Will Facebook’s IPO Feed 50,000 Sharks?

39 comments

We were hoping a bell would ring to signal a decisive end to the Mother of All Bear Rallies, now in its 22nd month, but it looks like we’ll have to settle for the next best indicator of The Top — namely, Facebook’s IPO, prospectively the hottest ticket on Wall Street since Time-Warner merged with America Online. Who would have believed, in these harrowing economic times, that investors would practically trample each other for a chance to buy shares in the Web’s version of the Brooklyn Bridge?  That, evidently, is what the Street’s glib promoters have in mind when Facebook’s IPO eventually happens: a buying stampede that will make Google’s initial public offering in 2004 seem as subdued as a PTA bake sale. However, there are so many sharks circling this deal that even if it raises the $55 billion or more that is expected, it will be just chum floating on the tide. Meanwhile, with no IPO even scheduled yet, how enthusiastic are investors? Extremely. A poker buddy of ours who attended a NYC investment banker’s sales pitch on Facebook the other day returned to Colorado with the religious fervor of someone who’d been to the Sermon on the Mount.

Because the IPO is unlikely to materialize before 2012, however, that could make it difficult to determine exactly when the hubris on Wall Street is peaking, setting stocks up for The Big One we’ve all known is coming.  If and when the IPO happens, you can bet that the public offering being hatched by Facebook’s Machiavellian founder, Mark Zuckerberg, and the Svengalis at Goldman Sachs will be the Last Big Deal of this era. Goldman stands to reap a fortune if the IPO comes off as expected – an awesome feat, considering it will have been achieved when the U.S. economy was deleveraging more steeply than at any time since the Great Depression. But it’s hardly a done deal, and the longer Zuckerberg and his brain trust at Goldman hold back so that expectations can build, the riskier it will become for them. For starters, some new kid on the block could knock Facebook flat overnight. It happened to Alta Vista, the top search engine until Google came along with a better one. And it happened to Netscape’s browser, which had a lock on the market until Microsoft leveraged its operating-system monopoly to shove Netscape off a cliff.

LinkedIn Jeopardy

But the biggest threat may materialize sooner rather than later, when LinkedIn tries to beat Facebook to the punch. Some on Wall Street are worried that LinkedIn, which networks businesspeople, will steal Facebook’s thunder if their IPO comes first.  Our take, based on personal experience with LinkedIn, is that their IPO could lay an egg. The company is just hot air, as far as we’re concerned, and they appear to be taking desperate measures to sustain the illusion of robust growth.  Let us explain. We dropped out of LinkedIn a couple of months ago because they kept sending us “requests” to link to others who were separated by three or four degrees from anyone we actually knew. A related problem was that when we clicked on the request links, they led not to the person supposedly wanting to link to us, but to a list of others, none bearing a name we recognized. Even more disconcerting is that we continue to get LinkedIn requests of this kind even though we took all of the required steps to drop out of the network. This is the kind of shenanigan that cries out for due diligence. As we well know, however, the financial promoters who will be taking LinkedIn public are about as eager for investor scrutiny as Hollywood lawyers.

Another problem with the potential to undo Facebook is that online marketers are growing too clever for their own good – so clever, in fact, that in the particular case of Google, one sometimes gets the creepy feeling that they are reading one’s mind when they induce us to buy things we do not need with uncannily well-targeted ads, coupons and incentives that pop up in one’s browser window.  Google does this about as well as can be imagined, raising the question of whether there is room for Facebook to sic its own ad-mongering Big Brother on 500 million subscribers.  Keep in mind that those half-billion subscribers have been generating a paltry $2 billion in annual advertising revenues, implying that the company will need to become much more clever and aggressive in order to justify a $55+ billion capitalization.

Deflating Retail

And let’s not overlook the fact that Facebook already has competitors such as Groupon that have figured out how to stampede buyers to starving brick-and-mortar retail outlets. Local advertising is where the real money is for Google, Yahoo!, America Online, Groupon et al., but regardless of how well Facebook is able to compete with them, they will all be fighting for consumer dollars in an economy characterized by falling real incomes, rising taxes and rising unemployment.  Shoppers with money left to spend will doubtless be thrilled when all-out war deflates prices for just about everything.  But how is that going to help the retailers?  One more point: Capturing those local advertising dollars will require a talented sales force that cannot be hired for minimum wage.  While Google has already begun to build such a sales force, Facebook is still struggling with the ground-level question of how to monetize their huge subscriber list. Who are you going to bet on?

Meanwhile, much as we’d love to see Goldman Sachs take it in the shorts if the IPO bombs, it ain’t gonna happen. We’ve seen quite enough evidence to know they’re smart enough to have no skin in the game unless the deal flies; in which case, they’ll own a substantial piece of the company, paid for with fees from the deal itself.

