constantnormal's Comments

A Look at 'So-Called' Market Share of Browsers

Mon, 04 Jan 2010 10:10:58 -0500

Hard to make a meaningful "market share" definition when every participant can be using multiple browsers on a daily basis. Kinda like voting when you get to vote for multiple selections.

The Solar Energy Market Has Bottomed

Fri, 04 Dec 2009 14:33:02 -0500

Davewmart, the thing that is hurting the residential solar market is the fact that there is no residential housing market. If new homes were being built at the rate that they were in 2005 or 2006, instead of having a huge overhang of unsold houses, even a small fraction of them going rooftop PV would provide a lot of support for the solar industry.

But the reality is that nobody is building a lot of new homes today, and without folding the price of a solar roof into the mortgage, one has to fund the entire nut up-front. And with the lenders being as fight-fisted as they are today, that means coming up with it out of your own pocket.

When you look at the cost of a rooftop solar facility, and slide it into a 20 or 30-year mortgage, it's really not so much, and probably cuts the electric bill enough to make it a sensible thing to do (to know for sure one would need specific figures, and do a time-value-of-money calculation using the mortgage rate against the increased principal amount, vs the utility savings).

The "high cost of solar" is not the thing that is keeping it from the residential housing market, it's that there is no residential housing market to speak of.

As an alternative (and very real) example, suppose there were a new shingle developed that changed color between dark and light with ambient temperature and light, so as to collect heat in the winter and reflect it in the summer. Further suppose that these magical shingles cost 20% more than conventional shingles, but cut the annual energy cost by 1%.

In today's housing market, just how many homeowners would be ripping their existing roofs off to replace them with these "mythical" energy-saving shingles?

But in a robust housing market, how many contractors would be using them in all the new houses they were building?

The problem in this case, just as with today's rooftop solar, is not that the product is too expensive, it's that such things sell better into homes at the time of construction, and we're just not building many new homes these days, and certainly not lending money for home improvements.

Top Apple Analyst Muddies Black Friday Results

Wed, 02 Dec 2009 09:07:30 -0500

Regarding Gene Munster's team of Apple-watchers ...

3 stores is not a lot of them, and with such a small sample, where they are located probably means a LOT (with high unemployment areas likely experiencing significantly lower Mac sales than the few still-booming areas -- contrast Detroit and Austin Apple stores. The confidence level of extrapolating data collected from three store to company-wide results is pretty low.

I think that his methodology is perfectly sound, but it's likely a case of not enough samples. Covering 12-20 stores, split between foreign and domestic locales, and distributed across a wide range of economic backdrops would give more reliable data.

And I suspect that every analyst counting the number of packages exiting the Apple Stores could stand to improve their own methodologies along those lines. More samplings, paying attention to geography and economic conditions, would give more consistent and more accurate numbers all around.

But that sort of thing takes time and money, and the temptation is always going to be to skimp on the data collection, plastering over the deficiencies with prose and numbers.

Global Warming Models: 'Out of Order'?

Sat, 28 Nov 2009 09:27:53 -0500

To the oft-chanted "why isn't it getting warmer?" crowd, I ask, how is the global ice pack melting if it's not getting warmer? When you drop an ice cube in a beverage, does the beverage get warmer? The answer is that the combination of the liquid and frozen water DOES get warmer, despite the liquid fraction becoming cooler in the short run.

When you can explain to me how the thermodynamics of a glass of water + and ice cube does not yield a net increase in temperature over the sum of the two items considered as separate items, then you are in line for a Nobel prize, as you have just negated the 2nd and 3rd Laws of Thermodynamics.

People expecting the global air temperature to immediately rise when we are melting the ice pack into the oceans, briefly dropping the temperature of the oceans while we erase the ice packs and RAISE the overall global temperature are missing the point that it is a large and complex system -- looking at one part of it tells you nothing. And people who think that because the air around them is not immediately heating up while we melt the icecaps, that there is no global warming are similarly deluded.

Idiots abound in the global warming controversy. More proof that there is no intelligent life on this planet. A self-correcting condition, as it were.

