Month: May 2017

Being Ahead Of The Curve

Many times being ahead of the curve, or too far out over the horizon, at first gives the illusion that one has incorrectly judged the coming storm warnings. It happens to all of us that have the audacity to dare express contradicting arguments to whatever the daily general meme of the day is. It would seem I am currently experiencing one of those moments.

This came to light today when the news of the day hit with the disgraceful stunt launched by Kathy Griffin. As repulsive as the act is, what hit me was totally by surprise and showed just how striking a moment in history this may be.

I have to admit, as I wrote back in December I thought the “Political Celebrity Jump The Shark Moment” took place then, with the release of the now maligned political call to action video for the electoral college to not cast votes for Mr. Trump. Here’s a bit of what I said. To wit:

“Celebrities have always been used (and I mean just that – used) as to help sway public opinion one way or another. Or, to seemingly give some stamp-of-approval to one candidate over another. It’s been going on forever, and it’s not going to stop anytime soon.

However, with that said I do believe the most recent incarnation of the “political celebrity” may indeed be going way of the Dodo bird. Case in point: Martin Sheen and his leading of the gaggle to influence electors of the electoral college to stand up – and cast their vote for someone else.

In what was supposedly some form of call-to-action video Martin Sheen (did you notice the purple shirt?) and others called for electors to change their votes away from their sworn obligated duties and cast them for someone else. They wouldn’t openly state their desired choice (cough-Hillary-cough) however the intent was clear.”

Now to be clear, I’m not saying I was for, or against, any candidate, that’s not the point I was, or still arguing. The point is/was that I believed that stunt back in Dec. was a moment to be marked in history as a “jump the shark” moment. It appears I was wrong, and there is definitive proof that I feel compelled to share, even if it alters my original call. And it is this…

Back in the late 60’s Walter Cronkite openly called for the ending of the Vietnam War. To this call then president Lyndon B. Johnson is claimed to have said, “If I’ve lost Cronkite, I’ve lost middle America.”

In regards to this (not belittling the above) there was a reaction that may have just as much of a “punctuation mark” on this whole Political Celebrity nonsense. And the correlation comes from non-other than an advertiser.

It has been reported (as far as I’ve heard) that the first sponsorship that has publicly pulled their product featuring ads by Ms. Griffin is none other that Squatty Potty®.

Other headlines across the media are all along the line of, “Deal in the toilet” “Ad’s in the crapper” and so forth. Actually, the headlines are delivering more humor and originality than Ms. Griffin has in years. But that’s my opinion, yours may differ.

So, much like Johnson’s evaluation of Cronkite’s remarks I am marking Ms. Griffin’s moment. After all…

If you’ve lost Squatty Potty? What’s left that won’t follow? Especially if you’re on one.

© 2017 Mark St.Cyr

Clarifying The ‘Entrepreneurial Mindset’

Over the weekend I was approached by a friend who read my latest article and asked me a question that was perplexing them which I thought I’d share, especially for those whom may be new to my work. The question was this:

“Your article made a lot of fair points, but what I didn’t understand was how you equated “waiters and waitresses” into the mix.”

It’s a fair question for it’s a topic (or sub category, if you will) very few in my field ever include, let alone even equate, as a relevant topic into the whole business genre. Most (and it’s near all in my opinion) so-called “small business specialists”, as well as the so-called “corporate specialist” don’t even give the idea of such entrepreneurialism a second thought. Most are only concerned with either, “Can I sell this recycled “new and improved” gobbledygook to another HR Dept? Or, “Can I sell this recycled “new and improved” crap to an audience, lathering on enough jargon and mumbo-jumbo that they’ll be so confused they’ll clap rather than ask questions?”

(See the scientifically proven and disavowed “Left Brain – Right Brain” thesis for clues on just how long a brain-dead idea can remain within HR circles, culture, and seminars. And if you’re one of those who had to sit through one of these presentations? You have my condolences. But I digress.)

So, back to the question, “Why do I include waiters, waitresses, and others such as these into the small business or entrepreneurial categories?” Here’s why…

The term “entrepreneur” means different things to different people. Especially those who take the word literally. You can put the term into your search-engine or dictionary of choice, and the definitions are all about the same in one form or another. Here’s what you’ll get in a simple Google™ query:

en·tre·pre·neur
ˌäntrəprəˈnər
noun
a person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.
synonyms: businessman/businesswoman, enterpriser, speculator, tycoon, magnate, mogul…

So, does a waiter or waitress fit into that description? Most will say no for reasons such as, “They don’t own the business of which they’re working. So that in, and of, itself excludes them from such consideration.” Fair argument. However, I disagree wholeheartedly, and here’s why…

First: For the sake of argument we all need to put the term “entrepreneur” into context as it is currently being used today. Entrepreneur used to mean (literally): building a business bigger than oneself. Today, the term has morphed into a catch-all phrase to now include anyone who’s self-employed.

