On walkabout in life and technology

Priming the Pump

When it comes to stocks, priming the pump works like this:

  1. Release a very negative article on a stock, citing rumors and anonymous sources (none of which is verifiable).
  2. Wait for the stock price to drop because your readers trust your credibility.
  3. Buy loads of the stock cheaply at the new lower price.
  4. Wait for the next earnings report to prove you wrong (which you knew already).
  5. Profit.

Despicable. Yet legal.

It’s a practice you expect from shady web sites like Business Insider. But not from professional news organizations like the New York Times, Washington Post or Wall Street Journal.

Today in “Apple Cuts Orders for iPhone Parts” (I refuse to link this), the Wall Street Journal just primed the pump on AAPL. The WSJ knows that “channel checks”, where analysts ask the suppliers of a company what order levels are like, are extremely unreliable. Manufacturing is seasonal, starting stock levels are unknown, future needs are unknown and most big companies have multiple supply channels.

But no, WSJ went there today. They know the next Apple earnings report is coming up on January 23, 2013. They know that both AT&T and Verizon have reported blockbuster sales of iPhones in the USA, both Japan and China are nuts for Apple products, and Apple has reported insane volumes of app sales over the last quarter. They know that Apple’s earnings are going to be the best ever.

But the WSJ primed the pump today and pushed Apple’s shares below $500 in pre-market trading. We can only trust that the market is smart enough to ignore this despicable behavior (AAPL is down at the open, but above $500).

So shame on the WSJ for priming the pump. You’re better than that!

Update: Looks like Nikkei and Reuters are also reporting this. Both imply that the change is in response to weaker demand (which is the author’s opinion and is not supported by facts). Both also mention the source is only one company, Sharp, and yet they both forget to mention that Apple also sources its displays from Samsung and others.

Update 2: Turns out, WSJ had some pretty horrendous made-up numbers in the article, but removed them some time this morning, leaving just the anonymous sources. Unable to find a link to those either.

Update 3: Jim Dalrymple points out Apple can’t respond to rumors of iPhone 5 cuts even if it wanted to because of a mandated SEC quiet period leading up to the earnings call. Something WSJ also knows, and they still published! That’s even more despicable.

Follow the author as @hiltmon on Twitter or @hiltmon on App.Net.