
That doesn’t include $200 million in bank fees the conspiring borrowers paid their bank cronies.
It’s another story of greedy, loan-pushing bankers, paying bribes, getting kickbacks, canoodling with corrupt foreign heads of state and government officials, and bank compliance departments being circumvented like subway thugs jumping over turnstiles.
Back in October, JPMorgan Chase & Co. (NYSE:JPM) analysts Eduardo Lecubarri and Nishchay Dayal warned that $7.4 trillion of global assets managed in passive funds could exacerbate a rout the next recession.
They were wrong, but at the same time, they were right.
We’re not in a recession.
But, the escalating selloff is weighing heavily on passive investors, especially in the highflying big-cap stocks that led indexes and index funds higher for ten years.
That means passive investors are losing money and could turn seriously active any day now.
If that happens, a crash may not be far behind – and we’re getting close to market levels that could trigger active selling by passive investors.
For most of last year, tech stocks were the momentum drivers; but now, after a tumultuous final quarter of 2018, momentum has reversed. There are no true leaders to look to, and an aura of negativity seems to permeate the market.
On the first episode of Varney & Co. in 2019, worries are still rampant when it comes to the government shutdown. But, as guest host Charles Payne points out, investors may be surprised (and relieved!) to know that the last time a shutdown coincided with the market falling was in 1990. Rather than focusing on that, Shah Gilani later reveals what investors should be focusing on as we enter the New Year – and a new, bearish-leaning market. Click here to watch.
The feds might be coming after the robots – finally.
Even here, as we start the New Year, I don’t have my hopes up. But I’ll take this good news.
On December 21, the SEC charged the country’s second-biggest robo-advisor, Wealthfront Advisers LLC, and a small defunct robo-adviser, Hedgable Inc., with misleading clients.
According to The Wall Street Journal, the two robo-advisors used “automated tools to create portfolios for clients, rather than relying on people to pick investments and councel customers through decisions,” misled clients by not monitoring accounts to prevent trades that created adverse tax consequences, illegally paid bloggers whose endorsements resulted in account openings, and, in the case of Hedgeable, used only 4% of client accounts to calculate company returns.
Here’s the $200 billion question (researchers at Backend Benchmarking say robo-advising makes up $200 billion of the investment and trading universe): Are do-it-yourself investors who rely on robo-advisors being shortchanged?
I have a question for you, it’s about the all-time biggest Dow Jones Industrial Average up-day in history.
You know, that 1086.25-point, 5% rocket ride up we all witnessed on Wednesday.
The question is: Do you think on December 26 that traders and investors woke up, got on their computers, called their brokers, and started buying stocks like it was a day-after-Christmas sale at the mall?
Before you answer that question, let me remind you. On the day before Christmas, the Dow Jones fell 653.17 points, hammering the average down to a new 52-week low.
So, I ask you again – this time your answer counts – were investors and traders and retail customers and retirees buying up beaten-down stocks on Wednesday, levitating all the major averages?
The question then should be: Who the heck was buying on Wednesday like there was no tomorrow?
Treasury Secretary Steven Mnuchin just shined a very bright light on a very dark corner of Wall Street.
Last week in a Bloomberg interview, Mnuchin said, “In my opinion, market structure has led to a lot more volatility. Part of this is a combination of the market presence of high-frequency traders combined with the Volcker rule.”
While the Treasury Secretary got a lot of flack for not pinning the stock market’s recent woes on President Trump’s trade war with China, the President’s threat to shut down the government, the President’s tweets about the Federal Reserve raising rates, he at least got the real narrative right.
Of course, rising rates are weighing on the stock market. Fears that a trade tiff with China will turn into a full-blown war is definitely weighing on the stock market. So were fears that there might be a partial government shutdown. And, that global growth is slowing is a heavy weight on stocks.
But those weights have nothing to do with the market moving 500 points one way or another in a day.