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Comment by nodesocket | Hacker News Reader

I find it a bit ridiculous Carl Icahn can go on "Power Lunch" on CNBC, speak for a few minutes, and cause investors to go into a selling frenzy (not only AAPL, but the entire market NASDAQ and DOW was affected).

Securities are so easily multiplated and affected by CNBC and their interviews, it is a bit scary. Perhaps even more scary are reporters who basically write opinion pieces and affect security prices.

Looking on Carl's twitter (https://twitter.com/Carl_C_Icahn/status/725717908056330241) he even said he was going on "Power Lunch" before he did. Of course it would be hard to know what news he was going to deliver, but you have to think some people "in the know" had an idea and made some money today.

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If you're bullish on AAPL, this is the kind of stuff that investors can and should take advantage of. Apple is the same company yesterday as it is today. It's ability to generate cash is the same today as it was yesterday. Carl Icahn saying something on TV doesn't change that.

From one of Warren Buffet's annual letters:

“If a moody fellow with a farm bordering my property yelled out a price every day to me at which he would either buy my farm or sell me his — and those prices varied widely over short periods of time depending on his mental state — how in the world could I be other than benefited.

If his daily shout-out was ridiculously low, and I had some spare cash, I would buy his farm. If the number he yelled was absurdly high, I could either sell to him or just go on farming.

Owners of stocks, however, too often let the capricious and irrational behavior of their fellow owners cause them to behave irrationally.

Because there is so much chatter about markets, the economy, interest rates, price behavior of stocks, etc., some investors believe it is important to listen to pundits — and, worse yet, important to consider acting upon their comments."

That works because farms have fundamental value. If it's a baseball card (no dividends, no buybacks) you have to pay attention to what randoms believe because selling to them is the only way you can realize any return.

AAPL does, however, have both dividends and buybacks.

And a huge pile of cash, right?

And another pile of patents.

And a global horde of loyal customers who will buy their products at above-market prices.

It's not saying that apple is suddenly worse than yesterday. It's that new information may make you suddenly realize you overvalued it yesterday, right?

I mean, part of the entire point of the stock market is that it operates on investor confidence; these kind of effects happen all the time from many different causes. If this kind of thing scares you, it kind of seems like the whole stock market itself would scare you.

Heck, there's a separate sub-sector of the financial industry devoted to "dark equity" and hiding the actions of influential actors in order to not produce these effects.

What's scary about it to me is simply the amplifying effect of celebrity investors. Lots of individual investors making individually irrational decisions can at least all cancel each other out, but when one irrational decision can drive thousands of other investors to all make that same decision at the same time, that's another matter.

Do you think this effect has any more drastic consequences than the average celebrity endorsement of any product in any other industry?

Yes, because a bunch of people deciding that they need a GoPro that they'll never use or drop extra money on a fashion line that has some celebrity's name on it isn't a big deal. That is money that is gonna be spent anyway.

Sending irrational ripples through the stock market affects things like interest rates, retirements, and employment in a somewhat widespread manner.

This is basically a recurring theme in Dilbert and also as an episode in the TV show. http://www.imdb.com/title/tt0803252/

Investor confidence depends on information from sources of varying credibility, and if CNBC is using their position as a source of market information it's probably good to keep their editorial policy on a short leash. Icahn is rich and famous so he can probably get on the show any time he wants, but to the degree that he's pumping with questionable intents he and the network are open to criticism.

If you know what's going to affect a security ahead of time, you can front run it :)

The whole thing is a scam, and by not doing anything the SEC is enabling this kind of behavior. Carl Icahn and CNBC should already have been investigated for this open manipulation of the market. We know that there are just few corporations with this power over the markets (CNBC, Reuters, Bloomberg, and WSJ). They should be on a tight leach by the SEC.

> Carl Icahn and CNBC should already have been investigated for this open manipulation of the market.

I'm not necessarily disagreeing with you (or for that matter agreeing with you), but where would you draw the line of free speech?

You're welcome to disagree with the definition, but the SEC already has defined "fomenting." In fact, there's already a fairly famous episode involving Apple: http://appleinsider.com/articles/09/03/13/jon_stewart_expose...

> this practice of "fomenting the market" is "actually blatantly illegal, but when you have six days and your company may be in doubt because you are down, I think it is really important to foment." Cramer specifically cited the example of stirring up rumors that Apple's iPhone would be rejected by both AT&T and Verizon Wireless, and that it wouldn't be ready to demonstrate in time for Macworld in 2007.

Free speech cannot be used to protect people who commit crimes against the economy. See for example scammers Kevin Trudeau, who was imprisoned for selling false information. These market manipulators could be convicted in a similar same way.

> Free speech cannot be used to protect people who commit crimes against the economy.

That's a tautology, and not very defining or useful. Of course the things that are crimes are not covered by free speech. But the question was, where do you draw that line? Sure, willfully misleading people can be fraud in some situations (note that lying is protected speech in some situations[0]). But there's a whole continuum of situations relating to speech and the economy. Is it free speech if you publish (true) information about a company that results in the stock price changing? Is it free speech if you publish wrong information that you believe to be true and it results in the stock price changing? What if you publish wild speculation without solid evidence (as people frequently do for predictions of Apple products) and that causes the stock to change?

[0] http://law2.umkc.edu/faculty/projects/ftrials/conlaw/lying.h...

Kevin Trudeau was imprisoned for contempt of court, not for selling false information.

You might enjoy Taleb's "Fooled by Randomness", which is a smart and personal look at how insane that system is.

After reading that, I ended up explicitly ignoring my portfolio except at rare scheduled intervals. I'm much happier, and I don't think my results are any worse.

stock markets are mostly mind games. cue warren buffett's fear-greedy quote.

The fact Icahn exited his position in February gives other investors the impression his model makes accurate predictions.

Well, that was also when Apple gave its guidance, which ended up pretty much spot on.

All Carl Icahn has to do it is tweet, he does not even has to go to CNBC.

He's got 279K followers, what's CNBC (or Power Lunch's) viewership, and how many of the viewers also follow him on Twitter?

CNBC averaged around 200k viewers during daytime recently: http://www.wsj.com/articles/cnbc-to-stop-using-nielsen-for-r...

In 2009, Power Lunch supposedly had about 400k viewership, but it's declined annually since then.

I would guess there is not a large overlap between CNBC viewership and Icahn's Twitter followers, but I don't have any data for it.

However, anything significant Icahn tweets is amplified beyond his readers. I've long wished Twitter would show embeds alongside favorites and retweets, because embeds contribute substantially to a tweet's views.

Yeah, pass-along would easily be higher for Tweets.

Were you scared when he bought three years ago, and went public?

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