Dot Com 2.0 – The Sequel Unfolds

The warning signs have been everywhere since the beginning, growing ever clearer with each new valuation round, IPO launch, and earnings cycle emanating from Silicon Valley.

Like a phoenix rising from the ashes of the post Dot-Com ruins people were told not only was it “different this time,” they were also instructed to observe even the phoenix bird itself had morphed into what is now commonly referred to as a “Unicorn.” And any comparisons to the prior meltdown in the land of Dot-Com were met with howls and scowls of, “You just don’t get it!” or worse.

The real issue was, it had nothing to do with “getting it.” It’s all been about Silicon Valley itself acting and arguing as if the past were irrelevant. Now many are coming to a very stark realization that the Valley may in fact once again have repeated all the same mistakes.

Far too many believed all their own press; and acted, spent, and mal-invested in ways that may eclipse the prior folly. Yes, welcome to Dot-Com 2.0. Where unicorns and more are bursting into spontaneous combustion in ways far more spectacular than previous. For it can all be viewed and commented on via the very creation that fueled it: Social media. I garner the news of this unravel will overtake these platforms with a speed, viewership, and voracity that could make the Kardashians jealous.

Another issue that will have an ever-increasing, devastating impact than The Valley currently realizes is: the all encompassing psychological impact such a bursting of a meme can spread and infect the minds of those that bought into all the fairy-tale hype, and pinned their tails on the Unicorn riches they assumed was surely theirs.

After all, if you listened to many now residing within the Valley one could argue that almost to a person today’s newest manifestation of millennial birthright is: Coding = A King’s ransom with a castle in the hills teaming with movie and rock stars, swim suit models, garages filled with exotic cars, and pools or fountains overflowing with champagne. All made possible with shares paid in lieu of salary at the next inevitable IPO cash out in perpetuity. Sadly, many are going to find out differently.

Back in October of 2015 I penned an article titled “Crying Towels: Silicon Valley’s Next Big Investment Op” In it I made the following statement:

“And this brings on a whole host of other meme shattering, break out the “crying towels” type arguments. For if it can happen there – guess where else it’s going to begin happening? Is ________________ next? Just fill in your current favorite high-flying Non-GAAP social darling on that line – for it’s going to happen at all of them very soon in my opinion. Much sooner than many now even think or ever thought possible.

“Coders” will gladly live in some single bed shared between 8 others apartment somewhere near the Valley. Heck. they’re now reporting stories how one can live in a shipping container on the cheap in San Francisco. Sounds fantastic right? Well, it is. As long as the dreams (and expectations) of landing the dream job in a start-up or similar where riches based in stock options and more are forthcoming or, dangled like carrots in front of wide-eyed dreamers.”

The proverbial warning shot became manifest when Twitter™ recently announced a 15% cut of exactly the type of staff or positions thought unimaginable just a year ago. i.e., Coders. Suddenly the very people once considered as “indispensable” and with an “inexhaustible need” unnervingly found that they were the first to go – in the first round of layoffs. This was the first visible prick to the meme-bubble bursting in my opinion. And as we all are becoming quite aware of: It’s far from the last, for the cannons have yet to begin firing in earnest.

Once high flyers such as the aforementioned Twitter and others are crashing to Earth like the proverbial canary. Companies like Square™, Box™, GoPro™, Pandora™, and now far too many others have watched their stock prices hammered ever lower. Yes, hammered, as in representing one selling round after another with almost no respite. Some have lost 90% of their once lofty high share prices.

What’s further disheartening to those still clinging (or praying) to the “meme-dream” is the ever-increasing reputation of the old “Great companies on sale!” chortles from many a next in rotation fund manager on TV, radio, or print. For it seems every round of selling is being met with ever more selling – no buying. And the lower they go with an ever intensifying pressure, so too does the value of the debutantes in waiting: The yet to be IPO’d unicorns.

Valuation after unicorn valuation are getting marked down in one fell swoops such as that from Fidelity™ and others. However, there probably wasn’t a better representation on how little was left to the unicorn myth (and yes I believed/believe all these valuation metrics were myth and fairy-tales) than the very public meme shattering experienced in both the IPO, as well as the subsequent price action of Square.

Here it was touted the IPO price was less than the unicorn implied valuation. This was supposedly done as to show “value” for those coming in to be next in line to pin their tails on the newest unicorn of riches. The problem? It sold, and sold, and is still selling – and not in a good way.

It seems much like the other company Mr. Dorsey is CEO of (and how anyone with any business acumen argued that was a good idea is still beyond me. But I digress.) this unicorn also can’t fly. And; is in a perilous downward spiral of meeting the ground of reality.

It seems the only interest in buying these once high flyers can garner is wrapped up into any rumor (usually via a Tweet!) that they are to be sold – as in acquired by someone else who might be able to make money with them. Well, at least that would free up the ole CEO dilemma, no?

And speaking of CEO dilemma and acquiring – how’s Yahoo!™ doing? Remember when the strategy for success for Yahoo as posited by the very public adoration styled  magazine cover girl articles of its current CEO Marisa Mayer was an acquisition spree? This was all but unquestionable (and much digital ink spilled) in its brilliance and vision inspired forward thinking. Well, it seems all that “brilliance” has been eviscerated much like how the workforce still employed there is yet to be.

Let me be blunt: All you needed to know things were amiss both at Yahoo as well as “the Valley” itself was to look at the most recent decision of Ms. Mayer to throw a lavish multi-million dollar costumed theme party mere months ago. As unquestionably foolish as this was – the rationale given by many a Silicon Valley aficionado that it was nothing, after all, “it’s common in the Valley” was ever the more stupefying!

Now it seems Yahoo is “cutting its workforce by double-digit percentages.” And: open to the possibility of selling off core assets of its business. Of course – at the right price. However, I’d just offer this advice:

Don’t wait too long on that “right price.” For if the current value of Alibaba™ is any indication – “right” is becoming more inline with “any” much faster than anyone dared think just a year prior.

However, as much as all the above is concerning to anyone paying attention. (And it’s just a thumbnail sketch of the most obvious.) There are those who’ll argue that today is far different that the Dot-Com bubble of the late 90’s early 2000’s. Many will point to the amount of start-ups and other metrics as a tic-for-tat type of comparison. i.e., Unless there are 500 new IPO’s this week as opposed to let’s say 255 today (example #’s only) then today is in no way comparison to the Dot-Com bubble is the ensuing argument. And; anything further is met with deaf ears, blind eyes, or outright dismissal warranting the usual “It’s different this time, and you just don’t get it!” point of finality to the conversation much like a teenagers defiant stance of “Because, just because!”

Well, fair enough. However, if I might be so bold as to use one argument that has been used on people like myself to both shut down any further parsing of facts, or outright dismissal regurgitated by many a Silicon Valley aficionado countless times. That argument?

