Sorry response so late, I have had my attention elsewhere.
And here I was getting so worried that you had turned your attention elsewhere.
Divergence begins here: I maintain that the former (TALC) is neither necessary nor sufficient reason to invest. While the latter (expected profit) presents a necessary and sufficient condition.
And I maintain that it is. Divergence occurs because you seem to be focused on confirmed gorillas that are in a more mature stage of their technology cycle and I focus on not only those, but also companies with technologies that are in earlier stages of those cycles which places a degree of importance on working through a number of scenarios before any kind of an investment decision even enters the fold.
Perhaps you could explain to me why the concept of the technology adoption life cycle is not a sufficient reason where one would start to even begin to think about any sort of investment in FC, GE, iSCSI, etc... in the first place.
It is not necessary because the madness of crowds and the greater fool theory offer up numerous opportunities for disproportionate returns in technology, irrespective of any underlying fundamentals. It is not sufficient, because profitability of investment in even the most stalwart of Gorillas can be profoundly affected by macroeconomic forces.
Yes, the issue of cyclicality due to the traditional business cycle (be it corporate led or consumer led) as expansion and contraction contributes to issues of macroeconomic influences.
However, if one invests while expecting to not profit, then one is not behaving with optimum rationality. Similarly if one expects to profit but does not invest.
We agree. Sometimes, expectations - no matter how well chosen and thought out with optimum rationality - do not work out due to forces far removed from our control.
Because I thought the entire game was about investing and securing disproportionate returns compared to the alternatives.
So you join Mucho and others in mocking the jacket cover material without specific reference to the internal criteria found between the covers? Why not remove the jacket cover, dispose of it and focus on the internals? And since we're no longer concerned with the technology adoption life cycle of a technology, there would be no need to hang on to any company for the long haul that was fortunate enough to have their technology chosen as the dominant standard within a TALC. We certainly wouldn't want to be caught holding such a company in our portfolios using any of the strategies pointed out in "Chasm", "Tornado" or "Gorilla" - whether the company ended up there via using the basket strategy or being purchased at some other point post confirmation when an attractive entry point was encountered and made "rational sense". After all, the longer term "weighing machine" of the market probably wouldn't be kind to such a company who enjoyed the benefits of dominating a particular technology for years and years. We certainly wouldn't want to have that company listed on the inside jacket cover of a book a decade or more from now.
To me the review of an investment is merely academic unless and until there is an active decision to purchase (or sell) or not.
Pretty much how I feel as I apply the principles of a technology adoption life cycle to a sector and all of the players that are emerging within that sector. Glad we agree once again. ;-)
So if we play the Gorilla Game as an investment vehicle then TALC is not sufficient. And I fail to see the purpose of the Gorilla Game unless it is as an investment.
Tell that to investors in AMD, Gadzoox!, Sycamore, Micron Electronics, Sybase, Informix, Remedy, Apple and on down the line.
And further, it is possible to profit in tech without playing the gorilla game. In which case TALC is not so preeminent and indeed not necessary.
We agree once again - at least if we are talking about royalty games, service sector, etc... (both on the long as well as the short side). Yet, it would be hard to find a company that is not tied to the technology adoption life cycle of which their products and or services address. Could you list some for me that have nothing to do with a technology adoption life cycle or target a market that is not tied to one?
To see what I mean, you provide a litany of good investment points in your post to me. Care to point out which, if any, experienced a substantial shift in TALC between June and September and now? So why didn't they remain equally attractive over this interval if the thing of utmost importance hasn't changed and something of lower importance has changed? Wouldn't a Dollar Cost Average price over the interval in which TALC was relatively unchanged have been more intellectually honest in citing profit potential, instead of some well picked low points?
While you are explaining to all of us here that TALC "is neither necessary nor sufficient reason to invest" within the FC, GE and iSCSI market segments, you might want to couple that discussion with your ability to address the issue of what has or has not developed in that market between June of 2001 and December 2001.
