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JP Morgan Follows Goldman’s Steps In Issuing Utter & Complete Bullsh1t In The Guise Of Equity Research: I Call Them On It!
This is a very, very important article. It is important enough that it should easily go viral, for it clearly and meticulously illustrates both the ease of perpetuating inaccurate information through the mainstream media (in this case, the venerable NY Times) while simultaneously demonstrating the blatant conflicts of interest, the “profit off of the client’s back” mentality and the piss poor performance of Wall Street’s biggest and most well respected (well, at least some of them) investment banks. The ideology espoused here is in the same grain as that of “Goldman Sells Nearly Half $Billion Of Apple Stock Directly Into Their Client’s Conviction Buy Recommendation: Guess Who Really Agrees With Reggie Now!” and to be absolutely honest, should be considered a direct follow up to said illuminating piece. Every single Apple investor or Sell Side Wall Street customer needs to read this article at least twice and click on every single link in it, for it gets to the basis of the reason why I had the balls to pen “How Google is Looking to Cut Apple’s Margin and How the Sell Side of Wall Street Will Enable This Without Sheeple Investor’s Having a Clue” last year – and still stand behind each and every syllable of that piece. Yes, these are direct, pungent, and hard hitting words! Now, let’s see if this analysis has the stuff to back them up and justify their use – after the break…
It appears few are willing to accept the mantle of that Fiery Sword of Truth and slice through the self-serving, conflicted, marketing and sales mantra commonly referred to as sell side Wall Street research. Well, we are more than will to take it to task. Join us as we wield this heavy blade of unbiased analysis to cut through the pork in the establishment, and cut deep we shall… Down to the bone! Done to the truth!
The NY Times Publishes Blatantly False Excerpts From JP Morgan
In response to the absolute garbage posing as news and analysis that I just came across in the NY Times (by way of our most accurate and astute analysts over at JP Morgan), namely IPad Rivals Fail to Gain Traction, a Report Says – I call…
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I just published a piece which took the directly opposing position to the NY Times article above, namely “Look & Listen Closely As The Solitary Margin Compression Theory Slowly Bears Fruit: Apple to Drop Flagship iPad Prices?“, which is in essence and extension of the thoughts first espoused in How Google is Looking to Cut Apple’s Margin and How the Sell Side of Wall Street Will Enable This Without Sheeple Investor’s Having a Clue. Yes! The title just about says it all. There are mounds of evidence that point significant game playing in the Sell Side. If you haven’t read these two pieces, they are a must before you move on. Now, back to my call of JP Morgan cum NY Times espoused BULLSHIT! As excerpted from the aforementioned NY Times article:
JPMorgan Chase: A report issued by JPMorgan Chase warned of an oversupply of tablet computers.
Technology companies who hoped to outdo the Apple iPad by offering alternate slate-like products are not seeing the demand they hoped for from consumers, according to an analyst’s report issued by JPMorgan Chase.
The report, which was issued on Wednesday, said companies building products to compete with the iPad have slowed production by as much as 10 percent since this time last March.
Hey, is that statement accurate? Let’s reference a Google search on the topic…
You see, Asus severely underestimated the demand for a truly functional, keyboard docking Honeycomb tablet with a big bright screen priced 20% below the cheapest competition. As to how they came to that conclusion is anybody’s guess, but they allegedly produced 200k for the month of May (all of which sold out in less than a day or so), and are slated for 300k for the month of June. Look below to see if that production increase is anywhere near enough to sate demand for this Honeycomb tablet. Now, back to the ever prescient analysis of JP Morgan as widely publicized by the NY Times…
At that time, the report said, competing tablet companies created 81 million tablets; this year the number has fallen to 73 million.
The report named the list of iPad rivals that have failed to gain traction, including Asustek’s Eee Pad Transformer, Motorola’s Xoom, Research In Motion’s PlayBook, and Samsung’s Galaxy Tab. Although the Eee Pad sold out in stores when it debuted, it is now easily available and in some cases overstocked.