U.S. Government's Size: The Slow-Motion Crisis

Tue, 24 Nov 2009 09:26:58 -0500

In 1900, most of the US did not have modern septic systems, they had outhouses, and most died early from diseases that are treatable today. Most local transportation was on unpaved roads via horse and wagon. Electricity was mostly a laboratory curiosity, only just beginning to make its way into daily lives.

So yeah, let's all return to the glamorous days of the 1900s.
Check your keyboard at the door.

On Nov 23 07:34 PM Liberty wrote:

> In the year 1900 the total US federal spending was only 3.0% of GDP.
> There was not even a need for an income tax during this time. The
> US government spending fluctuated between 2.15% and 2.87% of GDP
> until 1913 when the current federal income tax largely came into
> being. Since 1913, the federal government has grown to about 28%
> of US GDP in 2009, with govt. spending peaking in war years.

>
> The early 1900’s was the golden age of America, when the following
> inventions occurred.
> • The Wright brothers invent the first gas motored and manned airplane.
>
> • William Coolidge invents ductile tungsten used in lightbulbs.
• Benjamin
> Holt invents a tractor.
> • Albert Einstein published the Theory of Relativity
> • Leo Baekeland invents the first synthetic plastic called Bakelite.
>
> • Color photography invented by Auguste and Louis Lumiere.
> • The very first piloted helicopter was invented by Paul Cornu.
• Model
> T first sold.
>
> I believe the best thing for the US would be to dial back its spending
> to less than 10.0% of GDP, and let the private sector handle virtually
> everything, just as it did so incredibly well before the income tax
> changed everything.

U.S. Government's Size: The Slow-Motion Crisis

Tue, 24 Nov 2009 09:20:13 -0500

While a smaller non-performing government is better than a larger nonperforming government, what I am missing most in all this is any recognition of the need to make government BETTER, whatever size it is.

The septic inspection example is an excellent one -- as the author notes, there is certainly nothing wrong with requiring that septic systems be provably good. What's wrong is the idiotic laws that peg the inspection process to at the point of sale, rather than on a once-a-decade basis, or some more sane metric.

And the blizzard of insane laws does come more rapidly when the government is larger, but the primary problem is not the size of the government, it's the quality of the legislation, and how difficult it is to get bad laws corrected. However, I may be naive in not explicitly recognizing the influence and corruption aspects in our system of government -- it may be unavoidable that our laws are mostly paid for by the lobbyists and written only to serve special ionterest, and not the public good. In that case, smaller government is the only answer, with the target being the dissolution of the US of Bananamerica, and the formation of a tribal system of government, with small communities at war (or in an uneasy peace) with their neighboring tribes, as much of the MIddle East is today.

Surely there is a middle ground.

Can Apple Stop the Android?

Fri, 20 Nov 2009 09:32:49 -0500

All of what passes for "analysis" of the Apple vs Android battle neglects to consider the pace at which the underlying hardware is developing. Consider Apple's acquisition last year of P.A. Semi, in this regard. It seems likely that Apple's future iPhones will advance faster than those based on commodity hardware, and will utilize custom hardware to accelerate various parts of the architecture. The Android, targeting a wider spectrum of hardware designs, none of which can take advantage of P. A. Semi's custom hardware -- but which each may develop their own custom hardware, and how will Android support those?

The ability to take advantage of new hardware and keep their smartphones at the bleeding edge is what will determine the overall winner in this war, not whether one or the other is more "open" or "closed".

One could easily look at the Android and conclude it is the "more closed", in the comparison between the various Android phones and Apple's iPhone, based solely on the number of "apps" available for each.

And given the wide variation of Android implementations, across a number of different vendors' hardware platforms, can we say with any certainty that a given Android app will run on all of them (I don't know, and am merely raising the question)?

Also, the above "analysis" would have one to believe that Linux has taken the lion's share of the PC markets, and has brushed both Apple and Microsoft -- those old world closed architecture dinosaurs -- into the dustbin of history.

