Thursday, April 06, 2006

Conversation with the Ticker

I am looking at AMD's ticker every once in a while, and I don't believe what he is telling me. So, we got into an argument, that goes more or less like this:

Chicagrafo: "You've got to be kidding me! Is it down today?"

Ticker: Yep, Chi, it is down.

Chi - How come? Any bad news?

Tic - No, only good news, the usual stuff. Joe Osha bashed Intel, Fraunhoffer-Gesselschaft announced a R&D partnership with Infineon and AMD, a German magazine announced Dual Core Turion Features such as 1Mb L2 x 2, independent core voltage management, DDR2 - 800 dual channel; there are talks to expand/build factories in Dresden to the tune of 5.8 Gigadollars... should I go on?

Chi - Nah, not necessary. What has Sharikou been fighting about today?

Tic - That Chartered is 65nm and that Fab36 started commercial production in late Feb the latest.

Chi - Sounds like right to me, if not, the fact that there is a discussion about it means that at the very least they are ahead of schedule. What about the Hash and Ace?

Tic - Ace has been bullish, and Hash has been quiet, both for a change.

Chi - Cool. That means that we are about to break out with vengeance

Tic - Oh, no, you are down another 2%

Chi - What about the indexes?

Tic - They are all up

Chi - Fuc*, I don't Fu***** understand what's going on!

Tic - Another 1% down

Chi - What are the bashers saying!?

Tic - They are just repeating themselves: the Coredump, Mere-0 and Whocares prayers, saying that AMD is a POS, how much they have won shorting, saying that longs are stupid, bashing Sharikou.

Tic - Oh, another 0.5% down

Chi - Damn! that's 3.5% in a few minutes.

Chi - I will go back in a few minutes, I want to re-check my calculations for Earnings

After 5 minutes

Chi - It is more than $0.49 EPS, that means over $2 year, at 20x multiplier (5% APR on investment) $40 minimum per share. How are we?

Tic - Low 34s

Chi - What the hell?? why?

Tic - It seems that Q1 earnings are a moot point

Chi - Is that so?

Tic - Yeah, you know, the price war

Chi - The price war that can't happen? But if AMD has outclassed Intel so much, that they are not competition, who cares about the prices of the (de)celerons and xeons? Who is going to throw away good money on the rest of the computer to put an underperformer at the center?

Tic - Don't ask me, I am not guilty...

Chi - Aren't you? there must be something in your charts that say that you've to sell AMD...

Tic - Oh, no, it is that the Technical Analysts see that after the multiyear high there is no support

Chi - You're not convincing me, some people in the message board say that the specialist has been manipulating the closing price

Tic - Don't mess with my master. Are you one of those who believe in conspiracies?

Chi - Well, no, I don't; but there's got to be an explanation about why with so great news AMD goes down... do you know well your master?

Tic - Nobody knows well my master

Chi - Man, it is very frustrating all you are telling me, you are not helpful

Tic - I always strive to be of service, but some people wants to kill the messenger of bad news...

Chi - What are you talking about?, you always bring good news about AMD, and absurdly low share prices, there's got to be something wrong

Tic - I am well connected...

Chi - It is a conspiracy. I can't think of any other explanation... Let me check again, who are AMD partners or customers?

Tic - Sun Microsystems, nVidia, Rackable, Hewlett Packard, Soitec, eMachines/Gateway, Lenovo...

Chi - Ok!!, who among them is not doing well in the stock market??

Tic - They are all doing terrific. You interrupted my list, even Google is doing AMD. Just after the news of Google going AMD it was included in the S&P 500 index with an appreciation of 12.5%... Let me tell you a secret: All AMD partners/customers are doing fantastic, because AMD has magical properties.

Chi - What??? do you, the embodyment of cold computer logic dare speaking about magic?? Anyway, tell me who is not using AMD

Tic - Dell, Toshiba, Sony, Apple

Chi - Yeah, I know about Dell, you may remember that I also have bearish positions against it.

Tic - Yes, I remember. May I remind you that your bearish positions in Dell have given you most of your non-ethanol related recent gains?

Chi - Very kind of you. Well, Toshiba has been pushed over by Acer, right?

Tic - Indeed

Chi - Perhaps in this April, due to the lawsuit, the Japanese may start their new yearly cycle doing AMD, am I right?

Tic - I have no news on the subject

Chi - Thank you. What about Apple?

Tic - Doing very well

Chi - So the Corpse Duo is good!

