Comments on: Meta Questions on Apple’s Four Billion Dollar Dip http://www.jacksonfish.com/blog/2007/05/21/meta-questions-on-apples-four-billion-dollar-dip/ Handmade Software Experiences Sat, 30 Aug 2008 08:17:34 +0000 http://wordpress.org/?v=2.6 By: Steve http://www.jacksonfish.com/blog/2007/05/21/meta-questions-on-apples-four-billion-dollar-dip/#comment-15600 Steve Mon, 28 May 2007 06:08:26 +0000 http://www.jacksonfish.com/blog/2007/05/21/meta-questions-on-apples-four-billion-dollar-dip/#comment-15600 Hey Hillel, if you look at the stock market every second, or some small granularity of time, it likely won't make sense. Stocks always swing too high and too low. But, if you look at a stock over a longer period of time, it usually makes sense. Walter pointed me at a bunch of writings about efficient market theory and got me hooked up with the right set of indexing funds that are based on efficient market theory. Warren Buffet has always said that investing should be boring and he recommends people invest using index funds. You can also check out IFA.COM. There is a bunch of information up there about why trying to play individual stocks or mutual funds is a fools game. However, trying to guess what a stock is going to do, based on technical patterns, is still a lot of fun, but I definately wouldn't bet my retirement on short-term trading. Hey Hillel, if you look at the stock market every second, or some small granularity of time, it likely won’t make sense. Stocks always swing too high and too low. But, if you look at a stock over a longer period of time, it usually makes sense. Walter pointed me at a bunch of writings about efficient market theory and got me hooked up with the right set of indexing funds that are based on efficient market theory. Warren Buffet has always said that investing should be boring and he recommends people invest using index funds. You can also check out IFA.COM. There is a bunch of information up there about why trying to play individual stocks or mutual funds is a fools game. However, trying to guess what a stock is going to do, based on technical patterns, is still a lot of fun, but I definately wouldn’t bet my retirement on short-term trading.

]]> By: David http://www.jacksonfish.com/blog/2007/05/21/meta-questions-on-apples-four-billion-dollar-dip/#comment-13830 David Thu, 24 May 2007 03:09:44 +0000 http://www.jacksonfish.com/blog/2007/05/21/meta-questions-on-apples-four-billion-dollar-dip/#comment-13830 In Nassim Nicholas Taleb's "The Black Swan", he writes that people love remembering good stories. A 2% drop blamed on a fake Engadget story is a good story that spreads like wilddire. An ordinary 2% change is not a story worthy of telling. I grabbed the 3 months historical data on AAPL from finance.yahoo.com into Excel and calculated the % spread (delta between high & low versus open price) across all those dates. AAPL regularly has 1, 2, and 3% spreads in a day. On any other day, the 2% change wouldn't have been memorable. But on one particular day, there was a good story to be told... In Nassim Nicholas Taleb’s “The Black Swan”, he writes that people love remembering good stories. A 2% drop blamed on a fake Engadget story is a good story that spreads like wilddire. An ordinary 2% change is not a story worthy of telling. I grabbed the 3 months historical data on AAPL from finance.yahoo.com into Excel and calculated the % spread (delta between high & low versus open price) across all those dates. AAPL regularly has 1, 2, and 3% spreads in a day.

On any other day, the 2% change wouldn’t have been memorable. But on one particular day, there was a good story to be told…

]]> By: Hillel http://www.jacksonfish.com/blog/2007/05/21/meta-questions-on-apples-four-billion-dollar-dip/#comment-13061 Hillel Tue, 22 May 2007 16:11:47 +0000 http://www.jacksonfish.com/blog/2007/05/21/meta-questions-on-apples-four-billion-dollar-dip/#comment-13061 Yes... this makes sense. And I also wonder whether delayed iPhone revenues really represent $4 billion in lost value. That said, to me the value of a company needs to be based on a true long term outlook. Products and revenue streams take much much longer to create than press releases would have us believe. I suppose in a world where money is constantly being moved around quarter to quarter (or month to month or even day to day) this type of speculation makes sense. But to think that a company's value changes this dramatically because of a single quarter slip (without the benefit of some type of scandal or other huge surprise) is wacky to me. And my real issue is that companies seem addicted to the cash infusion they can get from the public market even though being tied to this type of speculative behavior is ultimately (imho) unhealthy for a business owner who wants to think about the business with an eye for the long term. Yes… this makes sense. And I also wonder whether delayed iPhone revenues really represent $4 billion in lost value. That said, to me the value of a company needs to be based on a true long term outlook. Products and revenue streams take much much longer to create than press releases would have us believe. I suppose in a world where money is constantly being moved around quarter to quarter (or month to month or even day to day) this type of speculation makes sense. But to think that a company’s value changes this dramatically because of a single quarter slip (without the benefit of some type of scandal or other huge surprise) is wacky to me.

And my real issue is that companies seem addicted to the cash infusion they can get from the public market even though being tied to this type of speculative behavior is ultimately (imho) unhealthy for a business owner who wants to think about the business with an eye for the long term.

]]> By: Eric http://www.jacksonfish.com/blog/2007/05/21/meta-questions-on-apples-four-billion-dollar-dip/#comment-12987 Eric Tue, 22 May 2007 14:10:01 +0000 http://www.jacksonfish.com/blog/2007/05/21/meta-questions-on-apples-four-billion-dollar-dip/#comment-12987 If they were delayed, that would mean that revenues from those products would also be delayed. The stock market is pricing Apple's shares assuming that those products are on time, and that they add to Apple's profits starting at those times. Remember, the stock price is a reflection of the perceived value of the company, and a large part of that perceived value is in the anticipation of the future cash flows that company will earn. The longer those cash flows are delayed, the less value they have because of the time value of money - $100 next year is worth less than $100 today, because I can take my $100 today and invest it over that year. So when new information is relayed to the market that revenues will be delayed, the stock price no longer reflects an accurate picture of the perceived value of the company. It also makes analysts question whether Apple can deliver on its plans, which also impacts its future value. Is that worth a $4 billion drop? I can't say, but hopefully that helps place things in context. If they were delayed, that would mean that revenues from those products would also be delayed. The stock market is pricing Apple’s shares assuming that those products are on time, and that they add to Apple’s profits starting at those times. Remember, the stock price is a reflection of the perceived value of the company, and a large part of that perceived value is in the anticipation of the future cash flows that company will earn. The longer those cash flows are delayed, the less value they have because of the time value of money - $100 next year is worth less than $100 today, because I can take my $100 today and invest it over that year.

So when new information is relayed to the market that revenues will be delayed, the stock price no longer reflects an accurate picture of the perceived value of the company. It also makes analysts question whether Apple can deliver on its plans, which also impacts its future value. Is that worth a $4 billion drop? I can’t say, but hopefully that helps place things in context.

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