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Dialectical Materialist

Dialectical Materialist
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  • Analyzing Apple's Past To Gain A Better Perception On Its Future [View article]
    Michael,

    I don't know how long you have been following AAPL, but revisit your assumptions after earnings. What they should demonstrate is:

    -- Apple is still producing products that people enjoy.
    -- More people are creating accounts on iTunes.
    -- China's significance continues to grow.
    -- The iPad mini was a monster hit.

    All of these together should suggest to the open minded person that Apple's sales in the near future will rival or exceed their recent past. Why? Because Apple remains a popular brand in the growing mobile market.

    There are no certainties. But there are reasonable assumptions. Just as people expect Samsung to continue to sell its phones, one has to assume that the satisfied Apple consumer will continue to buy Apple products.

    The lower margin argument in particular is a red herring. The whole idea promoted for why Apple's margin must shrink relates to their market share. But the market for mobile devices is expanding. So if they protect or grow their market share, they will have higher sales volume. Lower margins do not "demand" higher sales volumes, they cause them. It is largely self correcting.

    Similarly the "cloudy forecast" is part of Apple's history. Regardless of what the competition wants to talk about, Apple will do what it wants to when it wants to. This is key to the success they have had. Do you remember CES in 2010? It was all about the tablet. No one had yet seen an iPad, but there were any number of manufacturers trying to get ahead of the curve and release concept pieces that reflected what they expected the iPad to be. When the iPad was released, these pathetic prototypes were forgotten and the projects behind them died on the vine. Go back and check the history if you don't remember that.

    So now at CES we had a dog and pony shows involving TV. Everyone is trying to figure out Apple's TV in advance. Any wonder who the real force in innovation is?

    You can't possibly be bullish on innovation if you want it spelled out for you in advance, because if it is spelled out in advance, it is no longer innovation. So that is a dilemma.

    But what you can do is draw reasonable trend lines from existing market data and add to that the knowledge that Apple is not going to stand still. A new data point is about to be drawn on Jan 23rd. It should help advance the discussion about Apple's future.
    Jan 18, 2013. 10:00 PM | 1 Like Like |Link to Comment
  • Apple: Get Ready For January 18 [View article]
    Tuesday. Monday is a holiday.
    Jan 18, 2013. 05:05 PM | Likes Like |Link to Comment
  • Apple Sure Looks Cheap [View article]
    Glenn, my story is not terribly different. I have made some money and lost some money on OTM calls. Overall I have lost money on them. The real performers have been far dated deep in the money calls. The return is less when it hits, but the chances of total loss are much lower.

    I have a fair amount of OTM calls for Apple going into next Wednesday, but it is not a strategy I would ever recommend as "wise investing". I am using money I can afford to lose and that I expect I probably will lose. That is not what most folks are looking for when they are "seeking alpha".
    Jan 18, 2013. 12:29 PM | 1 Like Like |Link to Comment
  • Analyzing Apple's Past To Gain A Better Perception On Its Future [View article]
    Michael,

    You have posed an interesting question. Or looked at the problem in an interesting way. I propose walking through your own model using your own assumptions, only I will go you one better and say that AAPL will not grow at all (for this example).

    Suppose 2 x book. Cash and securities are the bulk of their "book". You neglect that they while they only have $20 a share in "cash", they have $120 per share in "cash and short and long term marketable securities".

    You say 250. Suppose Apple were trading at 250 today. They are minting money -- to the tune of about $40B a year.

    If they kept the same business in 2013, at the end of 2013 they would have another 40B in the bank. So the price at then end of 2013 should be 330. Then at the end of 2014, with another 40B in the bank, they should be trading at 410. And by the end of 2015 this price is 490.

    So an investor sizes up this company and determines that he can hold on to the stock for three years, collect a small dividend, and just about double his money in three years when he sells the shares for 490.

    Sounds like a great deal, doesn't it? And the fact that it is such a great deal would drive the price higher. Suddenly the investor would be willing to pay 2.5 or 3 times book to get in on this bargain. Others seeing the stock trade at 3 times book would do the math and conclude they would have even better profits in 2015...

    In short the reason that AAPL is not trading at 250 now is that the assumptions you would have to use to get it at that level quickly make it a great deal in a couple years, and people would want to buy in advance to make the money. This is why some people say that slowing growth is not a real killer for AAPL since the stock is currently priced for little or no growth. Many people forget to project out the impact of their cash into the coming years.

