Efficient Market Hypothesis Debunked
I used to believe in the Efficient Market Hypothesis. Until yesterday and today, when it showed itself to be retarded.
I mentioned the jump in AAPL shares in response to the iPhone. That went up again today, for a total increase of about 13% in 2 days.
Now, if the market was truly efficient, how could this happen? Pretty much everyone expected Apple to debut the iPhone yesterday. I suppose all of the previous rumors and shenanigans made it less than 100% certain, but I can’t imagine it was nearly uncertain enough to warrant that sort of reaction. If the market was truly efficient how could it react so strongly to something it already knew was a virtual certainty?
Maybe the phone turned out better than a lot of people were expecting, but I don’t really see how that could be. It costs $500 with a two year contract and is tied to one carrier. How many units can this thing sell? I’d be more inclined to buy Apple stock if they did basically what everyone was expecting and took a mediocre phone, painted it white, and made it play iTunes.
And also, does anyone know how much profit per unit Apple stands to make off of each? I can’t see how they could. I doubt Apple even knows for sure yet. So even if Apple sells 10 million of these phones in 2008 (and that means roughly 1/5th of all Cingular subscribers have to buy an iPhone. I’ve read that people change phones on average ever 2.5 years, which means that roughly half of all Cingular subscribers who buy a new phone have to plunk down at least $500) nobody has a clue how much their making on it.
And also there’s the well-known fact that Cisco owns the trademark on the name iPhone here. The two companies were allegedly in talks as of yesterday, but as of today the news is that they fell through and Cisco has officially filed suit. What does that do to the profit margins?
Casting even more uncertainty on the EMH is the fact that RIM’s stock dropped about 8% too. 8%? Could any intelligent person consider the iPhone a serious threat to the Blackberry? Not any intelligent person who knows anything about gadgets, that’s for sure.
These two products aren’t competing for the same customers. Even the few carefully chosen Apple cheerleaders who got a little hands-on time with the phone yesterday described typing on it as being not as good as a dedicated keyboard. Of course it isn’t, it couldn’t possibly be. And when the kind of people Steve Jobs trusts enough to handle the most eagerly anticipated release in his corporation’s history say it “isn’t as good” that really means its going to be annoying as hell to anyone but an Apple fanboy.
I’m not really sure who is going to buy this phone. Their marketing is good enough that lots of douches with more money than brains will pick one up, but 10 million of them in a year? For a $500 phone without 3G but with an obnoxious contract on a sucky cell phone carrier? I just hope Bodog puts up an over/under on that one. The iPhone is going to be the biggest disappointment since the PS3.
January 11, 2007 at 7:33 am
I’m interested in seeing how these work. The synching ability looks nice as does the internet and email applications. As you said, typing is going to be a key concern. If typing isn’t a pain, I will gladly get rid of my Treo and Sprint for Cingular and the iPhone.
Everything looks better on the iPhone then it does on the Treo. I haven’t used Blackberry’s much and my understanding is that they are significantly better then Treo’s so I’m not sure how this will effect their market. However, the Treo is pretty much the poster child for poor electronics design. Apple above everything else are just about the nuts when it comes to UI design. I can’t imagine who the iPhone will not trump the Treo in email, internet applications, and organization.
Apple stock has been on a very nice run since 2003 and a run I’m glad to have been on. They own the market in MP3 players, have their biggest market share in computers since the 80′s and now are in a position to use their popularity to get into the wireless phone market. I don’t really see the iPhone being a bust at all. I don’t expect it to destroy RIM at launch but I think you’ll be surprised with it.
January 18, 2007 at 6:45 am
I never believed the EMH. It depends on people reacting RATIONALLY to publicly available information, and people do not act rationally, and seem to be even less rational when money is involved.
As far as the iPhone, I know all my gadget-geek friends want one, but most of my other friends have never even heard of it.