Dialectical Materialist

Dialectical Materialist
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  • Apple: Time to Start Worrying?  [View article]
    Anyone who is familiar with Taleb's Black Swan might note that stocks (and companies) live in extremistan, not mediocristan. This means that members of the population are not distributed along a pleasingly mild bell curve but may have members who dwarf all others by miles. So for example if you graph human heights, you will get a mild curve. Some folks are short and some are tall, but no one is 1000 times as tall as most of the others (a mile high!). But company values or personal wealth (picture BIll Gates) are NOT bell curve things. So it is completely possible that while most large companies are worth a few billion, you will have a few who are worth 100 billion or more. The logic here allows that every so often you will get a severe outlier (Bill Gates is about 100 thousand times richer than a normal person). It is entirely possible that every so often a company will come along that will dwarf all others and have a market cap of, say 1 trillion dollars (in today's money). This does not mean that Apple will be this company. But it does suggest there is no good reason that SOME company will not enjoy huge and disproportional success. Stock value and market cap are not constrained by the law of averages and are not distributed along a mild bell curve.
    Apr 23, 2010. 05:05 PM | 13 Likes Like |Link to Comment
  • QUICK CHAT #39 -Start Tuesday 4/20/10  [View instapost]
    One of the things I know I get from folks here is an honest assessment of what they like and don't like about a stock or a sector. With most things you read, you have to wonder if someone is glossing over news (putting lipstick on a pig) or talking something down because they hate having been wrong about a rise or worse they want to get in at a cheaper price. There seems to be no sour grapes here, no hesitation to admit when something didn't go as planned, and no shortage of support for the success of others. You don't get that many places. Heck, I don't even get that from some of my buddies :)
    Apr 23, 2010. 04:35 PM | 8 Likes Like |Link to Comment
  • QUICK CHAT #39 -Start Tuesday 4/20/10  [View instapost]
    I hope they're bringing swatches and some ideas for redoing my livingroom. It's a new HGTV show "Government Makeover".
    Apr 23, 2010. 03:00 PM | 6 Likes Like |Link to Comment
  • QUICK CHAT #39 -Start Tuesday 4/20/10  [View instapost]
    One thing I've been reflecting on is comparing this kind of activity to what might take place at a private company -- either a tiny one like mine or a large one like IBM. I can't speak for IBM, but no one in my company would be able to spend that much time on the computer doing anything -- even something less scandalous like eBay auctions -- without having to show something for their work. Where was the evidence that they were actually working all this time? In other words, I don't care if they were sitting at their desk reading French novels, they still should not have been paid $220,000 a year if they were not working. Who was in charge of making sure these slackers were actually working? It turns out they were engaged in something particularly embarrassing to the SEC, but this story could easily be about dozens of folks who were basically wasting time all day and not being held accountable. How many non-surfing employees are their at the SEC right now who are not at their desks working?
    Apr 23, 2010. 02:50 PM | 5 Likes Like |Link to Comment
  • QUICK CHAT #39 -Start Tuesday 4/20/10  [View instapost]
    Aw, shucks...

    I love the phrase "preoccupied by other distractions"... Distractions are ringing phones and the folks gossiping at the water cooler. Surfing the net for naked pictures is not a distraction. Apparently for 17 senior staff members of the SEC it was a career
    Apr 23, 2010. 01:17 PM | 7 Likes Like |Link to Comment
  • Congressional Report Today will Fault Ratings Agencies  [View instapost]
    Like low morale in the army of a country entangled in a pointless war, the mood of a company's employees can often indicate when it is veering off course. Sometimes management ignores the rumblings because they are inept. Other times they are involved in a business strategy bordering on criminal conspiracy and they can not afford to be deterred by hard working, proud and honorable employees. In no case that I am aware of does the story end with "but in the end the employees were wrong and things turned out great".
    Apr 23, 2010. 11:22 AM | 2 Likes Like |Link to Comment
  • Is there life in the Nanopatch?  [View instapost]
    The nanopatch... great idea. I was unaware of this post until today. I have been thinking this sector would be a great place to dip a toe in, and you have given me a place to start. Thanks Robert.
    Apr 23, 2010. 11:10 AM | 3 Likes Like |Link to Comment
  • QUICK CHAT #39 -Start Tuesday 4/20/10  [View instapost]
    I'm confused about what happened to OG's great newsclip about the SEC surfing the web for inappropriate images when they were on the clock...? Surely this was news and worth of being reported and not in violation of any rules of taste (the post, not their actions)...?
    Apr 23, 2010. 10:57 AM | 5 Likes Like |Link to Comment
  • QUICK CHAT #39 -Start Tuesday 4/20/10  [View instapost]
    ... Incidentally, my other conviction stock, Netflix has just reach $100 a share and is trading at a silly P/E of 50. I sold into this rise and am not looking to get back in at this price.
    Apr 22, 2010. 10:26 PM | 6 Likes Like |Link to Comment
  • QUICK CHAT #39 -Start Tuesday 4/20/10  [View instapost]
    Triple, I will answer your question at the risk of being a bore...

