Google Target $4000 And Actions Semi's Unjustified Fall

Trader Mike put up a nice video on the concept of Web 2.0 that is basic but nice to watch. It kind of hammers home the point of what we’re trying to accomplish here, a collaborative trading community that harnesses the power of our collective experience.

One thing I realize in trying to write a book is what a huge step backwards it is to have to put words on a linkless page. I predict right now that the successful evolution of EBook devices will lead to a new Renaissance of reading and writing as the average person becomes able to convey hundreds of pages of data and concepts in a simple 12-page article that, in turn, references thousands of other pages that, in turn references thousands of others, quickly putting millions of hours of research work in the hands of anyone who should think to ask a question.

Just as the 1447 invention of the printing press did not instantly wipe out handwritten manuscripts or oral communication, Wikis and blogging are not going to immediately replace "Mainstream Media," but over time, it is clear that IREM (Instant, Robust, Electronic Media) will force the MSM to reexamine its place in the world.

We (a group of fellow bloggers at Information Arbitrage) had an altercation recently with the Wall Street Journal over a hack piece that was written attacking Blogging, Bloggers, the "imbeciles" who read blogs and anything else that doesn’t generate revenue for the WSJ (written by an assistant editor, of course). I won’t get back into it, but you can read commentary of myself and others here.

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Tech Guru Robert X. Cringly (I always use the X because it’s cool) is topping my 2015 $3,000 price target on Google (GOOG) by going to $4,000! He’s uncovered a covert plot by Google to accumulate all the spare bandwidth on the planet as a prelude to moving against your local service providers.

Extrapolating BitTorrent traffic to its logical conclusion, Cringly reasonably estimates that Google has figured out that ISPs have underestimated bandwidth needs by a factor of 30. He concludes:

"Those ISPs will be faced with the option of increasing their backbone connections by 30X, which would kill all profits, OR they could accept a peering arrangement with the local Google data center.

Seeing Google as their only alternative to bankruptcy, the ISPs will all sign on, and in doing so will transfer most of their subscriber value to Google, which will act as a huge proxy server for the Internet. We won’t know if we’re accessing the Internet or Google and for all practical purposes it won’t matter. Google will become our phone company, our cable company, our stereo system and our digital video recorder. Soon we won’t be able to live without Google, which will have marginalized the ISPs and assumed most of the market capitalization of all the service providers it has undermined — about $1 trillion in all — which places today’s $500 Google share price about eight times too low."

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Speaking of being valued 8 times too low, check out Actions Semiconductor Co., Ltd. (ACTS) (2/6), which just took a 5% hit (just .35) down to $7.39. Usually when a stock is this cheap I just buy it, but as it’s a Chinese ADR I’d rather limit my risk by buying the May $7.50s for .80 and selling the May $10s for .25. .55 I’m willing to bet on a craps roll (small bet) that they are as oversold as they seem. They’ve beat in each of the past four quarters and may be justifiably selling off by people who can see the real numbers heading for the hills, but I see some solid revenue growth (+15%) that excuses the uneven earnings growth as the company expands. I think they just got sold off with the semis and a nice report may give them a quick reversal of a very ugly downturn.

One of the downward drivers is a patent dispute with SigmaTel (SGTL), which we’d have to ask Reinharden to explain when he gets back!:

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Also from Trader Mike (who reads more than I do!) is a great find of Phileo (no relation) who wrote an exceptional article about trading for a living that I know will be near and dear to some of our hearts. He wrote a Part 1 and Part II, and at the end he commented: "Writing this article has been exhausting mentally, because I’ve had to think quite long and hard about what I’m getting myself into." You can certainly see why! I hope everyone puts this much thought into what they do for a living be it trading stocks or stocking shelves, we all should be on the road to fulfilling our dreams…

That reminds me of a scene in "Groundhog Day" (the synchronicity of these articles never fails to amaze me!) when Bill Murray is getting drunk at a bowling alley bar and he’s all depressed because he’s stuck in the town (and in the day, for that matter) and he says to a couple of other drinkers, "What would you do if you were stuck in one place and every day was exactly the same, and nothing that you did mattered?" So the other guy turns to him and says "That about sums it up for me."