Month: March 2014

The Facebook Affect

Nothing conjures up visions of grandeur today faster than anything related to social media. No not using it, that’s for the uninformed.  The real place one wants to focus their eyeballs is in the mad rush to develop something that sounds as if it can make money, then, don’t try selling it to users first. No, first things first. Sell it to the most highly coveted customers known in tech today: the investors.

Get this group on board first and customers be damned for we’re talking cha-ching here. Actual customers or users are secondary to today’s silicon valley mindset. You just need the “story” of users or customers to sell the idea first, not the other way around.

This way of thinking was once laughed upon, but now? It’s the new psyche (or reborn) mindset of tech and just as it was in the 1990’s, this mindset comes to fruition at exactly the wrong time: Right before the bubble bursts.

Social media for all intents and purposes came along at precisely the right time. No not as something spectacular and groundbreaking as connecting people around the globe and more. No, it came at precisely the time Wall Street needed a place (and a story for it) to allocate all that speculative money afforded them via the Federal Reserves QE programs. This was where the real “social networking” story took place. For there is no other place on earth where, the speculation of a customer – trumps an actual one, like on Wall Street.

If you think this is off base just imagine this hypothetical scenario playing out in any closed room meeting.
First pitch: We’ve created this widget that allows customers to do A, B, or C with their devices as never before. Currently we are still developing but we have 25K current users that pay a subscription fee of X, and are looking to expand and offer plans at levels of Y and Z. We are cash flow positive and believe $350 million would take this to the next level. The response? Next!!!

Pitch 2: We’ve created this platform that currently is underdevelopment, has under 10K active users however all the users think it’s currently “the bomb.” It’s a little “buggy” (as in barely works without crashing) yet we feel it’s the alternative to every other similar platform not currently making any money either. If just 1 current user gets 2 of their friends to even try us, we’re talking global with billions, and billions, if nor even more billions of eyeballs to sell ads to. Dude, all we want is $3 BILLION and you can own us: forget about investing for only a piece. It’s a no-brainier! Response? Sold!!!

This is the affect of the tech world’s psyche today. However, this is now being accelerated and perpetuated by none other than the original darling of Wall Street itself, Facebook™ as in, don’t worry, create it and we’ll buy it. For we understand the hearts and brains of hackers unlike anyone else. So don’t worry, just keep window shopping for that Ferrari™. After all, this is silicon valley, and we do things our way, regardless if it makes business sense or not.

The real issue that is troubling from my view is that Zuck and crew are not doing all these so-called “visionary” moves or acquisitions out of strength. I firmly believe they are out of panic, Why?

Well, if history is any guide, to paraphrase the late Andrew Carnegie: “The older I get the less I listen to what people say and the more I pay attention to what they do.” And to my eye Facebook is doing anything but what it should be doing first: Making money that justifies its market cap based on the narrative touted for its existence in the first place: A place that can sell ads that people and companies want to buy consistently because they prove their value to those very customers via the social media platform. Period.

Suddenly throughout the social media space there seems to be outright panic in the once heralded narrative where ad sales would solve all ills along with curing cancer. Guess what? Not only has it not solved or cured anything, the patients seem to be relapsing. Suddenly the prescription of where ad revenues were the only choice for a healthy bottom line, has given way to “alternative medicine.” e.g., Virtual reality and more.

Suddenly we find the Wall Street darlings of today talking, buying, suggesting, hypothesizing anything and everything under the sun other than the business model one thought was their raison d’être: Eyeballs for advertisers to buy ads for. As I said earlier “suddenly” why does one think this is? Well as they say, let’s go to the charts shall we….

 

Charts courtesy of SlopeOfHope.com

Chart courtesy of SlopeOfHope.com

These two bellwethers of the social media space have been on a near meteoric rise. Then seemingly out of nowhere the “book” has been dropped on top of the songbird. However, one thing you haven’t heard to fix this dilemma is anything related to the selling of more ads. Now it’s music and virtual reality.

Yep, that’s the new plan. But wait didn’t we hear that type of talk once before? When was changing the original business model for a newer, better, brighter, more bubblicious model prevalent before fulfilling the promises of the first? Oh yes, that’s right, during the 90’s tech bubble. Imagine that.

As you can see in the above chart Twitter™ it would seem morphed into the proverbial “canary in the coal mine.” In an unrelenting surge to market heights nearly doubling from its IPO debut, it is now flirting with the unthinkable: losing money. (or value)

And where or when did it peak? Right before the Fed decided to pull the plug. Since then not only is no one listening to the tweeting of the once beloved king of songbirds, the bird itself is suggesting maybe you want to hear music via their platform. Sounds novel if one wants to disregard, Pandora™, Spotify™, et al and their commercially viable successes. (or lack there of) I thought they were going to pay the bills via ads in tweets, now they need to become radios?