Edward should stick to the credit markets. The question of who will dominate the smartphone markets (and eventually, the cellphone markets, as the cost of hardware declines) is far from settled. At this point, looking at what Apple has done to date, one would have to regard it as the safe bet to win.

Hopefully, Android-based smartphones will continue to do well, and because competition improves all the breeds, I hope it will be adopted as the alternative platform to Apple's iPhone and prosper.

But I believe that Apple will prosper more.

IEA Report - Trouble for Oil ETFs?

Wed, 11 Nov 2009 09:47:02 -0500

Projections that are 20 years out are nothing but fantasies. Nobody can accurately project anything, in any area 20 years into the future.

There are so many status quo assumptions built into this projection that will ultimately be toppled that it is ludicrous. Technologies change, markets change, the global economy changes. And so far as global warming goes, who's to say that a decade from now some process to actively suck greenhouse gases out of the atmosphere will not emerge, that happens to use oil as a working medium? I can indulge in ridiculous fantasies just as much as the IEA.

The IEA is first and foremost, selling advice to rich oil-producers, so one would expect that advice to be heavily tailored to what their customers want to hear.

S&P 500's Top Returners in 2009

Wed, 11 Nov 2009 09:24:15 -0500

It would be nice see how the "valuation model" used to assess these stocks compares to things like PEG and price/(free cash flow per share).

Just tossing out the results from an ill-defined black box does not engender any confidence in me -- looks too much like a fund that is "talking its book".

Will The Federal Trade Commission Have an Issue with Apple and Google?

Fri, 08 May 2009 12:21:57 -0400

The obvious defense is that Apple is a hardware company whose software is (for the most part) restricted to its hardware. Google is an advertising firm, and also heavily into software (as an advertising medium), none of which is restricted to Apple products, and some of which competes directly with Apple.

Kinda tough to derive any antitrust benefit from those profiles.

Apple's Valuation: My Stance

Fri, 24 Apr 2009 09:14:08 -0400

" ... So I'm going to shy away from drawing estimates for 2010, but I openly welcome thoughts on what 2010 might bring and the supporting arguments leading to such conclusions."

" ... I think 2010 will be significantly better than 2009 ..."

OK, so which is it? I take it from your latter comment, that you believe this recession is "only" a recession, and that it will definitely be on the wane by 2010.

OTOH, IF this is something deeper and more structural (we call those things "depressions"), with unemployment and home foreclosures continuing to squeeze the global economy smaller and smaller, then 2010 could see increasing pressure on AAPL's customers, constraining their ability to buy products.

We have yet to hit the single-digit PE multiples characteristic of bottoms in extreme downturns, so there is a reasonable prospect that AAPL will continue to see its outstanding operating performance (which I fully expect to continue) rewarded rather weakly in the equity markets.

Revising Apple's Outlook in Line with Reality

Mon, 20 Apr 2009 11:04:19 -0400

Just what do you guys mean by "long-term"?

If you are talking "long-term" as in long-term capital gains, then Andy should take his profits now, before the bear-market rally gives out and AAPL sinks (along with everything else -- slower, but sinking just the same) as PE multiple compression drives valuations toward the single-digit regimes that occur at real bottoms.

Of course, if you are talking "love-of-my-life" long-term, well then you are correct and nobody should ever sell a well-run profitable company that they are in love with, certainly not over a small thing like losing money.

There were people buying at the top in 1929 (and 1937), some buying excellent companies (at inflated values, considering the impending future) and it took decades for them to break even.

There were people in love with gold, back in the 70's, and it took 30 years to regain the levels they loved it at.

Buying a stock for love can blind one to the fact that even the best-managed, most profitable companies can have their stock prices suffer for a very long time, if the larger market environment is bad enough. The name of the game is not to own the best stocks, it is to make money owning them. Those who forget that (or have never learned it) are doomed to be parted with their money.

4 Possible Market Scenarios

Sun, 05 Apr 2009 09:23:31 -0400

Tech companies may be "swimming in money", but most are only knee-deep in revenue -- possibly soon to be ankle-deep.

