1500 Days to Freedom

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Performance Update 2 of 50: Falling in February

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This graph would be a lot better turned upside down
This graph would be a lot better turned upside down

January 1: $586,043 (starting point)
February 1: $587,134
March 1: $576,890

The dirty totals
February loss: $10,244
Overall loss: $9,153
Days elapsed: 59
Days to go: 1441

The markets continued to climb in February. The S&P 500 went from 1498 to 1518. All indexes are currently near their all time highs. Things are going awesome; except for me.

Apple (460 -> 430 in February) yanked my portfolio down $10,500 just in February. Since January, Apple has dragged me down $43,000*: (553-430) x 350 shares! Uggggh. Let me rephrase that; UGGGGGHHH!!! Please learn from my mistakes; if you must mess around with individual stocks (and you probably shouldn’t), they should be a small percentage of your portfolio.

IMG_2502
Here is a beautiful picture I took in Rocky Mountain National Park. Hopefully, this nice scenee balances out some of the terrible numbers in this post.

In the near term, I’m not optimistic:

  • Apple will probably continue to fall. Sentiment on the company is very low and it wouldn’t surprise me if this one dips into the 300s (currently $430 and falling like a rock). Apple needs a big catalyst to turn it around and I don’t expect one anytime soon. The exception would be a very good earnings announcement in April. For more on Apple, see the end** of this post.
  • The markets are flying right now, but we’re probably due for a correction. All of my other investments are doing very well, but a broad market correction will drag everything down.

Long term though, I’m optimistic. Apple just had its most profitable quarter in history, but analysts are writing the company off for dead based on lower than anticipated iPhone sales. It seems like a short-term overreaction, but time will tell. Check back with me in 2014.

Even if Apple doesn’t recover from it’s death spiral, it isn’t the end of the world. 1500 days may turn into 1800 days, but working an extra year when you’re in your early 40s is a lot easier to do than when you’re in your 60s or 70s.

One of the main things I’ve learned about investing is not to worry about the short term fluctuations. When you buy any investment, your mindset should be to sit on it for years. If you must by individual stocks, buy companies with strong moats and let it ride.

Here’s hoping for a better March. I have a 401(k) match coming up and also an income tax return. Will that be enough to turn the portfolio positive? Stay tuned.

*While I’ve lost an incredible amount of money in a very brief time, I bought most of my shares in January of 2007 when the iPhone was announced. At that time, Apple was selling for under $100, so life could be worse.

**Here is what I think Apple must do to get it’s Mojo back:

  • Release an iPad Mini with a retina display: The iPad Mini has been a huge success. Releasing the next model with better specs will juice sales.
  • Open an App Store for Apple TV: The iPhone and iPad are tremendously popular with gamers. Imagine what an App Store could do for Apple TV. Sony and Microsoft would be shivering their boots.
  • Release an iPhone for China Mobile (CM): CM is the biggest cell phone carrier in the world with 700,000,000 subscribers, yet they don’t offer the iPhone. Apple needs to come out with an affordable phone for CM. Analysts complain about smaller margins, but right now margins are 0 for CM.
  • Come out with a TV: Make it 4K with 52″ and 60″ screen sizes. Make the iPad a killer remote. Make the iCloud a DVR, allowing you to watch stuff you record on any iDevice.
  • Come out with a bigger phone: People like big screens. The screen could be made bigger in a way that current apps would run without modification.
  • Finally, get into home automation/smart home technology: This involves being able to do things like control your thermostat or security system more intelligently. I’d love to be able to open my garage and front door with my phone. I’d love to be able to turn up the thermostat when I’m on my way home. Better yet, I’d like the phone to know when I’m a certain distance away and do it automatically. I’d like to see my energy use right there on my iPad so I can learn and be more efficient. Apple, get at it!

OK, that’s my 2 cents. Check back in a year to see if Apple has further destroyed my portfolio or if Tim Cook has read my blog and implemented all of my great ideas!

 

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Comments

  1. I don’t think Apple will fall too much more… I think it just got ahead of itself in 2012. Look at a 5 year chart and draw a trend-line from 2009-2013. You’ll see that we’re just about on it right now. It may take a year or 3 (more like 3) for it to return to the $700 level. But I’m seriously considering buying back in at this point.

    Yes, I know this is “technical analysis” at it’s “finest”… but while I don’t take much stock in TA, it does merit some consideration.

