On Sunday, October 2nd, I went down to Liberty Plaza to see the Occupy Wall Street movement firsthand and stayed for about 5 hours. What I found more than anything else was democracy at work and a "General Assembly" of people who in a lot of ways are more mature than our elected representatives in congress.
The movement has drawn criticism for not having a clear list of demands or solutions, but those critics are missing the point. We are faced with many complicated problems, and the solutions that will work will likewise be varied and complex. Our leaders have had several years to come up with solutions, and theirs have not been simple and the results continue to be lacking. The Occupy Wall Street movement is structured 'horizontally' meaning that there is no defined leadership per se, which makes the movement more open and inclusive and everyone's opinion is welcome.
The people I encountered at Liberty Plaza ranged from Columbia Economics Professor Joseph Stiglitz to employed and financially/politically savvy professionals with strong opinions on what can be done, to others who can't put their finger on what they think is wrong, but simply know that something is wrong and want to make things better. All were friendly, curious, and willing to listen to a myriad of viewpoints.
It is wrong to be critical of fellow Americans who are peacefully exercising their rights under the Constitution. People came to have a voice in a public forum, work together and learn. How can you criticize someone who wants to be engaged in a true democratic process? How can you criticize someone who says that they don't know something but shows a genuine eagerness to learn about it? I have seen people write that the protestors are lazy, spoiled and naive, and should get jobs. I will tell you that these people are none of those things. If they were lazy and spoiled, they would be at home watching TV or playing video games, if they were naive, they wouldn't be forgoing comfort to search for a better way and to say that they should be working is to tightly close your eyes to the economic reality around us.
Obviously the viewpoints were as varied as the people, but by and large most were willing to work together and compromise, and most realized that this is not about being either or, black or white, capitalist vs. socialist vs. communist or a poor vs. rich battle nor anti-government or anti-corporation. All were interested in making things better. In a time when establishment politics continues to try to divide people who have very similar core goals, the amount of togetherness, patience and understanding was impressive and refreshing.
There were core themes which most agreed upon and most of them centered on restoring fairness of opportunity to the system, eliminating or reducing corporate control over government, and promoting peace, health, and education.
As an example, when the country shifts from a banking system which was supposed to be capitalistic where gains and losses are privatized to one which is worse than either capitalism or socialism; where the gains are privatized and taken out of the system by the few, and the losses are privatized on the backs of the ever-shrinking middle class, that is a huge problem. That bankers received $1 million+ bonuses on top of $200,000+ base salaries after being bailed out by teachers making $50,000 per year is ridiculous. The contract of capitalism was broken, the institutions literally gambled and lost their rent money and got the government to pay for it with minimal repercussions.
Additionally, there is the issue of the incredibly skewed tax code which puts most of the burden as a percentage of income on the middle class. The fact that a dollar made from an investment held for a year or more (and there are accounting tricks to recharacterize almost anything to fit that bill) is taxed at a max rate of 15% while income made from working at a job is taxed at up to 35% plus an additional 5.65% for social security and medicare is ludicrous. Warren Buffet, one of the richest men in the world recently wrote in his New York Times Op-Ed piece:
"If you make money with money (investments), as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot."
I don't hate the rich, in fact I like most of them that I've encountered, and I am happy for their success, but there should not be any way that they pay less taxes per dollar earned than anyone who makes less than them. The systematic concentration of wealth into fewer and fewer hands is not only unfair, but it takes a great toll on our nation and society. Issues like this must be corrected immediately to avoid further destabilization. This is not about class war, only about everyone paying their fair share. I can see no reason why a dollar earned by making an investment should be taxed less than a dollar earned teaching or building something, or performing surgery.
The above only begins to scratch the surface, but illustrates that there are many clear issues to work on here. Those two above issues alone should be enough to necessitate a protest, but why think small and impose limits when so much can be accomplished?
Most participants are steadfastly committed to maintaining the protest in a peaceful manner, do not want to get into altercations with police, and actively strive to keep things safe and courteous. There has been $0 of confirmed property damage sustained during the movement. When one man climbed into a tree above the crowd, the crowd began chanting "please get down", the majority wanted to avoid giving the police a reason to disrupt the General Assembly meeting, and wanted to ensure the safety of all.
Although the police do at times step in to assert control even when things seem to be going smoothly. I saw a young woman standing next to a bike having a conversation for over a half hour in full view of the police. They arbitrarily came over and asked her and a few other people to move a few feet toward the park over an arbitrary line because she was "obstructing the sidewalk" even though foot traffic was light, she wasn't slowing any pedestrians down, and it was fine for her to be there up to that point, they decided to take issue with her. When she refused to move and locked herself to the bike, the police called for a truck with a power demolition saw which they used to saw the bike in half and arrested her. When one or two people in the crowd began insulting the police, others said "no, don't do that". After the arrest, a facilitator came to encourage people "not to be distracted" and to come back to the General Assembly where people were about to share their accounts of the incident on the Brooklyn Bridge.
