Demystifying The Microsoft/Apple Comparison Argument [View article]
"My sad feeling -- being a long time apple investor who has reluctantly sold most of his shares "
Why would you be sad? You made a good profit. Take it and move on or wait for a new price where you feel good about getting back in. Question is: Did you sell calls to get paid to surrender your shares or did you just drop the shares without a fight?
Demystifying The Microsoft/Apple Comparison Argument [View article]
""Smart money" is a made up noun.. I've been investing for 40 years"
There's your problem. Smart money doesn't invest. They trade. A good trader can feel the pressure building as momentum moves a stock on a steep incline. Smart money can pull the trigger to take profits (possibly get short) and wait until "investors" support the stock again. Yes Virginia, it is a "made up word" but it represents that group of "mythical" traders who can unemotionally look at price movement in terms of risk/reward not high/low.
"Google's response, when I wrote in to complain? Blame my device."
Hmmm. Sounds familiar. Like the Windows PC where finger pointing between the hardware vendors and Microsoft are commonplace. Is Google becoming the new Microsoft despite their "do no harm" pledge. I had to nuke their WideVine Media plug-in on a Macbook Pro because Google decided I needed to upgrade the version. Didn't even know it had been installed in the first place. And the updater program could only be stopped by killing the process. There was no quit or exit option.
"Not even remotely. If the price of the item you were short stayed at zero for five years and you never bothered to cover, and it later jumped to $5 million, you would still have to pay up."
Ok, one more and only one more time. The result of this trade scenario was a bankruptcy and the stock was deemed worthless when the company (just for your benefit,) either emerged from bankruptcy or was liquidated. There are no shares to jump to 5 million. It was wiped from the face of the earth and all the trading books. Analogy from Monty Python's Pet Shop sketch: It is an ex stock. It is not pining for the fjords. It is no more. It has ceased to be. This stock wouldn't voom if you put four million volts through it.
"Until then, it is just an open trade that could go anywhere, and anything you think you have "earned" on it is a completely fallible opinion that the next day's trading may blast to atoms."
I see by your comment history & instablogs that you know a lot about macro markets, the Depression correlation, and investor sentiment related to AAPL rise & fall but nothing about trading. So I see you need solid proof. Here it is in US Code".
"26 USC § 1233 - Gains and losses from short sales
(h) Short sales of property which becomes substantially worthless (1) In general If— (A) the taxpayer enters into a short sale of property, and (http://bit.ly/qO5GqA) such property becomes substantially worthless, the taxpayer shall recognize gain in the same manner as if the short sale were closed when the property becomes substantially worthless. To the extent provided in regulations prescribed by the Secretary, the preceding sentence also shall apply with respect to any option with respect to property, any offsetting notional principal contract with respect to property, any futures or forward contract to deliver any property, and any other similar transaction."
As you can see it says AS IF THE SHORT SALE WERE CLOSED. There is no closing transaction for property that becomes worthless. I hope this resolves this matter.
"I accidentally "liked" your comment while reaching for the reply button bilton. heh."
Colin, I don't live for your or anyone else's likes. If it bothers you too much, maybe you should contact the editors to see if they can rectify your error. I am here to talk about markets while trading. You missed it as well. I will try one more time. I was not dissing value investing. I use it as well in my retirement accounts because I have time to wait for maturity. I trade to generate additional income in a more immediate fashion. In my trading accounts, I do everything from multi-year long term buy or sell short & hold to daily day trading.
The problem with some people who quote Graham, Dodd, and Buffett is their blind view of other philosophies and specifically trading being gambling. They may be narrow minded or just lack the information to understand what really makes markets. The fact is all market participation no matter the due diligence is taking a chance with your hard earned money. That includes cash in banks, money markets, CDs, treasuries, bonds, stocks, commodities, foreign exchange, real estate, and anything else with marketable value.
- The country that insures your bank account could go bankrupt making their guarantee worthless for fixed income instruments. - The company from which you bought that triple A bond could be a sham like Enron. - That company whose shares you used good value analysis to buy could be a Worldcom. - Your trusted long time certified advisor could be a dishonest crook like Bernie Madoff. - Do you think farmers and airlines that buy commodities contracts as a pricing hedge are not at risk to socioeconomic or natural influences. - How about if Monsanto or ADM crops were found to cause cancer or highly degenerative disease?
