My Empty Stock Drawer

At the end of the calendar year, we have a little tradition when it comes to the stock market. Sell everything, and go completely into cash as the calendar switches from December 31 and starts again with January 1st. This year was no exception.

The reason behind my annual sell-off isn't the result of some chart-reading that tells me the market usually takes early January off (though sometimes it does). It also isn't because I have an innate need for a challenge, and see the move as starting the new year from scratch. Instead, it's simply that I do my own taxes every year, and don't want the hassle of tracking down individual trades that bridge a calendar year.

By making sure all my stock trades both begin and end in the same year, Intuit's TurboTax service can easily tabulate the gains and losses for each trade, and doesn't force me to dig through my eTrade records to see when a particular stock was purchased. Also, as I often buy and sell a single stock symbol multiple times in a year, I'm not left scratching my head and guessing where I should appropriately report I paid commissions. After all, if I have confusion, it's likely someone in the IRS will have confusion too, and might later ask me to clarify... leading to pain.

Clearing out my stock drawer (so to speak) also helps clarify what went well and what didn't over the year. There's no ambiguity as to whether one trade hasn't panned out yet or not.

So how'd we do?

Index	Q1	Q2	Q3	Q4
Me	+2%	+4%	+8%	+35%
NASDAQ	+<1%	+8%	+4%	-2%

That looks pretty good on its face. We were up more than 50% on the year. But if I dig deeper, it's clear I could have done significantly better if I completely ditched my quick trade strategy and had instead put all my money into Apple and slept on it.

Index	Q1	Q2	Q3	Q4
Me	+2%	+4%	+8%	+35%
AAPL	+8%	+31%	+26%	+29%

Being such an Apple guy, you'd think I'd have done the right thing, the smart thing, and given all I had to Cupertino. But I didn't. And while others have no doubt made out like bandits, I've ended up looking pretty silly, as the Mac and iPod maker more than doubled its market cap on the year.

I think a lot of people are looking pretty silly when it comes to AAPL. Even the most aggressive, pro-Mac guys, like me, couldn't have anticipated the kind of success Steve Jobs and team have delivered. But now, with Macworld approaching, and having cash on hand, maybe, just maybe, I'll do my part, and get back in the game. If I do, I promise I'll let you know.

Also See:

2005 Taxes in the Bag
The Stock Market Is Bleeding Us Dry
I Bet Wrong On AAPL, Again
Apple Stock Pays for AppleTV, New Airport Extreme
Taxes Completed Online, As Always
Top Eight Worst Stock Moves I Ever Made
Two Hours Of Apple Stock Plenty Profitable

Wrapping Up the eTrade Stock Story

Last week, after many, many acquisition rumors turned out to not come to fruition, eTrade announced the company had received a $2.5 billion cash infusion from an investment group, aimed to eliminate customer concerns over potential bankruptcy. At the same time, the company's CEO stepped down.

Thursday's news initially saw the stock jump from its depressed levels, touching briefly above $6 a share, up dramatically from its nadir in the $3.80 range just a few days before. But as soon as it hit $6, investors holding out for a bigger return from a potential buy from Ameritrade or Schwab saw this as their last hope to cash in, and a rash of sellers hit the exits.

I was one of them. As soon as I saw the cash infusion would be all the news we could expect for awhile, I got out, selling all I had at $5.73 a share. Most of the shares I had purchased on November 21st at $3.89 a share, but I had doubled down on Wednesday, the day before the news, with a big buy at $5.35 a share. All told, the week's earnings, just in eTrade stock, were more than $5,600 profit. Not bad.

Of course, any time I buy or sell as quickly as I did, my brokerage (eTrade, of course) doesn't like it, but I'd rather sell and worry about tax on profits than write-downs from losses.

Was the $5.73 sale a good idea? Apparently so. By the end of day Thursday, eTrade stock had fallen down to $4.82 a share. Those 91 cents a share to me meant a difference of $4,777.50 by selling in the morning rather than waiting until the afternoon. And on Friday, eTrade fell again, down to $4.60. But this time around, despite the low price, I don't think I'll be buying. As I see it, the big news has come and gone for a while.

Now I get to figure out whether I take this newfound cash and put it into Christmas presents, or if I put it back in the market.

eTrade's Losses Are Investors' Gain

The last time I mentioned eTrade's issues, I said I had bought in to the stock around $5.50, following a small recovery after bad news swirling around the company had decimated its market value. Not seeing the kind of continued growth I had expected right away, I sold my position a few days later around $5.65. I'd made a few hundred bucks, but nothing to write home about. But now I'm back in, and it's a different story - one that could be much more profitable.

