and I remember thinking, “what on earth is he on about?”
The market isn’t a mythical, vindictive beast wandering around with whips and chains looking to harm people and their investment accounts
Although I’m sure the Bitcoin Bulls feel like they’ve spent a few hours in the torture chamber recently..
But to explain, think of a pendulum that swings from a pivot until a point where gravity overwhelms the upward momentum and becomes a “restoring force”, accelerating it back down toward the equilibrium position
In markets, buyers and sellers create momentum until a point when they are maxed out – they have no more buying or selling power.
And that point of maxed-out-buyers or maxed-out-sellers is when “most people” are exposed
But then something unexpected happens – let’s call it “gravity”
forcing the pendulum back down in the opposite direction
Now we all know that colliding with a force moving in the opposite direction, “hurts”
So put that together & you hopefully understand that when “gravity” meets maxed-out-buyers or sellers,
“Markets move in a way that hurts the most people”
Now let’s look at Apple
the largest company
in the largest region
with the largest weighting
in the largest Passive indices
But not only is it the largest weighting (14%) in the S&P500 Growth Index,
it’s ALSO
the largest investment in Berkshire Hathaway which is
the largest constituent of the S&P500 Value Index
LARGE – get it?
I mean how else do you think you get to a $2.2 trillion market cap?
Meaning “most people” are exposed
“Yes, but it’s a great company with an ecosystem and if AirPods was a separate business it would be a Fortune 100… “
STOP!
This is not about the high quality of the business. We ALL know that it’s the best. Even my cat knows that. In fact, I’d be amazed if every living creature on the planet doesn’t know that.
This is about supply and demand and equilibrium
Large means “most people” are already exposed and being exposed, means you’re vulnerable to “gravity”
like a weakening global economy where… maybe the latest iPhone isn’t affordable
or increasing competition from everyone, including a new fancy Google Pixel
or assemblers in China are trying to escape their “prison”, sorry “campus”…, probably meaning production shortfalls
during their most important quarter of the year
with a strong dollar
when earnings are high
and the price multiple is higher
I’d say there’s a big risk that “gravity” is about to take over, wouldn’t you?
So, if you THINK you’re safe with “most people”
in your “low cost” (if that’s what you call -16% YTD…) Passives
and your funds with large positions in Apple and its tech peers
or should that be “pears”?
Please remember “gravity” causes overripe apples and pears to fall to the ground
so brace yourself
this could “hurt”