If you can envision a recovery where the consumers get renewed confidence that their jobs will be around, and have the bulk of their debt paid down, maybe you can project ahead to when the revenue picture improves for these companies.

Until then, the declining revenues are likely to provide a number of air pockets for these high-flying stocks.

Buying cash-rich tech stocks because they are cash-rich is not a sound decision in the face of massive future uncertainties. The only thing that is (nearly) certain is that these companies will survive until the next boom. AAPL could almost certainly withstand the financial collapse of the United States, but that does not mean one would make money owning it.

If you want to gamble on a recovery emerging because stocks are rising, you may as well buy housing stocks or TBTF banks. The returns for them are likely to be much greater in a recovery scenario.

Not so much if the recovery does not materialize.

I would be watching for large-scale insider buying at these cash-rich tech companies as a sign to acquire them. I have not seen any signs of this yet.

1100 Tonnes Now in the GLD Trust

Fri, 20 Mar 2009 13:14:51 -0400

It should probably be recognized that while GLD is "bullion-backed", that need not necessarily mean that they have 1100 tonnes of bullion in a warehouse. For example, they could have futures contracts to receive 1100 tonnes of gold, and no physical gold, or an actual 1100 tonnes of gold, or any mix in between. The thing to understand that GLD is not a substitute for owning physical gold, it is a substitute for participating in the price movement of physical gold, and as such, should be thought of as a form of derivatives contract, much the same as futures contracts or options, structured across various prices and dates so as to achieve the desired price relationship. But it differs from options and futures contracts, in that there is no expiration date.

Here's a link to a page regarding the GLD fund, and their auditability:
news.goldseek.com/Jame...

I think that so long as one recognizes the ETF for what it is, one should have no problem whatsoever making money using it.

If however, you are a goldbug wingnut, intent upon amassing a horde of the yellow metal along with adequate stockpiles of bullets and bottled water, eagerly anticipating the Libertarian Rapture, then GLD is clearly not your cuppa tea.

Just be aware of what you are buying and why you are buying it. If you are looking for a hedge against dollar depreciation in times of inflation and currency panic, then GLD should do the job at a very low overhead, as compared to the generous markups of buying gold coins or managing secure storage of bullion.

1100 Tonnes Now in the GLD Trust

Fri, 20 Mar 2009 12:37:17 -0400

oops. Apparently I'm not so good at the math either. Should be 71 pallets of a thousand bars each, not 7. Still, it's not that much physical space, and there is little danger of theft due to the difficulty of moving the stuff. (You're not going to haul it away in a fleet oF Mini-Coopers)

As to where it comes from, there are a bunch of mining companies all over the world, where do you think they sell their product?

1100 Tonnes Now in the GLD Trust

Fri, 20 Mar 2009 12:19:14 -0400

User 325302 -- have you ever calculated how much physical space it takes to hold 1100 tons of gold bars?

The standard gold bar is 7" x 3.625" x 1.75" and weighs 30.94 lb
[www.elmhurst.edu/~chm/vchembook/125Ade...

1100 tons = 1100 x 2000 lbs = 2.2 M lbs = 71,105.36 gold bars, or about 7 pallets of 10 bars wide x 10 bars deep x 10 bars high or 7 pallets that are 70" x 36.25" x 17.5"

It's not that large an amount of physical space. Do the math.

Standing Tall with Chemical & Mining Co. of Chile

Mon, 09 Mar 2009 10:59:56 -0400

I prefer quotes from Mr T to those from The Rock.

Apple and Amazon's Open Embrace

Sun, 08 Mar 2009 10:22:16 -0400

If we had ubiquitous wifi availability, then one could look at the Kindle as an "always-on" portal to written content -- there are more things written than just hardback books, like magazines, newspapers, comics (color will eventually come to the Kindle).

But there is a dearth of open access wifi in this nation, and in most parts of it, of wifi access of any sort. The Kindle is going to have a long runway before it takes off and threatens the magazine rack.

It must come down in price -- A LOT -- and improve in capability (color, for instance, is a requirement before comics and a lot of magazine content is practical) before it really goes mainstream, and there must be widespread access to open wifi.