Perhaps any resemblance to cherry picking a bottom was accidental. But not only were these stocks priced at the very lows, they were also those to which TALC delivers the largest Gorilla power. But in the universe of tech stocks, the vast majority exhibited similar price behavior between July and now as those you listed. A primate with 17 darts and the WSJ opened to the NASD listings at the same time as these hit bottom likely have seen good returns between then and now. In fact, many of the really big moves from lows to now occurred in tech junk, and it is not impossible that our primate with 17 sharp things would have beaten our sharp guy with his 17 primate things :o)
I'm well aware that other stocks within various segments of technology also moved, but I'm not interested in all of them. After all, we cannot all follow each and every "dart" whether we prefer to focus on those with higher barriers to entry or not.
[And then finally: The TALC is the basis and without it, there is no way to try and wrap a valuation around anything.]
I think that's poppycock, personally. I mean, we can invest in technology companies the same way we invest in donut companies. Or vice versa. Nothing to do with TALC.
Yes, you've already established your view that the entire concept is foolish. If we were establishing the investment horizon for a donut company, we would want to know the market size, barriers to entry, product mix, global reach, end customer market and their preferences, competitors already in the space and what the length and longevity of a successful enterprise might offer in terms of a horizon before we even began to think about the margins, valuations and if a donut company was a valid investment.
I will stick to my "poppycock" review of a technology adoption life cycle before I even consider moving along to the point where I start to think about valuations and review if the space offers an investment opportunity or not based on those valuations. I wouldn't want to climb on a vehicle that only has the fuel and capacity to go a short distance if I was more interested in going a longer distance. If the technology addresses every desktop and mobile device throughout the globe, or every light bulb used in an electronic score board/display board throughout the globe, or if the donut shop addresses only limited expansion in one particular country based on population and demographics - I want to know all of that before even beginning to think about possible valuations.
Everything to do with extrapolating current business ratios through future years with roughly constant ratios. The street isn't much more sophisticated than that.
Which explains why the "street" was unanimous in their agreement and decisions of ratios concerning those longer term "picked cherries" which ended up on the inside of jacket covers - in as well as outside of technology.
More to the point, we can choose to NOT invest by wrapping a non-talc valuation around a company. That is, by deciding that no matter what fraction of the market Company X has it will never earn its current market cap in present value profit, because no amount of advantage will drive economic returns of that magnitude.
Absolutely. Speak to the street on the above issues of sophistication in the previous paragraph. Plenty chose NOT to invest in Microsoft, Dell, Cisco, Oracle, Wal-mart, Home Depot, America Online, Intel, Applied Materials all along the path from their IPO's to date. No problem, as there were thousands and thousands of other avenues along the way. Likewise, of some of the younger companies that are currently under sophisticated review, the street will also choose NOT to ever invest based a variety of reasons. That doesn't mean there will be a lack of "inside jacket cover material" at some point in the future.
Perfectly true. And so potentially wrapped in subjunctives as to be possibly construed as cherry picking.
Or simply decisions on my part, based on valuations and technical analysis at the time, to put some cash to work following the reaction to such a catastrophic event.
Very true. But equally true if you had chosen the words May and June instead of September and October respectively. Or April 2000 and June 2000 for that matter. There were no lack of [participants] finding these "low" points to be attractive.
Yes, but many lacked the appropriate technical set up as well as overall economic backdrop to present the best risk/reward scenario for purchase outside of trading. This time, we have actual downtrend lines being broken, a commodity picture that points to economic recovery, stimulus firmly in place via a global rate cutting process that is reaching maturity and a chance for bottoming and basing to occur in many of the equities. That basing and bottoming period is a process that takes time, but it appears that it is underway as we chat.
That doesn't mean purchase of Cisco with a 3-digit pro-forma PE or Walmart at a PE of 24 are good investments... where one's criteria for "good" can be variably defined.
Quite true and time will be the judge of that. Hence, the importance of portfolio protection if those choices were unwisely chosen.
