Historically it's also a sign that it's time for outside investors to look carefully at getting out of a stock position.
I'd like to see a study of high flying IPOs where the insiders were buying, and/or where lots of them weren't selling. I think you'd be hard pressed to find a single example where it wasn't the case.
Insider trades can be a signal, but anyone applying it to the current Google situation is oversimplifying things.
Anyway, an investor should be constantly reevaluating his or her stock position regardless of insider activity. After reevaluating Google following the recent quarterly report I guesstimated a value of $280 per share. Since I wrote a covered call at $250/share there isn't much I can do unless Google continues to pull back, but even if I wasn't locked in I still wouldn't sell over $20/share. It'd cost me about $42/share in short term capital gains if I did that.
A company that's been around as long as Microsoft is a lot different from a newborn baby like Google. Take a look at any high flying company and you'll see that most insiders were selling as soon as their lock-up expired.
Don't the Google founders make just $1/year in salary? Selling Google stock is about the only way they can survive.
Take some advice from a fellow/.er and get out.
I did. I wrote a covered call at $250, and I've already lost $5000 in potential gains because of it.
You can juggle from credit card to credit card, but that makes your credit look like shit.
Take a look at your credit report some time. In most states you can get it for free at http://www.annualcreditreport.com/. Your credit report doesn't contain information on whether you've juggled money from card to card in the past. For each card it tells people 1) your current balance, 2) your current available credit, 3) the highest balance you've had, and 4) when you were late more than 30 days (along with categories for 60, 90, and in default).
If you currently have a really high balance on your card, that isn't going to look so good, but that alone isn't even enough to take your credit score out of the "excellent" range, which is where mine is at. And once you pay it off, all that's left is the highest balance you've had, which is a miniscule contributor to your credit score if at all. It might even be a positive in some circumstances.
Got one of those offers for "2.99% for life", where you can even write a check to yourself. So I transferred my balance to my other credit card, which was offering "4.99% for life", and wrote a check to myself for my full credit limit minus $500. My credit line was already fairly big since at one point I had two different cards with the same company and they cancelled one of my cards (the Citi.net or whatever that internet only card was) and combined the credit limits of both of my cards. Now as long as I don't use either of those credit cards for anything (I have a Paypal debit card which I use instead), I get that rate for the life of the loan.
You've gotta be careful, because if you use the card for anything else they will charge the full rate, and you pay off the lowest rates first. Also, if you are ever late by even a few days they will raise your rates to something like 25%. I actually had this happen a few times and all but once I was able to call them and fix it, but it's a big risk especially if you don't have a third card to transfer everything to if things go bad (I've got a discover card which I rarely use, they never offer the "for life" rates).
I have *NO* debt whatsoever, extremely good credit, and make a lot of money... and still I have 15% interest rates.
Part of your problem is probably that you have no debt whatsoever. Credit card companies like to see that you have some debt. But I bet if you called up your credit card company and asked them to lower your interest rate they'd do it. You don't even have to give them an excuse. Just call them up, and ask them if they can lower your rate. If they say no or something then explain how you have really good credit and make lots of money. I've done this before too, and I've likewise only been told "no" once. 15% is a high rate in todays interest rate environment even for a non-introductory rate. I get offers all the time for 9.9% fixed. According to bankrate the average is 9.95% for a platinum card, 11.48% for a gold card, and 13.30% for a standard card.
1) put me in a labor camp, 2) make my future prospects and life miserable enough that I kill myself 3) take apart my body and sell the pieces.
They're going to pick 1. But instead of making a labor camp, they're going to just let you continue the job you currently have and garnish part of your pages. Hence my reference to slavery.
There aren't even enough stocks to create a bubble.
Doesn't it work the other way around, though? The bubble causes there to be more stocks?
Anyway, it's my opinion that Google and the sector as a whole isn't significantly overvalued, if at all. People were talking about an internet stock bubble for years before the peak. By the end they were right, but at the beginning they weren't.
Maybe Google's decision not to declare a split will turn out to be a very good thing in the long run. I think a lot of this talk of a bubble is due to the price per share being so high.
Firstly, you nonchalantly toss out "those who took out those variable interest rate loans will become slaves to the banks" while dimissing the case that "the economy will probably survive without going into a major depression". In two sentences you manage to contradict yourself.
