Increasing My Stake in AAPL, Just Prior to Earnings…

Apple LogoI am (almost) doubling my number of shares by picking up a bunch today at $80.  Yesterday, the stock traded at its lowest value in 52 weeks.

Earnings are announced at the close of the markets today, and the analysts are very split on what the news will be.  The stock has been seriously depressed by the recent news about Job’s health issues, and the continued negative sentiment on the world economy.  I think this is a buying opportunity ahead of what I think will be strong results beating the estimates.

If they don’t or the stocks tanks for other reasons, I will be making a quick run for the toilet.  Based on selling RIM shares to buy AAPL stock at $90, and watching RIM run up 32% since, I really need some good news (NT news didn’t exactly help either).

I keep telling myself “you have to stick with your plan, you have to stick with your plan…”

Really Blew it on RIM!

In order to cover my purchase of more AAPL shares I sold my stake in RIM at $47.80.  I admitted at the time that I wanted to go long on RIM, but I was uncomfortable with how much I had in the market, and how poor the ratings were on the new Blackberry Storm.

When earnings were announced on Thursday with bullish comments about their ‘best start ever’ start to the Christmas season and the fact that they beat their revised (and lowered) estimates, the stock rallied which had me leaving a 11.5% gain on the table!

If I had infinite cash, I would go long on RIM, at the moment I just don’t think there is as much upside opportunity as with AAPL.” So I guess if I had ‘infinite cash’ I would be better off… but then again, I probably wouldn’t spend any time on the stock market.

I am not really upset about this gaffe however, and this is why:

  1. RIM’s results have re-affirmed my view that the key player in the rapidly growing ‘mobile internet’ business, namely RIM and AAPL, are going to see limited impact as a result of market dive brought on by the credit crisis.
  2. A 14% daily gain in the stock as a result of positive news shows that investors are willing to get back into stocks that indicate that they are less sensitive to the negative market conditions (i.e. when AAPL surprises in the next quarter with good results, I should see good gains!)
  3. This shows that companies involved in the telecoms industry may have better resilience to market conditions than others.  Since my day job involves telecom, this might be a good thing.

While doing some Christmas shopping, I followed my friend Justin around to every single wireless store in the mall (I didn’t know there were so many), to see if we could find a Blackberry Storm we could actually try.  At the last store we tried (Bell) they had an early production version that they were not allowed to sell.  I gave it a try, and wasn’t really very impressed with the user interface.  The clicking screen is very much a gimmick I am afraid.

What I didn’t fail to notice was, every single store that got an allotment of the Storm were sold out.  Perhaps the desire for an ‘iPhone’ for those stuck on the Bell/Telus/Other-non-GSM networks (that can’t carry the iPhone, even a hacked one) due to contract obligations was enough to put aside bad reviews and fork out for a Storm.

I am VERY happy that RIM continues to do so well!

Increasing My Position in AAPL, ‘Trying’ to Get Out of RIM

I watched news reports this morning that covered Apple’s annoucement that not only are they participating in their last MacWorld conference, but Steve Jobs’ will not be doing the usual keynote speech at the event.  While Apple claims that this is just the next step in a change of strategy that relies more on their Apple stores, and iTunes to reach out to customers, some of the press coverage decided to renew speculation that Jobs’ health is in trouble.

This, along with analyst downgrades to market perform from outperform (Oppenheimer) and the French government’s ruling that Apple has to allow other carriers in France to sell the iPhone, made for a bad day in Apple stock to the tune of -6.6%.

At first, I was pretty worried, but then I started thinking about the leadership position at Apple.  The market has a perception that Jobs is a ‘genius with a thousand hands’ type of leader, as evidenced by Apple’s decline after his original departure, and its resurgence after his return.  As a result the stock price is heavily influenced by rumours about his health since the expectation is if it fails, so will the company.

This may have been true when he originally left Apple, but I think there is evidence to show he has been able to grow good leaders under him since.  For example, he was the head of Pixar studios which was eventually sold to Disney for >$7 billion dollars, which has since continued to excel with such hits as the Incredibles and, most recently, WALL-E.  Clearly Jobs had set up a system which could continue to succeed in his absence.

No question that the stock will get hit hard if Jobs proves to be ill, but since Apple is unlikely to provide any more detail in the next few months, and I still expect Apple to positively surprise the market over this Christmas season, I am viewing today’s drop in the stock price, and a month-low in the US dollar as a buying opportunity.  I am increasing my position another 20% at $89.31.  For those keeping track, my average cost is now about $115.