    The only real explanation for why AAPL does not trade at a higher multiple is in fact the assumption that this cash generation will be slowing down in coming years. In other words, many people assume growth will actually shrink.

    If Apple can convince investors that it is not on the verge of shrinking, you may see the multiple expand. If not, it should continue to contract.
    Jan 18, 2013. 11:00 AM | 1 Like Like |Link to Comment
  • Apple Earnings: Expect The Unexpected [View article]
    It's not a large wooden rabbit by any chance...?
    Jan 17, 2013. 09:38 PM | 3 Likes Like |Link to Comment
  • Apple: Market Hero At The Crossroads [View article]
    Derek, alas, there will always be those who thing the Carnegie Foundation is "PC crap"!

    I'm glad you liked the idea.
    Jan 17, 2013. 09:14 PM | 2 Likes Like |Link to Comment
  • Apple: Market Hero At The Crossroads [View article]
    Ben and Jerry are very rich after having sold their company to Unilever.

    But anyway, you misunderstood my meaning, no doubt blinded by your hatred for those ice cream hippies from Vermont. (Actually they were from New Jersey and merely settled in VT, but that's marketing for you.)

    There is nothing "PC" about allowing the buyers of Apple products to CHOOSE the charity OR entrepreneurial project they want to support with some of Apple's money. See, that is the power of how this works. If someone needs to reconcile his decision to purchase Apple products with his disdain for what he thinks about Apple's role in pollution or labor in China, well then there is a charity that he could devote some of those funds to. This is an automatic critic silencer. Apple gets to crow about how they provide a method for its consumers to "help them change the world".

    On the other hand if someone likes to think along futuristics start-up lines, the money could be used in good old fashion capitalist fashion. Heck, you could give your Apple dollars to the NRA if you so chose. There is nothing inherently "PC" about the notion of supporting a charity or small start-up.

    The fact that you automatically took this to a place you did not like is your own issue. Like it or not, their reputation does matter and it will impact on how well they do in the future.
    Jan 17, 2013. 08:43 PM | 3 Likes Like |Link to Comment
  • Apple: Market Hero At The Crossroads [View article]
    Apple should take a page from Ben and Jerry's (e.g. "1% for Peace") and make sure they protect and increase their reputation as a socially conscious and forward thinking company.

    The purchase of each Apple item should give the buyer some number of "Apple dollars". These dollars can be donated to charity or used on crowd sourcing sites like Kickstarter. The person just uses his apple id and the funds are paid by Apple to the cause or project of his/her choice.

    This would allow people who buy Apple products to make sure that some of the profit they are helping to generate goes on to support causes and ideas they believe in. It would do wonders to sustain good will among Apple's customers.
    Jan 17, 2013. 08:15 PM | 6 Likes Like |Link to Comment
  • Apple Earnings: Expect The Unexpected [View article]
    wiesje,

    Compare this to last year. How much short interest was there going into earnings last January? I didn't see much evidence of any large short. Yet at the same time, the stock found buyers when results blew away the street. I think if the beat is large enough, the buying will start and that will be all it takes to convince others to pile in. Good news won't cut it. It would have to be great news.

    And you're right. If earnings disappoint, there will be free fall. That alone is enough to ensure there is some money on the sidelines waiting to buy, isn't it? By that I mean, they want to own AAPL but they are scared of how bad earnings may be. A healthy beat will allay their fears.
    Jan 17, 2013. 04:34 PM | 2 Likes Like |Link to Comment
  • My Once-A-Year Article On Apple [View article]
    So you were skeptical about the stock at 540 a year ago on its way to 700, but now that it is 500-ish (less than 10% lower) you think it deserves a look?

    I'm not sure AAPL is in a stronger place this year than it was last year. I fully expect anyone buying at this level will see it increase over the coming months, but then the same turned out to be true last year, didn't it?

    I look forward to your victory lap next year, talking about how you said it was worth a look at this level...
    Jan 17, 2013. 03:42 PM | 1 Like Like |Link to Comment
  • Apple Sure Looks Cheap [View article]
    You're in good company. Warren Buffet has called options "weapons of mass destruction".
    Jan 17, 2013. 01:51 PM | 1 Like Like |Link to Comment
  • Why Apple Will Beat The Street [View article]
    By far the bulk of Ford's revenue comes from Cars and Trucks.

