Analysts Eyeing Record Highs for Apple's Stock Price, Rushing to Raise Price Targets

[IJ Reilly]

I don't worry about it much.
I just don't take it to be a positive sign.

But apple is still a great company and the valuation numbers are not too high so I see no reason to sell the stock at this point.

That's just the thing. The lizard part of our brain is always pushing us to do what everyone else is doing, which in the markets means buying when everyone else buys, and selling when a lot of other people are selling. The best way to avoid being stampeded in either direction is to tune out the noise, to stop trying to interpret the meaning of what other people say or do. The lizard brain will make us do the wrong thing, more often than not. The piece of advice I give out here every so often is to not stare into the hairy eyeball of the markets. You may think you've figured out what it is telling you, but much more likely, it's controlling you, giving your lizard brain orders to do bad things.

 

[SHNXX]

That's just the thing. The lizard part of our brain is always pushing us to do what everyone else is doing, which in the markets means buying when everyone else buys, and selling when a lot of other people are selling. The best way to avoid being stampeded in either direction is to tune out the noise, to stop trying to interpret the meaning of what other people say or do. The lizard brain will make us do the wrong thing, more often than not. The piece of advice I give out here every so often is to not stare into the hairy eyeball of the markets. You may think you've figured out what it is telling you, but much more likely, it's controlling you.

Lol.
I would assign such emotions more to the limbic system rather than the basal ganglia ("reptilian").

But yes, I agree that we should make more use of our higher processing parts of our brain (presumably neocortex although none of this is known with precision due to the current technological limitations of studying human brain function).

/puts down the neuroscience hat

 

[IJ Reilly]

Lol.
I would assign such emotions more to the limbic system rather than the basal ganglia ("reptilian").

But yes, I agree that we should make more use of our higher processing parts of our brain (presumably neocortex although none of this is known with precision due to the current technological limitations of studying human brain function).

/puts down the neuroscience hat

Okay, so I flunked neuroscience, but I know quite a bit of recent brain science has been about how the primitive part of our brains controls more of our behavior than we consciously recognize. We may think we are being logical, rational, and analytical, when in reality the actions we are taking are being heavily influenced by low-level environmental responses that were baked in by evolution.

 

[SHNXX]

Okay, so I flunked neuroscience, but I know quite a bit of recent brain science has been about how the primitive part of our brains controls more of our behavior than we consciously recognize. We may think we are being logical, rational, and analytical, when in reality the actions we are taking are being heavily influenced by low-level environmental responses that were baked in by evolution.

we don't even need to invoke neuroscience.

the market has exhibited plenty of irrational behavior throughout history and a behavioral finance guru just won the nobel prize so your points are entirely supported by the facts.

 

[Swift]

Corruption in Action

You've been the favorite short of all these jerks, so they bid up the price on the rumor, sell on the news. Just massaging the market. They're making a bundle.

But that's not enough. You have to start bribing them with cash. Okay, it's always been thus. But what galls me is this will change their evaluation of Apple because if that goes up, they make more money.

 

[SHNXX]

You've been the favorite short of all these jerks, so they bid up the price on the rumor, sell on the news. Just massaging the market. They're making a bundle.



But that's not enough. You have to start bribing them with cash. Okay, it's always been thus. But what galls me is this will change their evaluation of Apple because if that goes up, they make more money.

Lol

 

[chrisbru]

It’s a Firefox plugin called Fox Replace, so if you’re using Firefox you could check it out (I don’t assume most people on here are using Firefox, so I won’t bother to link to it, but if you search for Fox Replace on their plugins browser it’s easy to find).

It’s actually configurable, and you can have it replace any text on any page with whatever you want. It’s stated purpose is for replacing curse words and expletives, but I’ve got it doing the analyst replacement, changing “bird” to “dinosaur” for kicks, and about a dozen other things to make reading online a little more spontaneous. I got the idea from an XKCD comic, so credit where credit is due.

Replacing a name brand shoe (or the like) with "buttplug" is pretty entertaining.

 

[rydewnd2]

There was a time in 1996 that I owned a bunch of Apple stock. Let's just say I wish I had been able to hold onto it as I surely would have retired a few years ago due to the gains Never again, I'm buying and holding.

If only you had a crystal ball..

 

[IJ Reilly]

we don't even need to invoke neuroscience.

the market has exhibited plenty of irrational behavior throughout history and a behavioral finance guru just won the nobel prize so your points are entirely supported by the facts.

Eugene Fama. Modern portfolio theory. More people need to know about both.

 

[SHNXX]

Eugene Fama. Modern portfolio theory. More people need to know about both.

Yeah I know a lot of people swear by it but as a financial layperson, it seems to me that past correlations are only useful until the reason for those correlations break down (see housing crisis where underestimation of correlations of default rates between loans in the same tranches of CDOs changed).

