As I predicted earlier, Apple stock spiralling down

[BanditVol]

http://finance.yahoo.com/news/dear-apple-welcome-microsofts-agonizing-193120439.html

Not everyone seemed to believe me.   

It's a simple concept...once a company grows so much that they comprise over 1% of the entire US economy, they stagnate.  It's either that or completely take over the economy, which is not going to happen.  Even with the stock losing ground, Apple is still 1.5% of the US economy.  Which is a lot more than computers and phones.....

[Volznut]

Apple will be fine. They need to come up with the next big thing...which they are working on. I will say this, they don't pay as much as I thought they would.

[PirateVOL]

Apple will be fine. They need to come up with the next big thing...which they are working on. I will say this, they don't pay as much as I thought they would.

So I take it you are maintaining your blue wardrobe?

[Clockwork Orange]

http://finance.yahoo.com/news/dear-apple-welcome-microsofts-agonizing-193120439.html

Not everyone seemed to believe me.   

It's a simple concept...once a company grows so much that they comprise over 1% of the entire US economy, they stagnate.  It's either that or completely take over the economy, which is not going to happen.  Even with the stock losing ground, Apple is still 1.5% of the US economy.  Which is a lot more than computers and phones.....

P/E is becoming very attractive for a tech company, if you're an investor that makes investment decisions based on such things. Which I'm not. 

I will quibble on one thing though . . . AAPL is 1.5% of the US public stock capitalization, which is substantially different than being 1.5% of the economy.

[Volznut]

So I take it you are maintaining your blue wardrobe?

Yeah...they did come back with an offer yesterday. I was underwhelmed. Countered, they did not budge, I told them no. Also, things are looking up at my place of work too, so I am not really looking any more...for now.

[BanditVol]

P/E is becoming very attractive for a tech company, if you're an investor that makes investment decisions based on such things. Which I'm not. 

I will quibble on one thing though . . . AAPL is 1.5% of the US public stock capitalization, which is substantially different than being 1.5% of the economy.

If not P/E, then what?  Please tell me you're not a tech analysis guy.  That's okay as a supplement, but fundamentals RULE.   

I did prang it though.  The rule of thumb is REVENUE, not market cap.  When that gets ~1% it's hard for a company to grow.  The GDP of the US is ~ 15T and AAPLs revenue last year was 156B, so that's what I hang my hat on.  It' s not my idea, BTW, I got it from Peter Lynch's book "One Up on Wall Street".   The example he used in the book was GE, but what he said made a lot of sense.  There are only so many Iphones, Ipads, and computers you can sell and there is always competition.

[Creek Walker]

Apple is going nowhere as a tech leader. Declining stocks are just part of the game at this point, but it doesn't change the profitability of the company or its role as an industry leader. They just posted the fourth largest quarterly earnings in the history of free enterprise. Unless Apple chooses to rest on its laurels, like Microsoft did, they will continue to lead the way in innovation. That status won't be based on selling iPhones, iPads or computers though. It'll be based on whatever the next big thing is. Apple hasn't failed to disappoint in constantly staying at the forefront of the "next big thing" and I suspect that will continue even with Jobs out of the picture.

[Clockwork Orange]

If not P/E, then what?  Please tell me you're not a tech analysis guy.  That's okay as a supplement, but fundamentals RULE.   

Nope. Neither. Considering that every buy and every sell I make has an 80% chance of being from/to a professional fund manager on the other end, any ideas I may come up with about what move to make and when to make it seem pretty silly. A guy with more time to research and more experience investing is making just the opposite move! It puts things in context.

So in the end I am an index fund investor who cares only about loooooong timelines. I slice and dice market sectors (by size and valuation) to diversify risk but I don't pick stocks or bonds and I don't time the market.

[BanditVol]

Nope. Neither. Considering that every buy and every sell I make has an 80% chance of being from/to a professional fund manager on the other end, any ideas I may come up with about what move to make and when to make it seem pretty silly. A guy with more time to research and more experience investing is making just the opposite move! It puts things in context.

So in the end I am an index fund investor who cares only about loooooong timelines. I slice and dice market sectors (by size and valuation) to diversify risk but I don't pick stocks or bonds and I don't time the market.

Well I certainly don't time the market, though I do sometimes try to pick a good time to sell something I am up on.  Most of what I do is from reading the greats...Peter Lynch, Benjamin Graham, George Soros (he wrote a book on investment in 1987 before he turned all political) Joel Greenblatt (not a great, but pretty good) and a couple others.  The best is Graham.  Warren Buffet calls his book "the greatest book on investment ever written".  I agree based on personal experience. It's worked for me. 

