Perry Glasser

Posts Tagged ‘social networking’

CITIZENS & TUMBLING STOCKS

In Business, Economics, Economy, EDUCATION, Finance, FINANCE FOR THE CLUELESS, Personal Finance, Politics, ROBERT REICH, SOCIAL MEDIA, Wall Street on February 5, 2018 at 7:27 pm
jimmy-stewart

investor

Dollar$ readers have asked for a comment on the recent path of stocks falling off a cliff. Though Dollar$ seldom references perturbations in the market, in this case he will make an exception because any number of people with brains of tapioca or in possession of advanced degrees will point to this event to declare it political, a referendum of sorts on Donald Trump for whom they hold unsustainable rage.

 

THE AXE OF RAGE 

Rage as a political stance is unsustainable because it consumes its object as well as those who revel in it. We grind that axe at our own peril.

That won’t bother pundits such as Robert Reich at Berserkely. Expect his gloating to surface in a day or two while his cadre of unsalaried graduate student do his work for him.

After all, Reich persuaded thousands of Facebook followers that Spring rain, the demotion of Pluto from planet to rock and back again, and your most recent dose of athlete’s foot, were all ploys by the rich to separate you from your money because there is no bottom to the depth of their greed. (Except for St. George Soros, who sends wheelbarrows of Canadian cash to political causes in the United States out of simple generosity, something that most of us would find curious if the cash came from Outer Slobbovia or Russia.) The Professor has yet to mention the President’s promise to go after Big Pharma or his championing “the right to try” to give the sick access to medications stalled in the FDA’s long system for approval. How could Reich do so? His followers might dial back their rage, and then who’d buy the Professor’s books, subscribe to his videos on Netflix, or line up to enroll in his one class per year in a lecture hall packed with the beneficiaries of privilege, those students at Berserkeley who on cue wildly applaud before marching to deny free speech to someone else?

To be sure, Professor Reich will neglect to mention that the trillions lost on world markets in the past few business days have mostly been lost by the rich. Who did you think owned the shares of companies? Your barber?

Also, make certain you know, that Dollar$ believes our President to be at base a lout, a racist, sexist, and probably a compulsive adulterer who happened to revolutionize American politics by seizing on social media as a means to create a bridge between himself and voters when his own party and the American press gave him all the chances of a balloon in a pin factory.

Benjamin-Franklin-U.S.-$100-bill

Chastity?

None of that, by the way, makes him unfit to join the ranks of John Kennedy, Franklin Roosevelt, Dwight Eisenhower, or Bill Clinton. There were many others; the folks who brag about zero tolerance for white male sin remain eager to rewrite history by expunging ordinary men from the presidential rolls. God help us if they figure out what the Founders did with their time when separated from spouses for months, and that rascal, Benjamin Franklin, was not know for his chastity.

Fortunately, The Donald did not run for Pope.

STOCKS

Dollar$ is happy to report the sky has not fallen, at least not in my neighborhood. If Jemima Puddleduck races past your front door, Dollar$ urges you to unwrap that shotgun you received as a gift from Grandpa. Go bag yourself an inexpensive cheap chicken dinner.

Responsible financial advisers will tell you to do nothing: Dollar$ agrees, unless you have a working crystal ball in which case Dollar$ would appreciate a call. All the elephants could not get through the door without the house collapsing. That’s what happened today.elephants

DECISIONS

What now? Better to ask: Where would your money be better off?

The world economy is peachy.

The American economy is also peachy, showing healthy signs of continued growth.

Do not confuse the economy with the stock markets. After a run-up of 21% in a year, market algorithms were bound to get nervous.  (Algorithms don’t properly get nervous, but the notion of market sentiment is a joke when upwards of 90 percent of all market transactions are conducted by computers.)

The American economy is in danger of suffering wage-inflation. Prices will rise because Joe Doakes, his cousin Joe Six-Pack, and their cousin, Jane Doe, are earning more.

O, the Horror! What will Reich say if people are earning more?  What fraud is being perpetrated that will need a decade to play out?

RELAX

The past week has seen a drop of 5 percent. More is coming.

Bear in mind that historically, a 7 percent gain in a year is good news. If after the carnage we saw today and can expect for a few more days your 401-k, your kids’ 509, and your savings ratchet back to a “mere” 12% annual gain, try not to swoon.

Stay  the course. There are bulls, there are bears, and there are pigs. People who try to time the market—that is, sell now with the hope and expectation of buying it all back when things have settled—are pigs , and like pigs will be slaughtered.

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DEMONIZE THE OTHER GUY

In Business, Finance, Political Economy, Politics, TAXES on December 4, 2017 at 5:50 pm
screwed1

Citizen

Dollar$ sadly notes that social media has reduced American political discourse into rabidly demonizing the other guy. I wish we could say Dollar$ is surprised.