Now, I agree that there will be too many tablets made. The major disagreement here is who will suffer from such an event. Apple is a massively successful company that has had the ability to push high volume and high margin products simultaneously. While I don’t think volume will suffer significantly in the near term, margin is a totally different story (Steve Jobs Calls End Of the PC, We Call The End Of The Fat Margin Tablet – Including The Pretty iPad, With Proof!). With the advent of Android (which is now the dominant mobile OS on a US and global basis, and is also the fastest growing the evolving the quickest), the high volume, low margin south east Asian electronic specialists are starting to gain a strong foothold.
The comScore numbers for the U.S. market mirror recent market-research studies from Canalys and Gartner, both of which show big first-quarter gains for Android. BoomBustBlog made the liklihood of Android dominance clear early last year (complete with downloadable market share models, while the entire sell side doubted it! Reference More of the Android Onslaught: Increasing Handset Revenues and Growth
Previously, they stumbled on the OS/ecosystem end of the equation as Apple ate their lunch. With that now successfully outsourced (to Google), they are innovating as if there was no tomorrow, reference Google’s Excellent Execution On The Android Platform Goads S.E. Asian Manufacturers Into Low Margin Innovation War! Many of these tablets will be better than the iPads from an innovative hardware perspective, sporting comparable if not superior ecosystems (think Google Wallet, Google Voice, Google Voice Command, Google Translate, etc.) and at lower prices. I made practically irrefutable arguments supporting said assumptions very recently. Reference “Is The Evidence For An Apple Margin Collapse Now Incontrovertible?“and “I Absolutely Dare Anyone To Read This And Still Not Consider The Probability (Not Possibility) Of Apple Suffering From Margin Compression“. I will now take this opportunity to attempt to quell the utterance of utter bullshit by JP Morgan and once again offer incontrovertible evidence! First, let’s quote this “JP Morgan through NY Times” guy once more, so we are all clear on what he has said and where he stands:
“The report named the list of iPad rivals that have failed to gain traction, including Asustek’s Eee Pad Transformer, Motorola’s Xoom, Research In Motion’s PlayBook, and Samsung’s Galaxy Tab. Although the Eee Pad sold out in stores when it debuted, it is now easily available and in some cases overstocked.”
An eBay search for the “overstocked”, “easily available” Asus Transformer that BoomBustBlog has crowed about so often lately (and on which this post is currently being created) yields (click to enlarge):
As you can see, the Asus is in such high demand that sellers can actually dump used devices OVER MSRP and for more than they actually paid for them! That’s right! People want them so bad that they will pay more than retail for a used one!. Let’s assume you’re a sell side analyst working for JP Morgan and you don’t believe in that esoteric supply and demand, economic theory crap. Let’s just see how realistic the analyst quoted above is in his assertion that the Asus Transformer is overstocked. Looking at the most prolific private electronics retailer in NYC – who just happens to be a 5 minute walk from JP Morgan’s global headquarters in the Wall Street area (just in case any JPM analysts actually want to get up off of their asses, do their “stated” jobs for a change, and get some facts straight. Yeah, I know…. I just make friends in investment banks everywhere… Wondering if my site is still banned from bank intranets)…
Hmmm. Sold our of the more popular 16 gb model (you can add 32 gb for under $30 via micro SD cards or 128 gb for under $200 via SD card, one of the perks of devices such as this). Not only is the device sold out, but look at those glowing, nearly 5 star reviews. It really, really looks as if somebody likes these machines!
Just so nobody thinks that I and my team don’t put in real work to bang out these analytical and highly opinionated articles, I want to acknowledge that I often take more than one day to write them, and my analysts often put man weeks behind each piece. This article is no exception, so I finished it up the following day. In that short time span, guess what happened to the stock of Asus 32 gb, “overstocked”, easily available transformers that pose no threat to Apple’s iPad 2????
That’s right! All gone. All of those unwanted products that everyone loves but sell side analysts can’t seem to grasp, even that cool keyboard with the 8 hour battery, dual USB ports and full size SD slot. If anyone has a doubt, you can call the three largest private computer retailers in NYC and ask their opinion about demand for these Honeycomb tablets. They are Datavision, B&H Photo and J&R Music World. You may hear stories such as 100 units on order, -321 in stock. You can guess how “overstocked” and “easily available” that is. And with orders of 100 or so at a time, it’s not as if Asus is not producing them…
Well, how about BestBuy, a larger, publicly traded retailer?