Marc Andreessen’s quote in his Twitter bio from Martin The Martian (one of my personal all time favorite cartoon characters I’ll add) “Where’s the kaboom? There was supposed to be an earth-shattering kaboom!” When talking about another bubble bursting.

The kaboom now has a name, place, and can be seen and heard by anyone brave enough to not avert their eyes or ears.

It’s called LinkedIn™.

© 2016 Mark St.Cyr

A Few Past Links, To Link Up My Thoughts, On LinkedIn

As the news of the day will certainly contain the debacle being witnessed in the share price of LinkedIn™ this morning, I thought I’d post a few quotes and previous links to articles where I warned of exactly what has taken place for newer readers. There are more but these cover the pertinence of the theme. To wit:

From the article “Linked Into What Exactly?” February 14, 2013

“Here’s something I know first hand from real people. Every single entrepreneur or business owner I know has either never visited the site again after signing up. Or, stopped responding to invitations of linking because; not one of these ever resulted in a worth while business opportunity. Ever!

I know some that have posted directly onto their info the equivalent of “No collaboration offers need apply.” Because that’s all they’ve ever received. Offers of collaboration that resemble offers more in line with letters from a Nigerian Prince. When they ask me what I did with my account and I say: “I deleted it.” the most common response I get is: “Yeah, I think I’ll do the same next time I remember. Only for not remembering is their info still there.”

 

From the 4 part series “Gauging The Gauges” January 9, 2014

“I have stated for years: “The only ones making money from social media, are the ones selling people the idea they need social media.”

Just look to, or remember all those stories that are consistently thrown across the financial media and others. All those buzz terms like: “user generation, followers, likes, connections,” and more? All touted as “The” metrics of relevancy for anyone using or purchasing. Now? Seems what’s needed for tangible, reliable, clear metrics is moving from the asking stage – to the demanding stage.”

 

From the article “Welcome To A New Normal Earnings Season” October 7, 2014

“With the Federal Reserve’s QE policy set to end this month all these “new economy” juggernauts are going to have to prove that giving away the store for “free” as to entice users, customers, and more; will have to prove they have the ability along with the quantifiable hard numbers accompanied by real “cold cash” they can pay those promised returns to Wall Street.

If this proves to be the case the term “trap door” will not be used in reference to some new gaming app available. It will be to describe serious consequences to people who assumed investing in these markets has been nothing more than a game to be played by “players.”

Just watch how fast the “players” in the world of algos and High Frequency Trading can change the meaning of “liquidity trap” when they decide – it’s not in their best interest to play.”

 

From The article “To Social Media’s Horror – It ‘is’ Different This Time” August 2, 2015

“Or maybe you’re one that couldn’t wait to sink your 401K teeth into LinkedIn™.  Once again, after years of pushing higher, and higher, it seems the new story is same as the “old story.” i.e., They seemingly needed to spend money as to gain potential “integration opportunities” by buying something (e.g. $1.5 BILLION for Lynda™) rather than investing directly and maximizing everything of what LinkedIn currently is involved in. i.e., A glorified resume writing and/or job seeker data base.

In other words: They can’t make money via the old model as to warrant their current valuations. So, instead of doing what they do, and doing it better, enabling higher net profits. It seemed they had better buy something that can. Even if the price paid (again a reported $1.5 Billion) is money spent not from net profits – but from Wall Street’s pocket.”

 

As I write this (in the pre-market) LinkedIn’s stock price overnight has plummeted by over 30%. That’s not a typo.

If you are one of the fortunate to have not owned any shares currently – I want you to think about it this…

Exactly how do you think this latest debacle is going to be viewed by anyone who still owns shares or, is holding them in lieu of a salary in the now myriad (Twitter™, Square™, LinkedIn™, Pandora™, etc., etc.) of value purging, net worth shattering “social darlings?”

Add to that: How do you think the people not only currently working in these “social darlings” but rather; the ones hanging their hopes and dreams of “Silicon Valley” riches that maybe living in some shipping container as they await their envisioned “payday” to arrive? How do you think this latest debacle will be viewed in connection with all the others as of late?

And what about the “investor class?” What do they now do? Remain invested? Invest even more? (Whether in these or any others.) Truly think about that. For suddenly “On sale at great prices” has morphed into “Do you dare to catch the falling knives?” and now “Will I be solvent by morning?”

But not to worry I guess. After all, Mark Zuckerberg just touted for the $19 BILLION dollars he spent of Wall Street’s money for WhatsApp™ it now has 1 Billion users. Doesn’t make a net profit or anything close, but hey, it’s all about eyeballs, right? Money and profits are secondary unless – Wall Street comes back looking for their promised riches. And they always come looking. Sooner, or later. Don’t they.

© 2016 Mark St.Cyr

A F.W.I.W. Observation

I receive a lot of questions from family, friends, and others on the current market actions of Google™ (e.g. Alphabet) as well as Facebook™ since they are now what everyone considers as two of the moniker de jure FANG stocks. (i.e., the momentum players.) Their push ever higher into the stratosphere as the market sells off closing in on 2% is being touted by many as “clear proof these names are indestructible.” Well, that maybe, and only time will tell. However, since they asked I felt I might as well show others what I replied. To wit:

Below are 2 charts the top is Facebook, the lower is Alphabet/Google. What I’m look at is; what may be witnessing in technical charting terms is a phenom known as a “blow off top.” If that is what is playing out the warning signs of such a phenom will be manifest if the price action falls back below the breakout line, and then crosses back through the space where I placed an “oval.” If it does indeed break back below that demarcated area with conviction and remains below it – all bets are off the table in my opinion.

Doesn’t mean it will happen, but for those who want to know what I’m looking at and how I’m viewing it – there you go.

2016-02-02-TOS_CHARTS

2016-02-02-TOS GoogCHARTS

© 2016 Mark St.Cyr

Did A Central Banker Just Margin Call All Other Central Banks Credibility ?

In a stunning policy move Bank of Japan Governor Haruhiko Kuroda introduced and adopted negative interest rates. The word “stunning” is fitting, for just weeks prior he stated there was no need to adopt such measures. It seems by all accounts his mind changed (or was made right?) after returning from Davos.

Whether or not this is the case one thing is certain: The Bank of Japan (BOJ) has thrown not just a monkey wrench into the financial system. He may have simultaneously made every other central bankers toolbox irrelevant, as well as incapable, to deal with the resulting damage. It’s one thing to have the right tool at the right time to tweak or fix. It’s quite another to lose grip of that tool where it falls into the running gears of the machinery. That’s when far more can (and usually does) go awry than just the original issue. (Think losing the small water pumps that keep water in a nuclear reactor as an analogy.)

No matter what anyone in the “smart crowd” would argue different. Today, both the financial world along with business in general is currently being manipulated made possible via crony capitalism as well as simultaneously being stymied by central bank policies. All occurring through the direct myriad of interventions into the capital markets globally. I believe that in no other time since the days of direct rule of Kings and Queens has such a small cabal of people had so much influence, as well as control, of global finance and business influence. Ever.

