Every day we are subjected to hyperventilating media talking heads telling us how important a so-called stock market event is. In reality most events are manufactured by the financial media which takes the temperature of the stock market constantly. If one is an active investor, one can get caught up in all the hoopla without realizing it. To put it bluntly, if you take your baby’s temperature every ten minutes, you’re probably going to see the same 98.6 degrees on the thermometer, but you’re going to have one mentally ill baby on your hands.
The financial media can’t help themselves. They have to talk about something in order to keep our attention. The talking heads have personalities that are very likeable and persuasive. They enter our homes and offices every day. Johnny Carson on the Tonight Show was permitted to enter our bedrooms every night. That started a trend. Now we have a mélange of media types that are permitted entry into our financial psyche nonstop during the trading day.
Active investors cannot afford to let these people get into their heads. On the one hand we have the financial news on in the background because we need to keep up with important news. On the other hand, we do not want financially illiterate morons like Bob Pisano bombing us with nonsense throughout the business day. The guy is a running joke in the trading community. According to Mick Jagger, he always comes on the TV at inopportune tines spewing out “useless information supposed to fire my imagination.” (Click Here)
There he is every morning at 9:40 AM giving us a line of garbage about what the stock market has done only 10 minutes into the trading day. And everything he says is energized to the point that one can get sucked into the supposed meaning of his diatribe. The guy is like some nightmare version of my nagging ex mother in law. I flip the dial when he comes on only to find another inexperienced persuasive self-important jerk weed obsessing on more nonsense.
For the last several days the talking heads have been obsessing about Apple – AAPL all day and all night. The sky is falling because AAPL’s IPhone sales are slowing down- Duh! They constantly debate whether this is the end of AAPL? I hate to break it to these idiots, but no one stock is bigger than the market and AAPL has been going through the transition from Hardware sales to service revenue for years.
Here is AAPL’s 5-year chart:
The above 5-year chart shows that AAPL has had a garden variety pullback so far. It also shows that AAPL spent around two years between 2015 and 2017 correcting and basing before it finally got back up to its old highs. Can AAPL fall further? You bet it can. Will it be the end of the world? That is laughable. But the narrative is that AAPL is the dog that wags the stock market’s tail.
Federal Reserve Obsession
Next we have the media’s obsession with Fed chair Jerome Powell. In the 1990s we were privy to Alan Greensands bathing habits. Yes, the inscrutable old Fed Chairman spent hours each day studying the economy while soaking in the tub. Now the media is obsessed with Powell’s bowel movements.
Stocks have been falling and the media rightfully attributes Fed policy as the main culprit. The media’s problem is that they follow Powell around as if they were the Paparazzi trying to figure out the meaning of Taylor Swift’s latest videos and songs. Memo to media: Taylor Swift is not Bob Dylan. I admit to knowing most of Dylan’s lyrics, but knowing them is not going to change my economic lot in life. And trying to find meaning in every word that Powell says is a fool’s obsession.
Last night Powell spoke and he mentioned that he is watching the economy and noticed that things may possibly be slowing down a bit. He said that the Fed will keep an eye on this as things evolve. Memo to hysterical Jim Cramer. Powell sees that stocks are falling. He knows that he is walking a tightrope between killing the economy and stopping potential inflation. Powell is stuck in a nightmare position where he has to tighten monetary policy in order to bring the amount of money sloshing around the economy back to historic norms.
Whether we like it or not, Powell has to get the amount of money from A to B in the above chart. The only question is how long it will take. Obsessing on his every word to Judy Woodruff last night may cause some short-term wiggles, but the die is cast. Until Powell states something specific like “The Fed is done tightening,” I would not look for hidden meanings in his words.
Stock markets run in cycles. This economic expansion and bull market are in the late innings. I hope that Powell really takes his foot off the breaks, and am realistic enough to know that we may have one last hurrah. The Fed has to tighten and is playing a dangerous game in doing so. But what choice do they have?
AAPL’s business has been transitioning. What do you expect from such a huge business? All huge businesses have slower growth and have to adapt. AAPL will never be the growth monster it was in its heyday. But AAPL is not in a crisis. It’s an amazing cash generating money making machine.
So, turn the volume down and avoid the media hysteria. That’s not easy but at least try.