Facebook’s issue are much deeper and I believe far more ominous. Ponder this scenario from a viewpoint of where you know little to nothing of the player yet had to make a pure business decision on whether to keep, pull, or put more money into a company…

You were sold the narrative that investing in said company would be beneficial to your investment for the company was “the” leader in a market space. It had 1oo’s of millions of active users and was growing that base to be over a billion. The core strategy to monetize all those eyeballs were to sell advertisers the opportunity to get in front of said eyes. Then a new meme begins to take hold where no matter where one turns both people as well as companies are publicly stating they’re being gamed. So-called “likes” (one of the main metrics pushed for validation) are being fraudulently generated across the globe where you can shop online and get deals from not one, but a myriad of dealers falling over-themselves to sell you thousands for mere pennies.

Follow that with the near unrelenting pace Zuck and crew have spent Billions upon Billions of dollars in a frenzy to do what? No, not generate ad sales that help warrant existing business. No, they purchased more companies and ideas that do exactly what they are doing: Hoping these eyeballs will turn into real ad dollars that will eventually pay the expenses and investors.

However as of yet, that’s still the hope, not the reality. But don’t worry, they’ve just bought a company that manufactures virtual reality headsets you can don as to help you out with your perception of what is virtual and what is – reality.

Tack on to that they’ve only spent around $22 BILLION on these “ideas” that hey, someday will turn a profit, right? But again don’t worry because they say they are going to be soooo disruptive in future.

What would you think? I know what both myself as well as a great many others would say: “Get my money out of there – now!” And that seems to be exactly what looks to be transpiring.

FB shares in less than a month have tumbled over $10 a share. That roughly equates to a loss in market cap of around $20 Billion dollars. Tack that onto their recent buying sprees and your far from talking chump change. And I believe it’s just the start.

As it stands currently FB has bled out nearly 25% of its market cap since January between its recent spending spree and Wall Streets recent “demanding of its money back” spree. (market cap of around $170 Billion in January minus approx $20 Billion in acquisitions and another $20 Billion in fallen stock value.)

Without the free money generated via QE looking for a home (any home) where the narrative of speculation trumps true EBIDTA (not non-gap) the only narrative now being spoken will resemble, “where’s my money?”

This is shaping up to be a real psyche change that will have a stunning effect for both silicon valley and the tech world at large. For once it’s shown that the purchasing of billion dollar babies that needn’t talk results only potential results is over – the jig will be up. If it isn’t already.

Once the Federal Reserve demonstrated they were actually serious and cut QE off at the knees in January it changed everything. And I mean – everything.

And that my friends will have a far more disruptive affect neither the tech world nor silicon valley ever dreamed of. But rather – they just may now be having nightmares over.

© 2014 Mark St.Cyr

 

A Thought For Today’s Entrepreneurs: Fear

Fear is a part of business as well as life. Beware of anyone that tells you they are “fearless” in all their business dealings. It’s hogwash.

Fear is real, and fear is a great built-in, hard-wired warning system that automatically will bring attention to something you may at first never considered a threat to both your business as well as bank account. It’s the understanding and discipline of dealing with fear that separates the brave from the fool-hearty.

Brave can win challenging victories others see as impossible or improbable. Fool-hearty usually rides into battle fearlessly: then get their heads handed to them. Understanding which of these two you are whether before, during, or after the battle is a necessary requisite for any entrepreneur. It’s a discipline that is always being honed. The training and retrospect should never end.

The problem today is far too many give fear additional leverage or empowerment by adding in every possible conceivable option that could go wrong, then multiplying that with theories or outcomes so improbable casinos wish they had such odds in their favor.

Taking calculated risks knowing they could go awry is part of being an entrepreneur. And yes, a calculated risk can also include knowing – you could lose everything. Yet the fear of not choosing is far worse than the fear of losing to any entrepreneur worth their salt. It’s part of the game. Period.

When you give fear too much leverage as to paralyze you, what you’ve actually done is turned that fear into more of a decision-making phobia. e.g, The fear of falling off a cliff so overpowers your reasoning and judgment you don’t even approach the ledge at a wading pool for fear of falling in.

Fear is emotion,  fear is real, yet, fear is controllable. Rather than viewing it as some ledge: you should rationally view it as merely the possible stumbling block that it should be.

© 2014 Mark St.Cyr

 

Profiting At The Bottom Line™

This month’s focus: When Paying Less Isn’t Worth The Price

Many times no matter how hard we try price is the only thing a potential customer will focus on before negotiations can move along any further in earnest. No matter how hard you try, you can’t talk value until you overcome a particular price point of contention where the only thing that matters first is: Are you cheaper on X product or service? Yes or no?

When this happens repeatedly we tend to overcompensate by leading with our chin. When we do, we unwittingly forget that price isn’t all that matters, and we get sloppy in our own due diligence about why a potential customer would buy from us, or switch from a current supplier to us.

Case Study: I had been working on expanding business with a customer where I was supplying some of their main items yet, was a mere pittance of their overall business available. The items I was supplying were highly contested for and I was the winning supplier repeatedly. After many discussions (and probably some pleading) I finally was given a chance to bid for the remaining items.

Using my previous history with the establishment I believed I knew what I had to do and what would gain me access to the rest: Price. So, after discussions with my buyers and management I put a sharp pencil to the items and submitted them for a face to face review. The result? I was cheaper, and by a considerable amount on many items. (between 5 and 10% respectively) Did I get the business I now thought was surely mine?

