TimingLogic's Blog

Reasoned, Relevant And Often Contrarian Commentary On Economics


October 24
I'm an electrical engineer and mathematician by training. My career has spanned diverse areas of expertise from being part of a team which designed the world's most powerful computers to corporate consulting around business transformation and information-based solutions to being a corporate sales and marketing executive in the information technology and business consulting space. I’ve led teams responsible for innovative and transformative solutions and been part of teams that helped set strategy for many of America's greatest companies. Two of my interests are econometrics, democratic finance and quantitative - qualitative analysis. Over the years I have developed risk-based models and trading systems meant to identify significant investment opportunities and periods of extreme risk. My blog is an outlet for another of my passions, writing. I generally consider myself a contrarian. Therefore, many of my rantings are meant to encourage people to question what they believe to be true. Terms of Use & Disclaimer: First off, I don't take anything on here too seriously and you shouldn't either. These are simply sardonic rantings of Bill, my alter ego, often meant to agitate for peaceful & nonviolent reform. This web site reflects the views of its authors. It is unaffiliated with any NASD broker/dealer. Statements on this site do not represent the views or policies of anyone other than its authors. The information on this site is provided for discussion purposes, comedic relief and entertainment only and are not investing recommendations. The authors may have positions in securities mentioned herein. Under no circumstances does this information represent a recommendation to buy or sell securities. While information discussed on this site was gathered from what are believed to be reliable sources, in no way is informational accuracy guaranteed. All information on this site may contain errors and omissions. Trading and investing involves high levels of risk. Always consult a licensed financial advisor or broker before making any and all investment decisions. Authors of this site and any sites which are fed by said site, including Open Salon and others, will assume no responsibility for the actions of the reader and user. Readers and users agree, as condition to accessing this site, to release and hold harmless this site's authors from all liability in connection with this site or any views posted on this site. All readers and users of this site agree that use of this site requires acceptance to the current Terms Of Use & Disclaimer and that current terms include any and all use and material from site inception. If you do not understand these statements in their entirety or do not agree to be bound by this current agreement, you must immediately discontinue use of this site. This Terms Of Use & Disclaimer may change at any time and it is the reader's and user's responsibility to review, understand and abide by any updates.

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FEBRUARY 17, 2012 2:33PM

Apple's Stock May Not Be As Cheap As It Looks

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Is that a joke? Well, it's the title of a Bloomberg article today.

From a post on here of four years ago I wrote...  MarketWatch highlights a small cap fund manager who sharpens his edge with the timeless principles of value investing made popular by the greatest investor of all time, Ben Graham. While Wall Street was blowing all of their cash at the very peak of a major cycle top, this fund manager was building his war chest of cash based on actionable intelligence. On timeless truths. Very, very few can actually walk the talk when it comes to the great discipline required for value investing. For the only true method of successful investing. I wrote on here long ago that only fundamentals-based investment knowledge would provide a safe haven in Wall Street's mad world of quantitative Frankenfinance. How true that has become. We live in a world where Graham's principles have been chucked to the curb like a bad habit. Instead I still hear the mindless blabber of physics majors using financial derivatives to hedge factors they don't understand. And none of them can spell economics, sociology, timeless investment ideals or fundamentals. What we see on Wall Street isn't science. It's voodoo backed by funny math. 

"To the extent that Wall Street gets away from book value, it is headed into potentially dangerous areas of thinking.  It then introduces factors – chiefly the notion of increasing future earnings – which are very difficult to measure and which therefore may be badly measured."  -- Benjamin Graham, most likely the  greatest investor of all time.  I mean investor.  Not gambler like those who are buying Apple's stock based on generally accepted bulloney of what quantifies an investment in today's financial freak show.

Okay, this is really simple.  I'll type really slow for Wall Street MBAs and Bloomberg reporters.  (That means you read this really slowwww.)  Read Ben Graham's simple statement above.  Now read the rest of this paragraph.  Apple's revenue has increased about 7x over the last seven years or so.  It's book value even less.  It's stock price has increased about 100x over that same period.   Do you see a potential issue here?  Bueller?  Bueller?  Anyone?  I mean come on.   This isn't rocket science folks.  You simply don't have to be an effing idiot.  In other words, don't let your Ivy League education interfere with your learning.

Apple's stock price has traded in a very, very tight linear regression band since 2009.  That tight linear regression band tells us the stock is being driven by program trading or Frankenstein finance.  It's price has absolutely no relevance to anything other than how much leverage and pump Wall Street and hedge funds can create to drive the stock into the stratosphere for personal profit.  There is no logic behind the valuation of Apple any more than there was logic behind the Internet bubble pump and dump or any other financial scheme Wall Street dreams up.  Earnings used in this Bloomberg article to finally ask the question whether the stock may not be cheap are as preposterous as stating the stock is actually cheap in the first place.  Apple's stock is a massive bubble.

In the past few weeks, the stock has shot through the roof and out of the manipulated regression band.  That is most certainly some type of squeeze or manipulation accomplished using derivatives.  What the hell does any of that have to do with anything?  Does Apple make unique products?  Sure they do.  But how does that have anything to do with a stock that has been pumped up 100x in a handful of years?  NOTHING.  The stock market reflects nothing of any type of reality.  It's an illusion created by an Orwellian world of finance gone mad.   

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