Until that happens, it will remain a toy for rich folks who spend a lotta time in airports/airplanes and would like to have a lightweight library to accompany them.

With a King's Ransom in Cash, Why Still No Buying Spree in the Tech Space?

Wed, 18 Feb 2009 10:50:41 -0500

I suspect they will start buying when revenues at the companies they would like to acquire turn higher -- which is going to be some time from now. Nobody is going to plunk down good cash (the most prized asset in deflationary times) for something that is going to be cheaper next month.

Equities vs. Inflation

Sat, 07 Feb 2009 09:01:06 -0500

Roger, as a "professional" money manager and investor, you of all people ought to realize that inflation occurs across all sorts of economic backdrops. A mild inflation is not at all detrimental to stocks, so long as it stays low, keeping price changes low and predictable, as that implies plenty of liquidity in a economy strong enough to make use of it. Even a moderate rate of inflation can be accommodated in a strong economy, for a while.

But if you crank of the rate of inflation, to where it becomes difficult for businesses to manage the monthly changes in raw materials and wages, then it's not so good for businesses. Stocks don;t do so well then.

Or if the economy is flat on its back, weak as a kitten, then you get stagflation, with constantly rising costs an companies struggling to turn a profit. Stocks don't do so well then either.

So what kind of inflation do you see (eventually) coming, from all the trillions the Fed is pumping into the money supply, hmmmm?

And how strong is the economy likely to be, in the face of record unemployment and record home foreclosures?

Options Trader Friday Outlook: GDPhew!

Sat, 31 Jan 2009 10:16:52 -0500

the 3.8% number exists only because the huge unsalable inventories that did not sell at Christmas counts as "production" in the GDP equation.

Take them out, and 3.8% becomes 5.1%. But Phil knows this.

And the numbers will, of course, be revised downward. The first taste of truth is always sugar-coated, if you can call a 3.8% drop "sugar-coated".

When you consider that this was for the strongest economic quarter of the year, and we are now well into the weakest quarter, with simply unbelievable numbers of unemployed being churned out, our Gross Domestic PRODUCTION for this quarter will make even the revised previous quarter look pretty good. I think that a 5% drop for this QUARTER, not the projected annual rate, but just due to this quarter, is looking possible.

And XOM was not so much "an incredible job managing a tough quarter" as an incredible job of managing refinery output in the face of huge drops in crude prices, to maintain sufficiently high prices of refined products. Slap them on the back and congratulate them for doing a nice job of managing their vertically-integrated oligopoly!

If Apple Does Correct, It Will Do So Soon

Thu, 29 Jan 2009 10:10:04 -0500

I can't see much call for Apple to invest their cash in a stock buyback, as over the past 12/9/6/3 months cash has performed MUCH better than AAPL. If a company is so desperate that they feel the need to use their cash to artificially inflate their stock, that's a stock I don't feel good about buying -- if I wanted that kind of company, I'd be buying shares in ExxonMobil.

Looking ahead, I don't see Apple's sales improving much, as people who are losing their jobs and homes (or fear the loss of their jobs and homes) don;t spend their last dollars/euros/whatever on a new Mac or iPhone.

I DO see the company remaining financially strong, with the PE not suffering much more compression, but the stock price WILL follow the near-term earnings lower.

Near-term, the emotional rally in the markets, with the few remaining bulls scrambling to drive stocks higher as they catch a breath, it may well result in AAPL performing pretty much as Zach says -- just as the stock has performed as Zach has predicted in his past essays. I still expect is to dive lower over the next quarter or two, just as Zach does, as sales inevitably decline because PEOPLE HAVE NO MONEY TO SPEND on consumer electronics.

Apple remains a fantastic company, with excellent products and the best management team on the planet (name me one other company with the breadth and depth of top-management talent that Apple has), but the stock markets remain in bear status, deflation has not yet been tamed, and it is shrinking the global economy day by day.

