Originally Posted by Dr Millmoss
Rationality does take over at some macro scale, but a lot of virtual randomness occurs in between. As the old saying goes, markets trade up on greed and down on fear. Both are emotional, not rational, reactions. Buying what you know and understand is always a good plan -- but still, trying to predict the market on any given day, week, month or even year, is a fool's errand.
Slight elaboration: Actually the bubble phase of markets is driven by quick buck greed (and not greed in the Ayn Rand sense of rational self-interest) and by all the late pilers in to the latest tulip-bulb-prices-(or dot.coms or derivatives of derivatives)-will-grow-to-the-sky mania, but the saying is that even sound bull markets "climb a wall of worry," i.e., the successful investors know (in the long run, yes, and not during any day, month or year) how and when to fight their fear to feed their greed. Further, markets tend to overcorrect in a fall and the savvy traders (again over time) have already started bargain hunting even as the chicken littles are still fleeing in droves, establishing themselves for the next leg up.
Which, thank heavens, until now and hopefully for long to come, has always arrived eventually.
Case study: Warren Buffett.
I don't buy individual stocks or bonds, but after 30 years of investing, if I had to choose one for the long term, i.e., make a bet 10 or more years out, even granting the succession issues looming at some point, and the fluidity of evolving technology markets, I would probably choose AAPL despite its inherent volatility. They're quite the outfit, own and/or master an iconic stable of foundational technologies, expertise, creativity, good consumer will, unprecedented buzz and actual business sense, and will reflect the brilliant team that resurrected them for a good long while.
They could lose their way, could lose their nimbleness in their sheer growing size, get mired like MS in an increasingly growing base of legacy devices and code, etc. But I wouldn't bet agin 'em when taken head to head with any other company I can think of.
Compared to Apple, for example, both MS and Google are basically one cash cow companies. MS is Win, Office and Server - all vulnerable on multiple fronts and Google is AdSense. Google lapped the existing means of delivering advertising. Which means, although they're driving hard and have major research chops, someone else could lap them. When all your revenue comes from one product (they're giving away everything else to spread that product) your profitability, share value and capacity to grow yourself is at-risk if you lose even a few percentage points of share, and people are going to keep probing for soft spots in your strategy.
While who would have thought Apple Computer (remember them?) would go from a struggling box maker with zero experience in the music biz, to being the world's largest music seller in just a few years? Or that they could capture such mind share and design dominance in the phone market in even less? That people would be lining up for days outside of physical Apple retail stores? That they would own an astounding percentage of the over $1000 personal computing market and be closing in on double digit US market share? Would build native Exchange into their OS before MS did? Would account for an inordinate share of photo and video uploads? Would go from zero to billions of sales in their mobile App store in the blink of an eye? Would be a major contributor to key open source technologies with good relations in that community? Would not only switch to Intel CPU's, but render the word "Wintel" null and void? Would own their own custom fab? Would go from Greenpeace pariah to ranking reasonably well on green lists?
Sure there are niggling miscues, questionable design, tactical and occasionally strategic decisions now and again, and challenges from many other creative savvy companies, but Apple, Inc. is a diverse, vibrant, well-run, well-positioned modern corporate machine firing on all cylinders.
Even if they continue to withhold the deserved gift of a headless mid-tower mac for the long-clamoring faithful of moderate means in favor of chasing rapidly growing markets.