When the prices were tallied it was made clear that I had in fact undercut my competitors on a great many of the items. However, what came back as response stuck with me to this day. Although I could save them money, it wasn’t enough to switch. I was informed that if I could not save them at least 10% overall per delivery – the paperwork alone and change of staff habits were not enough to warrant a change in vendors.

When I instinctively replied, “Well why don’t you just take the items I’m priced best on and not change everything.” The immediate response came back, “We’d then be cherry-picking vendors and that would leave us vulnerable to disruptions, for we would only be a price customer instead of a valued customer. And we can’t afford disruptions just as much as we can’t overpay for product.”

I suddenly realized why my own orders from this company were so consistent. I already kept a sharp pencil and delivered great service. My competitors I had to imagine had done the same as in looking to cut me out – but had met the same.

I had become sloppy in my approach thinking it was all about price when it wasn’t. Price although important played second fiddle to other considerations. Had I taken more time as to qualify why this customer would change vendors I might have had a better strategy going in, or had patiently waited for the right opportunity, rather than trying to make one where one wasn’t to be made.

Saving both my time – as well as theirs.

© 2014 Mark St.Cyr

Profiting At The Bottom Line™ is a monthly memo, which is pithy, powerful, and to the point. It focuses on innovative techniques and or ideas that you can put to work immediately in your daily or business life.

The Bull On Bossy

Maybe you haven’t noticed but there seems to now be a new war on words, that word today is “bossy.” Now before I start, let me make this declarative statement that’s now a near prerequisite when one states an opinion on what the “opinion police” will declare as off-limits territory.

I understand words have impact, I understand whole heartily words can both hurt as well as lift up. However, I am also adult enough to understand mixed messaging, good intentions gone awry, and out right hypocrisy when I see it. And this latest campaign seems to reek of not only the aforementioned, but quite possibly be sending exactly the wrong message rather than the right one.

Personally I have worked for two women CEO’s. And they were not CEO’s of some craft fair doily supplier to the powder puff convention. These women were in charge of the #1 and #2 largest independent meat companies in New England with sales of nearly half a Billion dollars between them respectfully.

For those not familiar with the wholesale meat business let me state this for I spent nearly my entire career in it. This was one of the last bastions of a real “old boys” club. A club where most had their first cocktails promptly at 5 – and I’m not talking PM. The work was hard, cold, and back-breaking. Not really the place where “girls” would look for opportunities or advancement.

As I sit here typing I am recalling my interactions and first hand knowledge of them. To think that one of them would be offended at being called bossy makes me laugh.

There was no way one could sit across from them and not realize they were women. However, what you also never forgot and didn’t need to be reminded of was: they were the boss. Period. They commanded respect in tone and demeanor not because they were easily offended women, but because they were in charge. I don’t know about you – but I don’t see a guy/girl issue here. Sorry.

Just look at the latest spokespeople coming across the airwaves declaring that “bossy” is something so terrible it can ruin your self-esteem or more. First Condeleeza Rice.

Here is a woman who was the not only the representative, but the conduit to argue for the United States positions that needed to be upheld in face to face meetings with dictators, despots, and others that look upon women with disdain let alone anything else. Did she worry about whether or not they thought of her as “bossy?” Would it not have been a far better thing for her to address this whole meme in a manner such as: I have been in front of the worst refuse the world has to offer, and the names they called me both behind my back and to my face never concerned me. Nor should you let names callers concern you either.

What about Sheryl Sandberg? Here she is running Facebook™ one of the most high-profile companies currently on the planet. When she went in for her interview does one think during the process she might have said: Well, I really want this job but what I won’t tolerate is when I tell people what to do, if they think I’m being bossy. If that happens I’m going to turn in my resignation.  Hardly. Nor would I think she even cares.

Again, would it not be better if this were addressed by someone in her position with the tones of: I run one of the premier, exciting, world-class corporations on the planet. What I never allowed was someone telling me I could never achieve being the boss of such an enterprise. I focused on who I am and what I’m capable of. Not what others thought or called me – as you should too. For I’m proof you can be here also. Just disregard the name callers, and build your dreams on your good name.

Then there’s Beyonce’. Look, I respect her as a performer and business talent. However, when a married with child woman is doing near stripper based videos with songs laced with the other B word, along with her husband renowned for music laced with derogatory words and passages concerning women, I find it a little too hypocritical.

Personally in her case , I think she’s sending out far too many mixed messages in a, “do as I say – not as I do” to even be included in this campaign. Really – bossy bothers her more than b***h? I mean…Really?

This also comes from the same wheelhouse that I have trouble with where people who made it to some of the pinnacles of success stand there and denounce how unfair, impossible, and all the other phrases to many to mention why you can’t do what they have done.

If you think I’m off base on this whole rant let me add in another term I find fits into this discussion that’s just as ridiculous: Glass Ceilings.

Look, there was a time where glass ceilings were very, very, real. However today? Most of them have been shattered. What we do have more of today are glass walls. i.e., Where more women are moving within different organizations at all levels in greater numbers holding ever more positions within the corporate structure. But the ceiling? Sorry, that’s been broken long ago.