Politicians of all stripes sway or prestige are pale in comparison today as to the dictates coming from one central banking authority or another. However, with such authority comes a very heavy price. That price? It’s becoming easier to spot both the “who,” as well as the “where,” catastrophic mistakes in policies effecting societies well-being may originate from. And I don’t think many central bankers truly understand just how precarious in that position they now sit.

We were told (“we” being the business world) ad nauseam by the central bankers themselves that they knew precisely what they were doing. In 2008 as the financial markets as well as the economy came-off-the-rails the Federal Reserve stepped in and stabilized what seemed to be an out of control death spiral. Many will argue valid points on both sides whether it was good, bad, or an ugly way the tools used to stem that tide were employed. Personally I believe there was a legitimate and valid argument to step in.

However: It was the remaining “in” while supplying ever more of the very things that made the original crisis inevitable in the first place that had/has anyone with a modicum of business acumen apoplectic.

The relentless iterations of QE (quantitative easing) and an unrelenting stance to remain at the zero bound on interest rate policies for years could be seen for the ever ballooning, ticking time bomb they were. It didn’t take too much imagination and thought thru to envision just how difficult along with its disruption in both financial as well as business thing would become once the proverbial punch-bowls were taken away.

Economic theory as to explain and guide central banks through this malaise are suddenly finding themselves squarely in the line of fire of business and financial fact: They’ve created an absolute mess. And what’s worse? It may be the bankers themselves that may no longer trust their own omnipotence to deal with what’s coming. i.e., They aren’t going to wait or care any longer about coordination of moves. It’s now everyone for themselves as just witnessed by what many are now calling a “Kamikaze” bank policy move from the BOJ.

Why is this so troubling many are asking. After all, it seems that the BOJ governor’s mind changed after meeting with all the other bankers and attendees at Davos. And if one is to believe all the reports; more QE, and negative interest rates were what was being called (as well as begged) for as to help stem the tide of this current market malaise. Maybe the BOJ just decided to emulate what’s now taking place in the EU? Sounds logical right?

Well yes, maybe. However, what may be far more front-of-mind for the BOJ is the current meltdown in China. Japan may try to sweep away concerns regarding contamination of any meltdown at their nuclear plants. What they can’t turn a blind eye to is the potential for contagion in any currency meltdown in the CNY. e.g., Chinese Yuan. And it seems that potential grows stronger with each passing day.

And just like the potential for radiation effects are at first unseen to the naked eye. The possible ramification of suddenly throwing one of the most heavily traded currencies (e.g., ¥Yen) into an anytime, anywhere, out-of-the-blue change in monetary pricing stability can affect carry trades across the global markets in ways far more treacherous, as well as dangerous than anyone ever considered. Especially in today’s highly levered, correlated, high frequency trading (HFT) algorithmic based market. The resulting effects are yet to be felt. After all – this all just happened Friday.

I would garner there were many a meeting across many financial houses over the weekend than will admit. For when it comes to a carry trade – any carry trade – stability of perceived pricing models is key. A change of just one fractional amount too far in the wrong direction for assumption can render a fortress balance sheet into a falling house of cards with an immediacy most never truly comprehend. One would think 2007/08 would still be well-remembered. By the way many are talking – it seems as if it was ancient history. It’s unnervingly surreal.

Today the markets are gyrating widely reminiscent of those early stage stresses and/or warning signs just prior to the first real downdraft experienced during the initial stages of the financial crisis. Back then we had one policy move, or jawboning official after another announcing plans to do this or that, sending the market into fits and starts near daily.

Many times these daily knee-jerk rises of 1% plus moves were only to be followed with subsequent selloffs erasing (and then some) any gains made prior. Sometimes with incalculable speed and disruption. Today, with an ever infected market now under near complete and utter dominance via HFT parasitic trading programs, these swings may become even more violent as well as fear induced as supposed “liquidity” vanishes and/or appears from markets faster than the laser beams can quote stuff that “liquidity” in the first place.

The problem now is: Which central banker or policy is to be believed? And more importantly: for how long? Couple that with: Who will now be trusted as having credibility both in stating what they mean, and doing what they said? As well as: doing what they said because they know what they are doing? Quite the conundrum, yes?

The issue at hand is answering the question of: just why did the BOJ do what it just did – in the way that it did it? The ramification to those questions could not be more explicit in their meaning than almost any other in my opinion. For the global markets may be in far more perilous a position than the central bankers themselves ever imagined, let alone – contemplated.

For those who never seen the movie “Margin Call” there’s a great scene as it’s then irrefutable and understood that it’s all about to fall apart where Sam Rogers (Kevin Spacey) is expressing concerns to John Tuld (Jeremy Irons) that he believes the firm is panicking in selling everything all at once, causing a possible run on everything and melting down the system. The response from Tuld is quite fitting when he states, “It’s not panicking if you’re first.”

Today, as many of the financial media and others are trying to explain away this monetary move by the BOJ as something as simple as “Kuroda has said he likes to shake things up, or be unpredictable.” I think they may be looking in the wrong direction. For what now must be considered into that equation is something that portends to far more concern than meets the eye at first blush. To wit:

Did the BOJ’s out-of-the-blue reversal on its monetary stance which was refuted just weeks prior by Mr. Kuroda himself take place because after listening to the arguments, suggestions, as well as concerns, from the participants at Davos he concluded much like what the movie “Margin Call” depicted: It was all about to unravel? And if so: is this him deciding to be “first” and considered it his only choice?

And if so, what does his actions pose for the credibility of his brethren bankers? Do they now act from a place of “Who can they trust?” And what does that mean for the rest of us? The implications are staggering when you begin to open those doors for they have the potential of making Pandora’s box seem harmless in comparison.

However, maybe this is all hyperbole and should be disregarded as over the top rhetoric from Chicken Little types with no actual central banking policy experience. Maybe we should take comfort in the unwavering hand of credibility that never saw the great financial crisis to begin with when he argued that subprime mortgages and the crisis they foretold were “contained.” Then Fed. chairman Ben Bernanke.

What does he say today? Well, when he was speaking in Hong Kong at the Asian Financial Forum as Davos was also transpiring he stated, “I don’t think China’s economic slowdown is that severe to threaten the global economy, ” along with “The U.S. and China are not as closely tied as the market thinks.”

Maybe “Margin Call” was one of the movies available on demand in the rooms at Davos, and all Mr. Kuroda is now doing is channeling his inner “Jon Tuld” moment. And why not? “It’s not panicking if you’re first.”

However, for the rest of us, we can only wait and see what happens next.

