Category Archives: Business

01.29.13
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What are you doing, Amazon?

I’ve been questioning Amazon for years.

Now others are noticing it, too:

How over-valued is Amazon’s stock? Compare P/E (share price / earnings per share) ratios:

  • Amazon: 3,500
  • Google: 23
  • Oracle: 16
  • Microsoft: 15
  • Walmart: 14
  • Apple: 10
  • Exxon: 10

(All the other companies make money.)

01.24.13
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Apple, Microsoft, Google, Amazon compared

Here is a chart comparing the Net Income of each company for the past five years:

net quarterly income

Here is a chart comparing the stock performance of each company for the past five years:

Screen Shot 2013-01-24 at 7.28.03 PM

Here is some commentary about the charts:

  • Everything makes sense. Except Amazon’s stock price. Geez.
  • I’d like to see Samsung in the charts (but I couldn’t find their quarterly profits for the past five years, and they are not traded in the US).
01.14.13
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The End of Microsoft

If Karma is real, the end of Microsoft will come, and it will be inglorious.

If stock price is indicative, the end of Microsoft will come, and it will be inglorious.

Here is (part of) their legacy:

  • Brazenly stealing
  • Stealing from, and then crushing, startups
  • Purchasing and killing “babies” (services/products created and built with love by an individual or small team)
  • Following competitors into markets and then selling at a loss for years to undercut competitors and gain market share
  • Mocking a competitor and their product, then copying that product
  • Having more legal trouble than any other tech company, since its founding
  • A noticeable lack of vision, taste, or class

Here is their stock performance:

MSFT - 13 years

Over the past thirteen years, they have lost half their value. If you don’t count the crash of 2000, then they are completely flat. For over a decade.

Bill Gates stepped down as CEO of MSFT in January 2000. Since then, Steve Ballmer has been at the helm. Why hasn’t Microsoft’s board gotten rid of Ballmer by now? I (and others) are not sure what Microsoft is waiting for. Another flat year? Another five? The inglorious end?

11.08.12
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Would you trade two years for complete financial freedom?

Would you trade 2-4 years of:

  • No smartphone
  • No cable TV
  • No internet at home
  • No car payment
  • Conserving gas: walking, riding bike
  • No new clothes
  • No eating at restaurants
  • Careful shopping for groceries

For complete financial freedom?*

(* having enough money and not needing to work.)

———————————–

Scenario #1

  • Unmarried high school grad. (18 years old)
  • Earns $15 hour.
  • Works full-time (40 hrs/week)
  • $15*8 hrs/day = $120 – 20% taxes = $96/day
  • $96*20 workdays/month = $1,920/month * 12 months = $23,040/yr
  • Saves 50% of income = $11,520/year * 4 yrs (while peers are racking up massive debt in college)
  • Earn 15% interest on investment
    • Yr 1: $11,520 + 15% = $13,248
    • Yr 2: $13,248 + 11,520 + 15% = $28,483
    • Yr 3: $28,483 + 11,520 + 15% = $46,000
    • Yr 4: $46,000 + 11,520 + 15% = $66,148
  • Then, you stop living on half your income, but you don’t touch the $66,148 invested and keep earning 15% per year.
    • In five yrs = $133,047 (you’ll be 27 years old)
    • In ten yrs = $267,605 (you’ll be 32)
    • At this point, if you continue to earn 15%, your nest egg will make $40,140 per year. You are free to live.

Scenario #2

  • Married couple, both spouses work full-time. Earn $50,000 per year together.
  • You save half your income = $25,000 per year.
  • Earn 15% interest on investment
    • Yr 1: $25,000 + 15% = $28,750
    • Yr 2: $28,750 + 25,000 + 15% = $61,812
  • Then you stop living on half your income. But don’t touch the $61,812.
  • Two years is not a long time. It is shorter than college.
  • The nest egg continues to earn 15% per year.
    • In five yrs = $124,326
    • In ten yrs = $250,100
  • If you continue to earn 15% interest annually, your nest egg makes $37,515. You are free to live.

Scenario #3

  • Married couple, both spouses work full-time. Starting out with professional jobs. Earn $80,000 per year together
  • You save half your income = $40,000 per year.
  • Earn 15% interest on investment
    • Yr 1: $40,000 + 15% = $46,000
    • Yr 2: $46,000 + 40,000 + 15% = $98,900
  • Then you stop living on half your income. But don’t touch the $98,900.
  • Two years is not a long time. It is shorter than college.
  • The nest egg continues to earn 15% per year.
    • In five yrs = $198,923.
    • In ten yrs = $400,105. At this point, @ 15%, you earn $60,015/yr.

The danger in each scenario: national stock market corrections. We had a tiny one in 1987, and large ones in 2000 and in 2008.

Note: Two years, five years, ten years are going to go by anyway (that’s how time works). Do you want to continue to trade hours for dollars, or do you want to set up something amazing for yourself (and offspring)?

Copy the best. John D. Rockefeller was the richest man in modern history. He said:

“And as I was saving these little sums, I soon learned I could get as much interest for $50 loaned at seven per cent — the legal rate in the state of New York at that time for a year — as I could earn by digging potatoes ten days. The impression was gaining ground with me that it was a good thing to let money be my slave and not make myself a slave to money. I have tried to remember that in every sense.”

———————————–

Each scenario at a more conservative 10% interest:

Senario #1:

    • Yr 1: $12,672
    • Yr 2: $26,611
    • Yr 3: $41,944
    • Yr 4: $58,810
  • In five yrs: $94,714
  • In ten yrs: $152,537 (@ 10% = $15,253/yr)

Scenario #2:

    • Yr 1: $27,500
    • Yr 2: $57,750
  • In five yrs: $93,006
  • In ten yrs: $149,788 (@ 10% = $14,978/yr)

Scenario #3:

    • Yr 1: $44,000
    • Yr 2: $92,400
  • In five yrs: $148,811.
  • In ten yrs: $239,661 (@ 10% = $23,966/yr)

———————————–

Appendix A: The S&P 500:

  • 2012 (YTD): 11%
  • 2011: 1%
  • 2010: 11%
  • 2009: 26%
  • 2008: -40%
  • 2007: 4%
  • 2006: 13%
  • 2005: 5%
  • 2004: 9%
  • 2003: 20%

Cumulative: 59%
If you invested $10,000 in the S&P 500 in 2003, it would be worth $15,900 today. If you cut out 2008 (maybe you sold to avoid a big loss), it would be worth $32,000.

Appendix B: AAPL:

  • 2012 (YTD): 38%
  • 2011: 25%
  • 2010: 54%
  • 2009: 115%
  • 2008: -57%
  • 2007: 129%
  • 2006: 22%
  • 2005: 128%
  • 2004: 201%
  • 2003: 32%

Cumulative: 7837%. Or… if you cut out 2008, 18,000%. Wow.
$10,000 invested in AAPL at the start of 2003, would be worth $793,700 today. If you cut out 2008 (maybe you sold to avoid loss), it would be worth $1,810,000.

11.04.12
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Why is amazon’s P/E 3,000?

The past week, amazon.com’s P/E has been around 3,000.

3,000.

Apple is around 13. Microsoft is around 16. Google is around 21.

Amazon doesn’t make money, yet their P/E is 3,000.

Amazon has the 2nd highest P/E in the world (after Lamar Outdoor Advertising, which also doesn’t make much money. Kior has negative earnings, so they don’t actually have a P/E/).

I really don’t know what is going on.

(Though I know something is.)