To have someone such as any woman CEO of a world dominating corporation with market caps of $10’s or $100’s of Billions give a speech or write on the topic of glass ceilings does a disservice to the people looking to follow their path. It sends all the wrong messages. It reeks of more: “I did it but you may not because of all these hidden forces.” rather than, “I did it, and so can you as I’m proof those forces can be overcome.”

This whole meme of where self-esteem, feelings, and more has really taken a turn down the wrong path. Rather than being the perfect opportunity where people could profess how others can turn obstacles into psychological strength training for one’s protection of psyche or ego. They march out on campaigns that just might be reinforcing the exact opposite of what many of us grew up reciting and internalizing.

“Sticks and stones may break my bones but names will never hurt me.”

As a matter of fact: Maybe they should be reminding more people of that age-old saying, rather than what they’re currently professing.

But maybe I’m being too bossy to suggest that.

© 2014 Mark St.Cyr

When Reading The Manual Isn’t Enough

Sometimes when I speak to a group I may start the conversation or workshop off with the following story.

Years back I thought I knew a lot about motorcycles. I knew the brands, the stats, the panache one had over another and so forth. Then I decided I wanted to be seen riding the top dog of the day. So I decided to buy at the time the undisputed fastest production motorcycle available. So intimidating was this bike at the time, just for a comparison in speed: the fastest production cars even today (Porsche™, Ferrari™, et al) boast speeds of Zero to 60 in just over 3 seconds. Thirty years ago this bike straight from the crate did the same in just over two! At the time it was “the” undisputed king of speed. Period.

When I received the bike I rode it according to the manual for it was truly brand new, and there was a break in period to go through. As I read the manual and its instructions I followed them to the letter. I didn’t do this, I was sure to do that, etc. However, after a couple of weeks the bike just didn’t feel right. It just felt like I was riding a log. Yes it was fast, yes it had “get up and go” but I was left let’s say: not as impressed as I was when reading the brochure. I felt for lack of a better term: under-impressed.

Finally I decided to call the dealership and speak to the head mechanic. I told him what I was experiencing and he asked, “Well, how are you riding it?” I said, “I’m going exactly by what the manual says.” He immediately responded, “Oh, no, don’t do that. You’ll kill it!” Then he went on to explain to me that I’ve been babying it far too much. It wanted to run and that’s what it’s made for. He instructed me not to “beat it” but rather to put it through its paces. Get it up towards its top power ranges and so forth, then call him after a week if there’s no change and they’ll bring it in for a check over. So – I did.

After putting down the phone I immediately went out for a ride. I hit the nearest highway and was proceeding up the on ramp. I looked over my shoulder and the coast was clear and decided, “Here we go” and cracked the throttle – hard.

The bike momentarily seemed to wheeze like it was going to stall, then out of no where it took off out from under me as if I were attached to the solid rocket booster of the space shuttle. So fast, with so much torque before I could look at my gauges I was doing near 70mph. I was still in 1st gear!

My fingers were holding on by the mere tips, my legs were nearly off the pegs, and for what little grasp I had it was all that was holding me on from the bike coming out entirely from underneath me leaving me left there rolling on the pavement. I was never so shocked and scared in my life. (and have yet to be to this day)

When I finally grabbed control I immediately slowed, pulled over, and stopped right there on the side of the highway. I got off the bike and started walking as I took off my helmet trying to gain my composure. (I also needed to check my shorts) I was shaking, I nearly lost control and dumped. However, this was what the brute power of this bike was made to do.

I had never been exposed to that type of performance so I had no idea of what to expect. So the fair, “OK” performance I was getting previously was still better than anything I had experienced before, and it was still putting other bikes to shame I was riding with. Even as I was “babying” it. So I never questioned what I was doing – I was questioning the bike.

After that day I knew exactly what I had, and what to do with it. I never had a day of riding that went by as unimpressive. Each ride was exhilarating, and more. Yet, had I followed the manual, word for word, never questioning, I would never have enjoyed it as much as I did. Not only that, I probably would have persuaded others from buying one. For when I was asked, “How is that?” I might have only replied, “It’s OK.” Where now I would say , “Are you kidding me? Like nothing else on the planet!”

Many of today’s motivation or business “How to books” have a lot in common with my old bike’s manual. They’re written by people who read a book, that read a book, on how a book should be written. And now, they want you to read their book.

Like the engineers and lawyers that put the manuals together – they’ve never truly or actually rode the creation and put it through the paces that it’s designed to be put through.

Business and entrepreneurship has a lot in common with performance machines. They’re there to be ridden – driven – put through their paces – to flirt with disaster, and more. If you find yourself feeling of late as if this whole idea of entrepreneurship or motivation really isn’t giving you the kick you thought. (or need) Maybe what you’re doing is reading too many “manuals.”

Maybe what you need to do: is put the book down, get out there, and really “crack the throttle” and move. Experience what it truly means to be in charge of your own destiny. Take that chance, commit to that new project, make that goal of doubling, tripling, or even more your sales or earning projections.