© 2016 Mark St.Cyr

Comparing Apple To Apples

It would seem far more people I know personally anxiously awaited the earnings report for Facebook™ than I ever imagined. Soon after the report (which no matter how you slice it via Wall St. beat all expectations) I began receiving notes or calls with the underlying tone of  “How about that! Still think you’re right?” I almost felt as if I was being prepped for an upcoming deposition in court. In some ways I found it odd, and in others I found it somewhat invigorating. And here’s why.

Far too many change their minds like the wind as soon as what seems to be “new facts” emerge. These facts may indeed be game changers. And when they are one should indeed reevaluate their position and/or thinking. That of course is pragmatic logic. However: more times than not, many fold like a cheap suit at the first sign of push back to their arguments and/or reasoning. For they take these new arguments and/or facts as proof positive, de facto, unquestionable, undeniable, incorruptible, unassailable – facts. In other words; too many “facts” are given fact status primarily based and sometimes purely on “face value” reasoning. So, they are never evaluated properly.

Remember: correlation doesn’t mean causation. It’s a term that’s been around a long time and with good reason.

What exactly are “new facts?” And how do they affect and/or change an overall strategy or big picture concept? Not evaluating properly and simply changing one’s plans or ideas based solely on “face value” rather than putting or seeking other encompassing factors for reasonable arguments into the mix is where most plans, ideas, and more fail – and are abandoned far too early. This more times than not is what leads to failure. Not the other way around.

When it comes to my thoughts on Facebook for those that want to know: I saw the report, seen the metrics, listened and read countless analysts viewpoints, understand what they mean – and am still of the same viewpoint. i.e., Facebook (FB) is today’s iteration of AOL™. That’s as succinct as I can be. And nothing in that report surprised me. In fact, put into context – it’s just about what I thought it would be.

Let’s put a few facts into context of my argument so you might get a better idea of why I argue my point in the light that I am.

First: This report reflects advertising revenue for this past holiday season. It is FB’s most important reporting quarter for that’s where the largest ad buys originate. Second: Their mobile user base and interaction has shown great growth. I believe spectacular/phenomenal was the most common expressions I heard. All are fair points. However, let me ask you this and see how you yourself answer it with no influence from me other than to frame it. Ready?

Do you think FB was the beneficiary of ad sales revenue this past holiday season because it was the best for advertisers? i.e., Their ad campaigns via FB paid for themselves via conversion rates that exceed their cost by moving merchandise? Which by the way, is why one buys ads in the first place. Or…

Do you think FB was the recipient (more or less) of a “hail Mary” ad splurge by retailers this holiday season in a desperate attempt to try what they believed might be their only choice, as opposed to traditional avenues? For the reports (and first hand accounts) were suggesting this holiday season was going to be lackluster at best – pathetic at worst?

Once you decide which one represents your view the best. Here’s the back drop fact you must now hold that argument with…

This past holiday season was not just lackluster, it was by all accounts (and factual data points) pathetic. Within days of the holiday shopping season officially ending big ad buyers and retailers such as Macy’s™, Target™, Walmart™, and others announced massive layoffs, myriads of store closures, and more. The earnings report from many of the one’s that have reported thus far as of this writing have shown the carnage across the whole retail spectrum. Many an article or headline across the financial media has used the term “bloodbath” as to describe this past holiday season when talking about retailers. So, with that fact in hand…

Do you think they’ll do (i.e., repeat the same and spend even more) going forward with FB? That’s the question.

In regards to the “They get mobile” argument I heard used as if it was the be-all end-all argument. I’ll ask this: Was there really a question they wouldn’t if mobile is currently the biggest space in communication? I mean really, the argument that they made it easy as to get more people to post about what they had for dinner, or if they took a shower with a selfie to tell the world about – is far less of an accomplishment than it is for a device maker like Apple™ who created that means, and have convinced people to shell out nearly $700 at a near 40% profit margin adding $Billions of that profit to an ever-growing war-chest of nearly a quarter of a $TRILLION dollars.

However, if one listened to the media you would think Apple was finished and that a FB “like” via mobile was today’s newest currency. The comparisons or assumptions for future revenue and growth that I read or heard seemed more in common with just trying to explain in knee-jerk form the immediate price action of the moment rather, than anything resembling something in-depth. At times I was left slack-jawed from some of the analysis. (Don’t be surprised if the spike after hours was more based on short covering as opposed to anything else.)

As I’ve stated many times just to be clear: “I am an Apple fan boy” yet, that doesn’t mean I won’t criticize what I might see as a valid reasoned argument. I believe the comparison of business metrics as well as avenues between a company like Apple as opposed to a company such as FB are misguided. They are not, nor do they represent the same business construct for comparisons, and to do so is at one’s peril. (i.e., all put under the Silicon Valley umbrella)

Apple in my opinion is at a very critical juncture. I am of the opinion what Apple needs is to once again raise the pirate flag over some isolated spot within that new facility they’re building; get out of their way; and let do what it once did best – turnout the unexpected in a way that Jobs expressed as “makes you want to lick it!”

Apple can do that regardless of the economy, regardless if iPhone sales get cut in half for the next year. That’s a very big difference between a company like Apple and FB styled companies. Apple’s stock value yes may plummet. However, for a company like FB? Without an increase in ad sales revenue every forthcoming quarter, never-mind the same amount – FB turns face-down in my opinion. Period.

And as much as I state I’m an Apple fan boy (for I use their products to near exclusion) when the world was touting that Apple could do no wrong as its stock price ebbed ever higher making it the most valuable company in the world I penned an article titled “Did Apple Just Become Microsoft” This was in May of 2014 nearly 2 years ago. Such a thought was shunned as “naive” as well as “ill-informed.” Today, that’s all you are now hearing about Apple since their latest report just this week.

“Apple seems to have turned from a growth company to a value company” seems to be the new meme emanating from the financial media. They indeed may be correct in that assumption, for as I stated what they need is some sort of “black flag” innovation and gusto to be more forthcoming if they want to re-engage that edge of spectacular.

As for realizing this may be the fact. I’ll just state I was on the record (so against the grain was the call Market Watch™ quoted my thoughts along with none other than  Bob Lefsetz) nearly 2 years before it seemed to have even crossed the minds of the so-called “smart crowd.” All when Apple could do no wrong, and their stock price was at all time highs and pushing higher I stood by my argument. It now seems I was far more correct than wrong.

As FB is now following that same pattern I have looked back upon what I base my argument on, question its relevance as well as expectations, and asked myself: Do you think you’re wrong or looking in the wrong direction? To which I still answer – no. I’m still of that same mindset. Nothing I have seen shows me different. Not in an arrogant or stubborn fashion. Just based in what I believe to be the facts based on my knowledge of business. Nothing more.

For after all, when I posed the Apple/Microsoft argument most said I was clueless. I still am – as long as you don’t listen to those who called me that to begin with. For it is they who are now expressing what I expressed years ago.

Funny how that works. No?

