SeeTheLight

Are These Earnings Really Cause for Celebration?

Manipulation by program trading and automated trading systems combined with low summer volumes means that we can stay far removed from the fundamentals for a long time. Every dip seems to be followed by a buying on a dip mentality and of course the end of day pops every day are just one more indicator of the ludicrous environment we are in.

I am bearish fundamentally, but have long since learned not to fight the tape. Set aside a large chunk of cash, put in some decent stops on your remaining positions and ride this bear market rally until it finally gives in, although whenever that might be is anyone's guess.

Big Blue's Stock May Be Affected by IBM's 'Bank'

@ Is this right:

I think you might be a little confused. The 46% margin means simply that for each dollar earned in interest it only costs 56 cents to earn it. This doesn't imply that IBM is charging loans at Loan shark rates.

For example. Let's say some one buys (not leases) a mainframe for $100,000. Then they finance it at 8% per annum. IBM's server group records the $100K revenue and the financing group earns 8K revenue in the first year. Then of that 8K revenue, it costs the finance group around 4.5K to earn it (paying salaries, borrowing costs, etc.). Obviously this example is a little simplified but it should illustrate it.

Pretty sure there are no loan sharking practices here, simply making it easier to buy the mainframe. If someone wants to lease a computer and re-sell it back later... why not? And It's not like IBM is forcing them to use their financing arm, they can go to bank if they want.

Hope that helps.

Big Blue's Stock May Be Affected by IBM's 'Bank'

@ Is this right:

I think you might be a little confused. The 46% margin means simply that for each dollar earned in interest it only costs 56 cents to earn it. This doesn't imply that IBM is charging loans at Loan shark rates.

For example. Let's say some one buys (not leases) a mainframe for $100,000. Then they finance it at 8% per annum. IBM's server group records the $100K revenue and the financing group earns 8K revenue in the first year. Then of that 8K revenue, it costs the finance group around 4.5K to earn it (paying salaries, borrowing costs, etc.). Obviously this example is a little simplified but it should illustrate it.

Pretty sure there are no loan sharking practices here, simply making it easier to buy the mainframe. If someone wants to lease a computer and re-sell it back later... why not? And It's not like IBM is forcing them to use their financing arm, they can go to bank if they want.

Hope that helps.