Wednesday, February 23, 2011

Apple Rumors and Market Psychology 101

By now everyone knows about the infamous headline from the National Enquirer proclaiming Steve Jobs has 6 months to live.  This bit of sensationist reporting stemed the upward march by Apple shares last week and began the downward spiral into this week.

As if that wasn't enough, there were reports this week that the iPad 2 was to be delayed a couple of months and the iPhone 5 was also being delayed until September.

When will these rumors stop and when will Apple's stock stop reacting to these rumors?  It is a known fact the markets instinctively react to rumors.  The old adage "buy the rumor, sell the news" is still alive and well even in today's information age.  However, the market will not always react blindly to any rumor as it seems to do in the past few weeks.  Apple has had quite a run since September 2010 and many investors were waiting for the right time to book some gains.  With all these rumors abound in the market, this seemed like a good time to cash out.  However, to many investors, missing out on the next bull run can be just as painful as buying stocks at their top.  Many of the Apple bashers in the market are not actually short the stock, but investors who have missed the last Apple bull run.

Now down to specifics.  Regarding the health of Steve Jobs, The American Cancer Society responded that based on photographs "it is impossible to make an estimation of someone’s life expectancy".  Also, the fact that Steve Jobs attended the dinner with President Obama last Thursday helped alleviate some investor concerns.  Ipad 2's rumored delay was curtailed by Kara Swisher at All Things Digital, who reported that the iPad 2 would be unveiled March 2nd.  With these reports supposedly squashing the rumors, why is that the stock pummelled more than the overall market itself?

The answer is simple:  Although there were various reports countering the rumors, none of these reports definitively prove the rumor to be false.  What Apple needs is one of these rumors to be proven false, and then and only then would the market start lending less credence to market hearsay.  Let's start the countdown to the 2nd of March.

1 comment:

  1. Dear Apple Informer,

    On February 23rd, you picked up an article by Seeking Alpha autor Andy Zaky that included inaccurate statements about Craig Berger and FBR. The article has since been revised here. We'd appreciate if could replace the excerpts on your site with excerpts from the revised version.

    Please confirm that you've updated the article on your site.

    Thank you,

    Ms. Michal Slawny
    Contributor Relations Manager
    Seeking Alpha

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