Follow The Rules

We interrupt this regularly scheduled edition of the Lund Loop newsletter to bring you a special edition of “The Worst Calls of All Time.”

It was September 26th, 1997, just over two months since Steven Paul Jobs had officially returned to the company he founded to take over as CEO from Gil Amelio (who?).

During Amelio’s reign, Apple suffered $1.6 billion in losses, essentially wiping out every bit of profit the company had earned since 1991.

And on this day, Jobs was preparing to deliver the coup de grâce to investors as the company was about to report its largest quarterly loss ever - $161 million.

Hopes were high that the Prodigal Son could pull off a turnaround, particularly among Apple employees, whom the mercurial Jobs had endeared himself to even more on his first day back at the helm by repricing their options.

But the cold hard truth was, besides massive losses, the only other thing he had to announce was a new marketing campaign.

Understandably, other tech leaders were skeptical that Jobs could save the faltering company, which, at the time, was rumored to be a prime acquisition target for Sun Microsystems (who?).

Fast forward one week later to an industry event where billionaire computer maker Michael Dell is onstage doing a Q&A with reporters and asked what he would do with the struggling Apple.

“Shut it down and give the money back to shareholders,” came his reply.

A few days later at a company town hall, Jobs gave his reply.

“Fuck Michael Dell.”

On Thursday, Apple reported quarterly revenues of $59.7 billion and the stock closed the week at $425.04.

Apple has split three times since Jobs returned - 2 for 1 in 2000, 2 for 1 in 2005, and 7 for 1 in 2014 – and those options he repriced on his first day back have a split-adjusted cost basis of $0.49.

Apple also announced a 4 for 1 split this week.

This has been “The Worst Calls of All Time”- Michael Dell edition. We now return you to the regularly scheduled Lund Loop newsletter.

Apple (AAPL)

Weekly: 14.73% YTD: 44.74%

On Friday, AAPL gapped up and reclaimed it’s previously broken trendline.

How crazy was this move? Both macro and micro, let us count the ways.

  • The stock closed up 10.5% on Friday, adding $171 billion in market cap in one day

  • That one-day increase in market cap alone is more than the total market cap of 465 of the S&P 500 companies

  • Apple’s $1.84 trillion market cap is getting close to the total market cap of the Russell 2000 ($2.06 trillion)

As far as the intraday move, I don’t think I’ve ever seen anything like it with a company of this size.

After gapping up, the stock based sideways for most of the session. Then, with only two hours left in the day/week, the stock broke above it’s opening high.

At this point, it was already up 7% on the day, but it just continued to grind higher.

The move was so relentless that on a 5-min chart not only were there no candles that closed below the 9-period EMA (red), but there were no candles that closed below the friggin’ 5-period EMA (blue).

And to top it off, the stock closed just $0.62 off the high of the day.

But there’s more.

Options traders are thought of as some of the smartest traders on the street and as such, price their contracts to perfection.

And at 2:15 pm EST, perfection had the $420 strike AAPL calls trading for 3 cents.

And why shouldn’t they be? The stock was already up 27 points and was trading at $412.00, 8 points away from the strike, with less than 2 hours left in the trading day.

But here’s what happened to those 3 cent calls going into the close.

Between 2:15 pm and the close, those near worthless options closed in-the-money at $5.16 – up over 17,000%.

That is full-on crazy.

We’ll take a look at some of the other crazy moves in tech this week, as well as 30+ other charts, but first, stick with me for a moment while I tell you a story.

I promise it will be worth it.

If you obey all the rules you’ll miss all the fun.

- Katherine Hepburn

You have to learn the rules of the game, and then you have to play better than anyone else.

- Albert Einstein

Regular readers of the Lund Loop know that during the coronavirus crisis I’ve rediscovered my love of nature in the form of daily hikes.

My current favorite trail gently winds along the top of a ridge, then slides down through a Tuscan-like valley, finally terminating at the shores of the Pacific Ocean.

I can’t describe the feeling of inner peace the consumes me upon setting foot on this trail.

My trail.

My stress melts away, my cares scatter in the offshore breeze, and I’m sure my blood pressures takes a nosedive when I’m on this trail.

