Once again, somebody elsewhere accused me of atempting to do fundamental analysis–f/a–on a stock with no earnings, perceptible book value, or owned intellectual property.
Evidently there is a new crop of traders on the market who do not understand the difference between a sales pitch and a business plan and just what a “common stock” actually is. So, i review the salient points again. Because “theoreticals” are for the losers who believe the delta of delta is a fixed point (talked to aig lately?) i will use the ever so handy example of btim.amex as a perfect “story stock” illustrating how a prident speculator can gain a perspective of how to play a story stick when the story makes sense.
the first rule of “speculating” is to >>>look<<<.
the most abused word in mkts ranging from equities to to spray on bald spot covering stuff is “value.”
so, what is btim.amex?? (this applies to allll equities..but this is not a hypothetical. )
btim is the common under a preferred of unknown terms.. therefore it is nothing. if someone were doing f/a n something, like viacom, thy would immediately look at national amusements, since it is known to own over 50% of viacom, and therefore sumner redstone will speculate that whatever is good for him is good for viacom common. the pref of biotime owns an unknown part of an entity that cannot pay the interest on its suddenly rediscovered debt from revenues. Debt that it told the SEC was now gone by means of a d/e swap that gave more control to a handful of financiers, but somehow came back into the most recent 10q, without explanation.
and here one can see “value”-those revenues coming in..500ml of hextend has been shown to have enormous, possibly incalcuable value to soldier who gets shot…and that same 500ml has a mkt clearing price of?? <$25. for the prident speculator this will perhaps serve as example of how “value” has nothing to do with price. If it doesn’t, go watch a bunch of visa commercials.
the pref most likely has a claim on the future of a non-existent (as of most recent 10q) entity called btim:asia. btim will have a rev stream of unknwon size from a fictituous entity called oncocyte..but nobody knows how. so what is there to look at? only the “story.”
the other day..on the basis of everything of what i know about the progress of real business,i suggested that btim,amex could have a natural growth rate of 20% a year, based on the sectopr it occupies, and progtression towards its held-out business plan. the “speculation” factor is built in by ignoring the change in o/s during the last year, of nearly 50%. That move alone requires “speculative” intent, since on an f/a, 0/30% is even “more 0″.
anything going on priceways in a common equity with a preferred is a fiction–by definition–that has no effect whatsoever on the odds of success, except when the mkt clearing price allows btim to sell more stock to fund operations. since a corporation an quasi-person is lready a fiction, and the preferred a condition on the fiction’s existence, what is a common equity? Thus there is a difference between “fair value” and “market clearing price.” As an example, i was reminded yesterday of a ticker for a holding co. and the net asset value–nav–of what is held can be seen everyday. the ticker sells for a small premium over nav, which is a vote for the management’s ability to pick things to hold. that’s a “vote” about perceived performance..not a “value.”
People resist the heck out of being told these things. They beg and plead and demand, and threaten speculators must be silent in the presence of the magician pulling the trick. That they do not hear themselves say “don’t wake me up, i like this dream” is…amusing to me. it is sad to others.
Somebody tried to hold their breath and insist that reality is what they want it to be by comparing btim.amx with proctor and gamble. to wit:
:”This ain’t no Proctor and Gamble,homey!”
that’s right. p&g makes stuff… and sells it.
and then makes more stuff.. and sells it.
and spends more on r&d every year than btim’s mkt cap.
and btim has since 1996 paid ak, then neal, and now garfie to take them over to keep from going belly up.
:”You seem to always pointing out the financials and “fundamentals” in a speculative stock!”
yeah. and therfore i don’t. as an f/a, btim=0.
as a story stock, it is “worth” what people who know the most are willing to pay…which in the past year has gone from a >>dime<< to $2. anything else is “pay no attention to the man behind the curtain” and therefore >>>not<<< seeing, >>>not<<< speculatiing…but rather, getting talked into a crap shoot.
and alll the baseball metaphors don’t change that. that’s just more smoke and mirrors.
:”the technology (stem cells)grows,funding,want and need increases” –which this person asserts think change the “value” of btim are each true statements, and therefore improve the odds majorly that somebody will do something. no more..no less.
to assume that it will be btim.amux is just betting on a roll of the dice, without regard for the loading on the dice.
>>>speculating<< is seeing how the dice are loaded, and then betting.
and i am adressing the “prudent speculator” and those who want to become prudent speculators.
This makes a lot of people…non-plussed. the fact that they think their emotions have anything to do with reality is not my problem. people can ask nicely, or threaten, all they desire to. just as people talk to the dice they are tossing.
The fact that an r&d entity will spend as much on r&d as it does on g&a, and an intellectual property co will spend as much on patents as it does on public relations isn;t affected at all.
prudent speculators know that, because they look.
Posted under business
This post was written by admin on November 22, 2009
