Yes, pity both of those little bonsai trees ;)
Sorry response so late, I have had my attention elsewhere.
Where did we end up? We have agreed that TALC is of utmost importance with respect to characterization of Gorillas. No dispute.
I think we also agree that rational investing is entered with profit expectations at the outset, or more precisely [(present value of estimated future price - current price)/current price] > Opportunity Cost.
And that both have a role to play.
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.
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.
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.
From this perspective, I reacted to your statement: I am not in total disagreement except for the utmost importance of TALC. That is what the entire game is all about.
Because I thought the entire game was about investing and securing disproportionate returns compared to the alternatives.
And so I objected "Utmost importance of TALC? ... bubble thinking".
Even in rebuttal you posted: Perhaps you don't see the technology adoption life cycle as being the essential part of the criteria for review of an investment in technology, but I do. It is the basis on which everything else is formed.
And
The entire basis of gorilla gaming revolves around the TALC which is what I was addressing. Without discussing the technology and the prospects for that technology adoption life cycle - there is no investment decision to be made.
So in these posts I see the crux of our divergence.
You used the words "everything", "the essential part", and wrap the word "review" around the action "invest".
To me the review of an investment is merely academic unless and until there is an active decision to purchase (or sell) or not.
So while we play part of the Gorilla Game (the part that consists of qualifying gorillas), TALC is of utmost importance. Sure, I can agree with that. But this is not "everything".
There is a final step that transforms the academic exercise into an investment. Which has nothing to do with the company, but everything to do about how it is priced.
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.
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.
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?
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)
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.
Everything to do with extrapolating current business ratios through future years with roughly constant ratios. The street isn't much more sophisticated than that.
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.
Which is a non-talc valuation decision. And one I've done many times.
So yes, I think this is the root of our difference of opinion. The other elements being merely window dressing.
On which I offer a few observations.
First, on hypotheticals. Although the low prices I had listed in a previous post did not all occur at the same time, on a valuation basis at those prices reached, I could make the justification of adding additional monies into some of them for particular time frames.
Perfectly true. And so potentially wrapped in subjunctives as to be possibly construed as cherry picking.
You wrote: Although you have disagreed with that premise in a previous post by stating that those lows will be surpassed at some point in the future, it appears that many market participants found enough attraction in the valuations at the time to accumulate some shares. Of course, depending on the time frame of holding those accumulated shares (ST, IT or LT), the valuations stand at a different level today than those late September, early October price points.
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, I agree with you that Cisco [for example] at a price of $11 is certainly more attractive than at $70. Or as you said it: Maybe a Wal-Mart at a forward multiple of 24 is no screaming bargain, but it seemed more so to me at the time than paying a multiple over 30.
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.
And while I think you were providing evidence that you have your money where your mouth is, I suspect even Greenspan would have difficulty following your finances: With the rise of the equity prices from those levels, I have been left with evaluating the risk/reward scenario of each equity to determine the time frame for holding. I don't hold all shares purchased from some of those low points, but came in the "range" well enough to justify having entered with additional shares.
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.
The real question to answer today is where you think the market will go *from here*.
So to that effect I admire the courage of those who say "SEBL is a good buy here at xx", or "SEBL is not a good buy here at yy". 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.
And then this, which is fundamental:
On the other hand, compared to original cost basis for many things I own - prices are awfully damn high. It all depends on the point of reference.
On which we are in complete agreement.
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.
Clearly we see the same present datapoint.
And clearly we use differing antecedents from which to extrapolate a future direction.
The other element (whether TALC as the foundation is more or less important than expected profit) turns out to be merely whether or not one's perspective is Gorilla Game centric or Profit centric.
Which isn't to say that the Gorilla Game isn't profitable. It can be. But it has had its less (even negatively) profitable moments.
Me, I would prefer to be GGaming when it is likely to be profitable. And standing aside when it is likely to be unprofitable.
And I look forward to the times when once again any primate with a few darts and money to spare can make a killing in the market over a sustained period. That's the kind of gorilla gaming that is most fun. If you pardon the pun.
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.
And it's cool you disagree. At least you argue the merit of the case, and do so quite well.
John |