    Apple (AAPL) is now 50% of my portfolio (in part because it keeps going up and any attempt to rebalance keeps being disrupted by its upward trend, and in part because I am a sissy about risk and feel this is both a stable and growth stock if there is such a thing).

    I am not an acolyte of all things Apple, and this story will end one day. Having said that, this stock is likely to reach $300 this year, based on ever growing sales of iPhones and new stuff like the iPad.

    I assume $14/share earnings this year, which translates into a cash adjusted forward P/E of 16. If they trade at a (non cash adjusted) P/E of 20 next year and their earnings grow 25% -- both of which seem probable -- that would suggest a price of $350 (better than 30% higher than today).

    So I won't suggest Apple will go up up and away and will never see $200 again, but it the near term I think this is still a huge buy at $260.

    But again, all this AAPL preaching is just because you asked :)
    Apr 22, 2010. 10:23 PM | 7 Likes Like |Link to Comment
  • QUICK CHAT #39 -Start Tuesday 4/20/10  [View instapost]
    You sold VISN twice... does that mean you are naked shorting :)
    Apr 22, 2010. 11:05 AM | 3 Likes Like |Link to Comment
  • Do Apple's Earnings Even Matter?  [View article]
    I agree there are a lot of folks making optimistic predictions about the price of Apple shares, BUT...

    The tech bubble was characterized by exuberance that had no relation to earnings. Companies would emerge with a concept to go online selling something, say hats ("lets call it hatsonline.com"), and they would get instant money from investors who thought anything online was going to make money. Fortunes were spent on "loss leader" advertising and website development before one penny of revenue had been collected. Shares of companies who went public were snatched up by indiscriminate investors convinced they were going to get rich.... It is no wonder that the bubble popped and much money was lost. But not all tech companies of the day were failures. Amazon, eBay, and Google are notable successes from the era.

    So now, let's see if exuberance about Apple is like the "irrational exuberance" of the dot-com era. Sky high P/E's were the norm (or non-existent P/E's since you can't divide by zero and many of these companies had zero earnings). But Apple has a cash adjusted forward P/E of something like 15 -- not too shabby. Another common trait was a fuzzy product concept and no proven sales history. Apple, of course has a product line which is being refreshed regularly with new products and upgrades to existing ones. These products have a proven track record of strong sales. Lastly, the typical dot-com burned through cash. Apple, on the other hand, can't spend money as fast as they print it, and has amassed over $40B in short term assets.

    An accurate examination of the exuberance of the dot-com days and present day APPL shares shows there is simply no comparison. This does not mean that AAPL will go up forever, but it does mean that folks who are optimistic about the company are not necessarily repeating the blind folly of the tech bubble.
    Apr 22, 2010. 02:07 AM | 1 Like Like |Link to Comment
  • QUICK CHAT #39 -Start Tuesday 4/20/10  [View instapost]
    That's interesting, and jibes with my personal spending a bit. I was not spending last year even though I could. It just didn't seem wise. Now I am spending modestly or buying the occasional toy (cough...iPad...cough), but I am not going wild. I am enjoying what I buy, but I am not going crazy.

    Even if the new normal is not full scale recovery, it could still allow for some heat to return to the economic furnace...
    Apr 21, 2010. 09:47 PM | 4 Likes Like |Link to Comment
  • QUICK CHAT #39 -Start Tuesday 4/20/10  [View instapost]
    See I should read through the comments before I comment on old stuff, because this is basically what I was curious about as well...
    Apr 21, 2010. 08:47 PM | 5 Likes Like |Link to Comment
  • QUICK CHAT #39 -Start Tuesday 4/20/10  [View instapost]
    Hey Triple,

    Congrats on your successful trip.

    I was wondering if you had a sense among attendees to your events that they feel more calm about spending than maybe they did last spring. The numbers suggest the consumer is coming back a bit, and I was wondering if you saw any front line evidence of this. Do you have enough samples for an opinion?
    Apr 21, 2010. 08:46 PM | 5 Likes Like |Link to Comment