© 2016 Mark St.Cyr

Wrong For The Right Reasons: And Why It Matters

There’s been a consistent theme of retort from many across the financial media. It consists of a two-sided response. The first sounds something like this: “How long have you been saying things were dire while the markets have continually risen?” This is a backhanded way of dismissing anything one has said previously, currently, as well as followup during the discussion. i.e., You’ve been labeled a scare monger. And a poor one at that.

The other is the outright or, blatant dismissive. It sounds something like this, “Well that’s your opinion. I should state there are many more who take the opposite view.”

Well, yes there are. However, that doesn’t mean they are either correct in their assumptions or, can argue why their view is correct. Yet, this is what’s done when someone wants to invalidate your point. It’s a snarky little way to dampen any legitimacy to one’s argument without further discussion. It’s a technique that’s used by many across the financial media as well as others. It’s subtle, however, to a trained ear – it speaks volumes about the user.

Personally I’ve had such things thrown at me and I detest them, for they’re vapid statements made by people who have either lost an argument they can not win or; think they are so smart they openly tout they don’t need deodorizers in their bathrooms. When I’ve been faced with the latter response my knee-jerk reaction has been to cite something similar to following:

“Well, that may be the case. But let’s just remember: Many a bull or pig believed based on valid assumptions that indeed; the farmer has their best interest at heart. After all who could argue otherwise based on all the free food, room, and board they receive? Unless you’re one of the few that escaped the “stock” yard and seen where the happy-trail ends. The one’s remaining in the yard can argue the other side all they want – it doesn’t mean they are right or, have a valid argument. Does it?”

Usually that’s when the conversation truly ends. There’s no further follow-up except for the ensuing stink-eye I’ll then be showered with. However, at least it ends with the snark now being called into question rather, than the other way around. (I know N. N. Taleb uses the turkey analogy which I’m of the same idea. It’s just my roots began in the beef business.)

Remember: These are techniques used or employed as to invalidate legitimate arguments with vapid reasoning. Once you understand and can discern them in real-time – you’ll never see an argument or discussion in the same light again. And these forms of discussions are now coming across both the financial airwaves, as well as print, at a fast and furious pace.

Why you might ask? Easy: everything you were told by that media that should no longer happen – is happening – at – an ever-growing fast and furious pace. So much so the “everything is awesome” crowd are now looking more like “deer in the headlights” with every passing market movement.

Let me illustrate it using the first line or technique I started with. The line of: “How long have you been saying things were dire while the markets have continually risen?” Well, let’s look at the most current example to show just how “dire” these markets truly are shall we?

As of today just how much worth (as well as wealth) has been wiped out as I iterated “at a fast and furious pace?” Suddenly, over the last 6 months; Trillions of $Dollars in market cap have been wiped out across the U.S. capital markets alone. If one uses a global index the wealth destruction is now double-digit Trillions. (e.g., $17 Trillion and rising) To put that into context:

In the last few months more than half, repeat, 50% plus, of the “wealth” affect everyone was so keen on singing its praises reminiscent of “happy times are here again” from 2011 till now globally: has been evaporated. i.e., gone, wiped out, you don’t collect $200 for passing Go. Thanks for playing.

All of this is happening against the backdrop where both the so-called “smart crowd” along with the Ivory Towered set expressed; a 25 basis point rate hike in the current climate was a non issue. In effect it was touted: It’s a good thing because the economy is in much better shape to withstand it. Or best yet, “just do it.” Suddenly all that “much better – just do it” emphasis has turned into “Please make it stop – things are going from bad to worse!”

This isn’t conjecture. Too think 50% plus of capital being evaporated within months wiping out years of profits, principal, as well as interest assumptions for carry trades, let alone solvency concerns of counter party exposures or, currency upheavals throughout the global financial world won’t result in far more volatile market swings within the U.S. going forward, let alone what has already transpired just this year alone is nonsensical at best. Idiocy at worst. We just happen to be the laggard as to feel the full brunt of what is transpiring throughout the global markets in my opinion.

Something that was scoffed at as “unimaginable” is suddenly not only the opposite – it’s arriving on our shores with voracity to what appears a totally unprepared market. All taking place against the backdrop the so-called “smart crowd” touted for years things like this – were behind us. So much so that even the “smart crowd” is beginning to openly worry or, raise concerns. So, with that in mind: do you think things are about to get better or more stable? Let’s postulate that using the following:

Remember the above analogies? Who do you think has the valid argument? An escapee from the “stock” yard? Or, the bull that’s currently sitting with his fat profits, and snarky demeanor currently holding his position tagged at #436 in the middle of the line? After all, it would seem more agree with him than does you. So: Think he has a valid point? Again, as proof to bolster his argument he’ll also throw out, “Look at you! You’re now so skinny compared to him. How many meals have you missed since getting out?”

See what I mean? Doesn’t sound so “smart” or “definitive” as to back up any “everything is awesome” based argument any longer once you understand does it? Yet, that won’t stop many across the media from positing such an argument. While as much as the above may represent those remaining in the “stock” yard. What truly should be unnerving for many a bull is that the owners of those yards (i.e., the current guest list flying home via private jets from Davos) are themselves frantically trying to explain (or plead) why “everything is awesome” is not turning into a bona fide shite storm.

Premier hedge-funds are closing at an alarming rate. Once seemingly “can’t lose” funds (see Ray Dalio’s “All Weather” for clues) and strategies are doing exactly the opposite. Some funds have needed to gate their investors entirely until further notice. And there’s a whole lot more. And when has all this taken place? Or, better yet: what has been the catalyst for all this mayhem? The one thing people like myself and others have banged our fists and keyboards to anyone that would listen. The ending of the only thing that made up this “market.” QE (quantitative easing) along with a protracted stranglehold to remain at the zero bound. (e.g., ZIRP)

Over these ensuing years of Fed. interventionist monetary policy, all the one’s that donned their investing “genius” or, monetary policy analytic “brilliance” caps were the first and loudest to the TV cameras, microphones, or keyboards to denounce people like myself and others as “conspiracy whack jobs,” “gloom crew,” “tinfoil hatted kooks,” and a whole lot more. However, today?

Unlike many a financial guru, next in rotation fund manager, Ivory Leagued or, Towered academic that touted their economic brilliance or, stock picks ad infinitum to anyone still listening. People like myself and others have consistently argued against the validity of manipulated data points (see “double seasonally adjusted” for starters) and expressed the consequences that would follow to anyone foolishly doing the opposite.

Again, unlike those aforementioned: We didn’t argue why adulterated data should be believed. We didn’t argue why people should take solace in the current employment picture of 5% as “a good jobs number.” We wouldn’t submit to the relentless brow beating or, ambush styled financial reporting (see any Bill Fleckenstein or a Peter Schiff CNBC™ interview for clues) handed out on many a financial channel and others. Quite the opposite. Regardless how high the “market” kept ascending.