If you dislike the proposed tax bill, it cannot be that in 500+ pages there is not a line or page you admire. If you admire the new tax bill, it cannot be the in 500+ pages there is not a page that is wrong-headed.

Here’s a challenge: call your representative and ask him or her what he or she likes (or dislikes) about the bill. Make them reverse field. Watch them cry.

Real-world logic allows for conversation and (gulp) compromise. Instead, we see Republicans who simply walked away from their responsibilities for the final year of President Obama’s tenure and refused to act on anything at all; we now have Democrats who think what citizens want is for them to do the same, to get even.

You know, like a kid in a school yard with a grudge.

Wake up, ladies and gentlemen who  represent us—none of us voted for you to do that.

Is it any wonder that Congressional approval ratings linger under 15%? Think of it, 6 of 7 Americans think their representatives are a bunch of horses’ asses.

Guess who is getting screwed?

Congress at work.

Congress at work

WHATSAPP, DOC?

In Business, Economy, Finance, M&A, Personal Finance, Wall Street on February 21, 2014 at 1:40 pm
Reads Dollar$

Reads Dollar$

Dollar$ finds the headline of this column irresistible. Bugs Bunny is a hero. True, there are better things that need to be done, but since the mission of this blog is to be instructive, Dollar$ will instruct.

In case you were in a cave yesterday, the tech business world short-circuited over the news that Facebook dropped a cool $19 billion to buy WhatsApp, a 4-year old startup with 450 million worldwide young users.

Gen Y entrepreneurs worth a mere $2 billion have their shorts in a knot. They should. Dollar$ doubts it, but perhaps they know they know  the Spanish philosopher George Santayana who wrote

Those who cannot remember the past are condemned to repeat it.”

George Santayana

George Santayana

 The Past.

All right, class, let us review.In the Great Tech Bubble of the late 1990s, every kid in Palo Alto who could spell “electron” was certain to become a billionaire. Many achieved their goal.

But only on paper.

Accepting stock options in lieu of salary, 20-somethings got wealthy as stock prices rocketed upward. When the companies tanked, since they had been unable to exercise those options, they were left holding paper. This condition is bad, but it is worse when one has leveraged the options as collateral for buying a condo, a car, a yacht, or a private island in the Caribbean. People who lend money get testy at tales of woe about why they are not getting paid.

Problem was the companies lacked was a revenue model that supported the stock valuation.

No one built businesses. Pets.com. Furniture.com. The list of failed Dotcoms is long. They were constructing entities with the intention of being bought, a business strategy roughly the equivalent of having a daughter for the sole purpose of selling her to a pimp.

Wall Street Prognosticator

Wall Street Wizard

Wall Street Wizards went into a frenzy.  What could be more profitable than creating businesses that did no business? All that needed to be done was sell the stock. The comapnies were operated by a handful of geeks who liked working 16-hour days, ate only pizza, drank Evian water, and whose idea of relaxing was to glom M&Ms while playing Foosball. The ruling investment strategy was to buy and sell quickly. Remember day-traders? Neither does anyone else. They all boarded the trolley to the Poor House when they learned that an investment strategy designed to make a killing by selling to the bigger fool fails when the bigger fool is you. 

Today.

So Facebook has bought a few million youth, fully aware that its original subscriber base is ageing while up and coming youth are fleeing Facebook as a grim place where parents monitor their movements or a place where you can volunteer to get ads with no pesky content?

Youth needs privacy. You know, maybe messaging services that auto-destruct nude selfies. Come to think of it, quite a few politicians need that, too.

There’s Twitter, of course. Where else can you sign-up to receive endless stream of stupefying non-news and marketing?

Now we’ve got the acquisition of WhatsApp, a kind of chat mode that duplicates what every smart phone already does. Dual thumb typing is an art reaching new heights.

The Future.

  • Property values in Silicon Valley will soar until they collapse—all that money looks for somewhere to go.
  • Watch for the Wizard Dance that tells us revenue is irrelevant in this brave new world of investing.
  • Watch for mutual fund directors to expose their clients to unnecessary risk because they have to look as if they are besting averages and the only way to do that is to latch on to businesses that have no business, but have stratospheric valuations.
  • Watch for people who need their money get reamed because they have paid for professional financial management, and professionals want revenue, not your financial safety.

And always watch for the ghost of Santayana. That’s the one laughing loudest.