After listening to the accounts of the bridge and dropping some pizza off at the food station, I headed home thankful that a large group of people decided to ensure that more voices are heard and that we as a society are not defined through our silence by the voice of a few.
Monday, October 03, 2011
Monday, September 19, 2011
An Open Response to the Netflix / Qwikster Split
What follows is a letter I sent to Netflix CEO Reed Hastings in response to his blog post of Sunday, September 18th, 2011 entitled An Explanation and Some Reflections
Please forward this to Reed. Since it took him so long to write me a personal letter on this, I didn't have time to do the same right away, but I think it will be helpful to a company which up until now, I thought was one of the greatest around. I used to swear by Netflix, and used to be zealously loyal to it and now I am considering canceling. I wonder if Netflix actually talks to its subscribers and makes plans based on the real world, or have your decision makers become completely disconnected and blinded by a success which can easily fade.
Please forward this to Reed. Since it took him so long to write me a personal letter on this, I didn't have time to do the same right away, but I think it will be helpful to a company which up until now, I thought was one of the greatest around. I used to swear by Netflix, and used to be zealously loyal to it and now I am considering canceling. I wonder if Netflix actually talks to its subscribers and makes plans based on the real world, or have your decision makers become completely disconnected and blinded by a success which can easily fade.
Below are the comments I sent to a friend of mine regarding Reed's letter and the situation.
Yeah... As far as Netflix, I feel I should have gotten a letter from the CEO within a day of the price increase announcement in the newswires. As far as I recall, this is the first official email I have received from them regarding this price increase period. All other info I have received from the news. I never saw a customized e-mail saying "here is what you were paying per month and here is what you are going to pay" and so don't actually know what my new price will be for my 3 DVD out at a time + Streaming plan.
To me, the actions described in this e-mail are making things far, far worse. I might actually look to go short on the stock, but it may be too late for that at least in the near term as it has already taken major hits. The only thing good I see is the addition of games. Separating the sites is completely IDIOTIC. The main asset to me that Netflix has of mine is my ratings of every movie since I signed up with them in 2001. There was also always the convenience of being able to look up any movie that exists and maybe watch it instantly, if not, no big deal, add it to the DVD queue. In fact, I was recently angered when they stopped showing non-instant movies on the iPhone app. I always used the Netflix app as a one stop to get quick info on ANY movie. As someone who is relatively financially affluent and time poor, I considered the elasticity of my demand for Netflix to have been very low. I am also one of Netflix's most profitable subs as I often wind up keeping a DVD for months at a time. So I felt a little annoyed on an intellectual level about the price increase, but I knew that I would swallow it in large part because of these conveniences and my stored ratings. I also didn't mind so much because if it means me getting a bigger selection of top tier movies instantly, I am willing to pay. If they think I am going to go to two separate websites or apps to rate every movie I see, they are insane. They should take great heed to this as this is the first time that I, a decade-long subscriber and early adopter am seriously considering abandoning the service (both of them). My decisions have also been a really good barometer for the overall consumer market because in general I am anti-materialistic and advertising-insensitive. This is not to mention all the money they are going to waste rebranding the sites, advertising for two separate sites, loss of brand recognition, additional charges paid to credit card companies for multiple transactions for the same customer, etc. It looks like they are going to WASTE the entire price increase on this fool's errand.
Eric
Eric
Monday, December 08, 2008
Oil and Keeping the Green Revolution Turning
OIL (All historic prices cited are indexed to inflation)
Pretty much everyone I saw in person in the late spring and summer heard me very enthusiastically telling everyone who would listen (and many I am sure wished I would shut up after hearing it several times) about the upcoming crash in Oil. I clearly remember the disbelieving looks and sneers when I told some individuals that I believed Oil would be at $50 per barrel within 5 years. I didn't think that it would happen quite this fast, but I knew it would. I posted a short note on this blog on Friday, June 13th, 2008, and I shared my unfinished in-depth entry with a few friends who were interested. I do want to put it up eventually as I still find the logic behind it interesting.
Right now I still see some room for oil to continue down. Demand destruction has not let up. I believe that we may return to the average price that oil has been at over the last 60 years which is right around $25 in current inflation indexed dollars. After the last energy crisis when oil peaked in 1981 to the mid $70's in today's dollars, it fell back to the $20's by 1985 where it stayed until 1998 (with the exception of the quick spike to $50 due to the first gulf war.