After I sold on November 16th, eTrade stock resumed its collapse, falling below $4 a share - signaling to me the right opportunity to resume my eTrade gamble (Partly due to this article). So on Wednesday morning, I put a sizable chunk back into the stock, now at $3.89 a share. It looks like it may have been the right move, as while rumors of a potential merger with Schwab.com or TD Ameritrade have been swirling, the stock jumped about 25% today, ending at $5.33 a share, giving me a 37% gain in a two day period, and an "on paper" profit of more than $3,500 so far.

Why play eTrade? Because I believe they have the best brand among online brokerages, and that their customer base will be a valuable commodity, even if they are sold or merge with a competitor. It's also likely the eTrade name would be kept, if not too damaged. After all, who wants a new name like TDAmerE*Trade or SchwabTrade.com? An eTrade customer can only benefit from this.

As an investor, I believe my funds are safe, and that the value of the company is higher than it is today. I've made more than my fair share of bad stock trades in the past, whether from premature selling or simply bad buying, but I'll be watching this one close, hoping it turns out well.

(Also see: Silicon Alley Insider: E*Trade On The Blocks? Probably., BusinessWeek: E*Trade: The Merger Buzz Grows, or E-Trade Shares Spike on Takeover Talk)

The Run on eTrade Won't Have My Footsteps

Mob mentality, especially on the market, can be a dangerous thing. I've found that often, the best thing to do long term is to avoid the one-day panics as groups jump out of one stock or another, whether based on rumors, or even hard news. This week's activity in eTrade just may be exactly that, as I've seen the viability of my long-term broker put in question.

As speculation and analyst commentary stated, eTrade will likely be writing off massive loans that have gone unpaid, to the tune of multiple billions of dollars. Some have speculated the company could go bankrupt, or even be at risk of closure.

Obviously, given all my discretionary market funds are tied up in eTrade, and have been since the beginning of the decade, the thought has crossed my mind to transfer my cash out of eTrade, back into the bank, for later investment in another brokerage. Any of them. But even more than my thoughts of going with the crowd by giving into the panic, I've considered going against the grain by buying eTrade stock, which just might be oversold. Maybe I could even actually profit from the short-term timidity of others?

Regardless of that choice, which I haven't acted on, I'm not leaving eTrade. The brokerage has given strong service for a long time for me, and I have close to zero expectations that I'd find my funds were completely gone. That would be a scandal of epic proportions, one I don't see happening.

Mid-Day Apple Notes, Post Earnings

As anticipated, Apple blew past analysts' earnings estimates this afternoon, as has now become commonplace for the company. Apple sold more than 1.1 million iPhones in the quarter, partially explaining why I see them everywhere now. Seems every good tech geek has one except me! The company also is seeing continued Mac sales growth. With those results, Apple stock jumped more than $10 a share, and is now trading after hours in the $184 range.

As I noted earlier, I took the opportunity for a quick one-day trade, getting in around $170 at 6:30 this morning, and getting out at $183.7 after hours. I don't have the patience to watch the stock accumulate, even with all the long-term opportunities I've missed in Apple, Google and others in the last few years. Sometimes, you just have to accept the fact it was time to take profits, and look for the next quick momentum pop.

Obviously, that trade easily more than pays for my near-term acquisition of Apple's new operating system release, Leopard, which hits stores on Friday. I watched a helpful guide to the new operating system last night, and posted my comments over on The Apple Blog (Leopard Is Coming, and I Want It). Mac OS X is just extending its lead over Microsoft Vista, and the innovation from Cupertino continues to reaffirm that I made the right choice for my OS. Hopefully, more will continue to make the switch in quarters to come.

Ready to Gamble on Apple Earnings Today

After hours today, Apple is set to announce earnings for the most recent fiscal quarter. And for me, month after month after month of seeing Apple stock go up, without my being involved, ends now. While I still believe the stock is highly priced, it seems that there are enough investors out there to push the price ever higher, and so long as that is true, it's a worthwhile investment.

Apple has some incredible momentum behind it. The iPhone is an unqualified hit, even with the AT&T boat anchor holding it back. Microsoft continues to make missteps, around Windows Vista, around MSN Live Search, and around the Zune. Apple is days away from introducing Leopard, the latest iteration of the company's rock-solid Mac OS. And market share continues to climb.

I've been wrong on AAPL before, in the short term, but looking at my eTrade records, no stock has more reliably made me money in just about every trade over the last three to four years. A look at the chart in this post shows why. Apple stock has outpaced just about every technology stock out there, and doesn't show much sign of slowing down. I only wish I had been even less diversified than I already am, and had put it all on Apple in the first place, best practices be damned.