Happytalk AAPL fanbois who can only see their beloved AAPL marching ever higher, ignoring the state of the global economy around them, are invited to pave the way lower with their money, by becoming the other side of my downside trades. As they say, making money and being successful is the best revenge.

You can name-call all you like about those who predict AAPL will decline in price, but how much money have you made in AAPL over the past 12 months? The chart at the top of this page suggests "not much". Trash-talking doesn't move stocks higher or lower, turn off CNBC and take a look at the Real World. Go run over to Minyanville and read "Emotion is the Enemy" [www.minyanville.com/ar...] repeatedly, until the message sinks in.

The Scariest Chart Ever

Sun, 25 Jan 2009 09:51:26 -0500

On Jan 20 05:27 PM JohnAl wrote:

> "Debt as a percentage of GDP ended up at %120 in 1946, which is about
> where we'll be when the bailout is complete.

Actually, total debt as a percentage of GDP is over 300% today, approaching 400%. The previous peak was a tad under 300% immediately prior to the Crash of '29.

1946 was on the low side, due to the near-complete elimination of personal debt, due to the prior decade of depression and the war.

But the picture Todd chose to present is misleading. Look for the huge spike in debt for WWII -- where is it? It's not there because this is a chart of ONLY Federal Reserve debt, not Treasury debt, not consumer debt, not corporate debt.

However, if you put all these together, the picture is still of a debt tsunami of historic proportions -- just nothing quite as hopeless as the representation made by a single chart showing only one part of the debt picture.

Apple's Q1 Blowout

Thu, 22 Jan 2009 09:31:32 -0500

@ SkateNY -- I presume you're doing a preemptive flaming of the inevitable "Apple is a fad" comments, as I could detect nothing of this sort in the article. In fact, the word "fad" appears only in your comment, and no where in the article.

The article was a good summary of the conference call, but if you're interested enough to read the article, you really should download the call from iTunes (a free download, search on "Apple earnings") and listen to it in its entirety.

Nice job with the summary, John. What I'd really like to see is an article that looks at the incredible depth and breadth of management talent in Apple, vis-a-vis other companies, not just in the consumer electronics realm, but ALL other companies. The incredible wealth of talent and experience inside Apple is unmatched by any other company I am aware of, bar none. Steve Jobs as the greatest pitchman alive today is merely the cherry atop the whipped cream. The company would continue to be unstoppable even if Steve were to leave.

It's a testimony to his leadership that he has managed to inculcate his modus operandi throughout the company. It will take a long, long while before Apple begins to misfire.

That's not to say that they're not going to slide downward during this depression -- they are, after all, in the consumer electronics field, and are undeniably makers of discretionary purchases, not water or food or medicine. But due to their strong management team, top-notch talent, and huge cash position (still increasing, by the way), they will slide lower a lot slower than their competition, gaining competitive ground all the while.

I can't wait until the stock gets down below 70 so I can back up the truck and go all-in on AAPL.

Gold Cannot Be Inflationary, But the Dollar Sure Can

Mon, 19 Jan 2009 08:19:46 -0500

@DiggerUK -- If "value added goods" are not creating wealth, what value is backing the fiat?

Try turning this around and assume a gold-based economy:

If "value added goods" are not creating wealth, what value is backing the gold?

So long as we have The Incredible Shrinking Global Economy, value is going to keep shrinking, along with demand, and ANY form of currency is going to find itself in greater numbers than needed, with the velocity of money taking a nose-dive.

The central bankers are desperately trying to goose the velocity of money my printing too much of it, as deflation is a cancer that will ultimately destroy global markets and encourage trade barriers to be erected to protect shrinking domestic markets, just as occurred in the 1930's.

So far, their efforts are failing. Worry more about how to get demand going again, in the face of soaring unemployment and a rapidly diminishing functional economy. Shifting the currency to gold isn't going to fix that.

Gold Cannot Be Inflationary, But the Dollar Sure Can

Mon, 19 Jan 2009 08:09:29 -0500

The way that the government "produces" more gold is to sell the reserves locked up (hoarded) at Ft Knox. This would work for any government, taking their gold reserves and liquidating them to provide cash. As our foreign lenders inevitably decide to reduce or cut off Uncle Sam's access to credit, this may be a way in which we raise cash.