When I invest, I take all this into consideration and take a leap of faith when I buy and hold a piece of equity or debt like I did April 2009 with $GE and $BCS and other companies in what became the deal of the new century. Investing is actually more nerve racking to me because I track all my holdings at least weekly if not daily. They fluctuate with the mood of the overall markets.
The difference with trading is the timeframe is much smaller and the concentration is on price movement. There is no waiting around for godot while someone else holds the money. There is no hoping the company is honest and actually doing what they say they are. In fact, there is really little care about what the company does. The only care about is how human nature of all the other traders and good little investors affect the price of the stock.
If you know anything about cash poker you will understand what I have explained as it is all about human nature as well. If you have only watched tournament poker on TV, well I can understand why you think it is gambling. It takes a lot of market or poker education to be successful at the game. Both rely on statistics to be profitable. Given enough knowledge a good player will over time have more big wins accompanied by smaller losses.
There are traders who use fundamentals to make buy and sell decisions. For example, buying a good undervalued beaten down stock then selling after its first run up. Or trading the rapid emotion following an earnings release as the big institutional holders increase or decrease their positions. There are traders who use statistical price movement as representation of human behavior around the stock. In gambling, you put your money on the table or in the machine and blindly hope. In trading, success comes from using knowledge and all the tools available. A trade which goes in the wrong direction can be hedged by using options just like an investor can buy a protective put or use astock repair to recover from a losing investment. A leveraged inverse ETF can be properly used as insurance for a multi day trade. An investor might try to do this and lose a lot of money because they do not understand what moves the price of the product. Successful traders do not just blindly put their money down and hope. They actively manage and adapt.
moses, there are a lot of "investors" around here who think they understand markets. Unlike other blogging sites, Seeking Alpha has a very diverse population from the beginner investor to CEOs, analysts, and hedge fund managers. That is what makes this a place to get facts rather than misinformation. Someone will always come along and provide verifiable fact rather than simply agreeing with the mindless herd.
Jason and Major, I'll try again to help you understand. Maybe you have never sold short (as in "naked") underlying contracts or options. The money is immediately transferred to the seller. You never owned what you are selling so there was no original purchase transaction. What happens after that is up to the seller and not some mysterious "round trip" fairy. A naked seller is not required to close a trade as long as they have the liquidity to cover the unlimited risk in the trade.
When a company goes bankrupt and is delisted or an option expires worthless, there is no entity that magically shows up and says "Hey, would you like to keep the money from your original trade". The other side just GOES AWAY. When I sell "time value" premium on $AAPL weekly options and it goes to zero, I receive no transaction report or statement saying "option expired worthless". I pay no roundtrip commission or fees or anything. I just go use the money to make another trade. Or I could also withdraw it from my account as it is real liquid money. When I borrow your shares and they become worthless, I don't have to pay you back. I don't have to tell you I don't have to pay you back. The only thing I have to do is report the trade on my taxes by setting the basis to the original sell trade commissions & fees.
Yep, sounds more investor hoper like you get on the $NOK $RIMM/$BBRY $MSFT articles than adding to the serious discussion here of where did the 200 billion in market cap go.
"trading stock just to speculate on what other people may or may not be willing to pay for it tomorrow is in general a loser's game"
Oh boy, here we go again. What is it with value investors and their archaic view of trading. Trading is nothing more than using human nature to your advantage using past behavior as a guide. It could be fair value or any other fundamental or it could be simply tracking price movement. It is more like poker than roulette: the more you know, the more likely you are to take the other person's money. They may get lucky occasionally but in the long run a good player will win.
"No one makes money is a stock until they have completed a round trip from money to stock and back to money again."
Almost. When I short sell you 100 shares, your money is deposited in my account but the price keeps moving. If it goes to zero, I never have to do anything else. There is no round trip. This is the same when you sell a covered call option. When the option expires out of the money, the price essentially goes to zero, you keep the entire premium and your covered shares.