Twitter, HuffPo, AOL, Facebook — The Fever Rises

In Business, Economics, Finance, Wall Street on February 10, 2011 at 11:44 am

A few weeks ago, this commentator raised some doubts about Goldman-Sachs’ valuation of Facebook for purposes of selling shares to non-US investors, bypassing SEC regulations and generally setting the gnomes of the financial world mounting each other in a frenzy of expected merger and acquisition commissions. Their kids would not need to get into Harvard or Yale—they’ll buy those asshole schools out. Get quotes on available tropical islands! What are Learjets going for?  Can I get my Rolex out of hock?

Some friends were quick to correct my doubts and mentioned the intangibles that I was omitting from the equation.

Uh-huh.

$10 per user?

We don’t need no stinkin’ sales! We got eyeballs! We got sticky sites! We spit on revenue! P-too-i!

By God, Wall Street hasn’t seen anything this promising since the good old days of the first Internet bubble. Break out your sock puppets! No one will ever go grocery shopping again.   Heck—why go outdoors at all?

You want to examine Facebook’s business model, you go to hell! you lousy m*****f**kers!

FB pays their goons who write code with stock options—as little cash as possible. The goons change the site to create white space for more ads. You can buy the equivalent of Facebook dollars for Facebook games. Sure. Why not invent a new currency? You need to go to more pages to accomplish what you used to do from one page. More page views, more revenue. More games, more revenue. Never mind they piss off subscribers by making them opt out every time they dream up a new scheme to sell what they thought was private information. They have 500 million subscribers in seven years! There are no limits! At this rate, Martians will need to join Facebook by 2035 because every earthling will have signed up.

Facebook sells ads and information to marketers, the breed of hucksters who are responsible for the tons of junk mail you throw into the landfill annually. What else can Facebook sell? Marketeers? Yeah! They sell stuff, too!

They sell ideas and they instill desire. They don’t actually make anything, mind you, that’s for 3rd world countries, you know, the crappy places like China whose currency is displacing the dollar all over the world, or Brazil, or any other place where the dumb m*****f**kers haven’t figured out that the big bucks go to financiers and salesmen. Shit, they’re selling the New York Stock Exchange to Germany. They’ll sell their grandmothers with a lease-buyback clause for Granny’s apple pie, if they can get a premium for Grandma’s sorry butt.

This week we see the Huffington-Post sold to AOL for a mere ten times annual earnings, $315 million dollars, part of AOL’s desperate strategy to become a media company, a strategy that failed when it bought Time-Warner, failed when it bought Patch, failed when it bought Endgadget, and failed when it THOUGHT about buying Yahoo.

Anyone notice a pattern here?

HuffPo started out as a left-y magazine of opinion that featured literate celebrities hiring ghostwriters to spread their “brand” (meaning “name”). After that, other paying deals would fall into place. More recently, HuffPo has emphasized to non-content slideshows of celebrities: and why not? Every slide is a hit! Every hit is a justification for higher ad rates.

If AOL mixed a boy scout troop with a girl scout troop in tents in the woods, they’d get chastity. The embarrassing 2000 Time Warner deal stank up the joint so badly that $99 billion was lost in two years, and by 2003 Time Warner shed AOL’s name in a vain attempt to get stockholders to forget the sucking sound of their money going down the black hole of a failed merger.

For those who need to know, in the M&A game, fair valuation generally lingers between 3 and 5 times annual earnings. In other words, you buy a company, the resulting entity expects to recoup its investment in 3 – 5 years. The key word is “fair,” and the finance team that puts together the deal has a vested interest in inflating future discounted figures as high as possible. The higher the sales price, the higher the commission, and it just must be an accident that in financial terms, like marriage in America, half of all mergers fail.  Seems the valuations are too high—somewhat like newlywed expectations.

This morning’s news has the financial world stiff-nippled about the possible value of Twitter, which rumor has at as much as $10 billion.

Now, Twitter limits messages to 140 characters. It started as a means for dull-witted teenagers to stay in constant touch with other dull-witted teenagers, broadcasting about rock-your-world moments about life at the mall. Why text just friends when a breathless world awaited news about your eyeliner, the cute guy at the food court, and your misery having to do with pimples? But unlike cell phone texts, tweets could bear links, and the day hashing was introduced, the kids at the mall were left in the dust. Some, we gather, actually talk to each other.

Trendlines? Channels? Broadcast?

Manna to the marketeers! O, mamma, I feel the heat coming on!

We have Twitter users with tens of thousands of followers who generate no original content. They retweet. They retweet a lot. It’s an endless daisy chain on Viagara of non- news. If you watch TV just to see the commercials, then Twitter is for you. Just remember, this ain’t the Super Bowl.

Rumor has it that there are only 7 original tweets and they have been retweeted 700 billion times each, circling the globe again and again in minutes, igniting smart phones with messages that link users to website where…

Marketeers sell stuff.

Stuff made in China.

That’s gotta be worth $10 billion, roughly $3 for every human being on the planet.