As you get older, you begin to discover how certain causal factors – many of which youth provides immunity against – tacitly affect your well-being.

Throwback a couple of Del Taco tacos slathered in “Del Scorcho” hot sauce in your 20’s and you’ve likely got nothing to worry about. But try that same shit in your 50’s and you’re playing Russian roulette with your gut.

Sidebar: Del Taco? Of the taco?

As I’ve entered into the back half of 100, one of the subtle quirks I’ve learned about myself is how the aesthetics of my surroundings subconsciously affect my mood.

Cluttered, busy, and overly eclectic environments agitate me and put me ill at ease, while clean lines and open spaces allow me to relax.

A Rococo apartment in France is my hell, a ryokan in Japan my heaven.

That heaven extends to nature and the things that inhabit it. The things I find on the trail.

My trail.

Where, against the backdrop of ocean vistas, stand Oak and Sycamore trees surrounded by Chaparral, Coastal Sage, and prickly pear cactus, all providing cover and home to various creatures.

Not a hike goes by where I don’t see quail, rabbits, lizards of all types and sizes, hawks, and a roadrunner. I’ve even had the good fortune to come across a Western Diamondback and a bobcat.

Unfortunately, there is another of nature’s less desirable creatures – along with the annoying baggage they bring – who regularly spring up along the trail.


People, on my trail.

For most of my life, I’ve been what you would call a rule follower, but in my younger days, I fancied myself a rebel.

A sitting on the couch while watching rebellious stuff on TV rebel, but a rebel, nevertheless.

I’m ashamed to admit it, but too honest to deny it, as a young punk, I would have been enamored of the exploits of Antifa, and to some extent, even the casual rioter.

These days though, I have nothing but contempt for the wanton destruction these groups perpetuate on a nightly basis.

It’s not the act of growing old that’s soured me on their anarchic ways, but an understanding of the consequences they’ve wrought.

I know what it’s like to work hard and run a business, one that supports a family.

I know what it’s like to actively, and often begrudgingly, play by the rules of society.

To do the right thing, even when you don’t want to - and when doing so comes at your own expense – in order to build something of substance.

Antifa doesn’t follow the rules. The rioters don’t follow the rules.

And neither do these fucking people who transgress upon my trail.

Let me be clear here, I know it’s not my trail. I use “my” in the collective form, as in, it’s a trail for anyone who wants to follow the rules.

Some rules are unspoken, while others explicit, but both should be followed just the same.

For example, the hikers’ code says that when two people approach from opposite directions on a single-path trail, the person moving downhill must yield to the upsloping traveler.

Okay, that one might be a little esoteric. I’ll grant the non-hikers a pass.

But some rules are – or should be – obvious.

When I’m ensconced in the bliss of nature, where the only sounds come from the wind through the canyons, the cicadas, or the warble of the Orange-Throated Gnatcatcher, I don’t want to hear your music.

Your mariachi music, your K-pop, your heavy metal, and especially your country western has no place being blared through that crappy Bluetooth speaker you got at the company Christmas party.

In fact, the only remotely acceptable broadcast music on the trail is Zamfir, Master of the Pan Flute’s Greatest HitsVolume III – and even then I’d have to be receiving an essential oil shoulder massage from a licensed Peruvian Sherpa to make it palatable.

But here’s the big one. The big rule.

At every trailhead and entrance point, there are large signs that both in words and imagery – the outline of a canine head with a bright red “X” across it – tell hikers in no uncertain terms that dogs are not allowed on the trail.

And yet, almost every day on my trail I see people – usually a couple – ambling along with a Fido, a Spot, or a Reno.

I see people breaking the rules.

Why follow rules?

And why is the 16-year-old Brian likely to find them arbitrary, punitive, and Rococo, while the 52-year-old Brian is more inclined to view them as measured, sensible, and a necessary, ryokanian way to maintain order and harmony?

The answer is more complex than you might think and may reveal more about yourself (read: myself) than you might want to know.

Let’s take the pooch predicament as an example.

People like their dogs. I get it. Not really, but I get it in the abstract.

I mean what’s more quintessentially American than the image of a loyal mutt – or $3000 purebred - scampering alongside its master as they wander a forest path together?

So why ban dogs on the trail?

