This is an old saying that we constantly heard during earnings season, leading up to QE2. It is known as one of the old wives tales of investing. A fairly simple concept, but with many different analysts expressing their different opinions, it turned out to be a confusing idea to some.
Basically, the saying suggests that the rumors leading up to some sort of announcement fall short of the high expectations of the rumors the majority of the time. Much more of a concern to short-term investors than the long-term because of the quick swings of short-term reactions. When Apple was scheduled to release their earnings, you begin to hear thousands of possibilities of what their earnings are going to turn out to be. This anticipation has wild ranges and the stock price surged upward, crossing $300 a share for the first time, pricing the exceptional expectations into the stock price. Then, when the news is announced, and it doesn't meet the high expectations, the stock price drops. So, a profit seeking venture would have the short-term investor buying the rumors and selling when the news is finally released. In the case of Apple, hopefully that investor got back in as now Apple is flirting with $320 like it's the hottest girl in town.
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