(If you’d like to have Rick’s Picks commentary delivered free each day to your e-mail box, click here.)

  • Rick Ackerman January 16, 2011, 8:03 pm

    Doug, you ain’t seen nothing yet. Wait till 3-D video games are able to simulate sex so that the experience engages four, or even all five, senses. At that point all productive work — or at least, the part of it now done by men — will cease for good.

    The first starlets who sign on as “models” — Cameron Diaz? Britney Spears? Megan Fox? — will become billionaires from royalties.

  • DG January 15, 2011, 9:05 pm

    I think it is bizarre that the best “high technology” we can come up with is Facebook and Groupon. In the 70’s we were revolutionizing electronics with commercialization of electronics via IC’s. This paved the way for commercialization of PC’s in the 80’s bringing mainframe computational abilities to the masses, creating a productivity boom across many industries. In the 90’s we figured out how to massively connect all of those PC’s with networking. More productivity increase. (BTW, all done with very little or no government subsidy, if anything many US companies had compete with foreign companies receiving subsidies from their governments).
    The last decade? Facebook? Are you kidding me? Oh, I forgot to mention the massive investment we have made into the world of “financial engineering”, ala banks. ( Those words should not be combined – it is an insult to engineering ) So we have squandered vasts amounts of human and monetary capital saving a banking system which is broken. Additionally, private capital has been allocated to creating social networking which provides very little net economic benefit, and likely could be argued creates net economic detriment due to the massive amount of time wasted on it. So for “Gossip on steroids” aka social networking, we are simply rerouting ad dollars from Google to Facebook. And we wonder why the general economy is dragging.

    And yet, real science projects, like future energy get relatively little investment. The projects that do get support, corn ethanol, are for example, make no economic sense because the energy they create are less than the cost of the inputs. Ain’t government subsidies grand? Anyone recall the massive $535 million loan guarantee (gift after loss) to Solyndra? Solyndra is the poster boy for why the government can’t pick and choose winners effectively. Green jobs my foot. http://fwix.com/dc/share/5650870a80/stimulus_props_up_losing_solar_firms_laws_force_government_to_buy_from_them

    Facebook, Groupon, “now” certainly looks like the cycle is in to me. It fits.

    There are over 50 new nuclear power plants being built in the world today. How many in the US? Mostly China and India. And we choose to squander our capital (that we borrow), on the failed banking sector and technologies which are not sustainable.

    sigh.

  • Rick Ackerman January 15, 2011, 2:58 am

    Interesting commentary from SmartMoney:

    “10 Things Facebook Won’t Say”

    Here’s the link:

    http://www.smartmoney.com/spending/technology/10-things-facebook-wont-say-1294414171193/?page=3

  • C Welch January 14, 2011, 6:26 pm

    As Far as Facebook is concerned my family and many friends of ours deleted our accounts last week. The privacy issue is of deep concern and the uncertainty of how much info they have already collected. We always made a point not to post “too much” information and limited the pictures we posted. If we are just now hearing Zuckerberg publicly talk about using or collecting “private information” in makes me wonder how much they have already amassed. Surely at some point more folks will wake up to this senario.

    • Rick Ackerman January 14, 2011, 6:45 pm

      Thanks for the anecdote. I didn’t make this point explicit in my commentary, but by definition, every time Zuckerberg ratchets up the aggressiveness of his profit model, he will be intruding further on subscribers’ privacy. I should also mention something else that 500 million subscribers already know: Once you are in Zuckerberg’s system, you cannot take back the information he has collected on you, since it is only possible to deactivate one’s account, not delete it. RA

  • Bradley January 14, 2011, 6:08 pm

    re: Facebook, put me in the “I just don’t get it, but I don’t have an iPhone either” group. Many of us who are not extroverts, and are “of a certain age”, think of Facebook as an enormous waste of time. Our good friend just closed her account because she “couldn’t stand the blather.”

    My wife works in the financial department of a major public company, and she comes home grumbling that co-workers sit on Facebook all day long.

    My sister visited Uganda this past summer, and returned to start a 501 (c) 3 to raise money to bring a young man here for him to attend college. We understand that the part of Kampala he is from is quite poor, has spotty electrical service, and the family does not have a computer. He arrived the other day, and we had him over to our house and he saw my laptop, and asked whether he could use it. He already has a Facebook site (he downloaded photos from our hike in the hills near here to it), and checked his Gmail account. My head was spinning…

    Our friends who moved from where we live on the west coast of the US, to live in Dublin, didn’t email us to let us know that they are following through on their idea to move to Uruguay to start a restaurant. We were a little miffed and felt left out, until we realized that no one younger than us emails anymore. They just post the information on Facebook.