In order to pick up more stock, I wanted to sell something else which had less up-side, since I was getting uncomfortable with how much I had in the market.  I am starting to lose faith in the ability of RIM to balk the downward trend in the economy.  Their new Storm was received cooly by reviewers, and appeared to be more of a reaction to Apple iPhone instead of something new and innovative.

Clearly a LOT of Blackberry purchases are driven by enterprise, and trimming costs on cell phones is one of the first things enterprises do when the economy turns sour.  While if I had infinite cash, I would go long on RIM, at the moment I just don’t think there is as much upside opportunity as with AAPL.

IF I can get out of RIM tomorrow that is…   This is what I was greeted with when I logged into my trading account to sell the RIM shares:

TSX Trading Halted All DayIt turns out, aside from 20 minutes at open, the TSX was closed ALL DAY.  Hopefully things will be resolved by market open tomorrow, but with RIM’s earnings coming out at the end of day tomorrow, the TSX’s technical glitches may end up costing me (or maybe saving me) money.  I’ll let you know how it goes…

SfaUT: Top 5 Posts of ALL Time

Well, actually it has been about 1 and 1/2 years since I started blogging, and I wanted to see if any ‘Unifying Theme’ has popped up.  Also, for anyone who has watched network TV, you eventually get to that episode where the money and/or creativity runs out, and they resort to running a ‘retrospective’ episode of clips cobbled together from previous episodes.  This is the blog post equivalent…

Maybe it is different for other bloggers, but I doubt it: the posts that you really, really like are NOT the ones that get the most hits!  Based on the number of hits, I should create a blog about Rogers or RBC rants, or perhaps a restaurant guide.

SfaUT Top Posts

The top post, which still receives more hits a day than any other post, is a rant about the high data roaming charges that Rogers bills its customers, which I experienced on my trip to Asia earlier this year.  Apparently this is a common experience with a lot of people, which has led to a lot of traffic to my site.  If you type “rogers data extortion” into Google, my post is the top hit (as of today).

Next, in #2 position, is a post I did about Google.  I was watching Google regularly releasing applications that I am sure others were building their entire business case on, and had a thought:  What is happening to the web start-up industry as a result of Google’s deep pockets, and free applications?  This got picked up by a web aggregator called Ycombinator at the time, and has since been changed to ‘Hacker News’.  Of those >1000 reads, about 80% were in a single day, and has since dropped to zero reads a day!

#3, and deservedly so, is my assertion that Singapore Restaurant is the best restaurant in Ottawa, and why.  It shows up on about page 6 of a Google search on Ottawa’s best restaurant, so it must only be really determined people that find it… or they are using some other search tool.  With 662 views, I hope at least a few of those people actually gave it a try, Abba and Foo deserve the business!

#4 was another fee-based rant:  This time the target was RBC Visa and their overlimit fees.  Since I don’t carry balances on credit cards this was actually a sympathetic-rant for a friend I was helping with some financial counselling.  I actually got quite angry on the phone with the RBC representative and accused them of taking advantage of people that were not financially savvy.  Now I wish I had recorded it, it may have made a good audio clip for the blog.

Finally, to maintain my lack of a ‘Unifying Theme’, the last in my Top 5 list is about an observation I made of how similar Klee Irwin and John Waters look… judge for yourself! This was my second post about Klee, who came to my attention in his hilariously funny infomercials on dual-action cleanse.

It appears that I am STILL Searching for a Unifying Theme…

TFSA: Tax Free Savings Accounts

My dad just tipped me off to this great opportunity to save your money AND avoid the tax man on your gains!

I think I probably already heard about TFSAs before, but it was only when my dad pointed them out again to me that I did some digging to find out what they are about.

The biggest question in my mind was how they were different from RRSPs.  Here is the skinny on that:

  • The money you put into a TFSA is not deductible from your income at tax time.
  • You can take the money out whenever you want, with no tax implications.
  • When you take money out, you have to wait until the following year to put it back in.
  • There are some limits to the kind of investment vehicles you can hold in a TFSA, but what they are is not clear yet.
  • The amount you can contribute is not dependent on your income, rather you get $5,000 per year which accumulates with a % extra added for inflation.
  • They start in 2009, but you can start the application process now.

Right now it really sounds like a can’t lose proposition, and a great way to promote savings.  Let me know if you head about any gotchas!  You can sign up for one at most Canadian banks.

For more information, you can go to this Government of Canada website.

Credit Cards: The Real Culprit in the Credit Crisis

It seems that the US Government, and many others, are finally realizing that giving out credit to people who aren’t disciplined about spending might be a bad idea. Wow…

Unfortunately, none of the measures they are putting in place really appear to be a solution to the problem, they are just a salve for the symptoms.