In the very near term, we will probably see some spikes especially with OPEC threatening that it will cut production at its next meeting on December 17th. I believe that they will probably be aggressive and cut quotas in the 2-3 million barrel per day range. OPEC has traditionally had a hard time enforcing their quotas and I believe that demand destruction will continue and outstrip the decrease in production. I would not be surprised at all if demand in the US fell to the 15 to 17 million barrel per day range.
I do feel like the easy money on the downside of oil has already been made, and I would not recommend that anyone without significant experience trade this market to the downside. I bought $80 USO (United States Oil fund ETF) puts when crude was trading around $130 per barrel. I have closed all those positions out except for one with a January 2010 expiration date which I am watching very closely.
We are finally in a relatively good place when it comes to oil. I actually think output cuts are a good thing for the overall balance of the market. We won't be strained against hard production limits and if demand does pick up, more production can be brought online relatively quickly and easily which means we should be safe from crisis conditions for awhile. Having prices kept a little higher than those that would occur with no cuts is also a positive because it encourages continued conservation and investment and adoption of alternative energy technologies.
ONLY YOU CAN PREVENT HIGH OIL PRICES!!
Here's the thing. During the massive run up in oil prices I felt that there was a lot of misguided anger toward all sorts of entities, especially oil companies (whose actual profit margins did not increase by very much at all). While I feel that speculation was one of the biggest causes of the insane runup and subsequent bubble, the other big cause is the oil consumer and the fact that oil was so cheap for so long which discouraged investment, development, and adoption of alernative energy sources.
I am happy with the many steps that Americans and citizens of many parts of the world have taken to become 'greener' such as increasing conservation and the investment in and use of new practices and technologies which are more sustainable and eco-friendly. The key is that we as a society must continue along this path for environmental reasons and for economic ones.
Each one of us has a choice and we each must continue to do our part, as a people, we cannot go back to being wasteful as that will put us right back into a crisis situation. Americans use twice as much oil per person as citizens in most developed European countries. We must continue to reduce our dependence on oil even if it stays cheap as only then will renewable energy realize the economies of scale which will bring the price of alternative energy down. So keep the smaller car, keep taking the train or carpooling, continue to replace your light bulbs with florescents and to cut energy consumption in other ways and continue to invest in and support companies who make an effort to be 'green' and who develop alternative energy technologies.
If you choose not to, I will be ready with a mirror for the next time you complain about how the 'greedy oil companies' are 'making' the price of gas high.
Pretty much everyone I saw in person in the late spring and summer heard me very enthusiastically telling everyone who would listen (and many I am sure wished I would shut up after hearing it several times) about the upcoming crash in Oil. I clearly remember the disbelieving looks and sneers when I told some individuals that I believed Oil would be at $50 per barrel within 5 years. I didn't think that it would happen quite this fast, but I knew it would. I posted a short note on this blog on Friday, June 13th, 2008, and I shared my unfinished in-depth entry with a few friends who were interested. I do want to put it up eventually as I still find the logic behind it interesting.
Right now I still see some room for oil to continue down. Demand destruction has not let up. I believe that we may return to the average price that oil has been at over the last 60 years which is right around $25 in current inflation indexed dollars. After the last energy crisis when oil peaked in 1981 to the mid $70's in today's dollars, it fell back to the $20's by 1985 where it stayed until 1998 (with the exception of the quick spike to $50 due to the first gulf war.
In the very near term, we will probably see some spikes especially with OPEC threatening that it will cut production at its next meeting on December 17th. I believe that they will probably be aggressive and cut quotas in the 2-3 million barrel per day range. OPEC has traditionally had a hard time enforcing their quotas and I believe that demand destruction will continue and outstrip the decrease in production. I would not be surprised at all if demand in the US fell to the 15 to 17 million barrel per day range.
I do feel like the easy money on the downside of oil has already been made, and I would not recommend that anyone without significant experience trade this market to the downside. I bought $80 USO (United States Oil fund ETF) puts when crude was trading around $130 per barrel. I have closed all those positions out except for one with a January 2010 expiration date which I am watching very closely.
We are finally in a relatively good place when it comes to oil. I actually think output cuts are a good thing for the overall balance of the market. We won't be strained against hard production limits and if demand does pick up, more production can be brought online relatively quickly and easily which means we should be safe from crisis conditions for awhile. Having prices kept a little higher than those that would occur with no cuts is also a positive because it encourages continued conservation and investment and adoption of alternative energy technologies.
ONLY YOU CAN PREVENT HIGH OIL PRICES!!