    Facebook and the (younger than us) people who make it the center of their worlds is a force to be reckoned with. Will it be supplanted by something else at some point? Probably. Is it jaw-dropping to see the power of a simple idea from some college kids? Definitely.

    • Benjamin January 14, 2011, 6:43 pm

      “Is it jaw-dropping to see the power of a simple idea from some college kids? Definitely.”

      It works until it doesn’t. Now, would so many use it if they had to pay more when ad revenues didn’t add up? Probably not. If they had the money to pay more, the ad revenue wouldn’t be low 🙂

      In a lot of ways, this model is just like government debt itself. If people could afford the taxes, government wouldn’t have to borrow to the point of having to at some point raise taxes that they cannot afford to pay in the first place. That’s why I loath all this “innovation”. I could swear sometimes I died and was sent to the Hell reserved for stupid people. Then again, that it gets under my skin… Maybe it wasn’t a mistake after all.

      Anyway, Martin Snell pretty much nailed it. The only reason I ever set up a profile was to check in on all those people bugging me to get on board. Last updates? Doesn’t look they even dated, much less updated.

      Conclusion? I must be a dateless geek, possible mutant, that lives in his parents’ basement because all my friends likewise never dated. So I might be interested in buying… New friends? Well, that was going to happen anway, but the popup ad clinches it!

  • Martin Snell January 14, 2011, 2:36 pm

    Totally agree that Facebook is overblown … however I have two teenagers (and 4 computers). When they are on-line, which is most of the time when they are at home, they have Facebook open, and are engaged with multiple chats as they do other things. In reality for them the internet has replaced TV (hardly watched) and Facebook has replaced the telephone (if they have a cell phone it is basically just used for texting, much like on Facebook).

    These are major technological/societal changes that will and are having major business implications. But can Facebook make a business case – I doubt it.

    $50 billion for 500,000,000 users is $100 per user (in profits required). But 500,000,000 is probably close to the top and a pretty good slice of these users rarely if ever use Facebook (people my age who have an account but don’t use it much if at all). I just don’t see it.

  • Rich January 13, 2011, 11:15 pm

    Please pardon another comment re defacto deflation discounts apropos of Rick’s mention of Groupons in this Amazon Costco Family Dollar world.
    Last night went to Safeway with Club Card linked to Online Coupons.
    The Safeway Club card itself gave 12% savings and the online coupons another 46% savings, both based on the original price, for a total 58% savings.
    The other day bought NY Steaks priced at $48.01 for $17.12, a 48% discount, not that much different from buying a discounted asset or bond.
    While some might argue this is a corporate gimmick, it is in fact discounting due to defacto deflation.
    Only suckers pay retail for consumption or investments…

    • Robert January 14, 2011, 5:34 pm

      “Only suckers pay retail for consumption or investments…”

      Oooooh, I like that- Can I borrow it occasionally? 🙂

  • Rich January 13, 2011, 10:54 pm

    FB IPO brings to mind the MSFT IPO in 1986, the Jan 2000 AOL Time Warner Takeover or the 2004 GOOG Dutch Auction IPO at 85 that many thought overvalued vaporware and Buffett would not buy, although he played bridge and linked tax free foundations.
    FB does not delete inactive accounts and uses many of the same aggressive marketing retention tactics of AOL and LinkedIn, even emailing account email contacts using the account email name for leverage.
    That used to be considered bad business practice or outright fraud.
    Employment agencies use FB and the www for reports to prospective employers, something missed by those who post intimate personal data and pictures on them. Jared Lee Loughner’s initmate posts on forums were made public.
    Most do not realize just as the internet came from DARPA (not Algore), FB and GOOG have deep links to various alphabet acronym agencies, one reason China hacked them. GOOG parked their jet at NASA. They can even disappear links and websites at will: http://www.businessinsider.com/2008/10/the-newest-google-plane-is-a-fighter-jet-
    Why play a game that uses loaded dice?…

  • Martin C January 13, 2011, 10:48 pm

    Rick and RedWill, it probably was a bit of a cheap shot and so I apologize. We are 90% on the same page, I do sometimes look for a reaction and tackle the consensus (even it is the opposite of the main stream consensus). Perhaps I haven’t grown out of my teenage ego trips yet.

    Rick, I do like a long lunch it’s true.

    If I understood your last comment correctly, you describe not direct market manipulation but a lopsided market where with stacked odds, ie lots of dollars have got to go somewhere?

    This is why I am not convinced that a market crash is inevitable in nominal terms as the value of the dollar can go down against everything, can’t this include the Dow?