Graham simply tells you how to properly value a company - if you trust the quarterly reports, but he also gives things to watch out for as signs of fraud.  What's interesting is that in the appendix of the reprinting (2001)  of his book that I own is a talk that Buffet gave in 1982, right when the huge Reagan bull market was starting.  In his talk, he said that the right way to invest is fairly straightforward and that Graham showed how to do it.  He then cites several, including himself, who have follwed that advice and done well since the 50s and early 60s.   Not just well either.  They THRASHED the market, often beating it by double digits year after year. Then he states why not everyone uses the method.

The methods that Graham champions only require simple algebra at the most.  Yet there will still be people that lack the mathmatical skill.  Next, there are people who understand the method very well but don't have the mentality.  They panic and sell too early, or don't have the guts to buy when the market is beat down.  Finally there are people that don't care.  They either think that their way is better (and often it works for them, so) or they just want to take risks and gamble. 

And believe it or not, professionals do gamble.  Early and often.  They also are often restricted by rules governing what they can and can't own, if for instance, they are running a retirement fund.  Sometimes their hands are tied.  And finally, it's always a judgement call, no matter how much research you do (IMO)

But I don't have any issues with you sticking to index funds. Many do. I have done well with individual stocks since I got serious about it in 2008.  And that's what's kind of funny. I got serious in April of 2008, and the market immediately melted down that fall. But unlike the tech bubble, which crushed me, I actually thrived relative to the S&P 500 price in the 2008 crash. 

I trade index funds myself, but only at about 10-15% of my stake.  I plan to expand that if I can find some speciality ones that I like.  I mostly stick to broad value index funds so far.  Very safe...but you aren't going to find a whole lot that double or triple in a relatively short amount of time. 

[Clockwork Orange]

Well I certainly don't time the market, though I do sometimes try to pick a good time to sell something I am up on.  Most of what I do is from reading the greats...Peter Lynch, Benjamin Graham, George Soros (he wrote a book on investment in 1987 before he turned all political) Joel Greenblatt (not a great, but pretty good) and a couple others.  The best is Graham.  Warren Buffet calls his book "the greatest book on investment ever written".  I agree based on personal experience. It's worked for me.  

Graham simply tells you how to properly value a company - if you trust the quarterly reports, but he also gives things to watch out for as signs of fraud.  What's interesting is that in the appendix of the reprinting (2001)  of his book that I own is a talk that Buffet gave in 1982, right when the huge Reagan bull market was starting.  In his talk, he said that the right way to invest is fairly straightforward and that Graham showed how to do it.  He then cites several, including himself, who have follwed that advice and done well since the 50s and early 60s.   Not just well either.  They THRASHED the market, often beating it by double digits year after year. Then he states why not everyone uses the method.

The methods that Graham champions only require simple algebra at the most.  Yet there will still be people that lack the mathmatical skill.  Next, there are people who understand the method very well but don't have the mentality.  They panic and sell too early, or don't have the guts to buy when the market is beat down.  Finally there are people that don't care.  They either think that their way is better (and often it works for them, so) or they just want to take risks and gamble.  

And believe it or not, professionals do gamble.  Early and often.  They also are often restricted by rules governing what they can and can't own, if for instance, they are running a retirement fund.  Sometimes their hands are tied.  And finally, it's always a judgement call, no matter how much research you do (IMO)

But I don't have any issues with you sticking to index funds. Many do. I have done well with individual stocks since I got serious about it in 2008.  And that's what's kind of funny. I got serious in April of 2008, and the market immediately melted down that fall. But unlike the tech bubble, which crushed me, I actually thrived relative to the S&P 500 price in the 2008 crash.  

I trade index funds myself, but only at about 10-15% of my stake.  I plan to expand that if I can find some speciality ones that I like.  I mostly stick to broad value index funds so far.  Very safe...but you aren't going to find a whole lot that double or triple in a relatively short amount of time.  

On average, people who stock pick, market time, sector-rotate, etc. get a return equal to the market minus costs, and costs are higher for most of those strategies. Some do better, more do worse. You also have risk that could be diversified away for free by holding broad market indices. Yes, you will almost never find a double or triple bagger, but you will not lose your hat either. And above all, buying and holding keeps you from making the behavioral mistakes that cost so many investors money. Even if you get out at the right time, it's hard to get back in at the right time. Even if you make the right call on a stock, it's hard to make the call for when to change course.