Is it the result of some random ruling by a non-dog loving politician?

No. There’s a rationale.

From the info board at the trailhead.

Leave Your Dogs At Home. Dogs are natural predators who mark their territory to keep competitors away. Their scents confuse territorial markings and their presence scares wildlife. They also tend to run through poison oak, coating their fur with toxic oil and transferring it to you.

Let’s break this down.

The dog lovers will rationalize.

“That is for other dogs. Less well-behaved dogs like Lulu. I can bring her on the trail because I’ll keep her on a lease. She won’t get or give me poison oak.”

And the nature lovers (me) will rebut.

“Does your dog’s scent stay on a lease? According to a nature film I saw in 2nd grade when my teacher came to school drunk, wildlife can smell the scent of a predator from 8,000 miles away – and it doesn’t tell them that they’re on a lease.”

“But my dog is so sweet. Bennie wouldn’t hurt a hair on a hare’s head.”

“You don’t seem to be carrying any plastic bags, and I don’t want to accidentally step in your dog’s shit in the middle of a Zamfir jam.”

And so on.

It’s a tricky logic experiment.

Side note.

So what do you do when you see someone on the trail with a dog, flouting the rules, and potentially upsetting the natural ecosystem that you and your other non-music playing, dog walking, right of way allowing hiking comrades prize so dearly?

Do you stop and chastise them, pointing out the rules and sign markers they’ve (purposefully) overlooked?

Do you act with simulated helpfulness and empathy, and proffer an “I get it, but there are some stupid rules, and I don’t want you to get in trouble” approach?

I don’t know.

Are you willing to be the proxy for every person in their life who told them they couldn’t do something they wanted to do?

For every teacher, every coach, every parent, every ex-spouse?

Do you want to represent, in human form, the pain from all the past wrong decisions they’ve made in their lives?

No way.

You know as well as I do that in this day and age when the ponies and peacocks are allowed in the first-class cabins of transatlantic flights for “emotional support,” that with any of these honest tactics you’re just spoiling for a fight with the double mochaccino set.

So you get smart. And lie like a motherfucker.

“Oh, hey, be careful,” you say with your best faux smile. “There are two park rangers right up around the bend and they might cite you for [nod in the direction of] the dog.”

But I digress.

The takeaway here is that we interpret rules not based upon the objectives they are trying to accomplish, but on how valid we feel those objectives are related to ourselves and our circumstances.

In other words, the way we pick and choose the rules by which we abide by is more a reflection of our own personal issues than of the rules themselves.

“I’m not going to put in a stop because I did the analysis and I know the stock is going to go up.”

“I won’t close this position out because if I do, I’ll be admitting to myself that I was wrong. And I can’t handle being wrong.”

“I know that as soon as I sell, the market will turn back in my favor, and I’m not going to miss out on that.”

From Mark Douglas’ book, Trading In The Zone.

A typical trader won’t predefine the risk of getting into a trade, because he doesn’t believe it’s necessary.

The only way he could believe it isn’t necessary is if he believes he knows what’s going to happen next.

The reason he believes he knows what’s going to happen next is because he won’t get into a trade until he’s convinced that he’s right.

At the point where he’s convinced a trade will be a winner, it’s no longer necessary to define the risk.

Because if he’s right, there is no risk.

Typical traders go through the exercise of convincing themselves that they’re right before they get into a trade because the alternative – being wrong – is simply unacceptable.

Remember that our minds are wired to associate.

As a result, being wrong on any given trade has the potential to be associated with any – or every – other experience in a trader’s life where he’s been wrong.

The implication is that any trade can easily tap him into the accumulated pain of every time he has been wrong in his life.

I’m not going to follow the rules because the rules don’t apply to me.

My trade.

My trail.

My rules.

Hey, before we get to the charts and the links, please give me 37 seconds of your time.

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Talk to you soon,


P.S. It should go without saying - but I’ll say it anyway - all opinions expressed in The Lund Loop are my own personal opinions and don’t reflect the views of my employer, any associated entities, or other organizations I’m associated with.

Nothing written, expressed, or implied here should be looked at as investment advice or an admonition to buy, sell, or trade any security or financial instrument. As always, do your own diligence.