Sign us up!

Remember, the last elephant crowding into the exit brings down the house. You didn’t have to be a software engineer to suffer in the recession of 2001-03; you didn’t have to own a house to get hurt when the housing bubble burst.

Stock up on canned goods.

Valuing Facebook and LinkedIn: the Pump and Dump?

In Business, Economics, Economy, Finance, Personal Finance, Wall Street on January 28, 2011 at 1:24 pm

Goldman Sachs neatly side-stepped US regulatory agencies by valuing Facebook at $50 billion but limiting sales to off-shore private capital investors, a valuation of $10 per Facebook user.

SEC?  Never  heard of the bums.

Revenues? Proprietary and secret.

Intended use for investor capital? None of your damned business.

Principles cashing out? Shut your mouth.

Surely Mr. Zuckerberg, who is not yet 30, will spend his next 40 years doing the same thing day in and day out.  How could it become boring?

The Pump and Dump strategy?

1. Accrue or issue billions of shares in a company.

2. Pump the stock with PR releases, mysterious rumors, hints of future growth…anything but genuine business acumen.

3. Dump the stock at premiums on the gullible and faithful. Last seller out the door is broke.

Pump and dump is inhibited by SEC regulations, those pesky bureaucrats who insist that balance sheets be public records, require executives who sign off on those records to attest to their completeness and honesty (that’s the Sarbanes-Oxley Law that Republicans insist is a nuisance), and require certified accountants to attest that the balance sheets adhere to standardized accounting practice.

Executives who ignore these laws do hard jail time. Ask the guys who ran WorldCom or Enron. You’ll have to ask on visiting day.

So excuse us for being skeptical of Goldman-Sachs’s valuation and wondering they are engaged in an end-run around US security laws.

Let’s do some arithmetic.

LinkedIn and Revenue – the Real Deal

LinkedIn will be the first social networking site to go public in the US.  The books on an industry are finally opening. (All data from pages B1-2 of the January 28 Wall Street Journal).

LinkedIn reveals it has 90 million users who for the first 9 months of 2010 generated $161 million in revenue.

Let me save you the arithmetic—figure that’s roughly $200 million annualized (add 33%), or near $2.10 revenues per user.

LinkedIn profit

It costs money to make money. Revenue is not profit. LinkedIn declares net income for those nine months to be a measly $1.85 million, or $.02 per user in three quarters, or $.03 per user per year.

That’s right, a whole three pennies.

LinkedIn is about professional networking, jobs, references and other stuff for grownups. LinkedIn offers services Facebook does not. You cannot find a single time-sucking game on LinkedIn.. No Mafia Wars. Most LinkedIn users come to the site less than once per month, a dismal number for any advertising revenue model.

LinkedIn declares three revenue streams:

  • advertising
  • premium subscriptions, and
  • specialized human resource services that accounted for 41% of company revenues

Dollasr$ Asks: What’s Facebook Worth?

It’s hard to imagine two competitors in the same industry being wildly divergent with revenues. The stocks and fortunes of Royal Canadian Lines and Carnival Cruise Lines sail in tandem. Wells Fargo and Bank of America move, mostly, as one.

But for giggles, blind to Facebook’s revenue streams or plans, let’s worship at the Temple of Wunderkind Zukerberg and triple LinkedIn’s revenue per user. Now apply that number to Facebook.

At $.09 per user in annual profit, Facebook with 500 million users might be earning $45 million in profit.

If Golman-Sachs values Facebook at $50 billion, it’s selling stock with a Price/Earnings ratio of more than 100.

Sure, there will be future growth, and if you care to discount it out, I invite you to do it.

At current valuations, if Mr. Zuckerberg and his company live to be 100 years old, he will have earned back all of what investors have put in. If he doubles growth and revenues above these estimates—a mere 50 years.

And that’s to break even.

Comparisons

Mature businesses show P/E ratios from 8 to 15; riskier companies from 15 to 25; technology grwoth companies can go as high as 30.

 

Market Cap (billions, Jan 28 2011)

P/E (trailing)

LinkedIn ??? ???
Royal Canadian Cruise Lines $10 20
Target Corp $38 12
Facebook $50 100 (calc. user basis)
Boeing Corporation $51 15
General Motors $55 8
Microsoft $240 12

Competitive Environment

If you wanted to go into business against RCL or Target or Boeing, you’d need significant capital outlay because you’ll need more than intellectual assets. Building a crusie ship or a jet takes some doing.

But what will it cost to compete with Facebook? How soon until someone, somewhere, gets a faster, cheaper idea?

Remember when IBM was under attack as a monopoly? Remember when Microsoft was under attack as a monopoly? What did it take for Google to enter the game?

Goldman-Sachs needs a visit to the woodshed.