Henry Blodget just pointed out that Apple’s stock is crashing and that there are a lot of reasons for it: the iPhone 5 run-up is over, the supply chain is in rough shape, and long-term competition is getting stronger.All well and good. But Philip Elmer-DeWitt at Fortune also has a theory, and it’s a little more fun.
He thinks hedge funders and other traders are intentionally depressing the stock—pulling it down like a slingshot band—so that they can ride it when Apple announces its earnings and the slingshot is released.
He writes: “It’s a phenomenon we’ve noted many times before, most recently in April when the stock fell $89 (13.8%) in the two weeks leading up to the company’s second quarter earnings report — shaking a lot of nervous investors out of their holdings—only to shoot up more than $60 the next day. (See The Apple slingshot released: $57 billion in one clock tick.)”
Elmer-DeWitt takes particular aim at hedge funder Doug Kass, who has been very negative on Apple on CNBC for sometime now.
A guy running a hedge fund, having taken who knows what position in a high-profile security, trashes it on TV, on the Web and in emails to clients shortly before what are almost certainly going to be record quarterly earnings, and then when the shares lose some value, brags that he’s been “correct on the stock.”
The thing about Kass, as Bullish Cross‘ Andy Zaky pointed out last week, is that he’s a serial Apple basher. He was urging investors to sell the stock when it was trading at $90 a share, at$130 a share, at $380 a share and again last February when it was in the low $500s.
As Schwarz warned his Economic Weather Station readers Friday: “Just when the average investor cracks, the hedge funds will load up their portfolios.” If you’re an average investor, you would be well advised to ignore guys like Kass.