Here's the thing. During the massive run up in oil prices I felt that there was a lot of misguided anger toward all sorts of entities, especially oil companies (whose actual profit margins did not increase by very much at all). While I feel that speculation was one of the biggest causes of the insane runup and subsequent bubble, the other big cause is the oil consumer and the fact that oil was so cheap for so long which discouraged investment, development, and adoption of alernative energy sources.
I am happy with the many steps that Americans and citizens of many parts of the world have taken to become 'greener' such as increasing conservation and the investment in and use of new practices and technologies which are more sustainable and eco-friendly. The key is that we as a society must continue along this path for environmental reasons and for economic ones.
Each one of us has a choice and we each must continue to do our part, as a people, we cannot go back to being wasteful as that will put us right back into a crisis situation. Americans use twice as much oil per person as citizens in most developed European countries. We must continue to reduce our dependence on oil even if it stays cheap as only then will renewable energy realize the economies of scale which will bring the price of alternative energy down. So keep the smaller car, keep taking the train or carpooling, continue to replace your light bulbs with florescents and to cut energy consumption in other ways and continue to invest in and support companies who make an effort to be 'green' and who develop alternative energy technologies.
If you choose not to, I will be ready with a mirror for the next time you complain about how the 'greedy oil companies' are 'making' the price of gas high.
Tuesday, July 22, 2008
Panicky Investors: "OMG! Apple is teh DOOMED!"
Apple Reports Record Third Quarter Results
Revenue Up 38 Percent Year-Over-Year
Mac Sales Reach All-Time HighCUPERTINO, California—July 21, 2008—Apple® today announced financial results for its fiscal 2008 third quarter ended June 28, 2008. The Company posted revenue of $7.46 billion and net quarterly profit of $1.07 billion, or $1.19 per diluted share. These results compare to revenue of $5.41 billion and net quarterly profit of $818 million, or $.92 per diluted share, in the year-ago quarter. Gross margin was 34.8 percent, down from 36.9 percent in the year-ago quarter. International sales accounted for 42 percent of the quarter’s revenue.
Apple shipped 2,496,000 Macintosh® computers during the quarter, representing 41 percent unit growth and 43 percent revenue growth over the year-ago quarter. The Company sold 11,011,000 iPods during the quarter, representing 12 percent unit growth and seven percent revenue growth over the year-ago quarter. Quarterly iPhone™ units sold were 717,000 compared to 270,000 in the year-ago-quarter.
“We’re proud to report the best June quarter for both revenue and earnings in Apple’s history,” said Steve Jobs, Apple’s CEO. “We set a new record for Mac sales, we think we have a real winner with our new iPhone 3G, and we’re busy finishing several more wonderful new products to launch in the coming months.”
“We’re extremely pleased with the growth of our business and the generation of almost $5.4 billion in cash in the first three quarters of fiscal 2008,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the fourth quarter of fiscal 2008, we expect revenue of about $7.8 billion and earnings per diluted share of about $1.00.”
Friday, July 18, 2008
Panicky Investors: "OMG! Google is teh DOOMED!"
Wow, so Google was only able to increase profits by 35% and revenue by 39% in an extremely challenging economic environment. Seriously, most companies would kill for this type of growth during the best of times and Google is producing it during a slowdown and in a seasonally weak period for search. The 3.2 billion dollar purchase of DoubleClick (which significantly lowered their cash position) and the decline in interest rates also reduced the return on their cash position.
It is also not like they are sitting around doing nothing about it, they are watching their budget more closely, are holding expenses down relative to revenue and have slowed their rate of hiring. I see the slowdown in hiring as a positive, but for some reason, many in the financial press are bemoaning this as a negative. One of the major challenges that companies like Google and Apple have face in hiring is finding enough qualified people. I would be more alarmed if they ignored the economic realities and continued hiring and spending at their previous rate. I see Google as the type of company where having too many employees will run up expenses without significantly increasing profits. I believe that Google is currently well staffed for its current initiatives and does not need to significantly increase headcount to achieve its goals. In tech R&D quality is a lot more important than quantity both in terms of dollars and staff. Look at Apple vs. Microsoft as a good example. Microsoft outspends and outstaffs Apple several times over, but Apple continually produces better and more innovative products. Controlling spending and cutting waste is always a good thing in my book, and a slowdown can be just the thing to force a prioritization in spending which will increase efficiency and ensure the future good health of a company.
The other important point to consider is that Google is maturing and already controls a huge portion of the market, they handle 69% of all search queries and bring in over 77% of all search advertising revenue. They simply will not be able to continue their previous levels of growth forever. While they are rapidly moving into new territory and I trust Google to innovate and find new opportunities better than 99% of the companies out there, it is simply impossible to grow profits which are over a billion dollars per quarter as fast as when they were in the millions.