The other thing is most of the models have normal distribution built in as part of the assumptions (like the black-scholes option pricing model) but financial crises are usually caused by events that are deemed improbable by these models.

I've read that some of the best hedge fund managers do not rely on such portfolio management theories although many mutual fund manager types seem to rely on these.

certainly calculating beta and other parameters is better than not doing it but these seem to underestimate risk.

 

[IJ Reilly]

Yeah I know a lot of people swear by it but as a financial layperson, it seems to me that past correlations are only useful until the reason for those correlations break down (see housing crisis where underestimation of correlations of default rates between loans in the same tranches of CDOs changed).

The other thing is most of the models have normal distribution built in as part of the assumptions (like the black-scholes option pricing model) but financial crises are usually caused by events that are deemed improbable by these models.

I've read that some of the best hedge fund managers do not rely on such portfolio management theories although many mutual fund manager types seem to rely on these.

certainly calculating beta and other parameters is better than not doing it but these seem to underestimate risk.

As a financial layperson myself I don't want to go down in the weeds with all the various academic debates (I am neither qualified nor very interested). But I am interested in the fundamentals, which seem to be that (1) nobody, even professionals, can outguess the markets on a consistent basis, and (2) the soundest investment strategy is to recognize the implications of (1). This leads to the modern portfolio theory concept of investing with the diversity required to maximize returns at any given level of risk exposure. As I am guessing you already know, the kinds of mutual funds that incorporate the concept are ETFs (passively managed) funds. The actively managed funds don't adhere to this concept, and consequently tend to underperform and also to penalize investors again with higher management fees, or so say the promoters of modern portfolio theory. I am persuaded that they have the math on their side, which is why a third of my net worth is now in index funds, and more is headed that way even as we speak.

 

[SHNXX]

That is patently false.

The track record for decades of outstanding managers such as Ed Thorpe and Warren Buffett clearly prove that random chance cannot explain all investor performance.

In fact Ed Thorpe's track record is 227/230 months with gains.

Like Warren Buffett once said, diversification can be "diworsification."

----------

As a financial layperson myself I don't want to go down in the weeds with all the various academic debates (I am neither qualified nor very interested). But I am interested in the fundamentals, which seem to be that (1) nobody, even professionals, can outguess the markets on a consistent basis, and (2) the soundest investment strategy is to recognize the implications of (1). This leads to the modern portfolio theory concept of investing with the diversity required to maximize returns at any given level of risk exposure. As I am guessing you already know, the kinds of mutual funds that incorporate the concept are ETFs (passively managed) funds. The actively managed funds don't adhere to this concept, and consequently tend to underperform and also to penalize investors again with higher management fees, or so say the promoters of modern portfolio theory. I am persuaded that they have the math on their side, which is why a third of my net worth is now in index funds, and more is headed that way even as we speak.

You should look into the record of Ed Thorpe and Berkshire Hathaway.
There is no way a passively managed fund can come even close to their records.

 

[teoreticar]

I got 2000 stocks and will buy 2000 more. AAPL is buy buy buy and hold.

 

[dljeffery]

Until the iPhone 3G release, I never felt the need for a 'smart phone'. And today cant go without it for more than a few hours

Maybe after the release of a stupid wearable product you will see the need for it.

Just this past weekend I was observing how many people were sitting around looking at their iPhones and thinking about how, back before the iPhone, only nerds had or wanted smart phones. Apple totally changed that market. I'm not sure if if it's because they made it more appealing, approachable, or whatever, but they did.

 

[psac]

As someone who bought a bunch at 699 pre-split (as the last buy at three different prices over time), and held held held, glad to see these forecasts. Of course they're still just forecasts...

 

[IJ Reilly]

That is patently false.

The track record for decades of outstanding managers such as Ed Thorpe and Warren Buffett clearly prove that random chance cannot explain all investor performance.

In fact Ed Thorpe's track record is 227/230 months with gains.

Like Warren Buffett once said, diversification can be "diworsification."

----------




You should look into the record of Ed Thorpe and Berkshire Hathaway.
There is no way a passively managed fund can come even close to their records.

I am certainly aware that a handful have beaten the odds, but the few beating the odds does not a rule for anyone else make. The facts are, the vast majority of fund managers fail to beat the broader indexes, and over time, expose their clients to greater than necessary risk and higher costs besides. This is patently true, and is the basis for modern portfolio theory.

If you are trying to use Buffett as way of disproving the value of modern portfolio theory, then it is a particularly poor example. Buffett has the clout to buy and rebuild entire companies. He is far more than merely a fund manager.

