"Adventures in Financial Market Efficiency"
Did something happen to the quality of Google’s products in January 2008 that made the company less valuable? And by coincidence something else happened to Apple’s products at the exact same time? And the problems were roughly of the same magnitude and duration with the same false dawn followed by July ’08 renewed downturn and the same January 2009 low point? Or can we just be reasonable and say that obviously there’s some murky element of market psychology gyrating fairly wildly across a time when both firms were steadily rolling out successful products?
The fact that these gyrations are unpredictable and there seems to be no reliable way of making a profit off them is interesting and important, but it seems odd to dignify it with the valorizing term “efficient.” As it happens, these are both large cash-rich firms whose actual operations were unaffected by the Jan 2008 — Jan 2010 sag in their equity value. The iPhone 3G and 3GS, the Android operating system, the new MacBook Airs, etc. were all released and all successful and there was no problem of lack of equity or lack of creditworthiness. But not all firms are so favorably situated. Plenty of good ideas are developed by people who don’t work for large, established cash-rich firms that can shrug off generalized financial market panics.