I would recommend keeping a close watch on this stock this quarter. If it pulls back significantly due to panic selling related to this earnings disappointment, it could represent an excellent buying opportunity. Google is the undisputed leader in search and one of the most innovative companies around. I am routinely amazed by the products they release which are often exponentially better than those of their competitors (even if they remain in beta forever :).
Full Disclosure: I have been long GOOG continuously since August 19th, 2004
It is also not like they are sitting around doing nothing about it, they are watching their budget more closely, are holding expenses down relative to revenue and have slowed their rate of hiring. I see the slowdown in hiring as a positive, but for some reason, many in the financial press are bemoaning this as a negative. One of the major challenges that companies like Google and Apple have face in hiring is finding enough qualified people. I would be more alarmed if they ignored the economic realities and continued hiring and spending at their previous rate. I see Google as the type of company where having too many employees will run up expenses without significantly increasing profits. I believe that Google is currently well staffed for its current initiatives and does not need to significantly increase headcount to achieve its goals. In tech R&D quality is a lot more important than quantity both in terms of dollars and staff. Look at Apple vs. Microsoft as a good example. Microsoft outspends and outstaffs Apple several times over, but Apple continually produces better and more innovative products. Controlling spending and cutting waste is always a good thing in my book, and a slowdown can be just the thing to force a prioritization in spending which will increase efficiency and ensure the future good health of a company.
The other important point to consider is that Google is maturing and already controls a huge portion of the market, they handle 69% of all search queries and bring in over 77% of all search advertising revenue. They simply will not be able to continue their previous levels of growth forever. While they are rapidly moving into new territory and I trust Google to innovate and find new opportunities better than 99% of the companies out there, it is simply impossible to grow profits which are over a billion dollars per quarter as fast as when they were in the millions.
I would recommend keeping a close watch on this stock this quarter. If it pulls back significantly due to panic selling related to this earnings disappointment, it could represent an excellent buying opportunity. Google is the undisputed leader in search and one of the most innovative companies around. I am routinely amazed by the products they release which are often exponentially better than those of their competitors (even if they remain in beta forever :).
Full Disclosure: I have been long GOOG continuously since August 19th, 2004
Google 2Q letdown raises economic worries (Excerpts from AP Story featured on Yahoo!)
SAN FRANCISCO (AP) -- Google Inc.'s earnings growth bogged down more than investors anticipated during the second quarter, raising worries that the ailing U.S. economy is starting to sap the Internet search leader.Google earned $1.25 billion, or $3.92 per share, during the three months ended in June. That represented a 35 percent increase from net income of $925 million, or $2.93 per share, at the same time last year.
If not for costs incurred for employee stock compensation, Google said it would have earned $4.63 per share. That figure missed the average earnings estimate of $4.74 per share among analysts surveyed by Thomson Financial.
It marked just the fourth time that Google hasn't exceeded analyst expectations in its 16 quarters as a public company.
Investors expressed their dismay as Google shares plummeted $40.70, or 7.6 percent, in Thursday's extended trading after closing at $533.44, down $2.16.
Google's second-quarter revenue fared slightly better than earnings, rising 39 percent to $5.37 billion from $3.87 billion at the same time last year.
Friday, June 13, 2008
Off to run the Pittsfield Peaks Ultra Challenge and Death Race
I am leaving to run the Pittsfield Peaks Ultra Challenge on Saturday, June 14th and the Pittsfield Peaks Death Race on Saturday, June 21st in Vermont. The Ultra Challenge is a 53 mile race with 14,000' of elevation gain, and the Death Race is a 10 mile race with extremely challenging obstacles. Each has a 24 hour time limit. My goal for these races is simply to finish as this represents my first ultramarathon, and so far only four people have finished the death race.
Check out last year's version of the races in this YouTube Video or check out the Peak Races Web Site.
I have a lot of posts which I want to write for this blog that have been bouncing around in my head for quite some time. I am finally starting to structure them and work them out in draft form, so I will actually start putting this blog to use. A lot of my ideas are clear to me, but putting them into a form which is understandable and will not be misinterpreted is somewhat difficult.
I am currently working on a post called "The Green Revolution" It is currently over 6 standard pages long and is ballooning in size as I continue to think of new points which I want to make. Basically it is support for my theory that we will see $70-$80 per barrel oil within 2 years and $50 per barrel oil within 5 years. I believe that the oil bubble will burst due to increased use of alternative energy, greater efficiency and conservation brought about by today’s high prices along with the fact that speculative profitability in this market is unsustainable. I believe that the current pain we are feeling from high energy prices is engaging market forces which will result in a great deal of change that will be quite beneficial in the long run. I wanted to get it done before leaving for Pittsfield but I just didn't have the time and didn't want to post it in an unfinished state.