Don’t just “think” about what it might feel like. It’s right there, within you. All the power you need is right there between your ears just as if it were right there in your hands or beneath your foot.

You are the motor. You are the machine. You are the control. Just put down that 295th edition of “How to be you in 598 easy steps” and get out there, trust in yourself, crack your throttles – and hold on.

You’ll be amazed what you can achieve when the one who becomes unbridled – Is You!

© 2014 Mark St.Cyr

Toot Toot

There’s an old saying: “If you don’t toot your own horn, there is no music.” While in some ways I very much agree with that statement like everything else in life, one should never over do it or else you can be seen as more of nuisance – just like that car alarm that goes off in your parking lot every night. However, this one I feel is worth sharing.

Last weekend I was alerted that my work was carried on the website ZeroHedge.com. (ZH) Some of you might just shrug and think , “Yeah so?” and I can appreciate that. However, for those that are “in the know” it’s actually quite a big deal. Let me explain…

ZH has evolved over the last few years in becoming both famous, as well as infamous, for anything regarding Wall Street and the financial markets as a whole worldwide. The site is routinely referenced throughout the media as a source for insights or perspectives on what is taking place within Wall Street and more.

The site has also been the place of record for releasing articles from whistle-blowers within the financial markets where dubious corporate malfeasance, market manipulation via political interventions, and more have been discovered then exposed. (hence the infamous reference)

Many of the highest watched and listened to news and political figures read, as well as quote articles from ZH in their broadcasts. (I am not being coy using the word “highest.” I mean ‘the’ as in take the top 10 in any media, i.e., TV, radio, or print with 10’s of millions of viewers, listeners, or readers, each!)

It is quoted from and used just as if the story or article was coming from an outlet such as The NY Times™ et al. I personally have heard more than one state: (I’m paraphrasing) “The reason why they read it is because, the people writing these are the experts of the experts, the people who truly know and understand what is going on within the markets and the economy.”  I’m not making that up, I’ve heard that very statement nearly word for word more than once, and quite possibly so have you.

For those who might not fully understand let me elaborate why I was so surprised and honored. First, ZH is something akin to a cross between a news aggregate – and a Wall Street whistle-blower safe house. You don’t find them – they find you. They only run articles on their front page that they believe are relevant and insightful enough that gives perspective where either no one is – or no one will. (as an add to, you can’t even get a subscriber account without going through a 2 week waiting process for approval or not. And that’s just to subscribe!)

Just some of the people who have been featured as, or in a Guest Post are notables such as, Nassim Nicholas Taleb, Nouriel Roubini, Marc Faber, John Hussman, Bill Gross, Mohamed El-Erian, and many, many other world leaders from both the financial stage as well as the political such as David Stockman just last week, and more. This is quite the assembly in any category bar none. So I was nearly knocked off my chair when I fired up my screen to see – there I was.

Screen Shot 2014-03-10 at 8.27.14 AMI can not tell you how I felt seeing my work there. It was for all intents and purposes exhilarating.

I know people whom I consider smarter, more articulate, and better looking than I who have tried for years to get even a passing mention on this site with no avail. Let me express further why I consider this such a touchstone in my view.

The trading site that I am a regular contributor to is run and owned by Tim Knight who himself is a contributor to ZH. I was always wondering in the back of my mind if someday I might find an article I posted there cross posted by him to ZH. If that event had taken place I would have been ecstatic. However, even people who contribute and read know: It’s one thing to have your work posted by a contributor, it’s quite another to have it picked and posted as a stand-alone by the editorial staff. aka Tyler.

Below is a screenshot of the front page when my article was top story, center placement, above the fold (pertinent newspaper jargon) this past Sunday March 9th.

ZH Front Page March 9 2014Had I been in that top left as a cross posted article available for viewing as I said earlier, I would have been more than excited. However, to see my work in a stand alone piece right there front and center where one reads the likes of articles or contributions by some of the people I named earlier, many of who I have the highest respect and regards for their insights is just hard to put into words for me. As I write this I am still feel as if I won some form of award worth winning.

Personally, I view this in higher standing in my own personal hierarchy of achievements more than if I was in the NY Times, or more. The reason?  It’s possibly easier today to get an op-ed in the Times than a stand alone article here in my view. (At one time that was wasn’t true, but today, just look at Forbes® itself for a clue.)

Years ago I had something similar but far less consequential happen in regards to making the front page of a newspaper.

In my local paper they ran an article as they do with any new business in a locale the brief mention, and small snapshot picture near the back of the paper in the business section. I was delivered the paper and article as a courtesy by the staff writer. No big deal – till I went across the street to the convenient store to see right there in the newsstand another paper.

In the main newspaper that covered our tri-state area (A Pulitzer Prize winning paper I’ll add) there I was in a front page business story. They put my mug on the front page in a picture that took up 2/3rds of the entire front all above the fold. I could nearly believe my eyes. I rushed back to my business to call my wife and tell her the news. She was excited and said, “That’s great!”

Then I called my mother to tell her she’s not going to believe what she’ll see. I went on to tell her: “Ma, you’re not going to believe it, but I’m on the front page of the paper, a huge picture of me and an article, And guess what? It has nothing to do with me being arrested or anything like that.” Her response? “Thank You!”

