Tuesday, October 18, 2005

The Magazine Indicator: Will the Apple Fall?

Shorts on Apple loom around the corner now that the consumer gadgets darling has made the cover of a major publication.

For those not privy, magazine covers are contrarian indicators traders have been using for years.

As the dominant Wall Street trope goes, "if your shoeshine boy is pitching you stocks, sell everything."

Since shoeshine boys are approaching obsolescence, today we use magazine covers to tell us when a stock has topped.

You'd be surprised to see how often they work.

Barry Ritholtz recently culled some examples of how magazine covers signal drastic changes in trends:

Fortune's housing cover...

Forbes nailed the top in the technology recovery on February 05, 2004.

Time top also ticked the internet bubble, naming Amazon's founder Jeff Bezos as its man of the year in December 1999.

Indeed, the mother of all magazine cover indicators was when Business Week nailed the bottom of the Bear Market with their infamous Death of Equities (1979) -- just before the beginning of an 18 year Bull market.
We find it hard to believe that Apple's glory days are over.

The core of Apple's genius lies in its ability to reinvent itself when the situation calls for it.

Unlike, say, AT&T (in the 80s and 90s, Ma Bell destroyed shareholder value by going after businesses like NCR) -- Apple has branched off into domains not its own and found gold.

Apple is loved because they embody something truly American: the art of change and mutability.

They also kick ass at marketing.

The iPod campaign, entrenched in counter-cultural estheticism, dropped on us like a sumo wrestler falling out of the sky.

And who can deny the micromanagerial prowess of Steve Jobs?

Kudos to him for sustaining Apple's enviable and organic product chemistry -- without Jobs, Apple's name wouldn't be synonomous with paradigm-shattering digital music media.

Apple may turn out to be one of those rare companies that leapfrogs the ill that historically follows a company after its face lands on an internationally recognized magazine such as Time.

Because Jobs isn't afraid to lose, it's almost guaranteed to he'll (continue to) win.

Only TIME time will tell.

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