Historically, there was a period of great gold inflation back when gold was used as currency, when the New World was discovered, and the Spanish (primarily) looted the gold stocks of the Incas and Aztecs and dumped them onto the European markets. There was no new gold in the world then, just a big jump in the amount being traded in the European markets.

For nations to dump/spend their gold reserves would have a similar effect.

Gold is *not* money. Money is anything that is universally used as a medium in economic transfers of goods and services. Try taking your bullion, gold coins, or other forms of gold to the grocery or gas station and putting them to use. Gold is simply a commodity, that for historical, commercial, and emotional reasons, has value. Since the amount being traded does not fluctuate very much, it tends to hold its value during times of inflation, but suffers (just like any other commodity) during times of deflation.

Deflation is what we still have, despite the Fed's printing money at high speed. Eventually (we hope), the Fed's attempt at inflation will induce inflation to offset the deflation -- however, it might appear as a localized effect only, with the US dollar crumbling while deflation roars on in the global markets, killing us with commodity and import inflation.

Then (and probably only then) will gold resume its upward movement, although it will be eclipsed by the upward movement in other commodities that are controlled by cartels that are willing to reduce production to push prices higher. When gold resumes its upward move, it will be following oil once more.

Restructurings and Bailouts

Sat, 17 Jan 2009 10:03:16 -0500

Roger, have you ever looked at the Japanese experience? It seems to me that we are more similar than different in our own ongoing real estate calamity.

In the case of Japan, they too lacked the will to let dead banks die, and kept dead/dying corporations of all stripes afloat through the gratuitous use of government debt.

And now they find themselves entering the 19th year of their ongoing bear market, with elevated unemployment all the while.

Try overlaying charts of the S&P 500 vs the Nikkei 225 from their respective peaks of Oct 2007 and Dec 1990. Then tell me how confident you are that we will not follow a similar path lower -- if we do, we're only about halfway down in depth, and only a few decades of time to endure. The Nikkei has dropped from over 38,000 in 1990 into the 8000's today. The S&P 500 has dropped from an October 2007 peak of 1552 to around 850 today -- looking at the twin peak of Y2K in the S&P, one could easily see a double-top retreating to somewhere in the 400's, if one subscribes to that sort of entrails-scrying.

So far, we have pumped more credit into C and BAC than they are worth, enough to create completely new banking institutions from whole cloth -- and yet these "banks" are still on the ropes, requiring an unending infusion of capital and credit.

But you think that the bottom is in. And you do this for a living?

Think the shock factor is gone? Just watch as negative earnings permeate the corporate landscape quarter after quarter, and unemployment rises in concert with declining corporate fortunes in a vicious cycle of bad financial numbers begetting more layoffs begetting worse financial numbers ... ever seen stagflation at work? This is the evil twin of stagflation, stag-deflation. Like it's sibling, it works not by dramatic moves driven out of fear and panic, but from a relentless, unending grinding away at investors and any lingering traces of bullish sentiment.

On a PE basis, we have a lot farther to fall until even our current earnings are fairly valued, and this in the context of an earnings landscape that is dropping like an anvil.

We have not even started actions to shut down the ARM scythe of economic destruction, and will likely see more millions of foreclosures over the next 3 years, as the next wave of ARM resets and soaring unemployment pushes more millions of homeowners into bankruptcy.

Our entire "plan" to date has been to pump credit into the lenders and let this fire burn itself out, devastating borrowers and the housing industry. We have now entered the stage where homeowners with conservative fixed-rate mortgages are finding themselves in jeopardy, as they are either laid off or forced to relocate for various reasons, and find that even with considerable amounts of home equity, the mortgage balance is more than their homes are worth. And home values continue to decline.