Tic - I wouldn't say so. It seems that Apple is receiving a lot of help to make the transition from Intel, and it seems that Apple is better at extracting kickbacks from Intel than Dell itself

Chi - Any chance about Apple doing AMD?

Tic - No news about it, but it has been remembered that Apple and Steve Jobs have established a reputation of shooting themselves in the foot

Chi - What? Explain yourself

Tic - Yes, a reputation of doing a great innovative package with inferior components, such as the original iPod with the faulty batteries, or doing awful packages with superior components such as the PowerBook 150. They also do the opposite of what they should, such as allowing MacOsX to run in PCs and being active at allowing Windows to run in Macs...

Chi - ...and choosing Intel instead of AMD... They've got to have a lot of feet to spare!

Chi - But anyway that contradicts your "magic" theory

Tic - Oh, no, it doesn't. AMD's magic is "white", positive, it helps customers and partners, it doesn't gives bad karma to the skeptics.

Chi - That's interesting... perhaps it is not a matter of magic, but cold business reasons: AMD leaves a lot of profits to be made because it is not exploitative and believes in cooperation, the ecosystem; and Apple is doing well because it is exploting Intel, who now is not available to be exploited by Dell, to the detriment of the later.

Chi - What about my article about the subject, Ticker?

Tic - Only has a few reads, but one (contrarian) comment. Sharikou dismissed it, though.

Chi - No, I am asking about your opinion

Tic - I will confide that my fellow newstickers and friends in the Media have been spinning too much positive news about Intel and negative about AMD. My Masters have asked me to do the same, but you're too clever to be fooled, so I will keep being fair to you

Chi - I appreciate that. Thus you agree that once this stock reaches $45+ it will have to slide all the way to the next quarterly report, Dual Core Turions notwithstanding, and stuff like that, right?

Tic - Yes. And instead of selling shares or buying puts your strategy of writing monthly calls seems better

Chi - You are not saying that just to please me, right?

Tic - Oh, no, I see that AMD doesn't have much chance of crashing down, so it doesn't plays all that well to puts, but the core issue is that once momentuous news such as an earnings report is priced into the stock, it has been demonstrated that there are no good news that kick the price up; not even Dellienware was able to sustain a meager 4%, thus little chances of a permanent intra quarter upswing play very well to the short term call writer.

Chi - That's what I thought.

Chi - How are we doing?

Tic - Green. Another bull trap, perhaps

Chi - About your "magic" theory, why is it that AMD is down?

Tic - I think that it is because the positive magic is spent in partners and customers, so there is nothing left for its own stock price.

Chi - I see. It is that Wall Street doesn't see a company governed by greed, that is not appealing to them. Let me explain it to you: Other things equal, every $1 that goes out of Intel's market cap should mean one dollar getting into AMD's market cap, but because of their relative sizes, 1% Intel's market cap means like 7% AMD's. If Intel is down 10%, AMD should be up 70%, but that isn't happening; thus the money that goes out of Intel's market cap doesn't end up in AMD's, something similar happens with Intel's profits. That's why WS may agree about the whole market down; perhaps it is not that at all, but that AMD is behaving like a Robin Hood, taking the extortionately high Intel's profits and leaving them in the ecosystem, and Wall Street doesn't really understand where the money is going.

Tic - Thus AMD isn't winning all that money, being so small, doesn't it make it vulnerable?, perhaps it is not such a good long term investment

Chi - Nah, AMD increasingly will get protection from the ecosystem, that will be the moat for the competitive advantages castle that Wall Street gurus like so much. Think about things such as nVidia's NBP (nVidia Business Platform) that is defined with an AMD processor at the core.

Tic - Hmmm... only if it manages to survive until consolidating the ecosystem...

Chi - Of course!, what?, do you honestly think that the perfectionist Germans are going to screw up in production? Do you seriously concern yourself about the Grand Masters not keeping up with outstanding architectures? Do you think that these guys battle hardened who most of them had a close encounter with Bankruptcy and in such circumstances pulled off DCA, ccHTT, AMD64, Dual Cores, SOI, sSOI, Fab36, APM are scared or worried about these times when they have pocketed the whole server market, 80% of Desktop retailing in the U.S., an explosion of production capacity, positive reviews, benchmarks, credibility, etc.?

Tic - You have good answers. It is very instructive to work for you. I will try to recommend these opinions to my other customers

Chi - Thank you, please let them know that History is being made, that whenever that happens, the nature of the changes is not readily understood, but that also principles have the tendency to prevail...

Tic - I sure will...