What is currently transpiring in the markets today is exactly what the “everything is awesome” crowd stated wouldn’t happen – and exactly what people like myself and others argued – was inevitable. And, suddenly it is they who are finding out the rarefied air of “brilliance” the Fed. enabled them to breathe has indeed been shut off – and all that’s left to inhale is their own exhaust fumes.

I recommend this might be a good time they stock up on that much dismissed deodorizer. Because, in my opinion – they’re going to need it by the time this rout is over in the coming weeks and months. Unless it leaves them scared sh–less much like the poor investors and others that continued to believe their assertions are currently finding themselves.

© 2016 Mark St.Cyr

A Quick Follow Up On : “Crying Towels”

It was only in October of last year when I made the following statement. To wit:

“The once emblematic IPO cash-out that lured many is beginning to morph into the loss of IPO dreams that resemble wash-out with every passing earnings cycle. For a glimpse into the event horizon that is the future. All one needs to do is look no further than what myself and a few others have dubbed the “canary in a coal mine” of all that’s Silicon Valley: Twitter™.”

So let’s look at what many around the Valley were using as a pejorative term to make the case that I had absolutely no clue about what I was talking about. e.g., “pictures.”

Twitter’s stock price and market valuation as of this writing…

Twitter

Twitter™

 

And if you invested 1 red cent in Square, even at the touted “reduced offering price” at IPO…

2016-01-20-Square

Square™

Your only way to look at it is: you don’t have that much red left to go.

 

Again from that article:

“And this brings on a whole host of other meme shattering, break out the “crying towels” type arguments. For if it can happen there – guess where else it’s going to begin happening? Is ________________ next? Just fill in your current favorite high-flying Non-GAAP social darling on that line – for it’s going to happen at all of them very soon in my opinion. Much sooner than many now even think or ever thought possible.”

 

But remember, what do I know. After all…

“And he has BEEN A CEO”

© 2016 Mark St.Cyr

F.T.W.S.I.J.D.G.I.G.T.

(For those who say I just don’t get it…get this!)

On January 7th I wrote a brief summation on the markets as to the where, when, and path they may take. At this time (and all one needs to prove my assertion is to have been viewing or revisit any financial media outlet archives during that week) everyone was calling for not only a “low” in the markets, but also – for a bounce. And not just a “bounce” but rather, a considerable one as been witnessed so many times previous. i.e., another BTFD (buy the dip) moment.

As usual, it seemed I was on the other side of that argument. Not because I see myself or, want to emulate some contrarian viewed, tunnel visioned martyr. Far from it. What I’ve been arguing, as well as, trying to make the case for is to help entrepreneurs, business executives, managers, CEOs, solo practitioners, and more to realize what the true undercurrents to the economy truly were, and how to position themselves to either take advantage of possible upcoming instability or, to sit back and understand that maybe at this juncture; standing pat, reducing, or fortifying one’s business might be the most prudent thing.

Whether you’re a CEO of a multi-national conglomerate, the owner of a one person tattoo parlor, or just someone trying to navigate the business world; one thing I have found is not an option: You must understand both the broad view as well as the intricacies of how the capital markets are intertwined and both support, as well as overhang many of the daily interactions you or, your company has day-to-day. In today’s interconnect world: Not knowing or understanding – is not an option. Period.

This doesn’t mean you must have the equivalent of some Ph.D. in capital market dynamics. (actually that might be the worst but I digress) However, what you do have to have as well as hone ad infinitum is a Bulls**t meter that is second to none. In other words, when you’re watching, listening, or reading from some so-called “expert” or “smart crowd” representative. If your “spider-senses” start signalling what you’re being told doesn’t quite make sense – you need to heed those inclinations.

Remember: you’re having those inclinations for a reason. Don’t ignore them till you can ease them yourself via your own research and conclusions. You’ll be surprised just how correct you might be as opposed to the so-called “experts.” Search out other media outlets (Zero Hedge™ being a must in my opinion) and reasoning’s from a variety of sources across the spectrum of media and/or blogs. It sounds so “but of course!” Yet, you would be surprised just how few (especially those who say they are!) actually are.

I started these F.T.W.S.I.J.D.G.I.G.T. articles a few years back (and there’s been quite a few) as a jocular version of “I told you so” yet, meaningful in a way as to answer many a critic I would have denouncing my original assessments, whether they were in the media themselves or, at some event or another. I’ve far from been correct on all occasions, but on the big as well as important ones? I’ll bare my track record against anyone in the so-called “smart crowd.”

Over the last week I heard a line stated by one of the financial media’s go-too representatives when the markets seem to be going haywire. The statement absolutely infuriated me as to the cavalier way it was both made, as well as its implications. That statement? (I’m paraphrasing but not by much)

“Well, it appears the recent sell off has allowed the Chicken Little’s to have their day in the sun. I guess they have to be right once in a while, after all so too is a broken clock.”

This was when the S&P was still sporting values that began with 20’s. Since then (only a week) they now begin with 18. And this may not be end of this current rout. However, whether or not the markets do in fact bounce from these levels one needs to keep in mind we were told things like this  – were well in the past. Suddenly it seems there’s a realization to the effect – they are just beginning.

The true reason why the above statement riled me was in the condescending way it was delivered. In other words, this is what “typically happens within a bull market” and the implication of “this too shall pass” was heavily laden within the argument. In other words, one would be prudent to be at the ready and “buy great stocks at ever better prices.” Well, that tone surely seemed to fit as I said – when the market still sported a figure in the 2000’s. However, to only days later lose another 200+ points (thousands if you want to use the Dow Jones Industrial averages) and close the preceding weeks with headlines touting “Worst Ever _____________(fill in the blank)?  A JBTFD (just buy the f’n dip) moniker of investment savvy has just turned into: “Who wants to be the first to buy a falling knife?” status.

Below is where the market stood on Friday. For those who like to say I just don’t get it…draw your own conclusions. To wit:

 

2016-01-18-TOS_CHARTSJust to reiterate. The above chart represents where we are today however, the ovals and calls were placed and posited when the people regurgitating the above quote were arguing against it. And here we are. As I have stated, you can look back in their archives for yourself. Mine are right here – warts and all.

What I would like to express or, the point I would like to make in all this is in direct confrontation with the idea as well as argument of the “broken clock” or “Chicken Little”  thesis many of the “smart crowd” have spouted as of late. Here’s the real issue of the current market status and its implication to the broader economy as a whole…

No, it’s not that the contrarians, or others that have been warning about such things are “finally having their day in the sun.” Again: No.

What’s currently taking place is the true fundamental carnage and rot that has taken place within the capital markets is finally coming to light. And without the rose-colored glass effects or, enabled blinders put forth via the Fed’s intervention, pasted over with faulty reasoning and manipulated data extrapolations is becoming so blindingly obvious – it can no longer hide.

This is what is taking place today in my opinion. Not anything resembling what the “smart crowd” wants to offer up differently. Period.