    A couple of genuine questions:
    – If market manipulation is rife, how does technical analysis still work?
    – Isn’t Mr Market too powerful for long term manipulation to work?
    – is t really different this time or are we just going to see the cycles repeat themselves, i.e. we should expect this (struggling) stock bear market to end in 4 years or so then start a cyclical bull upswing, and PM’s to peak in 2 to 5 years after a exponential blow off followed by a collapse and long grind down?
    – Is it possible that the bears can be blinded by certainty as easily a bulls?

    No hard feelings I hope

    • redwilldanaher January 14, 2011, 12:28 am

      1. The technical analysis question is impossible to answer for me. TA is subjective. I’d point you to Rick’s friend Chuck. Not to pick on him as he’s done a job over time and especially calling for a major rally with fairly good timing but he’s been anticipating a sharp correction for some time now. It hasn’t happened thus far. Is he wrong or early? Is Rick “wrong” when he revises targets higher and higher given the unfolding market action? That’s for you to decide I guess. I think a lot of classical TA has been “blown up” by this but as I’ve noted several times here, what’s aligned against some of these folks is much greater than they perceive IMO.

      2. Another tough question. I think most would say yes but it has never stopped TPTB from intervening any way, especially when they get to prepare for planned “bottom droppings”. Long after I’d come across the publicly available information regarding the Plunge Protection Team, (the president’s working group), dozens of people told me I was crazy to believe in its existence. Most of the 90’s tech madness was entirely based on many forms of manipulation and deception. It lasted for a very long time. Certain figures had their “legacies” tied to it you see. Rubin, Gorelick, Raines etc. all fared pretty well at the country’s expense. Yet it crashed by about 80% or so if memory serves before they reignited the printing press propellant and got things moving again. Finally, ask someone that lived under Soviet rule for all those years. I’d guess that the markets can manipulated far longer than most would ever guess.

      3. I can’t take a real shot at how long this will last. I’d throw most of the relational long term price structure based TA out the window at this point. Brave New World where anything goes. If the truth were ever reported, if reality were ever reflected in reports and accounting etc., then I’d say Rick’s bleak scenarios would happen much sooner than later. I tend to think the coercive action doesn’t have the shelf life of the more subtle, deceptive approaches. So I guess it follows that if the USSR was able to endure as long as it had mainly with a coercive approach, I can envision the more Huxleyesque approach of the USSA lasting as long if not longer but really, to answer this requires factoring more variables than I can conceive of.

      4. My take is that bears can actually be more blind than bulls. On some level the bulls know that they’re not only lying to the folks but also to themselves. They have to know that they’re nothing more than propagandists, as not one that I’ve ever watched or read has had the honesty to admit that they’re counting on the GREAT CON to continue because that’s simply what they need to have happen to maintain their franchises and that the CON has been working for a long time and they think it will work into the future. No, most of them won’t go anywhere near the truth so they just wink at each other and pretend that real problems are never a concern and that the next bubble is already being fomented off stage.

      No hard feelings at all.

    • Benjamin January 14, 2011, 4:29 pm

      redwilldanaher: “I can’t take a real shot at how long this will last.”

      I don’t think there is a way to even guess, as it’s not linear. Heck, it doesn’t even need to follow it’s own logic. Can we have hyper-inflation, for example, at any interest rate, even very high? I didn’t think so, until recently, where I conceived that it could well happen even at rates that scream hissing deflation.

      It’s only a matter of what TPTB choose. I could go over the many variables in the reasoning for each, but what it all comes down to is that they decide whether a country is snuffed out as the rest of the world engages in hyper/inflationary competition, or they let that country join the “fun”.

      Personally, I see too many signs that they’re out to sink Western culture. Reason? Wealth redistribution/parasitism being what they are, it was only a matter of time before enough poverty in the world caused by central banking would make unconsciable the continuance of their suffering, even for the parasitical class.

      If gangs were the topic, I could present a pretty accurate picture of how TPTB think and decide things.
      Suffice to say, back in the heydays of such paramilitary/welfare-check-repo-then-launder oraganizations such as the Gangster Disciples, the decision was made to let it run because, compared to the rest of the world, and considered alongside its/TPTB needs, things weren’t all that bad in places like the Cabrini Green housing projects in Chicago. But one child shot dead, and even the GD wouldn’t keep running with it and by then the politicians knew that there was no way they could keep “ignoring it” anyway.

      That was in 1992. How much did things in the nation and world change at that time? Well, for one thing, in a couple of short years Allan Greenspan became a household name. The USSR collapsed a year before, and Desert Storm in the same year… But as they discovered, they couldn’t keep on being America-West centric. The culture is turning to crap, pure and simple, while countries like China rise (for the time being).