Hopefully you'll explain this.
Secondly, nobody is a slave to a bank when they can just walk away from the object in question. People are just going to walk away from those homes and the bank will simply have to eat the difference.
Ever hear of a "deficiency judgement"? If a court sale of property doesn't pay off the mortgage, the bank is entitled to a judgement for the rest. And now that anyone with a decent job can't file Chapter 7 bankruptcy, there's a good likelihood that at least a portion of that judgement is going to wind up being paid.
The problem here is that 30-40% of real-estate is speculative, and many will dump it when ROI goes under 5%.
I don't see that happening, especially for the investors who have fixed rate mortgages. Home prices aren't going to come down until interest rates go up, and when that happens rents are either going to stay level or more likely actually rise.
Also, stock crashes usually aren't economically felt for up to a year after, where real estate crashes tend to snowball almost immediately.
Real estate prices tend to stagnate rather than crash, except in very limited areas.
Sadly, not allowing people to write off bad debts almost guarantees a deflationary crash.
I see where you're coming from. If people are getting large portions of their wages garnished to pay off their debts, they're going to spend less. If the fed steps in and provides liquidity to the businesses this might be able to be mitigated, but there isn't really much of an historical precedence for this working properly.
The same could be said of money itself. If you're not going to spend the money immediately, then what's the point of getting dividends? You're just trading in one type of piece of paper (stock certificates) for another (dollar bills). The only real difference is that whenever you opt for the green pieces of paper you have to give 15% of them to the government.
Sure, if you're going to spend the money, and the corporation isn't, then you might as well take the dividends. Even better, for tax efficiency, would be to offer a stock buyback program. This way the people who need the cash can cash out and those that don't can stay invested while continuing to defer taxes.
Google will probably be there in a year or so, and I'd be surprised if they don't announce a dividend or a stock buyback program within two years. Right now Google has nearly $3 billion sitting in short term investments. I'd feel safe that they can survive any downturn in ad revenues with about $5 billion, and they're expected to make about $2 billion in profits over the next year.
But you can't buy stock options on Berkshire Hathaway.
Google will probably have to split eventually, because putting up $30,000 just to exercise a single option contract is already getting out of the reach of even a well-seasoned investor.
It's nice being able to trade $30,000 worth of stock for just $1 in commissions though.
YHOO's currently doing about $35 where GOOG's doing $300. Sure there's a premium on perceived Google's tech superiority, but it's probably worth 2x or 3x YHOO. 10x does not make sense, long term.
It is clear from that statement that you don't understand stocks. Berkshire Hathaway is trading at $83,710 a share. The company which I started in my apartment back in 1998 is worth $1500 a share. The value of a stock per share means absolutely nothing without looking at the number of shares.
My company only issued 5 shares. Berkshire Hathaway issued one and a half million. Yahoo issued 1.4 billion and google issued 280 million. When you factor in the number of shares issued, Google is only trading at about 2 times that of Yahoo, which happens to be at the low end of what you said it should be trading at.
I addressed that in the second half of my post. But most people are getting fixed interest payments. Adjustible rate morgages only make up about one quarter of new mortgages.
The article was bang on when it asked how a company with annual revenues of 3.4 billion can have a fundamentally higher market capitalization than companies which revenues in the $74 billion plus range?
Expenses are part of the reason, and growth is there too, but debt is probably the biggest part with regard to Time Warner. AOL Time Warner has $60 billion in debt. Google has none. Even if you add back its tangible assets, TWX is still $20 billion in the hole. A rise in interest rates, along with a downgrade of its debt rating, and TWX could be bankrupt.
Google has retained earnings of a billion dollars. Time Warner has negative retained earnings of nearly 100 billion. That means throughout the time Time Warner has been in business, they've lost a tenth of a trillion dollars. What do they have to show for that? $40 billion in "goodwill" and $43 billion in intangible assets.
Google isn't without its risks. The fact that so much of its revenue is based on online ads is a major risk. But with no debt and $3 billion in current assets they could survive for years with no revenue at all, waiting for the ad market to go back.
Google's not the kind of company where investors read financial statements or annual reports or do a valuation.