Thursday, January 24, 2008
AAPL’s on sale...
For anyone who has been looking for an entry point into Apple stock and has a long term time horizon (over a year, preferably quite a bit longer), now might be your best shot.
After posting an insanely great quarter, the stock fell to below $140 per share from a high just a few weeks ago of over $200. Yes, their guidance going forward shows slower growth, but they are always very reserved when discussing the future. I can't remember a time in the last 5 years when they did not beat their internal guidance.
The key is that there is nothing fundamentally wrong with this company. The decline is momentum panic selling. I have full confidence that it will recover to over the $200 level within 12 months as long as there is no meltdown of the entire economy. I would still rather be in this stock than pretty much any other. Steve Jobs is still in charge of course and he is one of the most visionary people in any industry.
"For its fiscal first-quarter, Apple earned $1.58 billion, or $1.76 a share, on revenue of $9.6 billion. During the same period a year ago, Apple earned $1 billion, or $1.14 a share, on $7.12 billion in sales. In a statement, Apple Chief Executive Steve Jobs said that the results showed the company posting its highest quarterly earnings and sales in history." -CBS Marketwatch Article
Full disclosure:
I personally am not buying at this point in time as AAPL already makes up about 15% of my total net worth and it is generally not recommended to go over 10% in a single stock.
After posting an insanely great quarter, the stock fell to below $140 per share from a high just a few weeks ago of over $200. Yes, their guidance going forward shows slower growth, but they are always very reserved when discussing the future. I can't remember a time in the last 5 years when they did not beat their internal guidance.
The key is that there is nothing fundamentally wrong with this company. The decline is momentum panic selling. I have full confidence that it will recover to over the $200 level within 12 months as long as there is no meltdown of the entire economy. I would still rather be in this stock than pretty much any other. Steve Jobs is still in charge of course and he is one of the most visionary people in any industry.
"For its fiscal first-quarter, Apple earned $1.58 billion, or $1.76 a share, on revenue of $9.6 billion. During the same period a year ago, Apple earned $1 billion, or $1.14 a share, on $7.12 billion in sales. In a statement, Apple Chief Executive Steve Jobs said that the results showed the company posting its highest quarterly earnings and sales in history." -CBS Marketwatch Article
Full disclosure:
I personally am not buying at this point in time as AAPL already makes up about 15% of my total net worth and it is generally not recommended to go over 10% in a single stock.
Wednesday, January 19, 2005
NewsFlash - Do NOT Eat LiveSTRONG Bracelets
So I was all set to buy a case of 1200 LIVESTRONG bracelets to support Lance Armstrong and his foundation figuring that by eating a bracelet a day, it would keep cancer away. However I was shocked and dismayed when I went to the website and read the FAQ's and noticed the following:
Seriously, do they really think people are going to buy a BRACELET (brace·let (brslt) . An ornamental band or chain encircling the wrist or arm.) and then eat it, perhaps for a snack or when they are in an especially LIVESTRONG mood? A law should be passed where if you try to do something with a product which does not meet a reasonable person standard, you should not be allowed to sue on the basis that the consequenses you receive are what you deserve for being so damn stupid.
On another serious note, the Lance Armstrong Foundation does a great job of helping people survive cancer and it deserves your support.
Q: What are the wristbands made of?
A: LIVESTRONG™ wristbands are made from
100% synthetic silicon rubber. LIVESTRONG™ wristbands are not edible.
Seriously, do they really think people are going to buy a BRACELET (brace·let (brslt) . An ornamental band or chain encircling the wrist or arm.) and then eat it, perhaps for a snack or when they are in an especially LIVESTRONG mood? A law should be passed where if you try to do something with a product which does not meet a reasonable person standard, you should not be allowed to sue on the basis that the consequenses you receive are what you deserve for being so damn stupid.
On another serious note, the Lance Armstrong Foundation does a great job of helping people survive cancer and it deserves your support.
Tuesday, January 18, 2005
What Is Rational Insanity?
I was told that the Buddists believe that a person is the sum of their thoughts. This is fitting as our thoughts are truly what make us who we are and are in my opinion the most important result or product of our lives.
"Some of the world's greatest feats were accomplished by people not smart enough to know they were impossible." -Doug Lawson.
"Those who say it can't be done should get out of the way of those who are doing it."
I own Apple Stock...
