In Search of the Perfect Investment

Good shorts, based on weekend reading and thinking: Facebook and Best Buy. Both have bounced up for spurious reasons, but are now sure to go down. Read “A Steep Climb Back for Facebook’s Stock.” Click here.

Apple is now worth $950. That’s 52.8% up from here. Says Robert Paul Leitao

Over the next twelve months, I anticipate reported revenue growth of roughly 50%, corresponding earnings per share growth of about 60% and the aforementioned 52.8% rise in the share price value. I anticipate 12 months from today a price-earnings multiple of 14 times trailing 12-month earnings, suggesting a slight compression in the multiple from today’s valuation of 14.61 times trailing 12-month earnings of $42.55 per share. For the four fiscal quarters ending June 29, 2013, I expect trailing 12-month earnings of about $68 per share.

For his entire piece click here.

Of course not everyone believes this bullish stuff on Apple. SmartMoney believes Apple’s customers are tired of constant upgrades, and “our features are falling behind.” Click here for this semi-depressing attempt at bearish thinking on my precious Apple stock, click here.

Microsoft’s new free, enhanced email service is called Outlook. I like its interface better than Google’s Gmail, against which Outlook is meant to compete. David Pogue of the New York Times likes Outlook also. Click here.

Lessons for the weekend’s summer storms. We lost our main grid power — twice, no less. Our emergency “automatic” generator didn’t start automatically. We lost our DSL modem and one DirecTV box. What I learned:

+ I know now how to manually start our emergency generator.

+ Every electronic device should be protected by a surge arrestor. Most were. They all will be. I just bought some more on Amazon.  I bought  this for $5.99 and this for $6.99. Cheap protection.

+ Every phone line should be protected by a surge arrestor. Lightning strikes come up phone lines and destroy phone systems, DSL modems and fax machines. We lost our DSL modem to lightning which came up the phone line.

+ Verizon’s wireless MiFi is a useful backup to your landline Internet connection — DSL or cablemodem. See right hand column.

+ Mice destroy everything. Outside AC equipment should be sealed up, ringed with mousetraps and regularly checked. Ditto for cars in garages in the winter. The mice got to one of the chillers (a.k.a. a condenser), chewed through wires and basically destroyed the machine. Since the chiller is five years old, the manufacturer doesn’t have spare parts, but is willing to sell us a new chilller unit — for $5,000. Thank you mice.

+ Inside air handlers need filters. Your installer will probably forget to put one in. Good idea to check. He forgot to put filters in two of our air handlers. Real dumb.

+ The more junk you have, the more the mice  and summer lightning storms will destroy it. renting vacation homes is a superb idea.

+ Make sure you get every serviceman’s business card, with cell phone, home phone and email address.

The good news: We now have a more modern DSL modem.I feel more educated and more safe. Everything we have will be protected.

Useful stuff:

+ Check flashlight batteries regularly. Old, cheap batteries leak and destroy flashlights.

The smartphone and the Internet is re-defining the telephone business. Items:

+ Skype on my iPhone works better, faster and much cheaper than my cell phone’s normal through-the-air cellular service. This morning I had a crystal clear Skype video call with my dear friend in Austsralia. The quality was crystal clear and the price was right — FREE. Why use Verizon or AT&T? They can’t even do video. And my AT&T iPhone could barely find one bar.

+ Apple’s iMessaging is 10000% better than the cell phone company’s SMS messaging. Better yet, Apple’s iMessaging (which comes with the iPhone) is FREE. Why pay AT&T or Verizon for anyone else 20 cents an SMS message?  Never, ever buy an SMS package from your local cell phone provider.

Samsung’s 256 gigabyte solid state drive (SSD) is now $199.99 at NewEgg.

Solid state drives really do make your laptop (PC or Mac) go faster. This is the lowest price I’ve ever seen for this drive, which I use. This is the first time I’ve seen this excellent drive for less than $200. Click here. Use promotion code EMCYTZT2051.

Harry Newton who loves  a great book review. Here’s one. It seems Geoffrey Ward’s great-grandfather ran a pryamid scheme and was the Bernie Madoff of the 1880s. Mr. Ward has now written a book called  Dreams of Prosperity. `A Disposition to Be Rich,’ How a Small-Town Pastor’s Son Ruined an American President, Brought on a Wall Street Crash, and Made Himself the Best-Hated Man in the United States.

The New York Times review contains these delicious words (my bolding):

(Ulysses S.) Grant was not the only victim, nor was he unusual in trusting Ward. The young man sensed something in the culture. In this era of Wall Street’s flowering, people believed that money could be conjured from the air.

Ward knew that finance is a universe of the imagination, floating above the real economy of services and stuff. Prices bounce with each emotion. Any fear can be boxed as a derivative. The entrepreneur and swindler both create dreams of what might be, then convert them into stocks and bonds – optimism in its marketable form. “How much confidence you give me, so much hope do I give you,” Melville’s confidence man declares. Any founder of a start-up could say the same.

“Credit” is money talk for “I believe you.” Good credit makes dreams as real as bricks, as long as credit lasts. Anyone who sold Enron’s stock before it burst made a lawful profit. It must be so, for the honest fantasy needs time to grow into substance. Augustus Melmotte, Anthony Trollope’s financier in “The Way We Live Now,” describes “the nature of credit, how strong it is, – as the air, – to buoy you up; how slight it is, – as a mere vapor, – when roughly touched.”

Roughly or gently, the touch must come. The underlying reality of business, of profits and losses, eventually makes itself felt. A hoax can’t hide forever.

Ah, but in the dark space between anticipation and realization, the swindler thrives. In the 19th century, when few regulations threw light on hidden places, fraud not only flourished, but it was not always fraud. In 1866, for example, Daniel Drew engaged in huge insider trading as treasurer of the Erie Railway. He sold its stock short, forced the price down and profited at his own shareholders’ expense. It was perfectly legal. On Wall Street, Charles Francis Adams Jr. wrote, the operation was “regarded as a masterpiece.”

This was the environment for Ferdinand Ward, who worshiped luxury and lied reflexively. His ultimate crime was that his crime was too simple: “I had to rob Peter to pay Paul.” No market manipulation – just theft. He himself was no more complicated. Convicted and imprisoned, he cadged money and bribed guards. On release, he kidnapped his own son to steal his trust fund.

You can read the entire wonderful review here.