Let's see. I'm a Google investor, and I do both constantly.
Otherwise, they'd ask themselves why Google trades for 45x forward earnings, when you can pick up just about any oil company, and get a dividend too, for 10x.
It's a very simple answer: growth. You can't just look at P/E ratios without looking at growth. If you do you'll be stuck with mediocre returns.
I've got some dividend stocks too. Buying a stock like Google isn't without risk. If the ad market tanks, Google is going to get hit bad. But if the ad market doesn't tank, Google is going to grow tremendously.
Considering that he lumped in "market cap" (price times number of shares) as one of the things that isn't a factor in the price of a stock, I'd guess moron.
I dont see any buying, just alot of selling from a few select folks.
It's called diversification. When a stock triples from its IPO like that it leaves the insiders with all their eggs in one basket. I don't care how positive you are on the company at that point. It'd be lunacy to buy, and prudent to sell.
Google is a cult stock. People buying Google don't care about any valuation calculations or reason.
I bought Google because it was undervalued. I looked at the next years earnings, looked at the growth rates, looked at the rest of the industry both in the present and in the past, and set a value of $250/share. It met and exceeded that target, and I wrote a covered call for $250/share. Then it announced amazing earnings, and I recalculated everything, and now I'd put it fairly valued at $280/share. Wish I hadn't cashed out at $250, but hey, I made some decent money off the deal.
Plus, on top of all that, Google is cool, and it's the Current Big Thing!
I'm reminded of Krispy Kreme, Yahoo, Cisco Systems, and the optical equipment companies such as Bookham and Corning, all of which still trade well below their peak.
Yahoo was worth about $135 billion at its peak. Google isn't quite there yet (but one day it will be). As for the others, did they ever make nearly $2 billion in a year?
A lot of people fear Google being overvalued simply because they don't understand how the stock market works, and that unlike a stock like Yahoo Google has never declared a stock split. For long term investors this is a good thing, anyway, and it's probably the reason the board has kept away from declaring a split.
I agree that it's a credit bubble, but I think your analysis of the credit card situation is a bit overdramatic. Only a minority of people have 20% interest rates nowadays. Personally I have about $25K in credit card debt, with a weighted average interest rate of 3.25%.
It has gotten so bad in the housing market now that people are having to do negative amortization loans.
People are buying houses based on their monthly payments. This is fine if they get a fixed interest rate, and plan on living in the same place for 30 years. What will happen is interest rates will go up, the value of their house will go down, and they'll be stuck. Those people speculating on the interest rate swaps will get killed, people in the bonds market will get killed, but the homeowners will be fine as long as they don't move (and we don't wind up in a major deflationary environment, which is unlikely).
But another big problem is the increasing percentage of home buyers taking loans with variable interest rates. They are going to get burned, and burned hard. Most of them are forced into variable interest rate loans because they can barely afford the house in the first place. When interest rates go up, they're going to default.
This could have a terrible spiraling effect on the rest of the economy, but now that the bankruptcy laws have been changed so that it's very difficult to file for Chapter 7, the economy will probably survive without going into a major depression. Instead, those who took out those variable interest rate loans will become slaves to the banks.
Well, there's voting power, of course. And there is the possibility of a stock buyback program. And of course, there's just the value agreed upon by society.
After all, what's the intrinsic value of a dollar bill? Virtually nothing.
I guess you can get turn by turn maps, but I'm not sure how you're supposed to print them (and they're kind of crowded for my taste). Avoiding highways is somewhat of a big deal though: I just mapped the route from my old apartment to my new one and it tells me to get on a toll highway for all of 0.6 miles.
If, however, all TV's secretly had the ability, and someone smart enough just told you how to make them disappear, that would be what this is like.
Kind of like if your cable company sent you the porn channel, scrambled, and someone was smart enough to come out with a descrambler? That would be the cable company's fault, and we could sue them?
Slashdot Mirror
Historically it's also a sign that it's time for outside investors to look carefully at getting out of a stock position.
I'd like to see a study of high flying IPOs where the insiders were buying, and/or where lots of them weren't selling. I think you'd be hard pressed to find a single example where it wasn't the case.
Insider trades can be a signal, but anyone applying it to the current Google situation is oversimplifying things.
