“Markets move in a way that hurts the most people”, said a former boss

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”