Markets down hard this Friday afternoon and the DJIA is down 400 points since Monday’s highs. Nasdaq struggling hard since hitting 5k earlier in week.
Steady as she goes for me for now, but you know I’ll look to sneak in some tranche buying and/or a trade or two otherwise if the markets crack harder.
Today’s report:
It’s a sign o’ the times as reports hit that Apple will finally join the Dow Jones Industrial Average, replacing AT&T. I don’t try to game index stock switches but there’s an old hedge fund theory that you always want to buy the stock being kicked out and sell the stock going into the index, at least for the short-term. More to the point though, the DJIA has a history of adding tech stocks only to see them crash subsequently.
So although on the surface you might think that seeing Apple introduced into the Dow Jones Industrial Average would be a bullish thing — did you know that Microsoft MSFT and Intel INTC were down more than 50% each in the two years after they got included into the DJIA? For comparison Chevron CVX which was one of the stocks they replaced was down 18% in the next two years after it got kicked out of the DJIA.
As anyone in the markets at the time recalls, the tech stock bubble popped in 2000 (literally less than months the DJIA added Microsoft and Intel), but tech had been on a huge tear in the years and months before. Fast-forward to today as we see Apple included into the DJIA and sure enough, does looking at the two-year return figures for tech vs the sectors of the market surprise you?
Meanwhile, Apple itself is now constantly cited as “The World’s Most Valuable Stock” and is the go-to stock for any tech investor now that it’s back at all-time highs and the charts look beautiful. All this Apple love reminds me of 2012, when Apple was at a pre-split $700, I spoke at the Apple Investor Summit. I spent the last 3/4 of my speech outlining all the reasons we should be worried about a big coming pullback in Appleand obviously my lead point was the fact that we were sitting here in an Apple Investor Summit and everybody there was long and bullish on Apple. Feels a bit like today the near unanimous love for Apple from pros and retail investors and traders and daytraders and grandmothers and Carl Icahn and seemingly everybody else on the planet.
It’s often instructive to look back at your own analysis and keeping a record of why and what I invest in is one of the main reasons I write about my trades and positions all the time. And here you can actually look back and watch the video of my speech at the 2012 $AAPL Apple Investor Summit where I was sandwiched in between keynote speakers, Steve Wozniak (the co-founder of Apple) and Walter Isaacson (Steve Jobs’ biographer). As I outlined at the time in an article called “Wake up call for Apple investors” on Marketwatch:
“And then I really hit the audience — Apple investors, all of them, as this was the inaugural Apple Investor Summit — as I go through the biggest risks to Apple’s stock. And I also outline the single biggest risk to Apple’s business prospects in the years ahead — think anti-Apple backlash. Watch the video to find out more.”
Shorter term or longer term, I’m not sure I’d try to market time based on DJIA inclusions and removals. That said, for the next few months, I wouldn’t be surprised to see Apple lag the markets and struggle for a while. If only to wash out some of the weakhanded, nowfound longs in the name. I’m long Apple for 13 years this month and plan to hold steady for now but note that I also trimmed some near $130 recently.
I’ll finish this Apple analysis you with this hilarious and insightful mock Apple into DJIA headline:
APPLE TO REPLACE ALL STOCKS IN ALL INDEXES, DOW SET TO REACH 30K BEFORE JUNE
The Dow Jones will be renamed iJones and quotes will only be available on iPad.
A couple other notes:
Gotta watch this video, it’s very thought provoking for Revolution Investors:
I got to thinking about $AMZN in that video. Remembered I was interviewed recently for my take on $AMZN getting into retail brick-and-mortar locations:
Cody Willard, thinks Amazon could use physical stores to level the playing field. “Amazon has got so much growth ahead in continuing to take retail market share,” Willard told Benzinga. “Nothing would surprise me. I don’t think the stores are going to be a destination for retail shopping. It’s going to brick-&-mortar interface for you for Amazon.”
Willard doesn’t think the stores would act as a traditional retail outlet.
“This is just another way for Amazon to touch the customer,” he said. “As an Amazon customer, anecdotally speaking, I get frustrated with handling all the boxes [for returns]. If I could just run in the shop and get it processed it’d be a lifesaver.”
Willard said Amazon’s whole business model is based on making it easier to shop with the company. These stores could accomplish that.
“I have enough faith in [Amazon CEO] Jeff Bezos,” Willard concluded. “Having seen what he has done long-term in his company…if he’s going to do this, he’ll make it work.”
Finally:
Intraday collapse in the $EURUSD as the dollar rally continues. When will it stop? Or should I ask, will it stop? Is it at least finally time for a 5-10% countertrend rally in the Euro vs Dollar? Or will it happen when the Euro finally cracks parity and hits .99?