Anyway, an investor should be constantly reevaluating his or her stock position regardless of insider activity. After reevaluating Google following the recent quarterly report I guesstimated a value of $280 per share. Since I wrote a covered call at $250/share there isn't much I can do unless Google continues to pull back, but even if I wasn't locked in I still wouldn't sell over $20/share. It'd cost me about $42/share in short term capital gains if I did that.
A company that's been around as long as Microsoft is a lot different from a newborn baby like Google. Take a look at any high flying company and you'll see that most insiders were selling as soon as their lock-up expired.
Don't the Google founders make just $1/year in salary? Selling Google stock is about the only way they can survive.
Take some advice from a fellow /.er and get out.
I did. I wrote a covered call at $250, and I've already lost $5000 in potential gains because of it.
You can juggle from credit card to credit card, but that makes your credit look like shit.
Take a look at your credit report some time. In most states you can get it for free at http://www.annualcreditreport.com/. Your credit report doesn't contain information on whether you've juggled money from card to card in the past. For each card it tells people 1) your current balance, 2) your current available credit, 3) the highest balance you've had, and 4) when you were late more than 30 days (along with categories for 60, 90, and in default).
If you currently have a really high balance on your card, that isn't going to look so good, but that alone isn't even enough to take your credit score out of the "excellent" range, which is where mine is at. And once you pay it off, all that's left is the highest balance you've had, which is a miniscule contributor to your credit score if at all. It might even be a positive in some circumstances.
Got one of those offers for "2.99% for life", where you can even write a check to yourself. So I transferred my balance to my other credit card, which was offering "4.99% for life", and wrote a check to myself for my full credit limit minus $500. My credit line was already fairly big since at one point I had two different cards with the same company and they cancelled one of my cards (the Citi.net or whatever that internet only card was) and combined the credit limits of both of my cards. Now as long as I don't use either of those credit cards for anything (I have a Paypal debit card which I use instead), I get that rate for the life of the loan.
You've gotta be careful, because if you use the card for anything else they will charge the full rate, and you pay off the lowest rates first. Also, if you are ever late by even a few days they will raise your rates to something like 25%. I actually had this happen a few times and all but once I was able to call them and fix it, but it's a big risk especially if you don't have a third card to transfer everything to if things go bad (I've got a discover card which I rarely use, they never offer the "for life" rates).
I have *NO* debt whatsoever, extremely good credit, and make a lot of money ... and still I have 15% interest rates.
Part of your problem is probably that you have no debt whatsoever. Credit card companies like to see that you have some debt. But I bet if you called up your credit card company and asked them to lower your interest rate they'd do it. You don't even have to give them an excuse. Just call them up, and ask them if they can lower your rate. If they say no or something then explain how you have really good credit and make lots of money. I've done this before too, and I've likewise only been told "no" once. 15% is a high rate in todays interest rate environment even for a non-introductory rate. I get offers all the time for 9.9% fixed. According to bankrate the average is 9.95% for a platinum card, 11.48% for a gold card, and 13.30% for a standard card.
1) put me in a labor camp, 2) make my future prospects and life miserable enough that I kill myself 3) take apart my body and sell the pieces.
They're going to pick 1. But instead of making a labor camp, they're going to just let you continue the job you currently have and garnish part of your pages. Hence my reference to slavery.
There aren't even enough stocks to create a bubble.
Doesn't it work the other way around, though? The bubble causes there to be more stocks?
Anyway, it's my opinion that Google and the sector as a whole isn't significantly overvalued, if at all. People were talking about an internet stock bubble for years before the peak. By the end they were right, but at the beginning they weren't.
Maybe Google's decision not to declare a split will turn out to be a very good thing in the long run. I think a lot of this talk of a bubble is due to the price per share being so high.
Firstly, you nonchalantly toss out "those who took out those variable interest rate loans will become slaves to the banks" while dimissing the case that "the economy will probably survive without going into a major depression". In two sentences you manage to contradict yourself.
Hopefully you'll explain this.
Secondly, nobody is a slave to a bank when they can just walk away from the object in question. People are just going to walk away from those homes and the bank will simply have to eat the difference.