 

[SHNXX]

Analysts Eyeing Record Highs for Apple's Stock Price, Rushing to Raise Price ...

I am certainly aware that a handful have beaten the odds, but the few beating the odds does not a rule for anyone else make. The facts are, the vast majority of fund managers fail to beat the broader indexes, and over time, expose their clients to greater than necessary risk and higher costs besides. This is patently true, and is the basis for modern portfolio theory.

If you are trying to use Buffett as way of disproving the value of modern portfolio theory, then it is a particularly poor example. Buffett has the clout to buy and rebuild entire companies. He is far more than merely a fund manager.

By the way we are now talking about efficient market hypothesis not modern portfolio theory.

All it takes is one exception, one black swan to nullify a "rule."
If you went and observed that gravity doesn't work in the way it is currently described, the theory of gravity would have to be revised (well that did sort of happen already multiple times).

Certainly Buffett and Thorpe are among the most extreme examples but there are many others, enough to invalidate the efficient market hypothesis. That's just academic nonsense thought up by the ivory tower tenured professors.

Modern portfolio theory and efficient market hypothesis are models, mere approximations of reality.
Like many models, they fail to explain reality at extremes (financial crises or extreme outperformance).
When models fail to explain something, they have to be revised.
Robert schiller's work on behavioral finance are good examples of irrational behavior by the market and how broad mispricings can occur.

Thus that most investors fail to beat the market does not mean everyone fails or that it's not worth trying to beat the market.

 

[IJ Reilly]

By the way we are now talking about efficient market hypothesis not modern portfolio theory.

All it takes is one exception, one black swan to nullify a "rule."
If you went and observed that gravity doesn't work in the way it is currently described, the theory of gravity would have to be revised (well that did sort of happen already multiple times).

Certainly Buffett and Thorpe are among the most extreme examples but there are many others, enough to invalidate the efficient market hypothesis. That's just academic nonsense thought up by the ivory tower tenured professors.

Modern portfolio theory and efficient market hypothesis are models, mere approximations of reality.
Like many models, they fail to explain reality at extremes (financial crises or extreme outperformance).
When models fail to explain something, they have to be revised.
Robert schiller's work on behavioral finance are good examples of irrational behavior by the market and how broad mispricings can occur.

Thus that most investors fail to beat the market does not mean everyone fails or that it's not worth trying to beat the market.

They are linked concepts, but you don't have to accept efficient market theory to see the point of MPT, as I understand it. I know about the academic arguments pro and con and take no sides. Even the Nobel Committee hasn't taken sides, awarding prizes to proponents of both.

What I get is the basic principle of sector rotations and other market behaviors being fundamentally unpredictable. What I also get is that most if not the vast majority of fund managers don't beat market averages over the long term, that they expose their investors to more risk than necessary, and that they charge them handsomely for this dubious service. David Swenson and other have made the case that the vampire fees charged by actively managed funds destroy an awful lot more of investor's returns than investors typically realize. This alone is news nearly everyone can use. Most people don't know even this much.

The tragedy is twofold. One is the individual investor who thinks he is smarter than the markets, pretending to know what is the best time to buy and the best time to sell. They feel like they've succeeded if they don't lose money, which is obviously not quite the right objective. The math is all against them from the outset anyway. You don't have to miss your market timing by much to have been better off standing pat; but that again is something hardly anyone knows. And to tie this back into our original discussion, it's where the primitive part of our brains tells us to do the wrong thing more often than not.

The other is the non-investor, who believes the entire stock market is run by Micheal Douglas. They will attempt to retire some day with nothing more than SSI and, if they are lucky, a poorly managed 401(k). Don't get me started on that one. These people also need to know that the secret to successful investing is not trying to be Warren Buffett. It's about having a simple plan free of obvious pitfalls and sticking to it.

I wish I'd known all this when I was 30. I did well in the end, but in large part, I admit, by getting lucky.

 

[SHNXX]

Analysts Eyeing Record Highs for Apple's Stock Price, Rushing to Raise Price ...

I think EMT is ********.
MPT is still useful as a way of decreasing risk but one has to be aware of the risk metrics only being modeled based on past events so severe deviations from these can happen.

Market timing is definitely a futile goal except in rare cases.
But if one has a long term horizon and doesn't adhere to arbitrary rules that mutual funds do, it's possible to outperform the SPY.

Of course none of this is as good as giving your money to people like Ed Thorpe (now retired).
That's what I plan to do.

 

[iOSaddict]

incremental updates do not create stock value in a over saturated mobile market

nor does a do nothing head of retail

nor does an over hyped stupid wearable no one "needs"
(people need phones they don't need a watch)

nor does an iMac with the speed and power of a mobile device

AAPL target = $84

Don't you know much about how the stock market works.