I like the stock and I have always liked the company, hell I've always loved the company, but it was their 1997 Think Different campaign in association with ad agency TBWA\ChiatDay that made me truly realize that this is a different and better company than most (Thanks in large part of course to the vision of Steve Jobs). Here is a link to the original Think Different Commercial and below is the text. After seeing that kind of vision, you might begin to understand why Apple is one of the companies I actually enjoy owning.
Is Rational Insanity another way of saying Think Different? Well yes and no, but it definitely embodies the same spirit. It is greatly troubling to me that an incredible number of people I come in contact with spend their time worrying about whether others perceive them as "crazy", "wierd", etc. It was said that (I will get this quote right once I dig out the Princeton Admissions package from 2000 where I first saw it) the person you spend the most time with is yourself, so you owe it to yourself to be interesting. I have always been of the opinion that as long as you are not hurting anyone else, you should choose to be however the hell you like yourself best and not give a crap what other people think. If they don't like you or think you are wierd or crazy, it is probably a result of their narrow viewpoint or lack of intelligence, drive, or curiosity to explore beyond that which is pumped into them by the mass media. Many people spout off about diversity and acceptance and at the same time have no idea what it really is to see the value of different viewpoints, attitudes, etc. There are also plenty of times throughout history where you distinctly would not want to fit in with what was considered normal (Nazi Germany as just one simple example). Remember that what's right is not always legal and what's legal is not always right.
I'm glad that you decided to join me on this journey through the life of my mind... The best I can do to try and assure you that you won't be bored is to promise to never let this be an accounting of when I took a shower or what I ate as such things are boring and meaningless to me and infinitely less important to you. Then again, if you don't like reading this, go somewhere else!
"Some of the world's greatest feats were accomplished by people not smart enough to know they were impossible." -Doug Lawson.
"Those who say it can't be done should get out of the way of those who are doing it."
I own Apple Stock...
I like the stock and I have always liked the company, hell I've always loved the company, but it was their 1997 Think Different campaign in association with ad agency TBWA\ChiatDay that made me truly realize that this is a different and better company than most (Thanks in large part of course to the vision of Steve Jobs). Here is a link to the original Think Different Commercial and below is the text. After seeing that kind of vision, you might begin to understand why Apple is one of the companies I actually enjoy owning.
Here's to the crazy ones.
The misfits.
The rebels.
The troublemakers.
The round pegs in the square holes.
The ones who see things differently.
They're not fond of rules.
And they have no respect for the status quo.
You can quote them, disagree with them, glorify or vilify them.
About the only thing you can't do is ignore them.
Because they change things.
They push the human race forward.
and While some may see them as the crazy ones, we see genius.
Because the people who are crazy enough to think they can change the world, are the ones who do.
Is Rational Insanity another way of saying Think Different? Well yes and no, but it definitely embodies the same spirit. It is greatly troubling to me that an incredible number of people I come in contact with spend their time worrying about whether others perceive them as "crazy", "wierd", etc. It was said that (I will get this quote right once I dig out the Princeton Admissions package from 2000 where I first saw it) the person you spend the most time with is yourself, so you owe it to yourself to be interesting. I have always been of the opinion that as long as you are not hurting anyone else, you should choose to be however the hell you like yourself best and not give a crap what other people think. If they don't like you or think you are wierd or crazy, it is probably a result of their narrow viewpoint or lack of intelligence, drive, or curiosity to explore beyond that which is pumped into them by the mass media. Many people spout off about diversity and acceptance and at the same time have no idea what it really is to see the value of different viewpoints, attitudes, etc. There are also plenty of times throughout history where you distinctly would not want to fit in with what was considered normal (Nazi Germany as just one simple example). Remember that what's right is not always legal and what's legal is not always right.
I'm glad that you decided to join me on this journey through the life of my mind... The best I can do to try and assure you that you won't be bored is to promise to never let this be an accounting of when I took a shower or what I ate as such things are boring and meaningless to me and infinitely less important to you. Then again, if you don't like reading this, go somewhere else!
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Apple just reported their 2008 third fiscal quarter results. Overall it was another insanely great quarter. This was the best June quarter for Apple in terms of both revenue and earnings, and represents the best quarter of all time for Mac sales. Revenues were up 38 percent to $7.46 billion and profits were up 31% to $1.07 billion or $1.19 per share. The analyst consensus estimates were for earnings of $1.08 per share which Apple handily beat by 10%. Sales in Apple's own retail stores increased 58%. Apple added $1.33 billion to their cash position to end the quarter with $20.8 billion in cash and no debt.