© 2016 Mark St.Cyr

Too Many “Think Tanks” Are Just Kool-Aid Fueled Group Think

The morning routine for many over the last few weeks suddenly has had a peculiar fly in the ointment added to the day’s ensuing narrative. First: how is it that “everything is awesome” has suddenly turned many a 401K balance into WTF status. And second: why is it when they return home the TV no-longer seems to shout how the mornings plunge in stock prices was met with a near immediate BTFD (buy the dip) rally erasing any and all previous losses with gains? Suddenly it seems things are quite different.

Yes, indeed – they truly are.

For the last 5+ years the above has been the dispensed conditioning reminiscent of Pavlov’s canines of not only many a next-in-rotation fund manager, but also, the next in rotation so-called “smart crowd” guest from some well named “think tank” appearing within the various outlets of not only the financial programs, but rather, throughout the main stream media in total.

Over the last 5 years the various Fed. QE (quantitative easing) interventions into the capital markets has facilitated dumb luck trading into “genius” status, and no clue analysis into “spot on brilliant” prognostications. The real issue at hand is many believed their own press, and the current state of egg on their face would make many a Denny’s™ blush. As bad as that sounds – it gets worse.

The other day I was viewing a program where the guest was the president of one of the well-known, prominent, “think tank” (TT) institutes. (I’m not trying to be coy in not naming, it just doesn’t matter, for its more of a cabal than any one singular.) These TT’s are where policy members whether it would be Federal Reserve officials past or present, along with lawmakers and other central bankers from across the globe will speak among themselves (or dispense advice) and ruminate about monetary policy, its effects, and so on. And yes, far, far more.

Supposedly this is where the “thinking” gets exercised within the peer group for efficacy before, and possibly during, any implementation phase that might arise. One would think this is where a robust dialogue of differing ideas would be present. Alas, it would seem far from it. For if what I witnessed when listening to an argument as to why or, why not the current market gyrations are showing obvious warning signs that need to be heeded. The prevailing rationale and thoughts to my ear resembled more around illogical or, spurious group think, as opposed to anything resembling a tank where “great minds think alike” would gather.

On the table front and center was the topic of China and their current stock market malaise. Also, within the conversation was a two-part topic concerning The Fed. There was the question as to whether or not the current rate hike has inflamed the current melt down we’re witnessing in Chinese markets. But also, the topic of whether or not the “Audit the Fed.” initiative recently voted on was a valid issue. Whether or not you agree or disagree with the audit bill is for you to decide. However, the issue that took me completely off-guard were the arguments made against it and the examples used. From my perspective this was a brief moment of clarity when one could get a glimpse of just how delusional or decoupled from reality these TT’s have become. Ready?

(I had just taken a mouthful of coffee when these was delivered. So, if you might be doing something similar, may I warn you – put it down first before reading the next few sentences.)

In response to China and whether they have a debt problem the retort was : “China doesn’t have a debt problem – they have a stock problem.”

In response to the “audit” issue: “It’s The Fed. that has saved this economy, and just look at the $Billions it recently paid to the treasury.”

In response to the consumer: “Consumers are doing quite well.” “Gas (prices) is a boon to retail.”

In response to employment and the economy: “Jobs are doing great, people just aren’t spending.” “GDP is on the right track.”

If someone wants to argue or, consider that China doesn’t have a debt problem, maybe you would like to consider purchasing some ocean front property I have in Kentucky. I’ll give you a great deal. Trust me. Or, how about the beneficial argument about how the Fed. has made payments to the Treasury? If you can argue with a straight face and no chuckling what so ever (or else the offer is null and void) how we benefit as a nation emulating a Ponzi type system of money creation and payments – I’ll discount that beach property 10%. Heck, if you can do it; make it 15%. It’ll be worth it from my perspective. Again: trust me.

As startling as the above responses may be, what’s truly terrifying is although you or I may see the absurdity – the people “in charge” of monetary policy and more are not only of this view-point. Many are guest speakers as well as hand-picked or invited “senior fellows” that perpetuate the narrative and reasoning on why these views and responses to events are either correct or, proper while insinuating: they know best, and all you need to do listen (and/or obey.) Just don’t dare question them. That’s when things get ugly. Not for them – but for you.

Today, with the markets in turmoil resembling the antithesis of what was touted by the so-called “smart crowd,” this is going to have a far more negative effect on the populace at large than previous iterations. For 5 of the last 7 years since the financial meltdown of ’08 many believed this crowd actually understood or, at the least “had a clue” about what has been transpiring within the global economy by the manifestations created not by just the Fed’s initial intervention into the markets. Rather, that they could control the resulting Frankenstein it created in continuing that intervention.

During this period it could be seen by anyone willing to put down the Kool-Aid® long ago they could not. Yet. it seems at many of these “institutes” as well as gatherings of “great minds thinking alike” not only was it decided to avert their eyes and brains away from the growing monster, but it seems they decided to go full-Krugman supplying a free-flowing, open bar, endless supply of the punch to any and all takers.

As the many who believed, as well as listened, (or worse) took advice from this cabal. This weekend is going to have many wondering: Do they open their 401K statement this month? Or, like in 2007-08 toss it to the side and hope (if not pray) that the “experts” really do know what they’re doing. Or, is it different this time?

My feeling is: not only is it different; the one’s that understood the fragility of this house-of-cards left long ago. While the one’s that remained are in that process. And they aren’t coming back when the shouts of “stocks on sale” hit the airwaves in the coming weeks and months. Just like they didn’t this past holiday season for retailers. Sales don’t matter when the collective mindset has turned from bargain shoppers to – preserving what you’ve got. And the retail numbers are showing just that.

However, not to be alarmed. For the people who will tell you, “The consumer is fine” will also be the ones surrounded by their compadres in a massive display of “group think” and “great mind brilliance” next week in no other place than Davos Switzerland. For why should the economy or body politic be viewed as having anything less than stories of great success and enlightenment when a party of four’s single night dining bill and subsequent bar tab will probably eclipse exponentially the average Joe’s 2 week vacation tab? That is, if the average person can still afford one to compare it to.

Besides, do you really want to go on vacation today with all the safety concerns around the globe? Just look at what it’ll take to make these people who tell you “everything is awesome” have to contend with to enjoy theirs. This year it will take 5000 Swiss military to protect this enclave alone. I wonder what that’ll cost them.

Actually: who cares. After all the most important item at this event will be on-tap, free-flowing, and in endless supply.

Intellectual brainstorming resulting in pragmatic ideas as to solve the world’s economic crises and other issues you ask? No, silly…

The Kool-Aid!

© 2016 Mark St.Cyr

This Earnings Season Facebook Meets Reality – No Headset Required

There’s probably no other company that represents the “new” Silicon Valley identity and meme than Facebook™. Since its inception the investment story, along with its user metrics, has been a tale for the ages. No matter where one turned it seemed Facebook (FB) could do no wrong. Ever. The original idea along with just how fast it grew with its ubiquitous adoption and application was a match made in heaven for Wall Street. And with that it did the inevitable and went public in May of 2012.