Ever hear of a "deficiency judgement"? If a court sale of property doesn't pay off the mortgage, the bank is entitled to a judgement for the rest. And now that anyone with a decent job can't file Chapter 7 bankruptcy, there's a good likelihood that at least a portion of that judgement is going to wind up being paid.
The problem here is that 30-40% of real-estate is speculative, and many will dump it when ROI goes under 5%.
I don't see that happening, especially for the investors who have fixed rate mortgages. Home prices aren't going to come down until interest rates go up, and when that happens rents are either going to stay level or more likely actually rise.
Also, stock crashes usually aren't economically felt for up to a year after, where real estate crashes tend to snowball almost immediately.
Real estate prices tend to stagnate rather than crash, except in very limited areas.
Sadly, not allowing people to write off bad debts almost guarantees a deflationary crash.
I see where you're coming from. If people are getting large portions of their wages garnished to pay off their debts, they're going to spend less. If the fed steps in and provides liquidity to the businesses this might be able to be mitigated, but there isn't really much of an historical precedence for this working properly.
Last man holding the paper is fucked.
The same could be said of money itself. If you're not going to spend the money immediately, then what's the point of getting dividends? You're just trading in one type of piece of paper (stock certificates) for another (dollar bills). The only real difference is that whenever you opt for the green pieces of paper you have to give 15% of them to the government.
Sure, if you're going to spend the money, and the corporation isn't, then you might as well take the dividends. Even better, for tax efficiency, would be to offer a stock buyback program. This way the people who need the cash can cash out and those that don't can stay invested while continuing to defer taxes.
Google will probably be there in a year or so, and I'd be surprised if they don't announce a dividend or a stock buyback program within two years. Right now Google has nearly $3 billion sitting in short term investments. I'd feel safe that they can survive any downturn in ad revenues with about $5 billion, and they're expected to make about $2 billion in profits over the next year.
Warren Buffet has NEVER split a stock.
But you can't buy stock options on Berkshire Hathaway.
Google will probably have to split eventually, because putting up $30,000 just to exercise a single option contract is already getting out of the reach of even a well-seasoned investor.
It's nice being able to trade $30,000 worth of stock for just $1 in commissions though.
YHOO's currently doing about $35 where GOOG's doing $300. Sure there's a premium on perceived Google's tech superiority, but it's probably worth 2x or 3x YHOO. 10x does not make sense, long term.
It is clear from that statement that you don't understand stocks. Berkshire Hathaway is trading at $83,710 a share. The company which I started in my apartment back in 1998 is worth $1500 a share. The value of a stock per share means absolutely nothing without looking at the number of shares.
My company only issued 5 shares. Berkshire Hathaway issued one and a half million. Yahoo issued 1.4 billion and google issued 280 million. When you factor in the number of shares issued, Google is only trading at about 2 times that of Yahoo, which happens to be at the low end of what you said it should be trading at.
I addressed that in the second half of my post. But most people are getting fixed interest payments. Adjustible rate morgages only make up about one quarter of new mortgages.
The article was bang on when it asked how a company with annual revenues of 3.4 billion can have a fundamentally higher market capitalization than companies which revenues in the $74 billion plus range?
Expenses are part of the reason, and growth is there too, but debt is probably the biggest part with regard to Time Warner. AOL Time Warner has $60 billion in debt. Google has none. Even if you add back its tangible assets, TWX is still $20 billion in the hole. A rise in interest rates, along with a downgrade of its debt rating, and TWX could be bankrupt.
Google has retained earnings of a billion dollars. Time Warner has negative retained earnings of nearly 100 billion. That means throughout the time Time Warner has been in business, they've lost a tenth of a trillion dollars. What do they have to show for that? $40 billion in "goodwill" and $43 billion in intangible assets.
Google isn't without its risks. The fact that so much of its revenue is based on online ads is a major risk. But with no debt and $3 billion in current assets they could survive for years with no revenue at all, waiting for the ad market to go back.
Google's not the kind of company where investors read financial statements or annual reports or do a valuation.
Let's see. I'm a Google investor, and I do both constantly.
Otherwise, they'd ask themselves why Google trades for 45x forward earnings, when you can pick up just about any oil company, and get a dividend too, for 10x.