      It’ll end when we decide, or it will be ended, ended outside of our control. I sure as hell hope we choose wisely!

    • Rick Ackerman January 14, 2011, 7:06 pm

      No hard feelings, Martin. You’ll always be welcome in this forum. And thanks, Red Will, for saving me the chore of rebuttal.

  • Rick Ackerman January 13, 2011, 8:52 pm

    Were you perhaps out to lunch when I set forth the theory, repeating it maybe a dozen times over the last year, that the market is rallying simply because, at a time when there are virtually no institutional sellers of shares, stocks have been receiving a steady trickle of liquidity from a financial system glutted by otherwise undeployable and practically infinite credit dollars?

  • Martin C January 13, 2011, 8:34 pm

    Rich and redwill, sorry but you are wrong on this one.

    Did you actually read my post? Where do I indicate that I buy the Ponzi schemes? I have little doubt that many markets are heavily manipulated and headed for collapse in the non distant future. I do however think there is a possible (though unlikely way out) requiring scientific and social developments which renders the current economic system redundant, otherwise, some form of collapse and painful reordering is inevitable

    I am a die hard bear who saw the credit crunch coming and made a stack of cash while my colleagues and friends thought I was a crank and poured scorn on my negative views. I have a stack of scrap silver to use as currency when the inevitable happens along with canned food and water etc. Rubbishing my posts as if I am a happy clapper is utter nonsense.

    My point was while many are deceived (and fair play to them, ignorance is bliss) that all is fine it is arrogant to think that because others take a negative view it automatically gives a level of credibility. Desperately seeking reasons why markets have gone up when they “should” have gone down can be just as self deceiving as always looking in the bright side.

    When some one “hopes” the market will go down (as Rick starts this post) they are just as likely to look for the evidence and make the facts fit as the mainstream media are to always look on the bright side

    I am not so arrogant to think I am in possession of all the facts and know what is going on (even less what will happen in the future). Can you say the same?

    For the record, in general I respect and agree with much of RA’s analysis but do get riled by some of the reactionary stuff on this site where everyting is black and white and a one way bet

    • Robert January 13, 2011, 8:55 pm

      Look at the latest retail sector outflow from equities data:

      http://www.zerohedge.com/article/2011-starts-bang-42-billion-outflows-domestic-equity-funds

      Pay careful attention to the market performance to cumulative stock outflow chart.

      The informtion is right there- the major equity indices are rising because very few traders are buying with very large amounts of capital. The amounts of capital are serving as a proxy for trade volume, and since the remaining traders are all cut from the same cloth (ie: Bruno Magli/ Armani wearing Wall Street credit whores), it stands perfectly to reason that prices are rising – the funds are being pumped directly into the big banks like a Heroin I-V, and the bankers are running straight to the exchanges to party.

      The problem is that all parties end, and all heroin highs eventually wear off.

      I don’t know how long this party can last, but I do know that it CAN’T last forever.

      As I watch the Dow and S&P trace illogically higher in the face of declining retail investment interest, the only sound conclusion I can come to is that as the number of active buyers diminishes, the average IQ of the remaining buyers must also be diminishing…

      The volume numbers say that the timing for a contrarian play on the DOW is probably at hand (volume and capital outflows are definitely at bull capitulation levels) but still the price is at these nominally inflated levels without any logical support or any reasonable justification as to why it is there…

      I simply see no profit potential from the equity markets, so I’m staying away. Let the price do what it wants.

    • redwilldanaher January 13, 2011, 9:44 pm

      Yes Martin, I did read your post, that’s why I responded as I did. I apologize if I misinterpreted. It seemed as though your comments were intentionally provocative. I must have been wrong when I read it as a cheap shot with respect to Rick, someone, actually one of the very few, who’s opinion I respect even when I disagree with it. I still take great issue with your closing remarks. Frankly, I don’t believe that you’ve done nearly enough reading or research on the matter because if you had you’d know that we need not invent anything at all. It sounds like you probably know what the GATA boys have unearthed with respect to PM manipulation. Why would you think it would stop there? Saluzzi was on CNBubblevisionC yesterday and presented these facts: HFT 70% of trading volume, 22 second holding period. Dark Pools 30%. You do the math. The 11 Standard Deviation descriptions of some of the “action”, as in, how removed from normalcy certain time periods have been in this run, should boggle your mind. As should the 1st day of the month action and the nearly clockwork overnight perma-squeeze in the ES and other futures. None of this is natural but neither is having “your” central bank compensate PMs handsomely while providing them fresh and free billions per diem with which to buy high-flying equities (“the horsemen”). Finally, far from inventing “new” excuses, I think the majority of people here at Rick’s bemoan the fact that we all live in an invisible prison and there’s little that we seem to be able to do change that fact in the short run or at least at the moment. Call me a rube or old-fashioned but I have a problem with sociopathic banksters colluding to make me and mine debt slaves in perpetuity in the name of “saving the system” while enriching themselves and stealing more liberty from my family and posterity. I also don’t see where things have been a one way bet, unless you’re referring to metals hedgers. If you are, I don’t understand your objection. In terms of black and white, to me its overwhelmingly “gray” here. I think most of the commentators concede that while they know that something unseen moves against them, they’re not certain of exactly what, who, how or even exactly why. I’ve certainly conceded that several times over. Just answer this for me, was it a coincidence that the JCB and CCB came out in succession announcing that they’re on the prowl for risky at best Euroland sovereign? Seems black and white to me…

