I rode this puppy down from about $19 to $8 (yes, lost my shirt on it), but am pretty flabbergasted to see it down here under $4. What the hell is going on with this stock? I know the economic conditions are tough, but the P/E on this seems absurdly low. That said, it seemed absurdly low to me even at $8. What am I missing?
exactly, wob, they cant force the banks to lend and because of what has transpired with poor underwriting standards banks are going to be that much more cautious in to whom and for what purposes they lend.
one has to be capable of viewing the money supply over the last 5 years in terms of not only normal leveraged credit extention, but also extreme unregulated and overleveraged credit extention performed by off balance sheet SIVs, hedgefunds, freddie and fanny. IE the shadow banking system. as that credit creator winds down and takes with it the massive inflation and the consequential price appreciation in every asset class we are going to be left with deflation. this deflation already has and will continue to take assets prices, jobs, and the economy with down with it. The govt is stopping at nothing to prevent this, but they will not be able to success because the forces are too great.
yep, i agree with that.
my issue isnt so much with if simo is cheap here or not it's a good value with cash and no debt, but dont be surprised if this stock sells off more or just hovers for an extended period because the economy lands itself in an extendend and deep recession. in my opinion based on my understanding of monetary theory that is very likely.
Our dispute is really more about how long it lasts. As I have said next year will be slow, but I believe stock market anticipates recovery about mid-year. So we will have to resume the discussion in 6-months to 1 year to get anywhere. I'm sure if things were great no one would be willing to sell me their SIMO at 50% of book. As I have said also, even in a slow economy SIMO is in the right place to do well, i.e. SSD drives in low cost laptops and mobile TV growth in China. In fact, the low cost laptop market is likely to take off next year both globally and in the U.S. precisely because of the slow economy. Just look at Intel's recent success with their atom processor. How SIMO executes on it is the question. If they are even only marginally successful I think it can easily offset any slowdown in their existing business. We don't have to wait long to get some clarity on the state of the business.
Yes, I believe it. And when I say majority I should really say strong majority (>80%). That is not to say that there are not people and sectors that are not going to suffer tremendously from this mess. If 7% unemployment is enough to crash the entire world economy for an extended period then we are truly entering into some kind of strange new world. But if that be the case and when only partial irrationality prevails, if the powers that be deem that SIMO should only trade at $2.00 above book at $9.00, then I will still be pretty happy. If they go BK, then as Warren Buffet would say, "I will have done some very stupid things!", as I plan on significantly increasing my stake in this company over the next six months.
They'll lend to people with good credit.... they are starving for good customers, so they'll lend at a cheap price (0% APR), collect a transaction fee with the deal, and hope that you carry a balance once the offer ends.
Good customers are now really their only customers, so look for more deals.
I have to agree with tradenmachine. I actually live in Michigan, and I know that people are really hurting, including myself. I'm also seeing the effect the credit crunch is having on companies. Not only is it hurting now, I think it will get worse. Companies are slowing down investment and cutting headcount. That said, it's possible that equities may now have priced in this pain. I certainly can't say for sure, but given the amount of decline we've seen, it's conceivable that we may stabilize even as the economy stays in recession for the next few months. I say "stays in recession" instead of "goes into recession" because I actually think we're already in a recession, regardless of what the economists say.
I agree that those that have good credit will still be able to get credit at good terms. BTW, what is the upfront surcharge on the 0%? im sure its at least 2%.
Anyway that doesnt matter, because what i see the market doing is devaluing to zero the economic expansion that took place from 2002 until the bubble burst. And as well it should because almost all of that "growth" can be traced to home equity extraction. 25% of the SPX is financials. Those earnings came from loose lending and high leverage activities that are not comming back. Job losses from the financial sector are going to continue. Those are high paying jobs. What are those people going to do for work?
Furthermore marketwatch just published an article showing that mortgage rates moved the greatest one week percentage since 1987.
When 30 year fixed rates start moving up housing prices are going to fall porportionately. More walkaways more forclosures.
My career field is in the top 95% of wage earners. I work with people who all make 100K or more, but i dont think that is a very good gage of what most people make.
You wrote: "I still claim that the majority of americans are not cash strapped nor will be affected by the credit crisis"
You really believe this? Have you been to Michigan? CA's unemployeement rate is now above 7%. Do you think those people saved money during the boom boom years? Not a chance.
That's true. I was surprised to get a 0% APR balance transfer offer from Discover Card. Especially surprising given that in past months this offer has been at ~6%. I don't know how they have the ability to do this given the credit crunch...
Let me give you an example. I received a letter in the mail 2 weeks ago from capital one with big bold letters stating "CHANGES TO THE TERMS OF YOUR CREDIT CARD INSIDE". I thought, this should be interesting. It turns out they wanted me to transfer all my high interest credit cards to them for 0% APR. I just received another one yesterday. Yes, I think the banks will continue lending. Will they lend to those not qualified to repay, definitely not. This will impact many parts of the economy for sure, and overall it is a good thing. But I don't think it is the disaster that many are predicting. I still claim that the majority of americans are not cash strapped nor will be affected by the credit crisis. Everyone I know is better off than they were 5 years ago and have had enough discretionary income to easily stave off increases in energy prices, etc. If people are cutting back, most are doing so more out of uncertainty than an actual need to do so. I'm not saying it's wrong, but I think that is what it is. They will definitely still buy the things they want/need and cut back other less important things. The impact to most good businesses will be on the order of 5-10% reductions in revenue (in the extreme) rather than the 75-85% stock price contractions many are seeing. Even in the slowdown there is a huge disconnect between earnings and price for many companies. This will get corrected over time for the survivors.