It's a very simple answer: growth. You can't just look at P/E ratios without looking at growth. If you do you'll be stuck with mediocre returns.
I've got some dividend stocks too. Buying a stock like Google isn't without risk. If the ad market tanks, Google is going to get hit bad. But if the ad market doesn't tank, Google is going to grow tremendously.
Which Internet stocks do you feel aren't inflated then? I'd put Google down as one of the least inflated stocks.
Considering that he lumped in "market cap" (price times number of shares) as one of the things that isn't a factor in the price of a stock, I'd guess moron.
I dont see any buying, just alot of selling from a few select folks.
It's called diversification. When a stock triples from its IPO like that it leaves the insiders with all their eggs in one basket. I don't care how positive you are on the company at that point. It'd be lunacy to buy, and prudent to sell.
Google is a cult stock. People buying Google don't care about any valuation calculations or reason.
I bought Google because it was undervalued. I looked at the next years earnings, looked at the growth rates, looked at the rest of the industry both in the present and in the past, and set a value of $250/share. It met and exceeded that target, and I wrote a covered call for $250/share. Then it announced amazing earnings, and I recalculated everything, and now I'd put it fairly valued at $280/share. Wish I hadn't cashed out at $250, but hey, I made some decent money off the deal.
Plus, on top of all that, Google is cool, and it's the Current Big Thing!
I'm reminded of Krispy Kreme, Yahoo, Cisco Systems, and the optical equipment companies such as Bookham and Corning, all of which still trade well below their peak.
Yahoo was worth about $135 billion at its peak. Google isn't quite there yet (but one day it will be). As for the others, did they ever make nearly $2 billion in a year?
A lot of people fear Google being overvalued simply because they don't understand how the stock market works, and that unlike a stock like Yahoo Google has never declared a stock split. For long term investors this is a good thing, anyway, and it's probably the reason the board has kept away from declaring a split.
I agree that it's a credit bubble, but I think your analysis of the credit card situation is a bit overdramatic. Only a minority of people have 20% interest rates nowadays. Personally I have about $25K in credit card debt, with a weighted average interest rate of 3.25%.
It has gotten so bad in the housing market now that people are having to do negative amortization loans.
People are buying houses based on their monthly payments. This is fine if they get a fixed interest rate, and plan on living in the same place for 30 years. What will happen is interest rates will go up, the value of their house will go down, and they'll be stuck. Those people speculating on the interest rate swaps will get killed, people in the bonds market will get killed, but the homeowners will be fine as long as they don't move (and we don't wind up in a major deflationary environment, which is unlikely).
But another big problem is the increasing percentage of home buyers taking loans with variable interest rates. They are going to get burned, and burned hard. Most of them are forced into variable interest rate loans because they can barely afford the house in the first place. When interest rates go up, they're going to default.
This could have a terrible spiraling effect on the rest of the economy, but now that the bankruptcy laws have been changed so that it's very difficult to file for Chapter 7, the economy will probably survive without going into a major depression. Instead, those who took out those variable interest rate loans will become slaves to the banks.
What is a value of stock if not future dividends?
Well, there's voting power, of course. And there is the possibility of a stock buyback program. And of course, there's just the value agreed upon by society.
After all, what's the intrinsic value of a dollar bill? Virtually nothing.
I guess you can get turn by turn maps, but I'm not sure how you're supposed to print them (and they're kind of crowded for my taste). Avoiding highways is somewhat of a big deal though: I just mapped the route from my old apartment to my new one and it tells me to get on a toll highway for all of 0.6 miles.
MapQuest has better driving directions. Can you even choose to avoid highways or make multiple stops with Google Maps? What about turn by turn maps?
Google Maps shows that as a 4-way intersection, with a completly fictitious road following what is in fact a drainage ditch...
You must be using Wiki Maps, the map site that anyone can edit!
If, however, all TV's secretly had the ability, and someone smart enough just told you how to make them disappear, that would be what this is like.
Kind of like if your cable company sent you the porn channel, scrambled, and someone was smart enough to come out with a descrambler? That would be the cable company's fault, and we could sue them?
I doubt there is even a direct correlation between censorship and STDs or unwanted pregnancy, let alone evidence of causation.