  • roger erickson January 13, 2011, 6:15 pm

    economics reporters, just “starting” to think about money

    maybe Congress will someday?
    then our electorate? someday?

    a stone on the ocean floor is as real as gold ore in a mine

    Good thing SOMEONE didn’t know anything about economics! Brazil would NEVER have been allowed to act knowledgeably!

    http://www.thisamericanlife.org/radio-archives/episode/423/the-invention-of-money

    then reconsider the chart here
    http://stopmebeforeivoteagain.org/2010/07/intro_to_economism.html

    Beyond the illusion of money, we always have the illusion of democracy, or organization.

    Vs the Return on Coordination – the only thing that any complex system has, in the end.

    • Robert January 13, 2011, 8:36 pm

      Money is fiction… blah blah blah.

      Everybody knows it. People only work for the satisfaction that comes from accomplishment.

      However, back in the REAL WORLD, Aristotle still to this day provides the best definition of money:

      (1) A numeraire (demoninator of price)
      (2) a means of exchange,
      (3) a store of value
      (4) a source of liquidity.

      And, he went one further by defining the fundamental properties of sound money:

      1) it should be easy to transport and identify
      2) it should be durable
      3) it should easily divisible and fungible
      4) it should be hard to counterfeit
      5) it should easy to store

      No one in academic economic circles has successfully discredited Aristotle’s thesis after 3500 years, and yet everyone STILL chooses to side with paper and fiat as superior…?

      Nah, the last century will be regarded by history as a statistical anomoly. We are headlong into the process of reverting to the mean.

    • Steve January 14, 2011, 3:11 am

      Thank you Robert !!!!

    • roger January 14, 2011, 7:11 pm

      Like most all of Aristotle’s other definitions, he was partly right in local contexts but wrong in bigger contexts. His listed properties were all relative.

      Money as “a store of value” was always context-dependents, changing as contexts changes.

      As the rate of context-change exponentially changed, the proportional utility of currency as a store of value declined, to near nothing today. Modern currency is, perhaps 99% liquidity & numeraire, and only 1% as a reliable store of value.

      The bigger problem, as always, is people still believing over much in Aristotle, despite changing contexts.

      ps: Ari left out the primary purpose of sovereign currency. It should be used to optimize sovereign output capabilities. End of Story.

      Thanks, Robert, for moving the discussion along, & uncovering the need to move modern populations beyond the limits of Aristotle’s limited reasoning.

  • Robert January 13, 2011, 5:37 pm

    “some new kid on the block could knock Facebook flat overnight. It happened to Alta Vista, the top search engine until Google came along with a better one. And it happened to Netscape’s browser, which had a lock on the market until Microsoft leveraged its operating-system monopoly to shove Netscape off a cliff.”

    And let’s not forget the largest displacement analogy:

    Anyone remember Myspace? Myspace was on a tear until Facebook arrived and sent Myspace into the bit bucket of global fickleness.

    Is Facebook economically feasible? Well, let’s see. No one would deny that there is huge interest in social networking, particularly among younger Internet users- It seems everyone wants to know what everyone else is doing all the time. I personally don’t understand why, but that’s just me.

    But where does this interest convert to profits? How does Facebook inspire people to spend? Hmmm- seems they do it the same way everyone else does- by advertising, and by attempting to convince the “herd” that THE place to be is wherever everyone else on Facebook says.

    I agree with Rick’s call that Groupon, and other discounters that are focusing on local markets, and going straight to people’s mobile devices is a more compelling play.

    The contrarian says that if you like service, personal attention and relaxation, then the place to be is the place that everyone on Facebook is NOT.

    Fads run fast, burn out faster, and die young. Facebook’s long term (5 year +) survival depends on only one thing: People not getting bored with it.

