Agathon to discuss Apple's stock price

[rah]

Hmmm so if it goes up, you're still right because it's due to idiot people speculating, and if goes down, you're right and people are idiots. I'm starting to understand your concept.

[Asher]

Originally posted by rah
Hmmm so if it goes up, you're still right because it's due to idiot people speculating, and if goes down, you're right and people are idiots. I'm starting to understand your concept.

Well, I am right about people speculating (the earnings aren't there, look at its high P/E. Google is the same way.)

I'm also right that when the stock crashes sharply, it's because people are idiots.

I'm glad you're starting to understand the statement. The point of contention is entirely if the stock is overvalued or not. If one can argue it's not overvalued, then people buying it are not idiots. I happen to think it is, and so does most conventional wisdom.

[rah]

My only arguement with that would be that if the price stays high enough, long enough....it can't be considered overvalued, since reality will approach perception, but it is argueable of how high and long would it take to satisfy this condition.

[snoopy369]

Doesn't overvalued have no meaning outside of "will I be able to sell this stock for more than I bought it for in X time period"="probably not" ? Isn't that the whole basis of the current stock market? A stock that perpetually has idiots speculating on it can be a better buy than a 'normal' stock, because it will consistently have a higher price than it ought (if you're buying it during a more reasonably valued to you point)...

[Asher]

Originally posted by snoopy369
Doesn't overvalued have no meaning outside of "will I be able to sell this stock for more than I bought it for in X time period"="probably not" ? Isn't that the whole basis of the current stock market? A stock that perpetually has idiots speculating on it can be a better buy than a 'normal' stock, because it will consistently have a higher price than it ought (if you're buying it during a more reasonably valued to you point)...

If you want to see what happens to overvalued stocks, look at the dot com crash. It's really simple -- the entire industry was affected by boundless optimism and insanely high P/E. The same thing is happening to Apple right now.

[-Jrabbit]

I found this interesting:

AAPL institutional investors: The 71.68% of the shares outstanding that they control represents a greater percentage of ownership than at almost any other company in the Computer Processing Hardware industry.

Source: Business Week

My sense is that instituional investors don't mess around, but rather tend to be conservative in their choices. Heck, even so-called high-risk mutual funds are pretty tame in terms of the actual downside they're willing to include in their portfolios.

Are you saying that these investors are "too stupid to live"?

[snoopy369]

I think you either didn't understand my post, or chose to ignore it I'm well aware of the dot com crash and its causes/effects... my point is that 'overvalued' is always a subjective term, and simply describes any stock that has a higher value than the person describing it thinks it should have.

You presumably mean "speculative" stocks, ie tech stocks, where their P/E ratio is high compared to the rest of the market. This does not always mean 'overvalued', as stocks like GOOG show you can have a very high P/E ratio and still not be overvalued (although it may or may not now be overvalued, clearly 1-2 years ago it was not).

[Asher]

Originally posted by snoopy369
I think you either didn't understand my post, or chose to ignore it I'm well aware of the dot com crash and its causes/effects... my point is that 'overvalued' is always a subjective term, and simply describes any stock that has a higher value than the person describing it thinks it should have.

You presumably mean "speculative" stocks, ie tech stocks, where their P/E ratio is high compared to the rest of the market. This does not always mean 'overvalued', as stocks like GOOG show you can have a very high P/E ratio and still not be overvalued (although it may or may not now be overvalued, clearly 1-2 years ago it was not).

Huh? Google is perhaps the most overvalued of all stocks right now.

Tech stocks do have higher P/E, but Apple and Google are at the very high end of tech stocks.

Even now, after the stock went down ~35% in the last month and Apple posted record profits, Apple's P/E is about 30.

Compare this to MS at about 20.
Intel at about 18.
Cisco at about 20.
HP at about 17.
Dell at about 16.

[snoopy369]

And i'm saying that high P/E doesn't necessarily mean overvalued (unless the latter term is defined that way, but that makes it a useless term if it has the same meaning as another term...) If GOOG's ultimate stable share price is 900, why would its current share price be ovelvalued?

A high P/E is fine for a growing stock, if it's a stock that truly has a high potential. Apple may or may not, so you consider it overvalued (expect its ultimate price to be lower) while Agathon considers it accurately valued or undervalued (expects its ultimate price to be higher or the same). One of you will be right in the end... we'll find out in a few years I suppose

[Drogue]

Originally posted by Kuciwalker
Asher doesn't think this is at all shocking; it's confirmation of what he already believed, that AAPL is [was] overvalued.