Market cap cannot be viewed in a vacuum. It is simply what someone is willing to pay for a share of the company multiplied by the total number of shares. It is possible when the price reached 700 everyone except one buyer and one seller could have abandoned the market in $AAPL stock. The two remaining decided fair price was 500. They performed a 100 share trade and $50K changed hands. So, where did the 200 billion market cap go? Point is market cap is an illusion based on price not the actual real balance sheet facts of the company.
So, which is more valuable:
company A with 50 billion shares selling at $14 company B with 10 billion shares selling at $70 company C with 5 billion shares selling at $140 company D with 1 billion shares selling at $700 company E with 100 million shares selling at $7000
Demystifying The Microsoft/Apple Comparison Argument [View article]
Why would you be sad? You made a good profit. Take it and move on or wait for a new price where you feel good about getting back in. Question is: Did you sell calls to get paid to surrender your shares or did you just drop the shares without a fight?
Demystifying The Microsoft/Apple Comparison Argument [View article]
There's your problem. Smart money doesn't invest. They trade. A good trader can feel the pressure building as momentum moves a stock on a steep incline. Smart money can pull the trigger to take profits (possibly get short) and wait until "investors" support the stock again. Yes Virginia, it is a "made up word" but it represents that group of "mythical" traders who can unemotionally look at price movement in terms of risk/reward not high/low.
Is Mighty Apple Really Falling? [View article]
Hmmm. Sounds familiar. Like the Windows PC where finger pointing between the hardware vendors and Microsoft are commonplace. Is Google becoming the new Microsoft despite their "do no harm" pledge. I had to nuke their WideVine Media plug-in on a Macbook Pro because Google decided I needed to upgrade the version. Didn't even know it had been installed in the first place. And the updater program could only be stopped by killing the process. There was no quit or exit option.
Is Mighty Apple Really Falling? [View article]
Read a 10 year chart.
Apple: The $200 Billion Question [View article]
Ok, one more and only one more time. The result of this trade scenario was a bankruptcy and the stock was deemed worthless when the company (just for your benefit,) either emerged from bankruptcy or was liquidated. There are no shares to jump to 5 million. It was wiped from the face of the earth and all the trading books. Analogy from Monty Python's Pet Shop sketch: It is an ex stock. It is not pining for the fjords. It is no more. It has ceased to be. This stock wouldn't voom if you put four million volts through it.
And now for something completely different.
Apple: The $200 Billion Question [View article]
I see by your comment history & instablogs that you know a lot about macro markets, the Depression correlation, and investor sentiment related to AAPL rise & fall but nothing about trading. So I see you need solid proof. Here it is in US Code".
"26 USC § 1233 - Gains and losses from short sales
(h) Short sales of property which becomes substantially worthless
(1) In general
If—
(A) the taxpayer enters into a short sale of property, and
(http://bit.ly/qO5GqA) such property becomes substantially worthless,
the taxpayer shall recognize gain in the same manner as if the short sale were closed when the property becomes substantially worthless. To the extent provided in regulations prescribed by the Secretary, the preceding sentence also shall apply with respect to any option with respect to property, any offsetting notional principal contract with respect to property, any futures or forward contract to deliver any property, and any other similar transaction."
As you can see it says AS IF THE SHORT SALE WERE CLOSED. There is no closing transaction for property that becomes worthless. I hope this resolves this matter.
Apple: The $200 Billion Question [View article]
Colin, I don't live for your or anyone else's likes. If it bothers you too much, maybe you should contact the editors to see if they can rectify your error. I am here to talk about markets while trading. You missed it as well. I will try one more time. I was not dissing value investing. I use it as well in my retirement accounts because I have time to wait for maturity. I trade to generate additional income in a more immediate fashion. In my trading accounts, I do everything from multi-year long term buy or sell short & hold to daily day trading.
The problem with some people who quote Graham, Dodd, and Buffett is their blind view of other philosophies and specifically trading being gambling. They may be narrow minded or just lack the information to understand what really makes markets. The fact is all market participation no matter the due diligence is taking a chance with your hard earned money. That includes cash in banks, money markets, CDs, treasuries, bonds, stocks, commodities, foreign exchange, real estate, and anything else with marketable value.
- The country that insures your bank account could go bankrupt making their guarantee worthless for fixed income instruments.