    I don’t see a leverage play on the long side of people’s propensity not to get bored over time…

    Most importantly- If I’m wrong about Facebook, I simply won’t care. If Facebook creates a Million new Millionaires, then I’ll say “Well, I guess I missed that boat”, but if that day comes to pass, I would still be far more upset with myself for missing the buy on Ford at .99 in November 2008.

    • Benjamin January 14, 2011, 1:50 am

      I’m sure there is some uses for the whole networking thing, but like cellphones, I just don’t see that many are using it for anything particuarly exicting and potential. Well, I supose that many gallons of milk have not been forgotten at the store because of cellphones, and maybe someone now knows what such and such did lately because of networking (but couldn’t we know if we didn’t mess around on MyFace?). But that can’t be worth billions, in a sane world.

      Personally, what I think is that the government and some corporations are interested in social networking, for obvious reasons, and pay top dollar to anyone who promises to deliver it. They’re rich dummies and the world is full of hustlers who want/need money, that can also sound feasible enough to get it.

  • Benjamin January 13, 2011, 4:43 pm

    Sort of O/T, but didn’t ol’ Zuck come out the other day to assure people that Spaceface wasn’t going to be closing down?

    Anyway, all this ad money, or lack thereof, reminds me of how five years ago, they said in five years they would have microchips that could be planted in peoples’ heads that would act as a cellphone and, the promoters drooled, beam non-stop advertising into your brain while you slept. Who needs dreams when you can shop, eh? All of it was supposed to be info from your brain and your digital social networking and web browsing habits (which is another way of saying that it couldn’t read your brain unless you wanted it to, or that it could only monitor you if you got on a computer!).

    But here they are, five years later, still talking about pop-ups which no one pays any mind to, and dredging through keywords and contact lists. Same garbage, only now worth however many billions more than they were expecting. Innovative jerks…

    • Rick Ackerman January 13, 2011, 6:57 pm

      Children of the Fifties may recall how some people were upset that an exhortation to “Drink Coca Cola” may have been flashed at us for three nanoseconds while we were watching some movie at the theater. These days, you’d probably have no trouble rounding up a thousand people who would allow “Drink Coca Cola” to be stenciled on their foreheads for a $100 monthly royalty. Still more horrifying is that this would probably increase Coke sales.

    • Benjamin January 14, 2011, 1:36 am

      Well, I won’t argue one way or another if subliminal ever worked or not. What I am 99.999% sure of is that all this talk about mind-reading chips in the head is pure, unadulaterated bull because the brain is “impure”, with billions of neurons firing so many thoughts and subthoughts at any given moment…. If a chip can read through all that and pick out consumer habits and other threats to the security of the state with any accuracy, then all this today is as real as Martin C said it was. However, because of the interest of some parties and the undying devotion of utopian suckers, things like that continue to get money. Popups with ESP are just the beginning, you see, but in five years…

    • Benjamin January 14, 2011, 2:14 am

      Rick and forum,

      Forgive me for this, but I was suddenly reminded of something very, very awesome I recently read, which I think anyone with the time to read through just might walk away with full knowledge as to whether sublime ads ever worked or not…

      http://jonnys53.blogspot.com/2007/06/what-you-may-or-may-not-have-seen.html

      The gist: What Stanley Kubrick accompished was to show that, no, just because the psychiatrists say we only think we see patterns doesn’t mean they’re right, and that they can in fact be out-smarted with but “a little” genius. God, I just wish we could have movie producers and directors like him again! Anyway…

      Do sublime ads work? Well, much has been written about “The Shining” over the years, but every single one of those analysis only spun off some fantastic and seemingly thorough insights. All of it quite good, to be sure, but none ever hit the nail quite like the analysis posted.

      Again, any attempt to read or invade the human mind is going to clash with the reality of the brain. And I think this is proven through a movie and all that has been (and will continue to be) written about it. It was _thoroughly_ saturated with patterns and symbols and numbers, but no one ever noticed any of it… at a casual glance.

      Just thought it was worth sharing. Enjoy, if you have the time!

  • Martin C January 13, 2011, 3:25 pm

    Why were you hoping “a bell would ring to signal a decisive end to the Mother of All Bear Rallies”

    Is it perhaps that you are as devotedly obsessed with the bear side of the argument as Wall Street and the Fed are to the up side? While I largely agree with negative sentiment towards the Global Financial System there is nothing funnier than seeing some of the devotees of this site creating ever more fantastic theories of why markets have gone in the wrong direct, clear manipulation etc. No doubt some markets are more heavily manipulated than others but to claim every time your on the wrong side of a trade it is down to shadowy forces is very amusing.

    &&&&&&

    You get the award for Stupidest Post of the Month, Martin. I’d sent it to “Trash” before I saw Red Will’s response, but I’ve let it stand in deference to him. He covers all the arguments beautifully.