Wrong. AAPL may have been overvalued, but that doesn't stand to reason. Something is overvalued if, at the time, it's not worth as much as it's stock price suggests. Something going down may be because it was overvalued, or it may be because the information has changed. If I have a stock worth $100, then it releases news that some foreign government has banned it's product, causing the stock to fall to $80, that doesn't mean it was previously overvalued. $100 may be a fair value while its product is traded in that country, whereas $80 may be a fair value if it isn't.

Apple falling may be because it's overvalued, or it could just be because there's much greater fear of recession, and the first things people cut are luxury goods, like forgoing that new iPod. Hence Apple falls faster than the market.

Originally posted by Asher
Both Agathon and Drogue are disconnected from the US financial markets, and are artsy fislosifizing thinkers, so I don't think this is unexpected.

Wait, I work as a financial economist, and I'm an artsy fislosifizing thinker disconnected from financial markets?

Whether or not the market goes up on one day, it's going down overall, over any significant period. And Apple is going to fall faster, whether or not it was overvalued before.

Now, it may well be, and when you present an argument, you may have a point. Until then, you're still in child-like "no your wrong because you're a ".

[Asher]

Originally posted by snoopy369
And i'm saying that high P/E doesn't necessarily mean overvalued (unless the latter term is defined that way, but that makes it a useless term if it has the same meaning as another term...) If GOOG's ultimate stable share price is 900, why would its current share price be ovelvalued?

A high P/E is fine for a growing stock, if it's a stock that truly has a high potential. Apple may or may not, so you consider it overvalued (expect its ultimate price to be lower) while Agathon considers it accurately valued or undervalued (expects its ultimate price to be higher or the same). One of you will be right in the end... we'll find out in a few years I suppose

Predicting the future for tech stocks? Why don't you just go to Vegas?

[VetLegion]

Originally posted by Drogue
Wait, I work as a financial economist, and I'm an artsy fislosifizing thinker disconnected from financial markets?

You do seem to have funny definitions. What is a "fair value" if not the current market price?

[Asher]

Originally posted by Drogue
Wrong. AAPL may have been overvalued, but that doesn't stand to reason. Something is overvalued if, at the time, it's not worth as much as it's stock price suggests. Something going down may be because it was overvalued, or it may be because the information has changed.

Hello. That "information" is speculation and guesses.

I consider a stock overvalued if a huge portion of its value is simply because some idiots predict future successes. That's the situation Apple was in at $200, and the situation Google is in now. The stock's value isn't in its current performance, nor even it's short-term performance. At that point it becomes a speculative bubble. Such idiocy is what screwed up the markets so much in 00-01, and people still have not learned their lessons.

Apple falling may be because it's overvalued, or it could just be because there's much greater fear of recession, and the first things people cut are luxury goods, like forgoing that new iPod. Hence Apple falls faster than the market.

Your comments are in stark contrast with most talking head economists and economic publications, which argue Apple is among the least sensitive to recessions due to their consumerbase being among the least price sensitive. Further to shatter this, you seem to ignore the fact that all of Apple's contemporaries -- and the market as a whole -- are doing much better. Stop blaming this on general market woes, it's simply not.

Wait, I work as a financial economist, and I'm an artsy fislosifizing thinker disconnected from financial markets?

Yes, as evidenced by this post. I can't speak for the discretion of your employer.

[notyoueither]

Originally posted by snoopy369
I think you either didn't understand my post, or chose to ignore it I'm well aware of the dot com crash and its causes/effects... my point is that 'overvalued' is always a subjective term, and simply describes any stock that has a higher value than the person describing it thinks it should have.

You presumably mean "speculative" stocks, ie tech stocks, where their P/E ratio is high compared to the rest of the market. This does not always mean 'overvalued', as stocks like GOOG show you can have a very high P/E ratio and still not be overvalued (although it may or may not now be overvalued, clearly 1-2 years ago it was not).

I think overvalued means there's a **** load of cheaply borrowed cash in the stock markets, and the whole thing is creaking under the weight of the credit crunch. It will soon come up short and we will hear a resounding crash.

Apple, shmapple. Entire markets are built on a foundation gone to rot, and has been for some time. That's not just stocks.

[-Jrabbit]

That last comment is just cold.