Bailing out banks with taxpayer money doesn’t change behaviour of people, which means the problem will still exist when the banks are back to making huge profits.

Some examples of credit culture:

  1. Credit cards are allowed to charge 20% interest, which is criminal considering that this money is loaned to them at rates below 5%!  Keep in mind that they already make 2-5% directly from the retailer for every purchase you make.
  2. Looking for a mortgage on my FIRST house, several banks informs me that I can get a mortgage so large, that I would be ‘house poor’ for the rest of my life.  Some may argue the bank is just trying to help me ‘fulfill my dream’ but I think this is just irresponsible.
  3. Watching CNN (I know… first mistake) their sage advice for their viewers is to “pay off more than their minimum payment on their credit cards”.  This isn’t exactly the kind of training people need to keep themselves financially healthy!
  4. How many times have you seen ‘buy now, pay later’ as part of an advertisement?  By the way… OAC means, ‘On approved credit’… which always seems to be approved…
  5. Do you ever remember, at some point in your youth, being required to sit down and understand the banking system, credit cards, compound interest, RRSPs, or any of a large number of other topics that impact your financial well being?  I don’t.  Our mandatory schooling does nothing to train us to live within our means within this credit-based society.
  6. Once the credit rating of people has been beaten to the point where a bank will no longer touch them, new opportunists pop up to take even more of what little is left.  This makes it even harder to climb back up the credit ladder!  Ever notice that you can identify low-income neighbourhoods by the appearance of a ‘Money Mart’ or similar shop that will charge you a fortune to get access to your cash?

Why am I picking on credit cards in particular?  Unlike mortgages, that allow you to purchase a home likely to appreciate at or above its interest rate, credit cards are given to people when they are young, the interest rate is very high, and the products purchased are likely to DEPRECIATE quickly.  Once you get your first credit card (I think I was 18) there is no training that comes along with this deadly credit weapon.  We should instill in people that the credit card is to carry temporary credit only, and to be paid off immediately, before it destroys your credit rating, and puts you in the downward spiral of credit dependency; this just isn’t being done.  Its credit cards that set the tone in the relationship between people and their credit at an early age.

Lets look at some ideas that may actually change things:

  1. Instead of the sage advice offered by CNN above: Suggest getting a line of credit large enough to pay off all your credit cards, lock it in at a fixed payment with your bank, cut up your credit cards and learn to live on money you have already made, not the money you MIGHT make in the future.
  2. The government should restrict the size of a mortgage that someone should be able to get, at least for their first mortgage.  This way, people can learn to live within their means before they get in over their head.  This also means that they should limit mortgages to 25 years instead of the rest of your natural life.
  3. Remember how useless high school was for learning about things in the real world?  Well, how about mandating some financial planning courses?  Use math class to illustrate the downward spiral of 20% compound interest on a credit card!
  4. Fundamentally change the credit card system.  I can’t argue with the convenience or even the safety of using credit cards, vs. carrying around cash or the risk imposed upon a vendor when a check is used.  I really like getting my 1% kickback on my Starbucks Visa.  Suggestion: Legislate that the credit cards to be linked to a bank account that the balance has to be paid of every month.  If there isn’t any money left in the bank, the card doesn’t work until there is.

Why is this unlikely to happen:

  1. I suspect Visa, Master Card, American Express, Diners Club and others have fairly good lobbyists, or soon will.
  2. The current size of our economy is based on credit.  Why have cars, homes, and other big ticket items become so expensive over the years?  Easy access to credit, and the prevalence of dual income families (more on that last point in a later post).  If this credit supply was to be limited, the economy would slow down significantly.  This is exactly what the government is trying to STOP by propping up the credit providers!
  3. Our system seems to be based on the financially smart taking advantage of the financially stupid.  Its not in the interest of those with the knowledge (banks, credit companies, financial planners) to reduce the amount of money you spend.  There is also the poor ‘Money Marts’ to worry about.
  4. We would have to accept a few years or even decades of hard times to adjust to the new system where there is less cash available.  North Americans are pretty soft, especially me, and aren’t willing to give up their ‘rights’ to credit irresponsibility.

Hopefully some of the more intelligence economists -those that have been warning for years of this credit crisis- will be able to get more attention for their ideas on how to fix the illness and not just the symptoms.

Increasing My Position in AAPL!

Apple LogoJust a warning for investors that do the OPPOSITE of what I do for financial gain: I am increasing my position since I think AAPL has hit its bottom at around the $125 range.

My continued desire to buy their products, and the news that January’s consumer goods numbers are higher than expected has me thinking that AAPL will still do well this year.

I think $125 is a steal, and I am willing to bet my next holiday on it. 🙂

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