Hi blake paterson; Re mom and pop and the selection of stocks...
With regard to Rambus, there have been plenty of technical articles published foreshadowing the current extremely bad news. Mom and pop read those articles, or at least they should have, they were all linked to in this thread.
But there are always alternative sources of information, and given the inability to understand the technical issues, it is possible, in this case, to believe only the bullish ones. In fact, it is a natural hazard of the trader to see only the signs that indicate to him that his position is the right one. (Anyone who has enough trading experience has probably noticed this tendency. When you are long the stock, every down tick looks like an opportunity to buy more, every up tick looks like a confirmation of your intelligence. The same when short.) Thus mom and pop choose to believe the stories from Rambus rather than the stories from the other side. Simply put, their ears close to the hearing of words other than what they want to hear.
But this same problem does not apply to most technical stocks. When Anandtech reviews an ASUS motherboard positively, for instance, there does not erupt a spontaneous avalanche of complaints from his loyal readers. Sure there are plenty of people who suggest that Microsoft is incompetent and evil, but MSFT has a long history of making very good money, RMBS does not (relative to the stock price).
When a company has a very large short interest, it is there for a reason. Shorts are not stupid. At the end of this long bull market, only the smartest shorts are left, and they have a big short interest in this stock. Wonder why?
If mom and pop want to invest in stocks that they understand there are plenty of even technical companies available out there that they can have a good understanding of. AOL, for instance, sells internet service to the masses. The masses can look at their friends, and easily determine if they are happy with their service. The choice of internet provider is made at the mom and pop level. So is the choice of box provider, mom and pop have friends who have bought GTW computers, for instance. IBM sells computers to mom and pop, so does HWP. Other companies make adapters, printers, provide phone services, make TVs, etc., etc., etc.
Peter Lynch said buy what you know. I agree.
Mom and pop do have friends who buy add-on memory, but the freedom of those friends to choose is limited to choice of vendor, not choice of technology. Those friends can report that Smart Modular (i.e. SMOD) provided them with working parts that ran flawlessly at a good price. But mom and pop do not have the freedom to select what type of memory to buy, only which buyer to buy it from, Micron or Samsung, for instance. Mom and pop have to buy the memory type that their computer uses, and they are stuck with that type. The buyers that have the full freedom of choice regarding memory purchases are the electronics engineers who design the memory systems themselves, and it is their perspective that I have brought to this thread. It is those buyers who choose what the next generation of computers will use, and it is on their decisions that the fate of Rambus rests. Hint: They don't like Rambus.
If memory were the overriding decision point for computers, then it might be possible to convince mom and pop to buy only computers supporting RMBS. But memory is only a very small part of a computer, everybody knows that the CPU speed is more important, and that is what is largely advertised to mom and pop. If mom and pop did actually have the choice of memory after having chosen a particular computer, (like the way they can choose to install a particular software program, for instance), then the marketing people could probably convince them to choose Rambus. But instead, the choice of memory is tied up in the whole computer, and memory is only a small part of the machine as a whole.
-- Carl
P.S. Recently, people have been trying to compare the cost of SDRAM versus RDRAM by looking at the sales prices of different computers equipped with very small amounts of the two memory types. This makes about as much sense as trying to figure out which doorknobs are cheaper by comparing the prices of different houses. It is actually a lot easier to compare the prices of memory. Go to Arrow and look up the chip prices. Go to priceline and look up the module prices. Go to Dell and look up the memory prices. Very simple. No more complicated than comparing the prices of whole wheat and white flour at the local grocery store. Despite the utter simplicity of making these comparisons, and despite the numerous trade articles indicating the high cost of manufacture of RDRAM, mom and pop (and Rambus) have still found ways of insisting that it really isn't a much more expensive technology than SDRAM. This is called living in a fantasy world, and it is a lot easier to do than most people would like to admit. |
