Looking Ahead by Looking Back

Not being an early adopter, I regard my personal spending patterns as lagging indicators. When I embrace the new, new thing, it’s time to short the stock. Within the last six months, our household caught up to the rest of the family in the ownership of Apple’s products. When we get delivery of Apple TV, we will have at least one of every device the company makes.

You may recall that I put up this chart of the stock last fall:

APPL
Apple newest

I said at the time that, while I loved the company’s stuff, I for sure would not buy the stock. Now, several months later, It is beginning to look like that was the right call:

APPL
APPLE 2

Not trying to be a smart aleck, here. I’ve seen this sort of thing with technology stocks many times before. Just about the time investors hold it as a matter of certainty that the only place to put money is into the dominant tech stock, it comes to a perplexing end.

I bought a number of computers from DELL in the late nineties. Many of my friends did, too. It was hard to imagine anything but good things for the company. But look at the stock  after a dozen years from the top:

DELL
Dell Computers

It’s an old story, and my point is that technology is ephemeral. It is always being supplanted. It will usually look most impressive near the peak of its dominance, which probably makes technology, alluring as it is, the riskiest sector in the market to bet on. Here’s one more: Microsoft, still the dominant operating system for PCs:

MSFT
MSFT new

But what a dog of a stock–and people still love it! No way of knowing what the next new, new thing will be, but the odds are that making and keeping money from the stock will be chancy.

Taleb (Antifragility) makes an interesting point: When futurists write about what things are going to be like ten, twenty years ahead, they usually try to imagine a super slick existence driven by high tech. In fact, high tech becomes obsolete. What endures is the ancient. Our homes are built about the same way as a thousand years or more ago. In the home, we sit on chairs at tables and use artifacts like cooking utensils that haven’t changed much for millennia.

This brings me to an investment philosophy: I’m not interested in new enterprises. I want to invest in enduring old companies and old products when the market is valuing them dirt cheap. That time will come, and when it does, I’m more likely to take a good hard look at a soap company like Procter and Gamble than a tech company like APPL.

Cheers,

Rod

No one should consider any part of this presentation as a recommendation to buy or sell any securities whatsoever.

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