What price will Apple and Toyota pay for their endless denials?

Forgive me if the two things I want to write about today are old hat by the time you read this, but I was struck by several eerie similarities between them.

If you are any sort of technophile, then you have undoubtedly been following the whole Apple iPhone 4 story as if it were your favorite soap opera.

First there was that incident wherein an unfortunate Apple engineer accidentally left his prototype at a bar. When a curious tech blog immediately bought up the stray and threatened to expose its guts to the world, Apple, which used to be run by such nice young folks, got positively Stalinist in their demands that their property be returned immediately.

Strange...

At the time, it struck some of us as strange that Cupertino should be so hostile, as the publicity only seemed to stoke the Apple Heads' lust for the new toy.

 

Indeed, so many folks attempted to preorder new phones, they managed to crash both Apple's and AT&T's servers, and on launch day, whole cadres of loyal early adopters lined up for blocks and waited as long as 48 hours to get their hands on a new, as yet untested phone. In the end, the iPhone 4 was the most successful new product launch in Apple's history.

And now it gets odd.

Stranger...

Within hours, thousands of complaints began to crop up that you would lose your call if you allowed your palm to contact the bottom corner of the phone.

This was a particular sore point with the loyalists, because poor connectivity and erratic throughput are perhaps the only major flaw in the whole iPhone story, and the new "i4" was pitched specifically as the rather expensive cure for same.

At first, Apple denied the troubles outright. Then they conceded that if you touched an I4 "improperly" it might drop a call, but suggested that owners hold it more gingerly, or perhaps drop another $20 on a bulky protective cover for the poor thing.

And then things went from odd to Kafkaesque.

And Positively Bizarre

In an open letter, Apple noted that it has apparently been miscalculating signal strength for the entire lifetime of the product line – not just for the i4, but every single iteration.

When your phone was indicating "5 bars," – perfect reception – perhaps you had only two bars, or maybe even just one. So when you touched the phone while dialing, they tell us, you didn't actually degrade reception quality at all.

Because you never actually had any reception in the first place.

It's All YOUR Fault

But wait: This was not a confession!

Rather, Apple views it as a perfectly logical response that shifts the entire issue onto clumsy phone-clutching consumers, who, Apple points out, are free to return an undamaged phone at anytime. When pressed, they proposed a software patch that will increase the displayed size of your two or three remaining "bars" of reception.

The fact that they have just conceded to years of fraudulent representation – wherein millions of buyers were enticed to buy products based on critical presented abilities the phones simply did not ever have – hasn't even dawned on them yet.

As I sit to write to you, once invulnerable AAPL shares, which had just set a new all-time high, are putting in their 13th red candlestick in the past 15 trading days. If they continue this trend for another 15 trading days, they will move below the 200-day moving average for only the second time since April of 2009.

(Apple may be in the news, but it's not the only headline moving the market. Be sure to sign up for my fellow editor Justice Litle's investment commentary.)

The Ultimate Fail

Is Apple about to join Toyota (currently "enjoying" its umpteenth recall) as a former icon of quality now firmly associated with failure and denial?

While I suspect so, I don't know for sure, and to be frank, this is not the point of today's column.

I mentioned at the beginning that I saw a rather creepy parallel to Apple's story lurking out there. I am referring to the latest news on unemployment that is dragging the market into the doldrums.

The Prop Job...

The details of this second story are as follows: Washington had promised that the jobs situation would improve – soonest if possible but certainly prior to the mid-term elections come November.

When this did not appear to be happening, the folks at Census were apparently tasked with propping up the numbers to the extent where they represented some 95% of hiring that month.

Now I must confess that I was not a fly on the wall at the meeting where this was dreamed up. Perhaps the fact that the Census department claimed to have hired the same temp workers over and over (and over) again – as revealed by investigative reporters at the New York Daily News – was mere coincidence.

And the Price

That's just as likely as the idea that absolutely no one at Apple knew anything about the false reception readings on all iPhones until last Friday.

But here's my real point: Eventually, the truth gets out, and if these guys thought it was bad before they obscured and obfuscated and denied (and perhaps, just perhaps, even fabricated?) then they surely underestimated the price of such propaganda.

In my master chart of the OEX, I have a name for the bundle of thoughts that has repeatedly tanked the U.S. stock market.

Forget Trust – Just Verify

I call it "the loss of trust" meme.

Folks used to trust Apple and Toyota to deliver worthy innovative products, just as they used to trust the U.S. stock market to "always go up eventually."

Now we are seeing the cost paid when that trust evaporates.

Please understand that I am not saying that no stock or bond will ever again be worth buying. Rather, I am warning that the days of throwing a dart, and trusting that eventually you would make money are long gone.

Forget "the Dow." Forget "set and forget". Forget "investing."

It's an analyst's market, a trader's market now – and perhaps forever.

Don't forget to follow us on Facebook and Twitter for the latest in financial market news, investment commentary and exclusive special promotions.

Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to original content orwww.taipanpublishinggroup.com.