Monday, 06 June 2011 07:12

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 "" 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! Down 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...

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 Report

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 aGoogle 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.



[caption id="" align="alignnone" width="606" caption="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"][/caption]



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, 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...

Click for video

[youtube W3N9MmKy87s]

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.
Read more:


[youtube 0Rm8NQAib-A]

[youtube KPOj4QBHNAY]

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:

  1. “Is It Now Common Knowledge That Goldman’s Investment Advice Sucks???”
  2. Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best?
  3. 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
  4. Reggie Middleton Takes The Challenge To Goldman Sach’s Apple Proclamation One Step Farther, Apple’s Closed System Risks Failure!” Wednesday, December 15th, 2010
  5. 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!!!
  6. 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

Bullshit (also bullcrap, bullplop, bullbutter) is a common Englishexpletive which 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 an interjection 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.

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.

And in ending, a well deserved plug that meshes with my assertion that you get what you pay for. The reason why sell side Wall Street research is free is because its not free. It's paid for by the trading, sales and i-banking revenues. Hence, it's designed to work against you - not for you. BoomBustBlog offers truly independent (I have no transactional clients against whom I act as a principal), and the research is paid for solely by subscription fees. If you are interested in an unbiased take on Apple and its competitors, margin pressures, etc., I offer monthly and annual subscription to our research, the most recent on this topic being:

An example of our tech research results on the short side is available here: BoomBustBlog’s Fundamental/Forensic Analysis of Research in Motion Has Returned 2x-3x Original Investment This Year!

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?

Last modified on Monday, 11 July 2011 12:33