"we should perhaps count ourselves lucky that stocks have not dropped more" ... just wait. Large moves do not occur overnight. We will get bear market rallies, but in the face of unrelenting horrible earnings, historic highs in unemployment (I've read that if we calculated unemployment the same way that they did in the 30's, we would be at 17% right now), these bear market rallies will be either spirited and brief, or shallow and disappointing.

But keep that happy-talk coming. Bears need people to sell to. There's a significant rally of breadth and depth right around the corner. I can feel it in my bones.

Apple Is Resilient, But Hasn't Bottomed Yet

Fri, 16 Jan 2009 12:26:03 -0500

Roger, I sure hope you're selling those Feb 115 contracts and not buying.

But it's your money.

I'm looking for the inexorable grinding away at the global consumer by soaring inflation and eventually rising prices (as Bernanke succeeds in destroying the US dollar to replace the deflation with inflation) to take a toll on AAPL, with revenues slowly declining (due to the brilliant subscriber accounting method used for iPhones and iPod Touches -- d'ya think that Apple foresaw this economic morass when they elected to do that, or was it just dumb luck?) and their huge cash position cushioning the company from any economic shocks out in the Real World. Eventually, 15%-20% unemployment will take its toll in the consumer companies, and Apple is not immune to this, merely extremely resistant.

I expect the company to be a remarkable fortress of balance sheet strength, but as the money available to buy stocks declines along with the Incredible Shrinking Global Economy, the stock price MUST decline.

This is not any indication of a lack of strength in Apple, just a reflection of the obvious fact that in a smaller global economy, all the companies will be smaller too. AAPL will suffer less than nearly all other companies, but it will suffer its share of shrinkage, some from revenue shrinkage, some from PE contraction.

I remain amazed at the number of people who apparently believe that the fate of Apple hinges on the return of Steve Jobs. Steve never designed a single product or component, never wrote a line of code. His role is to keep the company oriented and focussed, and to keep kicking them to ever-greater heights of creative inspiration. But he does not supply the inspiration. All the organization that made all the great products that have put Apple where it is today are still in place, and the product pipeline for the next 5 years is almost certainly in place. If Steve should vanish from the face of the Earth overnight (God forbid), it would be at least 5 years before the company began to waver from the trajectory he has launched it on, if it ever did. The meme of The Steve is strong within Apple, one can make a case for it lasting long after he leaves the company. One could also see a return of a series of clueless CEOs like those that preceded his return, but I tend to think that is unlikely. There is a wealth of talent in place that will keep the company aligned to doing the Insanely Great work that has made it the giant that it is today.

But even giants shrink a bit when the world around them shrinks, and so I expect AAPL to shrink over the next few years, which only increases its value.

full disclosure: I own a small amount of AAPL in IRA accounts, and disposed of a large position in AAPL LEAPs last summer. Eagerly awaiting $60 AAPL so I can go long with LEAPs once more.

50% Returns, No Risk?

Sat, 10 Jan 2009 11:18:49 -0500

So .... if your 401-K is with Bernie Madoff, and your employer matches 50%, then you have 50% risk-free? Is THAT what you're saying?

And by the way, in my experience, most matching 401-K plans (and only a portion of them match anything AT ALL) match at much lower levels than 50%. My last employer matched up to 6% on the first 10% of the employee's salary, but they only allowed that match to be paid in company stock (which no sane person would have invested in). My son's last two employers have paid no match whatsoever on their 401-Ks.

You may as well have used a hypothetical 100% match in your fairy-tale example, to draw in a few more suckers. I presume that the more hits a Seeking Alpha page gets, the better the return to the author (certainly the better the return to Seeking Alpha). So start posting those 100% RETURNS WITH ZERO RISK headlines.

Good Chance Apple Will Choose ZPower for Its New Notebook Batteries

Wed, 07 Jan 2009 11:56:19 -0500

Oops. Any other ideas who the PC maker Zpower is working with is?

I suppose it could still be Apple, but prices are still too high for even them.

But for the moment, until demand for lithium drives up prices, Zpower looks like it has a fine product, but too expensive for anything other than satellites and similar applications.

With silver-zinc facing competition from both lithium and ultracapacitors, they have a difficult path ahead of them.