The story since has always been the same: User metrics of growth spun in ways that would make a washing machine blush; promises of future riches – in the future; and stories to fortify why Mark (I’m using the personal only for ease) was not only a genius to spend $Billions upon $Billions of investor capital on outrageously overpriced acquisitions; but also – why he could (or would) continue at an even more aggressive pace. Well, that was then and this is now. And guess what? It’s different this time.

I’ve been quite vocal over the years in trying to bring some reality back into any business arguments when the subject matter pertained to FB. I’ve never argued that FB wasn’t a valuable or useful platform when put into its proper perspective. However, with that being said, I have been left both speechless, as well as mystified, on the arguments and rationale coming not from the casual business acquaintances I may be speaking with. No, the most jaw dropping explanations are from either the next in rotation fund manager or, self purported Silicon Valley aficionado clamoring for a camera, microphone, or keyboard to express why FB is “fairly priced” or better yet “completely reasonable.” The valuation at that period of time? A mere $300+ BILLION with argued assumptions why it should be worth even more. Read that last line again while trying to rationalize that argument juxtaposed to the following:

FB has been worth more (as in market cap) than any of the following: GE™, Johnson & Johnson™, J.P.Morgan Case™, Walmart™, General Motors™, Ford™, Home Depot™, Disney™, Visa™, Boeing™, 3M™, and for the sake of brevity I’ll stop there for there are only about another 450+ more. And that’s just the S&P.

So, using the a fore-mentioned as a template or construct for any comprehensive objective reasoning – ague why a company that manufactures “likes” is worth more than say 3 or 4 times the value of a company like General Motors that actually manufactures vehicles that customers need to like then actually pay for? Or, how about arguing why “likes” are worth more than 2 or 3 times the amount of a company that manufactures aircraft that people like as in Boeing? Or better yet – why “likes” make this company worth more than a TBTF (too big to fail) bank such as J.P. Morgan Chase? But wait, wait! I can hear through my monitors: “What about all that data mining and eyeballs for ads? Surely this is where the value lies.” Sure it is…

Back in September of 2015 as the likes of FB and a few others were reaching ever higher I made the following observation:

“Sooner or later Wall Street is going to come knocking for either its promise of profits. Or, its money back. And when that starts (which I believe has already begun) the mad-rush to cash-in what ever value a share might have that day will be assailed with stunning speed. Much like the commodity space where stalwarts of an entire sector can find themselves struggling for solvency in mere months.”

As is usually the case this was met with consternation and ridicule from not only the financial media, but from many within Silicon Valley itself. Just questioning these valuations, let alone anything more, brought out a fury of deriding anger. After all, the narrative of “user growth” et al had been the currency for minting investment dollars ex nihilo in much the same way the Federal Reserve’s QE (quantitative easing) initiative made that fairy-tale a reality providing the “hot money” in much the same fashion. But the fairy-tale dreams have ended along with QE and the waking reality of an ever-increasing nightmare on Wall St. is now unfolding.

As I’ve iterated countless times before there has been no other commodity mined than that of “data” for everything social. And FB has been the undisputed leader in this category. Yet, just like real commodities (such as iron and others) there does come a point: unless there’s a real-use/demand for it – its value can become less than worthless.

For those who think such talk is preposterous (for they’ll contend things never lose a value below zero) one should remember: When it costs more to dig or produce than it can be sold for – how much is it really worth? And just like the commodity complex itself is finding its narrative as well as terminal value falling further and further as hopes of a turnaround get cut and slashed ever more (e.g., using the latest Atlanta Fed. report cutting GDP lower, again!) So too I believe is this about to hit FB as well as social media as a whole this earnings cycle in a way that the entire complex never anticipated. For the “canary” many still avert their eyes from within this commodity mine is Twitter™.

If one wants to see how dangerous these data mined, eye-balls for ad-dollar shafts have become there’s been no better proverbial songbird in my estimation than Twitter itself. And how is this “canary” doing as of late? Flat on its back, in the bottom of its cage possibly comatose is not that far off as a description. For this week not only did its stock price fall ever further, it now has reached a status never before seen in its public life: It’s now a “teenager.”

And no, that’s not good in a way one might think at first blush inferring it’s growing up from adolescence. No, this is the opposite where your $30+ stock investment falls and now sports a “teen” moniker as in $19 and change. And if things don’t change soon the term or moniker “adolescence” may have more in-common with the stock price than many bargained for.

Currently FB has fallen some 10% from its recent highs of a little more than a month ago. ($107+ to $97 and change today) and if the charts are to be believed – there’s plenty of pain left-to-be-had in the upcoming future. However, that’s from a technical view derived from charting analysis. Many will argue “technical analysis” has more in common with chicken bones than anything fundamental. And it’s a fair point, however, what happens when you correlate the “technical” with the narrative? Suddenly things look far more onerous as well as “fundamental.”

FB’s narrative about organic growth, user engagement, yada, yada, ya will of course be front and center as well as other important metrics to compare, contemplate, and extrapolate inherent value. However, I believe that narrative this time must change as to show bona fide, easily verifiable, value metrics to all that data in ways FB has never been made to address before. As I’ve stated previously: An increase of 100, 200, or 500 billion eyeballs is worthless if none of those new eyeballs converted into adding $1 of net profit for either the advertiser or FB. Period. Because – if the ads don’t or didn’t convert; the advertiser will sooner than later go where they will. And as go the advertisers – so goes FB. $300 Billion market cap or not.

Last earnings cycle the QE hangover along with the reality of the oncoming knock-on effects of a rate increase hadn’t yet been placed front-and-center into the mind of the “everything is awesome” crowd. That has now changed. Suddenly “making money” is morphing into “saving it from possible oblivion.” The narrative of “invest for the long haul” loses its charm when today’s nouveau investment cadre made up of Angels and Venture Capital watch dollar after dollar vanish into money heaven.

If you want more evidence on just how fast things can change just look to Square™ or Match™ today for any predictive insight. If you want to see something that may show you today, what may be in the future, just look to the past and think – AOL™. For there’s no better prescient representative to the “it’s different this time” narrative that FB may face this earnings cycle in my opinion. You’d be surprised just how much these story lines rhyme. That is, if you actually want to see.Yet there’s one more that will also be front-and-center this time that hasn’t been previous.

No, it’s not just how much Mark is still going to spend of FB’s investor capital. Although it’s important, it’s currently not the most prevailing. No, what’s truly different this time, as well as much more important, is a question that has never before been needed or contemplated but surely; will be front-and-center of every analyst, as well as current share holder of FB. That question?

Just where and when is Mark selling his FB shares?

© 2016 Mark St.Cyr