 

[IJ Reilly]

I think EMT is ********.
MPT is still useful as a way of decreasing risk but one has to be aware of the risk metrics only being modeled based on past events so severe deviations from these can happen.

Market timing is definitely a futile goal except in rare cases.
But if one has a long term horizon and doesn't adhere to arbitrary rules that mutual funds do, it's possible to outperform the SPY.

Of course none of this is as good as giving your money to people like Ed Thorpe (now retired).
That's what I plan to do.

Since you put it that way?

EMT is a crap theory in the manner it is explained by its critics, which from what I have read, is highly distorted. From the critics you'd think it was an effort to create some sort of deterministic model of the markets. I don't get that at all. From my reading, it is not intended to be an effort to rationalize the markets, more the opposite. The concept that markets price in all that is known about a given stock seems intuitively obvious to me, provided you add, felt, predicted, and suspected. If the current price is not a reflection of all these elements at the current moment, then on what is it based? The critics of EMT can't seem to answer that question, not that I've heard. EMT isn't an attempt to model the future so much as it's an admission that this cannot be done.

Value investment gurus tell us that they can read things into stock pricing that others cannot. If they say a company is undervalued, then it is, even if the rest of the market doesn't see the same thing, or never does. If an "undervalued" company remains undervalued for years, then is it still undervalued? Is the value investor still right? According to whom? In my book they are only right if the markets ultimately see what they saw first. And unless you are Warren Buffett, good luck with that.

The problem with actively managed mutual funds isn't that they adhere to arbitrary rules, but in fact that they adhere to no rules at all. You will find that most of them style drift with abandon. You think you invested in small company growth, but is that what the fund is buying? Often a third or more of the actual investments at any given moment are in something else. Your investment goals are confounded by fund managers who chase trends -- for which you pay them.

It is always possible to outperform. Anything being possible, that isn't the question. The question is whether it is probable.

 

[SHNXX]

Since you put it that way?

EMT is a crap theory in the manner it is explained by its critics, which from what I have read, is highly distorted. From the critics you'd think it was an effort to create some sort of deterministic model of the markets. I don't get that at all. From my reading, it is not intended to be an effort to rationalize the markets, more the opposite. The concept that markets price in all that is known about a given stock seems intuitively obvious to me, provided you add, felt, predicted, and suspected. If the current price is not a reflection of all these elements at the current moment, then on what is it based? The critics of EMT can't seem to answer that question, not that I've heard. EMT isn't an attempt to model the future so much as it's an admission that this cannot be done.

Value investment gurus tell us that they can read things into stock pricing that others cannot. If they say a company is undervalued, then it is, even if the rest of the market doesn't see the same thing, or never does. If an "undervalued" company remains undervalued for years, then is it still undervalued? Is the value investor still right? According to whom? In my book they are only right if the markets ultimately see what they saw first. And unless you are Warren Buffett, good luck with that.

The problem with actively managed mutual funds isn't that they adhere to arbitrary rules, but in fact that they adhere to no rules at all. You will find that most of them style drift with abandon. You think you invested in small company growth, but is that what the fund is buying? Often a third or more of the actual investments at any given moment are in something else. Your investment goals are confounded by fund managers who chase trends -- for which you pay them.

It is always possible to outperform. Anything being possible, that isn't the question. The question is whether it is probable.

EMH, MPT and diworsification vs. Graham, Buffett and Thorp.
I would rather put my money in with the latter.

http://blogs.wsj.com/marketbeat/2009/05/02/buffett-and-munger-stay-away-from-complex-math-theories/

By the way you should take your own advice and read Gene Fama's newer papers, the so-called "beta is dead" papers.

 

[Crzyrio]

Just this past weekend I was observing how many people were sitting around looking at their iPhones and thinking about how, back before the iPhone, only nerds had or wanted smart phones. Apple totally changed that market. I'm not sure if if it's because they made it more appealing, approachable, or whatever, but they did.

That is exactly my point.

No one sees the need for an iWatch now but if Apple is able to do what it did with the iPhone and iPad, it could be the next product we cant live without.

 

[IJ Reilly]

EMH, MPT and diworsification vs. Graham, Buffett and Thorp.
I would rather put my money in with the latter.

http://blogs.wsj.com/marketbeat/2009/05/02/buffett-and-munger-stay-away-from-complex-math-theories/

By the way you should take your own advice and read Gene Fama's newer papers, the so-called "beta is dead" papers.

I see what you did there. Instead of responding to anything I said, you posted a link to a five year old article quoting the people who we already know take a different approach. They say exactly what I'd expect them to say, which isn't much.

I think you are referring to one of Fama's "newer" papers from over twenty years ago. But who really knows?

Oh well, and I thought this might be an interesting conversation.