Wow! Sold out again. And again, not only is it sold out, but the reviews are overwhelming positive. Check out the breakdown…
As a matter of fact, more people would recommend buying an Asus tablet to a friend than would an iPad 2!
Don’t believe me? Simply look at the review and comments on all of these sites where it is sold out. The reviews above were taken from the Bestbuy site, and so is the iPAd 2 version below…
Hey, Newegg.com had a few, but they were sold out of that cool, nearly full sized keyboard/touch pad/8 hour LiPo battery/full sized SD slot/dual full sized USB port/laptop style converter dock that actually allows you to get the real work done that simply can’t be done on an iPad 2. Again, I’m typing this post on an Asus Transformer.
Note: Here’s an update of the Newegg site a day later. I’m sure you can guess what happened, can’t you?
By now, it should be obvious to even the most loyal JP Morgan employee and the most captured JP Morgan brokerage/asset management client that the premise behind the aforementioned analytical report is, well…. Bullshit! For those who are not familiar with why these products are in such high demand, reference these reviews and comparisons from“I Absolutely Dare Anyone To Read This And Still Not Consider The Probability (Not Possibility) Of Apple Suffering From Margin Compression“:
The post, New Taiwanese Tablets Show What So Few Have Suspected: Apple’s iPad 2 Is An Expensive Toy! contained other 3rd party reviews of the Transformer vs the Apple Ipad 2…
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IT Pro Portal The Asus Eee Pad Transformer has been a very popular tablet – even topping Amazon’s best selling tablet list – for two main reasons. Firstly, it provides great value for money; it is both cheaper than the iPad 2 and has a bigger screen with a better display resolution. Then there’s the fact that it has a rather affordable accessory that can convert it into a fully fledged netbook with a 16 hour battery life altogether. The device, which runs on Android 3.0 Honeycomb, is powered by Nvidia’s Tegra 2 chip and comes with 1GB RAM as well as 16GB onboard storage. Apart from Wi-Fi, it has USB, HDMI and Bluetooth connectivity. |
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One should expect very similar demand from the Samsung Galaxy Tab 10.1 as it launches in NYC’s Union Square Best Buy (exclusively), then nationally the following week. If one were to peruse the more independent reviews of this product vs the iPad 2, one would get a very different impression of its prospects against the iPad than are espoused by the JP Morgan report. A product that is thinner, lighter, and sports a better screen than the iPad backed by a very large multinational will most likely see some demand in this market.
Now, back to “How Google is Looking to Cut Apple’s Margin and How the Sell Side of Wall Street Will Enable This Without Sheeple Investor’s Having a Clue“.
You see, these oustsanding user reviews, professional critic reviews and incessant demand that keeps the newer crop of Android tablets “sold out” is essentially only the beginning. There are about 5 Honeycomb tablets released thus far this year, out of a roughly 440 vendors scheduled to release. They are coming with truly innovative form factors that we have never witnessed before (competition has this habit of breeding innovation) running the fastest (and by far) evolving, fastest growing, and most widespread mobile OS in the world. Unfortunately, not one sell side analyst has been widely published stating these facts and incorporating them into their analysis. Instead, all you hear from Wall Street is that incessant cheer leading bullshit that I referenced above. Now, pray tell, what do you think will happen to Apple when these Android (and soon full blown Windows 8 OS) tablets really get going (not just this 1% lift off that we have here, but when 100% of the vendors have their wares out and competing in the market place at every decreasing, south east Asian labor-driven, prices)??? The answer is margin compression, and it is actually starting to happen already – reference Look & Listen Closely As The Solitary Margin Compression Theory Slowly Bears Fruit: Apple to Drop Flagship iPad Prices? for a more in depth view, but the three graphs below drives the inevitable fact home right now:
Revenue per device, which as you can see has been trending down sharply over the last three quarters, including the quarter that launched the iPad 2.
At the same time that aggregate sales and revenue per unit have decreased, the cost per unit has increased over the same 3 quarters…
The natural consequence of the movement of the variables above – Revenue per Unit – Cost per Unit =
The sad truth is that the sell side of Wall Street sees the same thing that I do (yes, including JP Morgan) but their analysts don’t work for you, silly! They work for their proprietary trading desk, retail/institutional sales force and investment banking team. Do you really think that the analyst that wrote the report above is trying to make you money? Or assist his firm in taking your money? Pray tell, how much did any of you pay for that “Oh so astute JP Morgan analysis” above? The old adage, “You get what you pay for” rings true here. And as for analysts who are trying to take your money to enrich your firm, check out this circle jerk as I display it in undisputable, chronological and logical order:
- “Is It Now Common Knowledge That Goldman’s Investment Advice Sucks???”
- Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best?
- “Goldman’s $430 Target, Screaming Buy On Apple At Its All Time High Is In Direct Contravention To Reggie Middleton’s Logic – Who’s Right? Well, Who Has Been More Right In The Past?“ Tuesday, December 14th, 2010
- “Reggie Middleton Takes The Challenge To Goldman Sach’s Apple Proclamation One Step Farther, Apple’s Closed System Risks Failure!” Wednesday, December 15th, 2010
- “Goldman Sells Nearly Half $Billion Of Apple Stock Directly Into Their Client’s Conviction Buy Recommendation: Guess Who Really Agrees With Reggie Now!” May 27th, 2011 – Ah Hah!!!
- Dexia Sets A $5.1bn Provision For Loss On Trying To Sell The Same Residential Real Estate Assets Upon Which JP Morgan Has Slashed Provisions 83% to $1.2bn from $7.0bn: This one is very interesting, for I make the case that JP Morgan is playing hide the sausage with some very stinky residential mortgage assets, and everybody who sells sausages, or even just sucks on them knows it, but Goldman put JP Morgan on their conviction buy list anyway.” Why?”, you ask… So Goldman could unload their JP Morgan equity inventory at the highest artificially derived price possible (derived from you brokerage accounts, may I add). Or did you think that “Conviction Buy” list was designed to make you money?
Now, anyone who has read this entire article and does not email the editors of the media outlets (both mainstream and otherwise) who distributed that trash, otherwise referred to as equity research from JP Morgan, is just as guilty as those editors who PURPOSELY ran said trash in perpetuating known falsehoods, bogus analysis, misinformation, disinformation, and straight up, plain old lies. I would like to take this time to differentiate those who may have purposely ran bullshit from those who have have had said bullshit slipped to them inadvertantly, perhaps under the belief and understanding that JP Morgan and other big Wall Street banks are somewhow experts in this field. Those editors and publications in the second camp, this is your opportunity to make good on what was most definitely an efficient delivery of bullshit. Those who are in the first camp, well…. Bullshit on! I simply caution you that the Fiery Sword of Truth is heavy, and strikes true!
So readers… Contact your NY Times, Endgadgets, Cnets, ZDnets, WSJs, Bloombergs, Huffington Posts, CNBCs, etc. of the world and tell them to run this article as a counterbalance to the falsehoods and misdirection. It is understandable if I may have used the term bullshit (it actually is a term listed in Wikipedia, click the link if you don’t believe me, you’ll find a JPM and GS ticker somewhere in the 3rd to the last paragraph) too often to describe the bullshit that I linked to above. If that’s the case, you do have my permission to remove said term bullshit in the article’s partial reproduction and link back to my site.
Bullshit (also bullcrap, bullplop, bullbutter) is a common English expletivewhich may be shortened to the euphemism bull or the initialismB.S. In British English, “bollocks” is a comparable expletive, although bullshit is commonly used in British English. As with many expletives, it can be used as aninterjection or as many other parts of speech, and can carry a wide variety ofmeanings. It can be used either as a noun or as a verb. Used as an interjection, it protests the use of misleading, disingenuous, or false language. While the word is generally used in a deprecating sense, it may imply a measure of respect for language skills, or frivolity, among various other benign usages. In philosophy, Harry Frankfurt, among others, analyzed the concept of bullshit as related to but distinct from lying.
“Bull”, meaning nonsense, dates from the 17th century,[1] while the term “bullshit” has been used as early as 1915 in American slang,[2] and came into popular usage only during World War II. The word “bull” itself may have derived from theOld French boul meaning “fraud, deceit” (Oxford English Dictionary).[2] The term “horseshit” is a near synonym. Worthy of note is the South African English equivalent “bull dust”. Few corresponding terms exist in other languages, with the significant exception of GermanBockmist, literally “billy-goat shit”.
