On Google's Stock

First of all, I’m a dumbass and never looked into the fact that I can use Scottrade ELITE through Scottrade, a Windows trading platform, instead of the Java charts I’ve been using this whole time. The only requirement for ELITE is that you have more than $25k in your account, which is also the amount you need to be a pattern daytrader and not get penalized for it (thanks to the SEC’s dumb anti-daytrading efforts). Anyway, ELITE has far better and more reactive software, data for charts that goes much further back in time, and more. Yay!

Tech stocks finished the week weak. There’s more selling to come — at least a re-test. But here’s the long-term picture on GOOG:


That small chart shows the trendline going back to GOOG’s IPO, but I wanted a closer-up chart to show how the line was defended last week.

A lot of charts look like GOOG’s right now. They are flirting with a long-term trend line. In 2001, these trend lines did not hold. Stocks collapsed as earnings shrank and P/E ratios contracted.

Just last week, Citigroup just went from a P/E of 7 to a P/E of 35 — this after its value has dropped more than 50% in half a year. Pretty huge considering it’s one of the biggest banks in the world. Their earnings must have really stunk for their Price/Earnings to quintuple AFTER losing half the stock value.

I’m looking for a re-test and another big rally next week… And it better come or else the market perceives something to be very bad.

But here’s the thing on GOOG. There’s an opportunity there for something HUGE. Right now, Google is bidding in a public government auction on the 700MHz spectrum freed up from analog TV broadcasting. (the government has phased out all analog — all TV must be digital now)

This is a paradigm shift opportunity. If Google wins the auction, then it can break the stranglehold the telcos have on spectrum. What you’re talking about is massive cash inflows and opportunities for Google. Its stock may boom. The social implications are also staggering as a company that is receptive to sharing information and having friendly payment schemes will be able to compete with telco. Google could get its own cell service.

The way to make real money in this world if you’re just a regular schmoe is to invest in paradigm shifts, anticipating the next big thing. The possibility exists here.

I’m a little skeptical that Google’s going to be able to pull this off. Their public statements have indicated limits on how far they’ll go — and I can’t really imagine that telcos will just sit idly by and not collaborate or at least throw a lot of money at this problem.

I remember reading Ben Mezrich’s “Ugly Americans : The True Story of the Ivy League Cowboys Who Raided the Asian Markets for Millions” and in it, he writes about this trader who’s working in Japan and ends up investing his firm in this guaranteed paradigm shift he’s found — a change in regulation or something that will reallocate money from one company to another — but when he begins to ask around about the deal, no one seems to have heard anything.

Eventually he deduces that the deal is all hype and that it’s not going to happen. He has his firm reverse its bet and then the news comes out — there was indeed no deal, the stocks sank, and his firm made a lot of money immediately.

So that’s something to keep in mind. But GOOG has some massive potential that you don’t very often get…at least not in such a public stock. Changes in government property/regulation can reap large rewards. That’s one thing I’ve learned. (and hope to take advantage of one day)

One large problem: the auction ends when bids stop coming in. So the auction could end soon, or not until a very long time from now.