The Apple Party Continues

The share price is not the only thing about Apple (AAPL) that has gone parabolic, the media/blogosphere attention has also gone parabolic. The company announced a long awaited dividend for part of the cash hoard along with a share buyback. George Moriarty collected a long list of Seeking Alpha articles here (George hired me on theStreet.com in 2005, we’ve been friends ever since and now he is working for Seeking Alpha). I had a similar post recently and the mania around Apple has grown meaningfully since then (well, I think it has). The last time I mentioned Apple it was around 18% of the iShares DJ US Technology ETF (IYW) and now it is 20.9% of IYW. IYW is an ETF we use for some of our clients. Trying to predict when or how a mania ends is pretty close to impossible other than getting lucky (everyone gets lucky every once in a while) but this will end one way or another as they all do and it would be reasonable to expect some sort of shareholder pain. Maybe this won’t happen until $900 but right here the stock is up 48% YTD which is amazing for what was already one of the largest companies by market cap (now it is the largest). In my opinion anyone who has made a lot on this stock would not go wrong selling some portion of it right here and continuing to (hopefully) ride up higher. If instead it starts heading lower then you sold at a pretty good time. I view this as a win no matter what scenario. I have...

The Apple Party Continues

The share price is not the only thing about Apple (AAPL) that has gone parabolic, the media/blogosphere attention has also gone parabolic. The company announced a long awaited dividend for part of the cash hoard along with a share buyback. George Moriarty collected a long list of Seeking Alpha articles here (George hired me on theStreet.com in 2005, we’ve been friends ever since and now he is working for Seeking Alpha). I had a similar post recently and the mania around Apple has grown meaningfully since then (well, I think it has). The last time I mentioned Apple it was around 18% of the iShares DJ US Technology ETF (IYW) and now it is 20.9% of IYW. IYW is an ETF we use for some of our clients. Trying to predict when or how a mania ends is pretty close to impossible other than getting lucky (everyone gets lucky every once in a while) but this will end one way or another as they all do and it would be reasonable to expect some sort of shareholder pain. Maybe this won’t happen until $900 but right here the stock is up 48% YTD which is amazing for what was already one of the largest companies by market cap (now it is the largest). In my opinion anyone who has made a lot on this stock would not go wrong selling some portion of it right here and continuing to (hopefully) ride up higher. If instead it starts heading lower then you sold at a pretty good time. I view this as a win no matter what scenario. I have...

Just How Risky Are Stocks?

There was an article in the WSJ titled Stocks Are Riskier Than You Think. The article was very long and tried to make too many points but there was one particularly useful passage; If you’re expecting stocks to outperform, say, 70% of the time, you need to think about how much you stand to lose the other 30% of the time. It does not do you a lot of good to have 20 years of great performance, only to be trounced in a crash just before you retire. A long standing idea is that stocks become less risky the longer you hold them. The basic idea there is with a long time horizon you have more time to recover from a downdraft. In the last few years I’ve seen where some have turned this around. Stocks become riskier the longer you hold them because everyday that passes brings you one day closer to the next time stocks cut in half. Chances are anyone with a normally allocated investment portfolio in 2007 who was looking to retire in 2009 probably agrees that risk increases over time. The article appears to question whether or not stocks really do offer the best chance at long term growth. I would say they do except for when they don’t. Over most long periods of time stocks do offer growth, this has been the case and I believe will continue to be the case. In the last decade and change that has not been the case domestically and there have been other similar periods where domestic stocks did relatively poorly and this will happen again...

Just How Risky Are Stocks?

There was an article in the WSJ titled Stocks Are Riskier Than You Think. The article was very long and tried to make too many points but there was one particularly useful passage; If you’re expecting stocks to outperform, say, 70% of the time, you need to think about how much you stand to lose the other 30% of the time. It does not do you a lot of good to have 20 years of great performance, only to be trounced in a crash just before you retire. A long standing idea is that stocks become less risky the longer you hold them. The basic idea there is with a long time horizon you have more time to recover from a downdraft. In the last few years I’ve seen where some have turned this around. Stocks become riskier the longer you hold them because everyday that passes brings you one day closer to the next time stocks cut in half. Chances are anyone with a normally allocated investment portfolio in 2007 who was looking to retire in 2009 probably agrees that risk increases over time. The article appears to question whether or not stocks really do offer the best chance at long term growth. I would say they do except for when they don’t. Over most long periods of time stocks do offer growth, this has been the case and I believe will continue to be the case. In the last decade and change that has not been the case domestically and there have been other similar periods where domestic stocks did relatively poorly and this will happen again...

How Many Of Us Really Understand Risk?

Institutional Investor excerpted a little from Howard Marks from Oaktree Capital Management writing about risk. The article covers just about every aspect of risk and provides a little validation for some of the ideas I write about. The article is a must read. Instead of dissecting the article I’ll just add a couple of thoughts. The excerpt devotes very little to how people take their perception of risk and then mismanage it. Someone left a comment on a post of mine at Seeking Alpha that he has 40% in closed end funds. I don’t know if closed end funds are new for this person or not but every few years there is the right type of negative event in the market that generally crushes closed end funds, unjustifiably so. A 40% weighting is a crushing waiting to happen. Invariably, while things are going well, like now (on a price basis, things have been going well), no one says “oh yeah, the next time the market goes down a lot I am going to get caught with too much exposure to the wrong thing and I am going to panic sell big time.” No, when things are going well people say “of course markets correct, everyone knows that, I won’t panic.” No doubt the person with 40% in closed end funds thinks he has mitigated his risk and for all I know he may have somehow mitigated his exposure to more volatility than he really wants but this is a thing that too many people miss. To my way of thinking the time between the market cutting in half from...

How Many Of Us Really Understand Risk?

Institutional Investor excerpted a little from Howard Marks from Oaktree Capital Management writing about risk. The article covers just about every aspect of risk and provides a little validation for some of the ideas I write about. The article is a must read. Instead of dissecting the article I’ll just add a couple of thoughts. The excerpt devotes very little to how people take their perception of risk and then mismanage it. Someone left a comment on a post of mine at Seeking Alpha that he has 40% in closed end funds. I don’t know if closed end funds are new for this person or not but every few years there is the right type of negative event in the market that generally crushes closed end funds, unjustifiably so. A 40% weighting is a crushing waiting to happen. Invariably, while things are going well, like now (on a price basis, things have been going well), no one says “oh yeah, the next time the market goes down a lot I am going to get caught with too much exposure to the wrong thing and I am going to panic sell big time.” No, when things are going well people say “of course markets correct, everyone knows that, I won’t panic.” No doubt the person with 40% in closed end funds thinks he has mitigated his risk and for all I know he may have somehow mitigated his exposure to more volatility than he really wants but this is a thing that too many people miss. To my way of thinking the time between the market cutting in half from...