Low-cost, broad-market, long-term investing is the way to go for nearly everyone IMO. There's too much investment porn out there that leads people to make serious mistakes or have too much confidence in their "system," whether that's based on fundamentals or technical analysis or some idiot's newsletter. Too many idiots giving bad advice on CNBC, like Jim Cramer. And even the experts you mention have been terribly wrong many times before . . . Lynch used to be the shining example of active investing, and then his fund gave back nearly everything as his luck caught up with him.

If you've done well against appropriate benchmarks (without knowing your investments it's hard to say if the S&P 500 is the appropriate benchmark) then I applaud you and hope your good fortune continues. I prefer to leave less to chance and take no asystematic risks. I get my risk from small stocks, value stocks, and systematic market risk, and that's plenty. Adding company risk, manager risk, etc. with no expected return doesn't make sense to me. But your mileage may vary!

[BanditVol]

On average, people who stock pick, market time, sector-rotate, etc. get a return equal to the market minus costs, and costs are higher for most of those strategies. Some do better, more do worse. You also have risk that could be diversified away for free by holding broad market indices. Yes, you will almost never find a double or triple bagger, but you will not lose your hat either. And above all, buying and holding keeps you from making the behavioral mistakes that cost so many investors money. Even if you get out at the right time, it's hard to get back in at the right time. Even if you make the right call on a stock, it's hard to make the call for when to change course.

Well this is the main point.  There is no timing of the market or stock prices with Graham.  In fact, he rants against trying to do that over and over again in his book.  It's simply looking at the stock and deciding whether it's over or under priced (and ignoring the overall market completely).  And it all comes down to profits, how long the company has turned a profit, how much debt it has, and a few other things.  Some of those I mention above have had losing sessions, but Buffet's record is pretty unparalleled and speaks for itself.  Lynch retired from actively managing Fidelity Magellen in either 92 or 93, and at that point had beaten the S&P 500 every year since 1979.  Maybe he had the good sense to get out when he was on top, but he never had a bad year in that run.  Soros averaged an eye-popping 19% annual return from 1967 when he started his hedge fund, to 1987 when he wrote the book I read ("The Alchemy of Finance").  I think he had one year where he was down 1%-2% (1981 I believe). And they all mock the "efficient market" hypothesis.  It's almost as if they are personally offended by it. 

Like I said, I don't do market timing, except in a secondary way, and I don't do sector rotation in the way you perhaps meant.  The only way I get into a sector is if I find a good bargain on say, a medical supplier, I might look around for others like it, in case the entire sector is depressed (which Obamacare did hit that sector briefly).  But I don't deliberately rotate on the cyclicals or have some formula to allocate a certan % to tech, energy, utilities, etc, like a lot of the newsletters recommend.

Anyway, as you might guess, I really enjoy it.  It's like a hobby and sometimes when I am really into it, almost a second job. 

I do agree on one thing for sure.  Cramer is an idiot.     Having said that I enjoy watching him occasionally and I have picked up a thing or two from him.  So he'not a complete idiot, I guess.   

[BanditVol]

Apple is going nowhere as a tech leader. Declining stocks are just part of the game at this point, but it doesn't change the profitability of the company or its role as an industry leader. They just posted the fourth largest quarterly earnings in the history of free enterprise. Unless Apple chooses to rest on its laurels, like Microsoft did, they will continue to lead the way in innovation. That status won't be based on selling iPhones, iPads or computers though. It'll be based on whatever the next big thing is. Apple hasn't failed to disappoint in constantly staying at the forefront of the "next big thing" and I suspect that will continue even with Jobs out of the picture.

I was just using Ipad, Iphones, and computers as an example, because that's what they sell now.  Whatever they sell in the future, people are unlikely to take a second mortgage or sell their cars to buy, because that's what it would take for Apple to grow at the rate it has been growing.

As for the innovative future, I have the opposite view.  I think they are screwed without Jobs.  He was the driver of all that.  Having said that, I think they have a bright future...but they will resemble today's Microsoft or IBM of the 90s.  What Lynch calls a "slow steady grower".

[BanditVol]

Apple will be fine. They need to come up with the next big thing...which they are working on. I will say this, they don't pay as much as I thought they would.

Oh they will be profitable for a long time to come, so long as they don't practice massive fraud or something.  As for them not paying as much, how else do you expect them to rake in those profits.