Market Cap

A little bit over ten years ago, in the aftermath of the September 11 attacks, I decided to take advantage of the fact that a lot of publicly traded stocks were selling for a lot less than they really were worth.

One of the stocks that I bought at that time, was Apple Computer (since renamed to Apple Inc).

As was true for all of my investments at the time, I bought them because I liked the company and it really wasn’t a part of some greater investment strategy.

I bought ten shares of the stock, at approximately $16.00 per share.

About two weeks later, Apple launched a new device. It wasn’t the first of its kind on the market by a longshot. Maybe you’ve heard of it. It was called the iPod. This device changed Apple’s fortunes significantly.

In the intervening ten years since I bought that stock, the stock has split 2-for-1, which means that I now own 20 shares of stock, each of which has a starting price per share of $8.00.

(Note that at one point about two years after the split, my broker sold one of those shares to pay for brokerage fees, a move which I did not authorize. I learned about it when I got the tax bill for the sale of the share. I immediately bought that one share back, so my average basis of the twenty shares really works out to closer to $11 per share…)

I mention this because Apple’s stock passed a milestone today. As of the close of business today, one share of Apple’s stock is worth $542.44. Apple’s Market Capitalization crossed the $500 billion level today. ($505.8 billion, based upon this stock price…)

I suppose now is a good time to explain what market cap is. It’s a really simple formula. You take the stock price and multiply it by the total number of outstanding shares on the open market, and that’s what it is.

Some people say that it’s a measure of the size of the company. That’s somewhat true, but not universally. There’s a finite number of shares of stock of any company, and most companies like to maintain a certain level of availability on the open market, but it doesn’t speak to the total number of shares actually held by its shareholders (including me, an extremely small investor). It’s not a perfect measure of the size of the company, but it does say something. In other words, if you want to buy all of the outstanding shares of a company, that’s how much you’ve got to pony up. As you can guess, it’s a very important number for any company looking to buy another company.

Apple is the largest company in the world, based upon market cap. Has been since about mid-January, when it overtook Exxon-Mobil. Both Apple and Exxon achieved a $400 billion market cap in January. Now Apple is nearly $100 billion larger than Exxon.

Back in the 90’s, then-chairman of the Federal Reserve Alan Greenspan criticized the stock market for having irrational exuberance because of what he perceived as over-inflated stock prices. He was right, or at least prescient, as a lot of companies went under in the dotcom burst a few years later.

Apple’s stock has been going up this year as a direct consequence of two things:
— first, they reported earnings that were nothing short of incredible for the quarter that ended on December 31, 2011. Apple’s earnings were not only the best the company had ever seen, but also the second best quarter ever reported by any single company. (Exxon holds that record, going back to 2008, when gas was over $4.00 per gallon).
— second, the rumor mills have been speaking to a new iPad that will be launched next week. The rumors hold that the next generation of Apple’s already popular tablet will have a significantly better screen display (to the point that it will have a better resolution than a 42-inch HDTV), faster processor, and lots of other goodies. There will be a media event on March 7 to go over some of the details.

No matter what Apple announces on March 7, the stock will go down on that day. The stock is already inflated to reflect what the market expects of the product, so when we know the specifics, some people are probably going to sell. That’s what’s happened with every other major product launch Apple has had: the rumors drove the price up and the actual launch pushed it down a little bit.

It’ll take a lot more, though, for Apple’s market cap to end up at a point where it’s less than Exxon’s.


Oh, the Iniquity!

A friend of mine saw the following in a grocery store:


For those of you who aren’t familiar with Ezekiel 4:9 (and can’t quite read it on the box itself), it reads as follows:

Take wheat and barley, beans and lentils, millet and spelt; put them in a storage jar and use them to make bread for yourself. You are to eat it during the 390 days you lie on your side.


(Please note that my translation is the NIV translation… The translation on the box itself appears to be the King James translation.)

Let’s ignore for a minute that neither Golden Flax nor Almond is prescribed in the recipe provided by this particular bible verse. Let’s also ignore that this is not being purchased in a storage jar, and that it is not bread that they are selling…

Think about the whole line of this verse that states that you are to eat this “during the 390 days you lie on your side.” This is more than thirteen months in this state. Is this a cereal for the hopelessly lazy? If you are to remain by and large motionless for that long, you might need the foodstuffs provided above to maintain some modicum of strength. But why would someone wish to stay in a horizontal position for such a period of time?

Just go back a few verses in this chapter and you will see. Ezekiel 4:4-5 reads as follows (NIV Translation again):

Then lie on your left side and put the sin of the people of Israel upon yourself. You are to bear their sin for the number of days you lie on your side. I have assigned you the same number of days as the years of their sin. So for 390 days you will bear the sin of the people of Israel.

(Incidentally, Ezekiel 4:6 says to lie on your right side for an additional 40 days to bear the sin of Judah, so in all, god instructed the “son of man” from Ezekiel 4:1 to bear mankind’s sins for 400 days in all…)

These are instructions for the Messiah. In other words, this is one of many biblical prophecies that foretold the coming of Jesus (a biblical personage in his own right).

Now I don’t claim to be an expert on the entire life of Jesus, and none of the gospels of Matthew, Mark, Luke, or John really give us any insight into him between his birth and age 27, but none of them mention him lying on his left side for 390 days and then on his right for another 40 in order to bear the sins of the people of Israel, especially after committing a genocide (Ezekiel 4:2).

Then again, I should think that literally being forbidden from doing anything for nearly fifteen months is a huge undertaking. Far more emotionally draining than being captured, tortured, executed, and then spending three days in hell.

So, at the end of the day, do the people who buy this cereal think themselves worthy of it? Do they fashion themselves as the return of Jesus? Would they buy the Almond or Golden Flax flavor? And that price! $6.29! I can see that the makers of this cereal wish to make the consumers live amongst the poor.

And did I mention that I don’t really care for beans?