Which I think says that you bought low and now are thinking of selling, or not. Fine. So I sold very high and now I am thinking of maybe buying. That makes us even in terms of having done something right *in the past*, but it's easy to look back and pick our moments of genius. Which is why it is called cherry picking.
I took advantage of a trading opportunity and was left with having to make decisions on those gains to make sure I have the portfolio balance I want going forward. In some instances, profits were taken weeks ago where I felt the least comfort in terms of portfolio balance because I made a couple of concentrated purchases. Some others have caused me to weigh both the fundamentals as well as the technicals to make the choice of holding or where to set stops for protection. No cherry picking involved, just protecting things. I'm sure Mr. Greenspan is well aware of the amount of trading that goes on in the stock market for gains on the long and short side.
The real question to answer today is where you think the market will go *from here*.
That's not the real question for me as there is little point in predicting where the "market" will go. I'm much more interested in my particular investments and how the businesses of each are doing. Likewise, I'm much more interested in studying particular groups - many of which move in opposite directions of the overall market's direction.
But each of us can look to a subset of winning purchases and sales and point at how brilliant we are. For example, You cite the cost basis for the SEBL you first bought '98 between $4 and $7. And omitted that the cost basis for SEBL bought in '00 (between $40 and $110 I presume?), and or sales in between.
I cited the average trading range Siebel was trading in back during 1998 when both Mike and I were engaging on the Fool's Siebel board as we were both invested in shares at the time and talking about the CRM market. There was nothing brilliant about it as we simply had both made the decision to invest some of our money in the company at the time based on the developing CRM market, Siebel's emergence in that space and what the earnings growth projections were at the time. I don't think it would be too difficult to find any investor who would not admit to - given the chance now - selling at $110 or whatever, shorting all the way down and then reloading to the long side in the low teens as a worthwhile path for one's capital. However, that's obviously not an option and so we are left with reviewing the current valuation of Siebel as well as the TALC - although perhaps you wouldn't want to weigh the significance of the TALC for CRM/ERM going forward like I would, but I agree on the valuation review to see how much of the future is priced into the stock - to see if our current investment in Siebel is one that retains its position in our portfolios or if there are other areas in the market that present a "better" place for that particular portion of our capital that is devoted to Siebel.
You post as if such awfully damn high prices is justification for even more awfully damn high prices. I post as if it is an indicator of a risk that they will become less awfully damn high.
No, I don't post it as justification for even more "awfully damn high prices". Simply pointing out that certain individual investments made in previous years are much higher now than when I first entered them due to the tremendous growth those companies have achieved in the past few years to decade. Regarding the risk/reward nature of some of the more mature, larger cap equities, I agree that a lot is priced into them and the growth rates by nature of their size as well as the (hate to use the word) TALC is more mature. That's why I keep a good portion of my investment capital in smaller, faster growing companies that exhibit the type of growth that could drive share prices higher from current levels for those companies and their respective target markets. Both in technology and outside of technology by miles. No donut companies involved.
But first, we would have to see some serious down. 'Cause there's not a lot of room for up. At least how I read the tea-leaves.
Plenty of tea-leaf reading going on, but I guess the sophistication of the market will point the way - just as it always has done in the past centuries. I would disagree in terms of not a lot of room for up within certain individual companies that address niche markets which are experiencing growth that far outpaces the lack of growth or decline in other markets.
And it's cool you disagree. At least you argue the merit of the case, and do so quite well.
If I ever resort to using words like "cool" and "poppycock" in the same post, I will retire to the mudge thread where they are about to ban me anyway because of the length of my posts.
Now go buy yourself a basket of eBay, Nvidia, Krispy Kreme, Autozone, PFizer, Amgen, Harley, YUM, General Electric, SPY, QQQ, Qualcomm, KSU, Ryland, DoubleClick, Calpine, Haliburton, Ballard, Disney, Merrill Lynch and let me know in 20 years what you've got left. ;-)
BB |