The earliest attestation mentioned by the Concise Oxford English Dictionaryis in fact T. S. Eliot, who between 1910 and 1916 wrote an early poem to which he gave the title “The Triumph of Bullshit”, written in the form of a ballade.
And in ending, a well deserved plug that meshes with my assertion that you get what you pay for, here is my much more realistic take on Apple, et. al. offered via subscription on BoomBustBlog:
-
LinkedIn IPO valuation comments- Apple – Competition, Cost Structure and Forensic Valuation
- JPM Q1 2011 Review & Analysis
- Google Q1 2011 results
- Google Full Forensic Analysis and Final Valuation Report (63 pages) and the accompanying Google Valuation Model (pro/institutional subscribers)
- Mobile Computing Vendor Long List Note WIP
- Long candidate #1 – Hardware: The Mobile Computing Wars
- For those of you who are not aware of my track record, I invite you to find out more about me: Who is Reggie Middleton and what is BoomBustBlog?
- advertisements -
Is it just me or does it take everybody 3 times to get the math capcha right?
It sometimes doesn't like my first answer even though it is correct and my post is actually made even though it gives me an error response about 3 digits versus 2 or something like that.
The only dog I have in this race is I would prefer truth over fiction.
Truth is you can't eat an iPad. Soooooo, the price of AAPL will have to come down sooner or later.
That's my stock pick for the week. Where's my hookers and blow and JPMorgue unlimited fraud card?
I'm still waiting for Reggie to answer his follower regarding multifamily investments. Invest or not, Reggie?
Excellent article, nice comparison between iPad 2 and Asus. Personally I would go with the Android tablet, however the iPad is still very nice.
Reg you will never convince the Apple culture that there is plenty of comparable/better products for a better price than Apple has to offer, nor will you convince them regarding your financial perspective. I have been following your financial analysis, regarding Apple and to date I find it informative and factual.
I credit Apple with innovating many devices, however the competition catches up, exceeds more quickly these days, and at a better price. I will give a large share of the credit to Google, as it is the Android OS that is largely responsible for the success of Apple's competition. For many Apple is more of a sign of status and belonging to that group than anything, do not bother to argue with them. In our household the only Apple products we use are portable music players. Every device we own exceeded Apple products at the time we bought them.
hey where do i plug my usb drive into this newfangled ipad thingy?
see the top of the page:
http://www.tigerdirect.com/
boycott israel, that means motorola, goldman, and the rabbis that run b&h.
would be cool to see reg chop the apple logo in half.
hey reggie
when are you going to do more stuff on the euro debt crisis, I'm missing your no bullshit analysis. plus you are the only commentator to even mention eastern Europe
Reggie
Dont let the comments get you down. You have done a great job with the facts. Jobs work on earth is done.
And Apple will be history in a while
Footnote...Last week AAPLS market cap breached Intel and MS COMBINED!!!
Which is rather ironic since what's his name, oh ya Bill Gates openly wondered why Jobs was wasting his time with Apple.
Only time will tell.
I don't have a horse in the race.
Having said that, I never cease to be amazed at how many people choose style over substance.
The iPad may be less functional or have fewer features but that may be what many people want.
The iPad and iPhone are winning over a LOT of Windows users, and the occasional Linux devotee simply because it is what their friends/colleagues are using.
The price dropping on an iPad is actually bullish for Apple as the excessive price of their devices has been a reason to stay with PC or Linux or go Android.
People have to choose platform now for Desktop, Laptop, Smart Phone. You can't very well go iPad and not eventually go Apple for a desktop and Macbook; most people stay in the PC/Windows/Android vein or just go Apple all the way.
If the dominoes keep falling in Apples favor as far as platform and device choice they will make a lot more money.
Reggie,
You are way too emotional about Apple to be investing against them. The Ipad is a great product. Apple is a great company. Most people haven't even heard of ASUS.
It is absolutely amazing that I can post this much undisputable evidence that JP Morgan's equity research is full of holes and cannot be trusted, yet the comment section focuses on pictures of shirts (or lack therof), Apple customer service, replaceable (ultra high margin, they can afford to give you two once they break and still break a profit, which goes to show you how much value you got in the first place) iPods.