Apple shipped 2,496,000 Macintosh computers in the June quarter for an increase of 41% over the year ago quarter. Apple has been able to significanly increase unit sales, revenues, and market share for its lucrative and high margin computer business due to a combination of factors including the huge amount of user dissatisfaction with Windows Vista, the 'halo' effect from their other products, and gaining acceptance of MacOS as an operating system. The Gartner group now ranks Apple as the number three US PC vendor with 8.5 percent market share. Not only did Apple increase sales by the largest percentage of the major manufacturers, they also increased sales by more units than HP. With only 8.5% market share, Apple has significant room to grow in this area. I believe that a good deal of Apple's growth both in revenues and profits going forward will come from Macintosh sales.
Apple sold 11,011,000 iPods this quarter which represents unit growth of 12% and revenue growth of seven percent. The average selling price of iPods has been declining due to the sales of a much larger amount of inexpensive shuffles, especially after a recent price cut. Due to the already high market share Apple enjoys in the MP3 player business (as high as 70% in some countries), I do not see this area of business as a significant growth driver. I believe that iPod sales will show some growth, but will eventually start trending toward being flat especially due to decreased demand for iPods from owners of iPhones.
There are quite a few accounting items which actually make iPhone sales, revenue, and earnings seem lower than they are. Apple shipped 717,000 first generation iPhones during the June quarter. This number is significant because of the fact that in early May the stock of the first generation was pretty well sold out and not replaced due to the pending release of the 3G model. Therefore, no iPhones could be sold for more than half the quarter. Also, the revenue for all first generation iPhones sold after March 6th (the date the 2.0 software was announced) was booked on July 11th when the 2.0 software and the 3G iPhone was released. Therefore, all iPhone revenue and earnings in the June quarter is for iPhones sold prior to March 6th. Additionally, due to accounting rules, since Apple is making new features and software available for the iPhones available at no additional cost, they account for the revenues and earnings on a subscription based model over 24 months. Therefore, an iPhone sold in a particular quarter would only add 12.5% of its total revenue and earnings to that quarter's results.
Response to the iPhone 3G was described by Apple management as "stunning." The phone sold one million units within 3 days of release. This is contrasted to the 74 days it took to sell the first million original iPhones or the nearly two years to sell the first million iPods. I personally wouldn't be surprised if Apple sells 10 million of the iPhone 3G before the end of calendar year 2008. Apple is currently having trouble keeping up with the incredible amount of demand for the new phone, but they say their production ramp is going well. Apple will launch the iPhone 3G in an additional 20 countries on August 22nd bringing the total to over 40, and plans on having it available in more than 70 countries before the end of 2008. The App store is also doing extremely well, and adds significantly to the value of the iPhone and iPod Touch. There are currently over 900 applications available from the App store and users have already completed over 25 million downloads of programs. Apple recieves 30% of all revenue from application sales, while the remaining 70% is passed on to the developers. The iPhone currently enjoys a 28% share of the smartphone market which leaves plenty of room for growth, especially as the smartphone market grows to a larger percentage of the cell phone market as a whole.
There was some talk in the call about a "product transition" which will lower gross margins to the 30 percent level for the 2009 fiscal year. The explanation that Peter Oppenheimer gave for this is that Apple is While I won't speculate on what the product introduction will be, I believe that the temporarilary lower margins will be well worth it due to higher overall profits and market share. From management's comments on the call, it definitely seemed that this new product transition will be released in the current quarter ending in September. This release, depending on how it is received could easily push the stock well over $200 per share.
The only thing in the whole conference call which gave me some pause were the concerns about Steve Jobs' health. Apple had previously stated that he is on antibiotics for a 'common bug'. Today in the call, management stated that Steve loves Apple and has no plans on leaving and that his health is a "private matter." On a deeply personal level, I wish Steve the best of health. As one of the people I look up to most, his genius in so many fields is unequalled and his innovative vision is unsurpassed. The world would be a much less interesting place if it were not for Steve's many contributions. He truly did put a dent in the universe, and I am sure he is not done yet.
Apple is currently down about 10% to under $150 in the after-hours trading on this great quarter's results. I view this as a good buying opportunity for long term investors especially if we see some good pullbacks. I believe that the institutions, funds, etc are going to use this as an opportunity to get in before it really runs up. I am reiterating my price target of $200 before the end of January, 2009 which I made in my blog post AAPL's on sale... when Apple was trading at 135.60. I really don't know what more you would want than a company growing profits by over 30% in this market environment which is best in class, with tons of innovative products, no debt, and nearly $21 billion in cash. Even if hard times are ahead, this is a company that has the resources to weather the storm. Apple's future looks very bright to me and I will be holding tight through this short term volatility.
Full Disclosure: I have been long AAPL continuously since August 4th, 2004.