I remember the day the news hit that a CEO of Seattle-based company, Gravity Payments, decided to pay everyone who worked for him at least $70,000/year. The thought process was that his people were not making enough money to make ends meet. A quick thought came to mind. It wasn’t a nice thought! It was : “how long until this man is out of business?” The thought process was simple.
Your people who were already making $70,000, who started at lower levels, worked their tails off and EARNED the higher pay would not be happy. New hires would make $70,ooo even though others making the same amount had been there for years. It didn’t matter how long you had been there, how hard you had worked, how many hours you had put in. Here’s $70,000.
Your people who did not have the skill set to earn the $70,000 would no longer have the incentive to learn or work to get that skill set. Those same people who otherwise would make $30,000 were now eating up $40,000 of capital that could have been used better elsewhere.
Your people who may have worked harder to make that $70,000 no longer had the incentive to work harder to make that $70,000.
So what happens?
He lost some of his best employees. He lost some of the customers of his best employees and has now fallen on hard times. It does not take a Sigmund Freud to figure out why. People love to aspire. People love to reach higher. People want to work harder…all in knowing their is something bigger out there for them. When they see that is no longer the case and you are no longer looked at based on your greatness or lack of greatness and that your pay will be equal to someone that you deem not as qualified as you, you will react. That reaction is usually to move on.
$15 minimum wage anyone?
As we have written, Apple has continued to underperform and now, as we write this, has broken some very important technical levels. Just remember, when we use the words “technical levels,” we are talking price, not someone’s opinion. In case you did not know, it is price that counts most.
It is not thrilling to lose arguably, the most important stock in the market. It is that important because it is the most loved stock in history and the most overowned stock in history.
It is important because of its big weighting on many indices.
It is important because it is a megacap tech company. Megacap tech is what has been leading this market.
It is important because it is representative of growth, of beta and of leadership stocks.
It is important because it influences psychology.
Keep in mind, it typically takes a lot to crack such an important name. But in real time, it is now happening. Not only has Apple moved below the all-important, longer-term 200 day moving average but it has breached it’s last important breakout to the upside at $120. The stock still has the rest of the week to reverse but so far, ain’t happening.