What is it about Apple that drives so many people to ignore the facts? And to the commenter above, I did not turn bearish on Apple until right about the time it hit its peak price. So far, bearish was just about the right call. Hey, its a good company, but most have unrealistic expectations, and are fanatically emotional when they should be cold and calculating.
Now, about the topic of the article... JP Morgan's research quality....
http://www.shanghaidaily.com/article/?id=473389&type=National
The stock does seem a little overvalued, especially since Steve Jobs looked like a bag of bones today, sad.
Apple was almost gone before Steve brought them back to life; not sure what will happen when he is gone.
Well I unfortunately cannot take an unbiased position in this argument as the analyst you are attacking is a close relative of mine. I am certainly not a shill for big investment banks (I have been on here for a long time). But I know my relative and I can tell you that he is definitely not a permabull. Also, he lives in San Francisco.
Is attacking the correct verb to be using? He is wrong, and I'm calling him on it. I'm not accusing him of being a perma-bull either, or not living in San Fransisco. I'm accusing him of coming to grossly inaccurate conclusions considering how easy it is to either verify or disprove the statements in the article. Hey, if I'm wrong simply show me where and how. I'll be quick to admit it. I just need for others to do the same.
Reggie great job. I for one read the whole article and enjoyed it. Great grass root analytics. A lot of weathermen never look out the window before giving their forecasts. Keep up the great work!
It seems that you're biggest point of contention with the analysis is that Asus tablets have been in short supply and that they have definitely exceeded expectations (both critically and commercially). I am making no comments on the quality of the tablets. I just think that you are using anecdotal evidence and a negative outlook on Apple to support your opinion that there exists a significant demand for the Transformer.
i think the picture of you is hilarious, nice entertainment
all you care about is margins, low margins means more sells, you never throw in growth or net income or cash flow, it is always margins and market share, never about growth in the market
I wish you would stop posting on ZH. Too much drama. Not enough intelligence.
Here's one vote that he keeps posting as long as ZH is around. Great job, Reggie.
+1 oz. AU
Reggie is one of the best.
I want to hear more on european debt issues.
+1
Put your sword away, Reggie.
Careful when cherry-picking you don't forgo the forest.
Your arguments are not forward thinking enough with INTEGRATION, the combining and consolidation of electronic tools and services that people use their gadgets for. Apple has this market basically cornered, and yes there are complimentary services on the other platforms, but it is a MYRIAD of solutions, not just one. People are being drawn into the Apple family of products becuase of simplicity, not because it can't be done cheaper with more moving parts another way. ipad vs. Asus *yawn*
Investment banks full of shit? You don't say!? We better bail them out again so they will tell the truth... /s
A few years ago my wife's ipod quit working and she took it to the local Apple store.
No questions asked they gave her a free replacement.
That's all I need to know about Apple.
Oh great, first we had the Harry Wanger spinoffs, and now we've got Texas G i nslinger.
Try doing that with a MacBook pro with a faulty motherboard. I will personally guarantee they will do everything they can to make sure you do not get a new one (since they'll blame the software).
That's all I care to know about Apple. They're no different than Dell, HP, etc.
That's becuase there are 62%+ margins on the iPods where the notebooks or in the low 30s or so. What the commenter above does not understand is that its not about how cool the company is, its about how much profit they were able to capture from you during the initial purchase and any incremental profit garnered from follow on services (ex. Apple care).
You will almost never get a no questions asked free replacement from a low margin product after warranty.
As always GREAT WORK REGGIE!! I already posted your links on several websites!!! I read a while back about iPad workers signing an agreement that it is illegal to commit suicide at the factory...
Lots of info here
http://fiatsfire.blogspot.com/
Should be useful to your endeavors!!!!
A picture of yourself with your shirt off? Really? I couldn't read the rest of the research after that.
picture of shirt off and his insistence that he is viral made my stomach turn
Um.. I'm sure you really couldn't *rolls yes*
Ok, I lingered. But what really got me is the 40% run in AAPL stock since Reggie has been bearish. Who cares if ASP's come in a little if they are in a land grab for virgin territory and the stock is at 12x?
Reggie, please, for f*ck sake so something on the auto industry. Pick an easy target .... say GM. I really want to hear about living the GM rebirth, and how it is going to save America. Pretty please?