So if she’s watching (and I’m sure she is) again, this ones for you. And to all of you that have been with me since the beginning, recently found this site, and those that subscribe and continue to join let me say first and foremost a heartfelt thank you to all of you as well. For without your patronage, there would be no reason to write or say a single word.

© 2014 Mark St.Cyr

A Thought For Entrepreneurs

Everything in business is about language from rapport, consensus building, mutually defined objectives, outcomes, etc.

As an entrepreneur it is your responsibility to increase your awareness and skill to identify when these are taking place in real-time. It is also imperative to constantly hone that skill.

To give one example, you must be able to identify when either a peer, customer, or more is talking to you, rather than talking at you.

When someone is speaking at the other there is the transfer of words – but there’s no dialogue taking place that can end in any meaningful or beneficial manner.

It is your job and responsibility as an entrepreneur to not only be able to distinguish when this is taking place in real-time, but also to skillfully redirect the conversation back to where a true dialogue transpires. Yet, just as important is the ability and skill to politely end it if a dialogue can not be re-established.

A mutually agreed upon outcome from a dialogue where all parties benefit only happens when both sides understand the other. And that only happens when people talk to others. Not at.

Anything less and your wasting your breath.

© 2014 Mark St.Cyr

A Little Historical Reference For – Volatile

I was asked by a reader if I would extrapolate on what I considered a “volatile” trading environment. The question was in earnest, so I thought I would repost what I believe is no better example of just how fast, and with such force, the financial markets can move out of what seems like nowhere with the following audio.

The person reporting and calling the markets in this audio is Ben Lichtenstein of TradersAudio.com. Again, I believe there is no better representation on just how fast one’s faith in the “markets stability” argument can be shattered. It’s also a great reminder how all the “hedging” that was in place during this period worked out. For if one remembers – it didn’t.

Ben who is the one making this recording is watching this event from the seats on the left side of floor just below the screens.

Ben Lichtenstein of TradersAudio.com whose voice you hear in this recording, is watching and describing this event from the seats on the left side of floor just below the screens.

Link to audio/video recording http://www.youtube.com/watch?v=1mC4tu1NhUA

Puts the idea you can “hedge” yourself against any turmoil into perspective doesn’t it?

This happened May 6th 2010. However, if I bring this yet 4-year-old event up, you would think I were referencing something that took place during the Jurassic period.

© 2014 Mark St.Cyr

Understanding Why It Feels: Different This Time

There probably isn’t an over used phrase thrown across the media landscape than, “It’s different this time.”

One can’t look at the financial markets, the political stage, and more without shaking ones head. Nothing seems to make sense. Yet if one wants to lazily answer, “It’s different this time.” Things become crystal clear.

Water now seems to run uphill. The definition of words no longer mean what they once did. (we’re still marveling on what is – is) Free society means the loss of only a few freedoms per year, as opposed to everything at once. Work is a bad thing however, if someone else goes to work and pay for your things – then that’s good. You can keep your plan if you like your plan – but if we don’t like it – well – you can’t. The Federal Reserve would never monetize the debt – however if you’re a preferred dealer in the QE (quantitative easing) program – they’ll do it for you. I could go on but for brevity’s sake, I’ll stop there. I believe you get the drift.

These precarious times leave many scratching their heads. It has been (and continues to be) extremely difficult to rationalize exactly what one personally, or business and investing wise should, or should not be doing.

When everything one has both learned through experience or looked back through history for clues now seems irrelevant, or worse – indifferent. It truly makes one question one’s sanity as you wrestle daily with the over whelming feeling that you just may be – the only sane person in the asylum. And that is not a comforting resolution to one’s conclusions. For it begs the rebuttal: Then who’s truly the crazy one?

I was asked the other day why I continue to make arguments for caution where some people at times are having a field day with the equivalent of kicking me in the shins as the financial markets rise higher, and higher, to ever higher heights? It’s a good question and I thought I’d extrapolate more on what or why I’m seeing blatant warning signs others can’t or, refuse to.

Let me express why my observations cause this with the following line: When everyone is on the band wagon – except the band. You had better take notice.

First, let me give some background as to why I have standing to make such arguments.

In addition to my business acumen, I cut my teeth and actually traded my own money (not some form of 401K account – a true margin account) in the futures markets and more both before, during, and after the financial market meltdown of 2009. A period where; if you momentarily dared to turn away from your screens to just shred a document, your positions could be up six figures (as in making money) or down the same. (as in lost)

So turbulent and crazy this period of time was, many had to shake their heads to snap out of their contemplations of; “Hmmmm?” after seeing a Depends® commercial roll across the TV. And every single one almost to a person of the so-called “smart crowd” paraded across the financial media landscape not only didn’t see it coming – they were patently dumb struck on why it was happening, and what one should do about it. (People think these commercials are placed because of age demographics. After 2009, I started to question that argument. It now seemed to speak to a far greater group. But I digress.)

During that time, I have traded with open positions when the markets has been “Lock limit down.” For those not familiar with the term it basically means the markets are halted or shut down as to try to stop the panic.