    You remind me of a guy named Frank Pecarich, “retired soil scientist,” who for three years got on my case almost daily about how bulletproof his beloved California real estate market was. I’m sure he’d have argued the same if he’d lived in Las Vegas, or Phoenix, or Tampa.

    RA

    • redwilldanaher January 13, 2011, 5:03 pm

      Martin, I find your comments amusing. As I’ve stated many times before in this forum, if you want to argue that TPTB aka the Great Coordinated Ponzi Schemers and their legions of minions are going to be successful at hyper-manipulating economies, markets, messages and media and thus opinions, that’s all well and good. It can’t be ruled out and it wouldn’t surprise me if new highs were even achieved. On the other hand, if you have any clue at all it can be seen that this has nearly entirely been and will continue to be artificial. Far from fighting the tape, many have played this lockdown of nearly everything by going and remaining long the PMs. Others have traded the rallies in equities. I’ve seen Rick, a die-hard logic and reason based bear, do a fine job in forecasting despite his long term bear thesis. I love it when people like you, people that appear to be happy to be deceived, actually get arrogant over the fact that others refuse to adopt your simplistic/surface level interpretations. Your “team” has produced giant goose eggs over the past quarter century as anyone that’s called these massive frauds for what they’ve been and remain has been right without a miss. I guess it will take a complete collapse to snap you out of their spell. As we type central banks are imagining more imaginary currency into existence and using it to snooker the world and apparently that’s bringing cheers from you. The primary dealers are let in on all the info we knew they were well in advance and that’s confirmed. They POMO nearly every day and thus there is a constant bid courtesy of the recipient minions under the markets at all times. See Denninger on the amazing return of fraudulent account by the banks. Anyone that can rub 2 brain cells together knows that the government fudges the numbers egregiously. Corporations do the same, barely paying any tax at all, and corporate accounting may even be a sadder joke than the ratings agencies. The power structure that caused the crises not to be wasted has an even stronger grip as a result of the crises opportunity. I could literally write for hours and back it all up with statistics and reports but I’m sure it wouldn’t matter. People that take cheap shots normally don’t spend enough time reading or thinking as they prefer to spout off first and foremost.

    • Buster January 13, 2011, 5:48 pm

      For your amusement, a look at history….

      The Money Masters” -in 22 parts.

      http://www.youtube.com/watch?v=lXb-LrVkuwM&feature=related

    • Benjamin January 14, 2011, 1:21 am

      Thanks, redwill.

    • Steve January 14, 2011, 3:05 am

      And from me Thanks Redwill – WELL DONE.

  • John Jay January 13, 2011, 3:14 pm

    Goldman can afford to be reckless and bold.
    Don’t forget they are backed by a rich uncle.

  • Buster January 13, 2011, 2:58 pm

    Though the discussion is generally focussed on Facebook, the real story is a little deeper. So, in the interest of focussing the spotlight on some of the crooks who are responsible for so many of our problems worldwide, here is the link as a reminder of why Goldman Sachs employees are now carrying guns to work….

    http://www.rollingstone.com/politics/news/the-great-american-bubble-machine-20100405?page=1

    • Rich January 13, 2011, 10:26 pm

      Originally published July 2009…

    • John Jay January 14, 2011, 6:33 am

      Buster,
      Nice to read that GS article again.
      All those grifter schemes, for all of those years.
      All the billions they made.
      All the politicians they bought off to get their way.
      Instead of RICO indictments.
      Now they are running the show.
      The Federal government is now a wholly owned subsidiary of GS.
      Only in America! Awesome!
      Do you know if they have any openings over there?

  • donniemac January 13, 2011, 10:18 am

    If I was younger, I would be very wary 🙂 of Facebook. The intrusion into one’s private affairs is the scariest part of the social network, and I agree with RA, the potential for a new kid on the block is huge.
    That said, if Facebook can continue to be the majority player, and it seems to be, than it may have the success of Google and Yahoo.
    FYI, I am at the age where the only advertisers interested are those selling Depends and cheap manufactured homes in Punta Gorda. But for anyone under the age of 60, what is happening with the advent of personal data collection could be scary. I foresee a time when cautious people will have 2 or 3 browsers that they use for different tasks, much like I have 3 different email accounts, a very public one, a less public one, and a very private one.
    If the prevailing attitude towards the economy here on this board is wrong, the Facebook IPO could be another crack at Google/Yahoo type gains. Personally, I think we are headed for another down patch unless corporate profits benefit from Asian and Latin American activity, corporate performance totally separated from what goes on in North America.


FREE Impulse Leg Toolkit

Use this simple tool to spot major trend changes the instant they begin.

No, I'm not Interested