Today, I just might roll the dice and take my chances. We'll see by this afternoon if that was the right choice.

Is Microsoft Irrevocably Broken?

Microsoft is still number one in some major elements of the computer industry, without a doubt. It's number one in consumer operating systems and number one in enterprise operating systems. The company sells the number one office suite, has the number one position in Web browser software, just saw the XBox 360 beat Nintendo's Wii in the most recent month, thanks to the release of Halo 3, and undoubtedly is a major force in many other areas I haven't mentioned.

But over the last ten years, especially over the last five, the company's momentum has been overshadowed by some extremely nimble, innovative, companies, like Apple and Google. The company hasn't made much headway outside of its core businesses, with public failures of MSN, Live Search, and Vista, to name a few. The old status quo where every startup in the Valley was afraid to compete with Microsoft has been eclipsed with a new realization that not only can you beat Microsoft, but instead, it's Google that might end up being the 800 pound gorilla who could be your greatest partner or your greatest enemy.

Some of the very best blogging on Microsoft comes from two sources who have grown increasingly frustrated with the company's direction, and have seen their skepticism grow as the company continues to just tread water, quarter after quarter, watching as the latest buzz comes from Cupertino, Mountain View, or a gaggle of startups that have Microsoft begging just to be associated with - like Facebook, or prior to the acquisition, YouTube.

The first, Mini-Microsoft, plainly says the company has grown too large to lead in this new economy, asking for the Redmond monolith to scale down and simplify. The second, MSFTextrememakeover, looks at the situation from that of a shareholder, and the answer is not pretty.

Putting one's money in Microsoft stock for the last year, five years or ten years has been as close to a dead end as you can find. While it hasn't evaporated, the aforementioned Apple and Google have seen their stocks skyrocket.


All stock detail sourced: Google Finance | (Table: Apple's Keynote)

The difference is dramatic. That's why MSFTextrememakeover is asking this week: What If Microsoft wasn't a screwup? I think it's more than just screwing up. Microsoft once had a culture of aggressive tooth and nail competition and winning at all costs. Many antitrust suits later, with much of the old blood having moved on to newer, shinier things, the company has lost the competitive edge it once had. It's one thing to be huge, and quite another to be good.

Additionally, in order to be taken seriously as a stock or as a company, investors have to believe in the management and its direction. Bill Gates has lessened his influence on the company, working more on non-profits than for-profits. And Steve Ballmer doesn't have the credibility and the ability to inspire employees and customers the way Steve Jobs, Sergey Brin and Larry Page have. It could be time for a change there, as Microsoft looks more and more like yesterday's IBM than tomorrow's Google. The question is, is the company broken, and can it be saved?

Recently, Ballmer was seen saying the company would buy upwards of 20 startups a year with the company's cash horde. But truth is, smart startups don't want to be part of Microsoft. That's yesterday's story. Now, they want to be part of Apple or Google, or part of Facebook, if there's a match. There have been stories of Microsoft's richer offers being refused. And it runs contrary to Mini-Microsoft's hope for the company to focus and slim down before getting even larger.

If I wanted to stop using Microsoft software altogether, I could do it. I wrote this post on Google's Blogger, running on Apple's Safari browser, on Mac OS X. I edited the above graphic in Adobe Photoshop, after making it in Apple Keynote. The need to run Microsoft software is now gone, as companies move to the Web, and open source alternatives become a very real reality. Innovative companies win through having an edge and differentiation, and I strongly believe Microsoft's edge has dulled. Without significant change in leadership and focus, things are going to get a lot worse for the company before they get a lot better.

New TAB Post: AAPL vs. APPL

For years, I've watched Apple stock closely, often as an investor, and always as a fan of the brand and the company. Over the last decade or so, it's no secret the company has grown to command significant respect for its innovation and dramatically rising sales. Yet, oddly, many in the financial community and elsewhere can't seem to get one basic thing right - the Apple stock ticker. (AAPL)

All too often, I see stories about Apple citing the company's ticker as APPL, instead of AAPL. It doesn't seem like much to be sure, but it can't be dismissed as a typo after years and years of seeing it happen. As the company's stock is at all time highs, above $160 a share, and sporting a market cap approaching $150 billion, it's time the company got more respect, and authors got the ticker right. A - A - P - L. AAPL.

That's the background behind my most recent contribution to The Apple Blog, titled Dudes, It’s AAPL, Not APPL!. Per agreement with them, I will not be cross-posting the piece, but instead, have provided a link. Enjoy.

All is Not Quiet With Apple Before Earnings

As an Apple (NASDAQ: AAPL) shareholder, these are the times that try men's souls. While remaining very positive on the company's long term goals and product trajectory, the latest spat of news coming out of nearby Cupertino has me thinking as to whether tomorrow would be an excellent time to get out of my Apple stock position, at least for the short term.