    I bought in 2005 for $35, and sold in 2011 for $300.

    • Thanks for you 2 cents! I hope you’re right!

      I had a look at your site and see that you love cycling. Me too! I’ve been mountain biking in BC. It was very technical, but awesome too. Very nice corner of the world.

      Here in Colorado, people are bike crazy too. Can’t wait for the weather to warm up just a bit…

  2. I could write for hours on Google verses Apple. I actually like both companies. Here are some quick thoughts:

    Google is doing amazing things. With self driving cars, Google Glass, Google Now, genetic research; they are changing the world. Right now, I suspect most people think of them as a search engine. I expect that in 5 years, they won’t be thought of like that any more.

    Android and Samsung are killing it right now, especially internationally as you said. However, I think its mainly because Android phones are cheaper. For example, no-one in my immediate family has an iPhone. Why? The iPhone was $200 and the Android was free. With that in mind, I find iPhone users to be more sophisticated. They download apps and use many of the features of the phone. My family members use their Androids 95% of the time to make calls. The other 5% is maps and facebook, but they stumble when trying to use even these features.

    If you look at Apple’s sales numbers, the older phones are almost selling as well as the new ones. Again, its because the iPhone 5 is $200, the 4S is $100 and the 4 is now free. Apple has always been a premium product, but I think if they are to stay relevant, they need to come out with a cheaper phone. People in 3rd world countries like China and India just can’t afford to pay $800 for an unsubsidized phone (the business model overseas).

    I have both an iPhone and a Galaxy S3 (I write software for both iOS and Android). Both are great devices, but I think the iPhone is a little more intuitive and easier to use for the masses. The S3 is a great phone though too. Hardware isn’t quite up to Apple standards, but you have to have a protective case, so you never really notice.

    The thing that will help keep the iPhone/Apple relevant is their ecosystem. For example, lots of folks buy music from iTunes. iTunes works best with the iPhone. I love iPhoto. Guess what, again the iPhone works great with iPhoto. Expansion of the ecosystem with a TV and home automation will make iProducts stickier.

    With all that said, I have no idea what the landscape will look like in 5 years. I was at Google headquarters a couple years ago and I asked about Android verses iOS. An engineer who had been paying attention to the conversation turned around and said, “Android is a piece of *&^%ing sh*t!” It was garbage at that time. Fast forward to now, Android has caught up and in some ways surpassed iOS which is looking a bit stale. Google in innovating like crazy. Google Now is scary good. However, I think Apple still has some tricks up it’s sleeve. We shall see.

    • Thanks Lacy-

      One more comment about Android verses iOS and then I’ll stop. It irks me a bit how much Android copied iOS. Android didn’t start out as a touch based OS. As soon as the iPhone came out, Google pretty much copied it. Give Microsoft a bit of credit for changing their mobile up a bit.

    • Hi Mrs. Pop-

      I was surprised too by the action on Friday. I thought we’d see a 200 point drop in the DJI. Maybe its coming on Monday?

    • I thought your American markets might react/overreact to the sequester too.

      Our Canadian government is worried about it and sent a message to your government asking them to get off the financial crisis rollercoaster although I am sure it was said in some neutral political speak.

      How long until your next government standoff and the next financial crisis?

      • End of March is when the current “Continuing Resolution” runs out so after that there would be a government shut down except for “mission critical” roles. Of course we have been operating with a real budget and on continuing resolutions for the past 4 years so I wouldn’t be shocked if they just passed another one.

    • Hi Tony-

      I think we’ll see a big turnaround before the end of the year. I never thought I’d see the day when Apple’s P/E is below 10! Fingers crossed for both of us!

  5. Oh wow! If Warren Buffett were a cartoon character, he would most definitely look like the old man from Up! Always love Buffett’s optimism.

    I’ll be interested to hear about your income tax return. That may seem like an odd statement, but to explain better – my day job is as a tax accountant 🙂

    • Hi Mrs. Herb-

      My return would probably bore an accountant to tears! I’m just a W2 employee. Regarding investments, I do a lot of buying, but not much selling, so no stock sales in 2012. For the first time, I did have dividends (Apple and Costco). I also had income from Prosper and Lending Club.

      It may get interesting in 2013 if we end up buying a rental property. We’ll have that income, depreciation, etc.