    If you view smartphones and tablets as types of computing devices that will dominate the purchase of all computing devices for the next several years, then the iPhone and the iPad simply become members of this class.

    So if you are comfortable with the notion that hundreds of billions of dollars will be spent globally on items in this "mobile computing" class, the only question becomes whether the iPhone and iPad will remain important members of this class.

    It is a certainty that rival devices will also gain traction in this expanding market. But the idea that 75% of Apples revenue comes from sales of devices in this huge and growing market does not have to be any scarier than the notion that all Ford really does is sell cars and trucks. It's not what market they are tied to, it's how well they will do in that market.
    Jan 17, 2013. 01:27 PM | Likes Like |Link to Comment
  • Apple Sure Looks Cheap [View article]
    Danny,

    Right now the Feb 540's are trading at 9.90. Call it 10 for convenience. Each contract represents 100 shares so the cost for each contract is its price x 100. That means a 540 costs $1000. So you could get ten 540's for your $10,000.

    How much money could you make? Well the most important thing is that if you kept them till expiration and AAPL closed 540 or below, you would lose everything. If it closed at 550, the's each be worth 10 and you would break even. If AAPL went on a great run and reached 600, each one would be worth 60 (x100). So your $10,000 bet would be worth $60,000.

    The possible returns are why people get trapped into doing this. But if it really would pay 6 to 1, one has to ask what the odds are that it will really happen. Yes, you can get lucky and make a killing buying out of the money options. I never have. Any decent money I have ever made in options has been with far dated deep in the money calls. This time could be different. With AAPL set to have a blowout earnings and the market seeming to expect total failure, the price could move quickly. But it also may simply entice people to cash out quickly as well, capping the possible run.
    Jan 17, 2013. 01:16 PM | 5 Likes Like |Link to Comment
  • How Apple Gets To $400 A Share [View article]
    Indeed, in fact everyone being in the same boat is much of the problem.

    You're of course correct that it isn't "cash". That is just lazy shorthand. That is why I often use "cash and prizes" but of course the technical term would be cash and short and long term marketable securities.

    The bond market crash will be an interesting event. It could be a total collapse or it could simply be a matter of prices coming down and rates going up. There will be concerted effort to keep the market from collapsing, you can count on that. In the end, if the efforts at orderly decline are fruitless, companies like Apple will be in great shape. They owe nothing. They may not get everything they are owed, but among the wreckage they will be goliaths. There will be easy pickings and their $7 billion in actual cash will go far.

    Companies like Apple may not be entirely liquid, but they have a great deal of dry powder to make deals and purchases in the event of market collapse.

    Again, their conservative approach to money that everyone blasts them for is only effective if there is a crisis. So the worse the crisis (assuming we all still know what money is) then the better off they will be relative to all the rubble around them.
    Jan 16, 2013. 05:23 PM | Likes Like |Link to Comment
  • Is There A Worm In The Apple? [View article]
    Have you seen the video where Cramer admits that hedge funds have fed bogus negative Apple stories to the media in order to drive the price down? This is easy, he says, because they know Apple won't comment. By the time the dust clears and the truth is known, the damage is done.

    I am not one to worry about "manipulation" every time the market does not see what I see in a stock. But in the case of Apple you have a former hedge fund manager admitting to intentional manipulation of Apple.

    When the news stories all over the web are that two people are standing in line at the Apple store in Beijing and the iPhone is a flop, but it is later revealed that Apple sold 2 million in a weekend what do you think that suggests?

    When earnings are released and it becomes well known that the iPhone 5 turned out not to be the flop we were told it was, who will be asking for explanations about how the media have jumped all over this "disappointing demand" story?

    Spreading FUD (fear, uncertainty, doubt) is a well worn tactic by those who would like to see a stock or a company take some heat. There is no reason to believe that the most watched company on the planet would somehow be immune from this kind of manipulation. Quite the opposite, given the hunger media have for anything Apple that will help drive eyeballs, it is uniquely suited for these type of shenanigans.

    But I do agree that in the end the price is the only thing that matters.

    "For quite some time, the bulls have been dead wrong."

    No, actually by your own definition, the bulls have been right for quite some time.
    Jan 16, 2013. 11:17 AM | 1 Like Like |Link to Comment
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