Apple announces quarterly earnings an hour after the NASDAQ market's close, and of late, the company's stock has been steadily climbing upward. Despite today's pullback of less than a quarter of one percent, the stock is above $93 a share, up 4% from last week, and more than 12% over the last three months. For me, I'm up just under 10% in this most recent short-term buy.

But in the midst of this, in the last few weeks, Apple has confirmed their next generation operating system, Mac OS X 10.5 (Leopard) will be delayed until the fall, rumors have arisen that the much-awaited iPhone is suffering from stability and battery issues, and the SEC's inquiries into stock manipulation and backdating continue. Today's well-documented news reported former CFO Fred Anderson's settling by paying fines of more than $3 million, and issuing a press release that CEO Steve Jobs instructed him to institute the irregularities in the first place. (See: GMSV)

Whether true or not, any suggestion that Jobs could be at risk sets shudders down the spine of any good Apple investor or Macintosh fan. As the company's business and marketing leader, Jobs represents the soul of the company, and is given the lion's share of the credit for all good things that have come to pass at Apple in the last decade. On the news of Anderson's finger-pointing, some in the media admitted to having cold feet, and selling all their Apple stock.

I've bitten the poisoned Apple a few times myself over the years, holding when I should have sold, yet also selling just before a rally. Even if the company reports stellar earnings, with all these questions, will the Street be satisfied? I'm not so sure. Come this time tomorrow, I just might not own any Apple stock. And truth be told, I might not be happy with my decision either way.

Buying on the Dips Can Kill Your Finances

In order to outperform the market, it's a required element that you take a contrarian bent - either through buying into a stock early, shorting one at its apex before an eventual descent, or buying stocks on the cheap, if you feel they have been cut down to size unnecessarily, or by too much, effectively meaning you're betting on a near-term rebound. While I definitely subscribe to a buy and hold strategy for some stocks of reputable companies with serious short and long term upside, I have fallen victim at times by trying too hard to be a contrarian.

Take Yahoo! (NASDAQ: YHOO) for example. Outside of my 401k, I have never been a Yahoo! investor, until yesterday. While I've written previously that I think Yahoo! has lost significant market share and mind share to Google in the search and online ads arena, the company is no slouch. Following Tuesday's quarterly announcements which disappointed analysts, the stock took a significant haircut Wednesday, dropping more than 10 percent. Effectively, the company's stock was on sale for more than 10 percent off. (Unless you start getting picky and looking at current or future P/E)

So, given I had some available cash in eTrade, I added Yahoo! to my portfolio for the first time. If the stock regains half its one-day loss, I'll be up 5%. But, as sometimes happens, the first day's losses continue the next day or even further. Not only did yesterday's pummeling not include a late-day bounce, but Thursday's trading has seen Yahoo! go down an additional 2 1/2%, meaning instead of being up a few hundred bucks, I'm down a few hundred bucks, and I have to root for the stock to rebound just to break even, let alone make money.

This isn't the first time I've lost money on hoping to catch a bounce. It's called "catching a falling knife". If you see a stock taking a dive, and you're trying to accurately pick the bottom, wrong guesses can draw blood, just as much as they can if you, like I once did in 2002, sold Sun Microsystems at 2 1/2 bucks a share. (It now trades at nearly $6)

The question is, will I wait for Yahoo! to rebound, and make money, sell quickly to cut losses, or hold on until I lose even more? Those are the three choices. For now, I'm holding and waiting for an eventual retracing.

Rich Man, Poor Man - Stocks and Shocks

The week's stock swings could make one nauseous, if they weren't almost entirely to the downside. Some people are calling this the first sign of a recession, the end of the Web 2.0 bubble, and saying the long bull run for the market may be coming to an end.

All I know is that my 401k is taking a beating. Siphoning off a percentage every two weeks to Fidelity, we're fairly heavily leveraged in some of their broad funds. While mutual funds are supposed to protect your risk from the ups and downs of individual stocks, they pretty much guarantee you will get hammered when the market goes for a dive. And that's proven to be the case this week. (See: FCNTX, FDGRX, FDEGX, FCPVX, FEXPX)

Both Wednesday and Friday saw me lose thousands. I lost more money on Wednesday and Friday combined than I take home in a month's pay. Even my quick Apple investment I was so proud of just yesterday is already down a few hundred bucks. There's really nothing good to talk about in the market right now, but it's my hope that this is more of a one or two time bump than an overall trend.

The market has seen bigger hits before, and keeps coming. But today, going into the weekend, it hurts.