The Market and Other Foolishness

The price of Apple's stock is big news. It went down. Yippee. If you've studied the stock market at all, you'll know that's one of two possible things it can do.

I read somewhere that it's Steve Jobs' fault. I didn't actually go to the story, but I saw a link that said something about His Steveness playing games with his quarterly projections and how that was hurting stockholders. It's true. But it's only going to hurt the really dumb ones.

The intrinsic value of a stock is calculable if you know how many shares there are, and the value of the company's real and liquid assets (cash, real estate, buildings, unopened jars of mayonnaise, etc). Based strictly on the $18.4B His Steveness has in the coffee can buried in his yard, the value per share would be in the ballpark of $21. Cash isn't Apple's only tangible asset by any guess, so I made a conservative SWAG. I don't have all the data in front of me, but my guess is that the per-share intrinsic value of Apple is in the neighborhood of $40-60.

The rest of the stock price is entirely made up of predictions and calculations based on projections based on past statements based on past performance and future anticipated growth, analysis based on those calculations, guesses and mummery. It ain't real. The people who tell you they can reliably pick near-term winners in all that overvalued mess are lying or stupid. The experts are pretty good at hindsight. They can explain in great detail why their last prediction didn't work. Hint: it was somebody else's fault. Ooooh. Let's blame the CEO who refused to fuel our idiotic fantasies with predictions on the very thin edge of plausibility.

The people who think they get some kind of guaranteed continued increase in individual stock prices are the people who make smart investors rich.

If you don't grok the reality of stock values, you should follow El Jobso's lead and keep your money stuffed in a mattress. What hurt Apple investors isn't Steve Jobs; it's believing the soothsay of analysts. Analysts take the anticipation of a possible future molehill, turn it into a perceived mountain of urgent transactions and brokers fees, then report to the believers at the seance. Listening to analysts is what hurts investors.

I'm holding on to my Apple stock. It'll go back up after the moths flock to another lightbulb.

Oh wait. I just checked. Todd Sullivan. That's the guy on Seeking Alpha. His premise hinges on the need for analysts to get their adolescent fantasies fulfilled in projections, so they can make better wrong predictions. So Steve Jobs is a bad man. Huh. Just between us girls, I think Todd's full of used insoluble fiber.

How can we be out of peanut butter already?