- The company from which you bought that triple A bond could be a sham like Enron.
- That company whose shares you used good value analysis to buy could be a Worldcom.
- Your trusted long time certified advisor could be a dishonest crook like Bernie Madoff.
- Do you think farmers and airlines that buy commodities contracts as a pricing hedge are not at risk to socioeconomic or natural influences.
- How about if Monsanto or ADM crops were found to cause cancer or highly degenerative disease?
When I invest, I take all this into consideration and take a leap of faith when I buy and hold a piece of equity or debt like I did April 2009 with $GE and $BCS and other companies in what became the deal of the new century. Investing is actually more nerve racking to me because I track all my holdings at least weekly if not daily. They fluctuate with the mood of the overall markets.
The difference with trading is the timeframe is much smaller and the concentration is on price movement. There is no waiting around for godot while someone else holds the money. There is no hoping the company is honest and actually doing what they say they are. In fact, there is really little care about what the company does. The only care about is how human nature of all the other traders and good little investors affect the price of the stock.
If you know anything about cash poker you will understand what I have explained as it is all about human nature as well. If you have only watched tournament poker on TV, well I can understand why you think it is gambling. It takes a lot of market or poker education to be successful at the game. Both rely on statistics to be profitable. Given enough knowledge a good player will over time have more big wins accompanied by smaller losses.
There are traders who use fundamentals to make buy and sell decisions. For example, buying a good undervalued beaten down stock then selling after its first run up. Or trading the rapid emotion following an earnings release as the big institutional holders increase or decrease their positions. There are traders who use statistical price movement as representation of human behavior around the stock. In gambling, you put your money on the table or in the machine and blindly hope. In trading, success comes from using knowledge and all the tools available. A trade which goes in the wrong direction can be hedged by using options just like an investor can buy a protective put or use astock repair to recover from a losing investment. A leveraged inverse ETF can be properly used as insurance for a multi day trade. An investor might try to do this and lose a lot of money because they do not understand what moves the price of the product. Successful traders do not just blindly put their money down and hope. They actively manage and adapt.
Apple: The $200 Billion Question [View article]
Apple: The $200 Billion Question [View article]
When a company goes bankrupt and is delisted or an option expires worthless, there is no entity that magically shows up and says "Hey, would you like to keep the money from your original trade". The other side just GOES AWAY. When I sell "time value" premium on $AAPL weekly options and it goes to zero, I receive no transaction report or statement saying "option expired worthless". I pay no roundtrip commission or fees or anything. I just go use the money to make another trade. Or I could also withdraw it from my account as it is real liquid money. When I borrow your shares and they become worthless, I don't have to pay you back. I don't have to tell you I don't have to pay you back. The only thing I have to do is report the trade on my taxes by setting the basis to the original sell trade commissions & fees.
Apple: The $200 Billion Question [View article]
Yep, sounds more investor hoper like you get on the $NOK $RIMM/$BBRY $MSFT articles than adding to the serious discussion here of where did the 200 billion in market cap go.
Apple: The $200 Billion Question [View article]
ROFL! That is the funniest comment I have seen in a long time. Thanks for sharing.
Apple: The $200 Billion Question [View article]
Oh boy, here we go again. What is it with value investors and their archaic view of trading. Trading is nothing more than using human nature to your advantage using past behavior as a guide. It could be fair value or any other fundamental or it could be simply tracking price movement. It is more like poker than roulette: the more you know, the more likely you are to take the other person's money. They may get lucky occasionally but in the long run a good player will win.
Apple: The $200 Billion Question [View article]
Almost. When I short sell you 100 shares, your money is deposited in my account but the price keeps moving. If it goes to zero, I never have to do anything else. There is no round trip. This is the same when you sell a covered call option. When the option expires out of the money, the price essentially goes to zero, you keep the entire premium and your covered shares.
Apple: The $200 Billion Question [View article]
So, which is more valuable:
company A with 50 billion shares selling at $14
company B with 10 billion shares selling at $70
company C with 5 billion shares selling at $140
company D with 1 billion shares selling at $700
company E with 100 million shares selling at $7000
Apple: The $200 Billion Question [View article]
Yeah, it went into the pocket of another market participant. What they did with it is anyone's guess.