Confounding Apple

So, Apple just recorded the largest quarterly profit of any company in history. It realized $18.4 billion profit on $76 billion of revenues. That is, it made a quarter of net income on every dollar of sales. Wall Street’s reaction? Meh. Here’s a breakdown of top technology companies, comparing third quarter 2015 profits:

 

net income tech 2015 3rd qtr

Now, I always thought that the measure of a company, in financial terms, was how much money it makes. Apple makes more than anyone else, and it’s not even close. (Also, keep in mind that Samsung, number two in the above chart, seems to sell everything, from televisions to toys, while Apple produces only a few different devices.) Yet, investors focused on what’s next with the company, as they always do. So, they bid the share price down. But since Apple outperforms every other company by a wide margin, it’s really competing against itself on Wall Street. It is a stock market victim of its own success.

Oh, and I must chuckle at “analyst” projections. Self-described experts study tea leaves to  divine sales figures. Then if Apple exceeds “expectations,” the stock price rises. If it dips below, shares tumble. Nevertheless, such projections are almost always wrong, since they are mere guesses based on tea.

John Maynard Keynes thought of stock markets as beauty pageants. It was not who you thought would win the contest, but who you thought others thought would win. This notion helps explain the irrational herd instinct that fuels money matters.

I attach zero credibility to people who bet other people’s money, which fairly describes Wall Street, don’t you think? And, given the financial collapse of 2008, why should anyone believe in these guys? Given the volatility of the market, it seems that the experts themselves have little faith in what they’re doing.

Case in point. Before Amazon announced its 4th quarter financial numbers this afternoon, the stock rose by nearly nine percent. Then came the figures, and they were not pretty. In after-hour trading, the share price fell by nearly 15 percent.

One more thing. Google—or should we say ‘Alphabet’?—is poised to overtake Apple as the world’s largest company by market cap. And how does Google make its money? Selling all those goddam ads on websites. Do no evil, my ass.