I have been in situations (and know of many other veteran traders) where positions were unable to be closed as to stop the bleeding – as one watched the account balances disappear, or worse  – go negative. Not to mention the frustration when the inability to get hold of brokers to alter or close positions when platforms freeze, while account balances swing wildly out of control.

There are people who’ll line up to tell me about how they currently have this or that hedged. How X will take care of Y and so forth. All sounds good, the rationale appears sound, but experience will tell you, a backup plan for the markets is insufficient and foolhardy at best. You need a backup plan – to your backup plan – with an additional backup plan. Along with the ability and faith you can execute it in a panic situation. Period. And that’s just for starters.

You haven’t truly traded volatile markets till you’ve stood and stared doe-eyed watching the money in your account as it spirals downward out of control with seemingly no way to stop it. There are ways, but very few know, never mind could execute in the moment. I would venture to say based on people I’ve spoken or listened to, 4 out of 5 are ill-equipped for any real shock to the markets. Especially at where they are currently. However it’s exactly this crowd that is the most vocal using the guise of “The Fed’s got their back.” as if bad things now can’t happen. So why worry? Because – (you guessed it) “It’s different this time.”

I know and try to relate first hand stories of veteran market traders worth millions wiped out in near moments and far, far more. (Never-mind by their own hand or trades just ask a victim of the MF Global™ scandal) Yet, I continually falls on deaf ears as one talks to people who just believe the markets are, “ducky.”

Many (if not most) either just started handling their self-directed 401K accounts (which is the way to do it in my opinion) over the last few years. To them the tone and tenor of anything market related falls into the category of, “Everything of the past is old news.” “The Fed’s got their back,” and more. I’m usually left to myself just shaking my head.

Personally, I have read more books on technical analysis, market psychology, option studies, probability studies, volatility strategies by all the best known authors, along with even more brilliant yet, less heralded ones. I have put money to work via investment advisers, as well as real-time trading strategy/execution services. Yet, if I question someones thinking or thoughts on the markets? I get a look like, “Yeah sure. What do you know. Can’t you see? It’s different this time!” And once again, the conversation just about ends there.

I’m begging to feel that in some strange way they may have a point. But – it’s for all the wrong reasons. And here’s why…

A few things (although very big) have changed over the past 5 years since the great market collapse. These are in no specific order of importance.

First: The advent of government involvement within the financial markets is unprecedented in its history. It can not be understated the influx of Trillions of dollars via the Federal Reserves QE programs, and the levered effects that influence has brought to bear. We don’t have a shred of true market forces that warrant such levels. (Please save the emails. You’ll do better with CNBC® than me.)

Who cares if war, or anything else pops up on the horizon which not that long ago (say before QE?) at the very least would cause the markets to take at the very least – a defensive position. (Remember Greece?) Nope, not in the least.

As one nation after another with its cities on fire, citizens battling in the streets, cries of defaulting on sovereign debt, export/import disruptions, and more. Since the intervention of the QE programs; as long as the spigot remains open – the world and its crises are mere footnotes.

Just look at what is taking place today in the Ukraine. Quite possibly the greatest global uncertainty wrench into the gears of the world at large. Russia puts boots on the ground, test fires an ICBM to heighten threats. North Korea test fires more missiles during this same period. At the same time our largest holder of debt and largest trading partner China publicly sides with Russia’s invasion calculations, not to mention their newest economic figures have been awful (and they are notorious in fudging them as to make them better than they truly are)  and the markets reaction? Not only higher, but Investor Intelligence™ surveys show that traders are the least caring of a market hiccup in over 15 years!

That’s the equivalent of more unicorn and rainbow thinkers in the market today than the dot-com bubble! Absolutely mind-boggling in my view.

Back all this into an algo-filled, machine dominated, high frequency trading environment and you can make the rational argument that the once ,”free” financial markets. Are now truly different this time.

For if the machines only care about the numbers – will act on those numbers – and you only supply the numbers the way the machines care about. Well, you do in theory have control, right?

Well yes but (and it’s a very big but) till you don’t. Then what?
And that’s where my arguments still fall. Again, far too many whether they be entrepreneurs, traders, business executives, and more are not calculating, “what ifs?” That is a recipe for disaster in my view.

To show how far we’ve come from reality all one needs to do is to look at how or what the media will or will not cover. Remember, Black Monday? That was back in 1987 when the markets crashed. Over, and over, and over this was reported on anniversary after anniversary. Now? For all intents and purposes, it passes quieter than two ships passing in the night.

I bring this point to the forefront for the sole purpose of pointing out there was an anniversary this week. It was the 5th anniversary of the financial markets collapse. The worst since the era that brought about The Great Depression. And if I didn’t bring it to your attention now, many of you probably didn’t even know it. The near mention of this event had more in line with the Harry Potter character of “You know who” as in “He that shall not be named.” The 2009 financial collapse now seems to be of the same ilk.

Again, as to push the point I made earlier on things that leave people scratching their heads. Black Monday (a far less eventful matter as compared with the final declines of 2009) was headlined, spoke of, theorized, along with a great whaling and the gnashing of teeth – every anniversary. And what about this one? The silence was deafening.

