Bear Market May Require No Hibernation Of Wisdom

LOS ALTOS, CA -- Investors know times are volatile when Warren Buffet loses $3.5 billion off the stock market.

Hang on. The ride may not be over, warns stock brokers like Rory McCowan of First Discount Brokerage in Los Altos.

"Stay nimble" were the words of wisdom McCowan had for investors as the market nears a bear market filled with lagging earnings reports, dipping stocks, uncertainty and collective forces that burden the economy. A bear market versus a bull market is characterized as timeframes in which securities prices fall at least 20 percent from recent highs amid widespread pessimism and negative investor sentiment.

"What we learned during the '08 debacle is when we're high is best to jump out of the market," he said. The 2008 collapse signaled the recession of March 2009.

The point is, hasty decisions can be made with the push of a button. More people pull the trigger on the stock once it starts to slide. But the first set of investors are the smartest. The last investors to react to obvious news will be left behind. Keep in mind, the market reacts with a delay. Those on the forefront read, pay attention and predict what will happen to make fiscally sound decisions. If one waits to react, it's too late.

It's a day and age of self reliance and self invention.

"Nowadays people talk about being in control of yourself," he said. "And the one thing you can do now is to listen in to conference calls, and you get to hear the smartest guys (in the room, per se) asking the questions."

And perhaps the caveat of being a self assured investor is the way it should be. The market reacts to uncertainty the way someone reacts to an insult. So when U.S. President Donald Trump, as the leader of the free world, spews something on one day and counters it on the next day the market as the business barometer for our capitalist society becomes topsy turvy at critical times.

"We don't know what to believe. Anything he says I think is said according to what he's negotiating at the time," McCowan said.

And for the world according to the technology sector, precision is required to maintain a vision of forward-thinking commerce.

Trade has been a sticking point with this president -- to the point Silicon Valley technology leaders met with Trump's trade representatives to get a pledge their product sales will move in a robust way overseas. It also hasn't helped that Trump's administration has restricted access to H-1B visa workers -- a requirement to gain a competitive edge over other worldly tech-driven regimes.

While coming out of the worst December on Wall Street in contemporary times, the tech giants are feeling the pinch. It's not every day the Dow Jones Industrial Average falls 600 points at the drop of a hat.

Apple, for one, warned of a disappointing earnings report by way of a $5 billion revenue miss as Bloomberg reported, after decades of celebratory gains.

What's happening?

McCowan suggests that after monumental growth of its Mac products and iPhones the Cupertino-based company should move ahead with something else.

"I think the concern with Apple is the competition has caught up," he said.

Could its products have reached a level of market saturation?

"If you've talked to Samsung users lately, they're thrilled with their phones," he said.

It's hard to know what's in store for the behemoth in the tech world.

Apple isn't alone. Tesla is another stratospheric performer that in recent days seen a drop in earnings.

"You're going to have a correction," McCowan said. After all, the difference between shares at $50 versus $300 could be as volatile as a rogue founder, an energy trend or a loss in focus.

Or, could our expectations of our most winningest companies be too high?

Patch posed this question on multiple tries to Apple investor relations personnel and received no response.

But the black and white reality of a flimsy market right now is laid out in Apple head Tim Cook's letter to investors, which revises the earnings ending Dec. 29 as lower than expected from two months ago.

By the numbers, revenue came in at $84 billion, with operating expenses at about $8.7 billion.

First, timing is everything.

"We knew the different timing of our iPhone launches would affect our year-over-year compares," Cook wrote, continuing with: "We knew the strong U.S. dollar would create foreign exchange headwinds, and (we) forecasted this would reduce our revenue growth by about 200 basis points as compared to the previous year. This also played out broadly in line with our expectations."

The next hiccup revolved around "an unprecedented number of new products to ramp during the quarter" with the supply constraints mounting. "Sales of Apple Watch Series 4 and iPad Pro were constrained much or all of the quarter. AirPods and MacBook Air were also constrained," read his statement.

Fourth, an economic weakness in some emerging markets played a role in slumping sales.

"This turned out to have a significantly greater impact than we had projected," Cook said.

Add to that, fewer iPhone upgrades were made than anticipated.

Further, Cook admits: "We did not foresee the magnitude of the economic deceleration, particularly in greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in greater China across iPhone, Mac and iPad."

It's no secret that China’s economy began to slow in the second half of 2018 -- with the government reporting gross domestic product growth during the fall quarter as the second lowest in the last 25 years.

"We believe the economic environment in China has been further impacted by rising trade tensions with the United States. As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed. And market data has shown that the contraction in greater China’s smartphone market has been particularly sharp," the statement read.

Still, Cook defined a silver lining as deeming China as a market for "a bright future," despite challenges.

"And, while we saw challenges in some emerging markets, others set records, including Mexico, Poland, Malaysia and Vietnam," he said.

Apple plans to discuss final results during its first quarter conference call on Jan. 29 at 2 p.m. PST.

--Image via Sue Wood, Patch