Here’s the rub – we all know the unemployment #’s are worthless. We know they’re currently manipulated to the point of absurdity. We know that GDP (gross domestic product) trade deficits, and much, much more are now running inline with as much controversy as to their validity as those we get from the Chinese government. Accounting standards and the reporting of earnings are once again venturing on comedic.
(As in an a company lost money according to general accounting, but based on Non-general? The place is rolling in dough!”)

Fact or fiction seems to no longer matter anymore. It’s now blatantly obvious: spin a tale no matter how large for if it sticks – it’s now considered fact. And if they don’t believe the first lie – just readjust or recalculate the formulations to provide something they will believe. It’s becoming near maddening.

So I guess it truly is, “different this time.”

Just what happens when it’s realized that puddle on the floor isn’t from unicorn tears but from someone who didn’t see a Depends commercial is now anyone’s guess.

© 2014 Mark St.Cyr

(Addendum: The typo for “Black Monday” occurring in 1989 has been corrected to 1987)

The More Things Change…

As readers who’ve been with me for a while are well aware; I’ve made no bones about my feelings of many of today’s Wall Street darlings such as Facebook®, Twitter®, and so forth.

Although I criticize them, it doesn’t mean, nor should it be misconstrued that I’m belittling their original products or services. I believe now as I did when introduced the ability to connect or rapidly deploy information is groundbreaking. How these companies are suddenly worth Billions if not tens of Billions of dollars, while hardly generating any revenue let alone profit – is quite another.

When one tries to argue, or at the very least, question many of the premises as to why these companies are worth X or Y. Near immediately some gaggle of defenders begin defending the long-term business premise – with ephemeral logic.

At some point a company needs to demonstrate: It can acquire a potential customer – then sell a product to that customer – make an actual profit on that sale which allows all overhead of that process to be paid for by said profit – with money left over for either expansion, dividends, and more. Period.

If a company (of any size) can not demonstrate that entire sequence, (with real accounting and deposits made in the bank) then everything is “wishful thinking” until it does.

It can be worth billions, upon billions of dollars renting or owning real buildings, employing real people, and more. But, (and it’s a very big but) it’s still only nothing more than an experiment or idea in action. It must, and I do mean must get through the above cycle or example with the ability to repeat it before it becomes what we like to call – a viable business.

I know I’ll get a lot of grief with this however, someones has to point it out: As of right now, as big and as wonderful as I think or believe the company and management of Amazon® are. They too are an experiment in progress. Reason? They have yet been unable to make profits consistent with their market share that would sustain the overhead and more as I stated above. At some point, even Amazon will need to demonstrate more. (Although I believe out of any dot-coms of the last 20 years; they have the greatest chance to do it – and more.)

As I was thinking about all this over the last few weeks. I was trying to remember a scenario of where a lot of what’s currently transpiring again with Wall Street darlings and their sudden rise in market capitalization where they’re buying this, and buying that. Along with anyone whom questions the logic – is seen as some doubting Thomas. Then I remembered Ted Turners autobiography, Call Me Ted – My Life, My Way with Bill Burke, 2008 Grand Central Publishing/Hachette Book Group.

In that book, Ted outlines what transpired to both himself, as well as the company during the height of the dot-com era. He discusses his total dismay with the mega merger of that time with none other than what I can only describe as the emblematic company of what was transpiring then and now: AOL®  And their purchase of Time Warner™.

To summarize, back at the end of the 90’s when dot-coms  were “the” phenom. Valuations for dot-coms was just as laughable if not more so than many of today’s heralded “social everything” companies. Then the merger of mergers was announced when the so-called biggest and baddest player AOL announced it would acquire Time Warner. The deal at the time was the largest ever seen.

Back then AOL had the money to buy Time Warner because its market cap (aka stock value) was twice the size of Time Warner’s business. What drove AOL to be so highly valued in the eyes of Wall Street? Ad revenues and their potential growth. (sound familiar?) And just how was this merger being justified to become even bigger, better, and more profitable in the future? Ad revenues. (again…sound familiar?)

As explained by Ted in his book, this deal was put together so quickly it was as if there was no tomorrow for AOL to acquire Time Warner. It is also funny to hear as a side-note in the memoir, that this deal was originally being proposed to Yahoo® at the time, but they turned it down. He states he was basically told on a Friday and needed to approve it that weekend, as to be announced to the world that Monday. (Sounds hauntingly similar as Google® not buying WhatsApp™ before Facebook does it not?)

There’s far more to this than I’ll summarize here. I would recommend you acquire the book yourself for it is a fascinating account of Mr. Turner’s past business and family affairs.

However, what is eerily similar are the narratives, impressions, circumstances, and rationalizations surrounding the Wall Streets darlings of the those times – and their juxtaposition to today’s.

For what happened next to both AOL and Time Warner in such a relatively short period of time should live long in one’s memory when considering whether a model of business is as viable as being proclaimed or, is being sold.

For remember how that all worked out in the end?

© 2014 Mark St.Cyr