Seth Godin uses the term “Freelancer” as to clearly distinguish between the two. e.g., Entrepreneur, freelancer. I agree, however I’ve just found the term easier to use then explain my rationale for using it later. (i.e., adding the “mindset”, or “spirit” descriptor) But that’s just me.

Here’s a quick explanation and sample from Seth’s blog back in 2006 which should be required reading to anyone thinking about entering the realm of business in any fashion. To wit:

“Most companies are not appropriate sites for VC money. That’s because they’re freelance ventures, not entrepreneurial ones. A freelance venture is one where you work to get paid. An entrepreneurial one is where you can make money while you sleep. Meaning that you work really hard and you scale and suddenly you own real estate or media properties or technology or a system or a brand that people pay for without you actually doing any incremental work yourself.”

“Freelancing”, in my experience, sometimes sets up the same kind of questioning that “entrepreneur” does in many of my conversations. Why? Because some people just want to take a thing far too literal (Usually, so they can argue about something they believe will show how they’re correct and I am not. e.g, One-upped the teacher syndrome.) rather than understanding the context of the discussion. This is why I use the term, “entrepreneurial spirit, or mindset.”

Waiter, waitress, or anyone who works where “tips” are part of their income are more times than not more entrepreneurial minded than most business people I know. The ability to earn “tips” is one of the only ways other than commissioned sales compensation that one has direct control over one’s ability to increase their income without acquiring or needing approval from management.

The better they do their job – the more compensated they are. Regardless of anyone else. And a good waiter or waitress can make or break a customer’s experience faster than a poorly prepared meal. Think about it; how many times have you been served an adequately prepared meal, but the waiter or waitress made the experience above average, and you tipped accordingly? i.e., Well above the 15% norm.

While conversely; how many of you had a wonderfully prepared meal – but the table service was lousy, and tipped accordingly? i.e., Left little to nothing.

In the latter scenario – which do you remember? The great food? Or lousy service?  And which one gives more weighting as to not going back? For many – It’s the latter. Are you beginning to see my point?

This is another reason why I railed against the idea of waiters and waitresses arguing for “gratuity entitlement” in accordance with impending minimum wage increases.

A waiter or waitress (or anyone where “tipping” is part of their income for that matter) who takes their profession to heart and executes their duties under the mindset that they’re the one’s who are in control of their income usually are not only in great demand – many can average incomes on par with some of the most senior white collared positions.

Some (meaning the wait staff) are the sole reason patrons frequent these establishments to begin with. You can usually tell a good restaurant when the same wait staff has been there for years.

I personally know a few “wait-staff”, and have a few friends who were put through Ivy League colleges paid solely by their mother’s income derived by waiting tables.

Don’t take my word for it, just ask people like Laura Ingraham and others who routinely will note such. Waitering, and waitressing are noble professions and one of the few which allows the entrepreneurial mindset and benefits to work near instantaneously when applied.

If you want a working example of how to start your own business using other people’s money? This is clearly one. Think about it.

However, you have to understand the principles at work – and apply them – to take advantage of them. If not – you just become someone similar to those which never receives more than a sympathy tip. (See: All those “tip jars” you now see at places where tipping is really not appropriate.)

As I always state: No matter the size or scope of one’s business, the first and foremost foundation of it all is:

“The Business of I.”

© 2017 Mark St.Cyr

On This Memorial Day

As we get ready for summer we begin with the kick off celebration of Memorial Day.

In our race to ready the grill, chill the libations, and hit the water, let’s not forget the reason for this celebratory kick off to summer. It’s made possible for us because brave men and women on our behalf stand in harm’s way so that we can relax in peace.

Let us never forget that. Ever.

I rarely talk about private matters. However, I think it’s only fitting no matter how old we get to still reflect on loved ones or friends who’ve gone past like ships in the night.

Marine Lance Corporal – James A. St.Cyr E/3 Born 2/08/47
KIA – Quang Nam 3/26/66
Vietnam Memorial Wall – Panel 06E – Line 052
(My Uncle aka Uncle Jimmy. To this day still missed terribly by all.)

As long as we’re alive – we should never forget. Whether it’s someone you know personally, of your own family, or even someone you’ve never met. We must always remember what it is to be an American regardless or race, creed, gender, immigrant, or nation born because: someone – somewhere – stands ready to give their life – so we may continue with ours.

Thank you to all that have served, or continue to serve. This American wishes all of you the best.

Mark

Remembering A Still Falling Hero: Small Business

On this holiday weekend known here in the U.S. as Memorial Day, I would like to make a slight turn in the narrative that many give little to no attention too, yet, is one of the most important underlying principles or fundamentals which helped shape, lift, mold, sustain, and create one of the world’s greatest economic powerhouses bar none.

That “turn” is in remembering: The liberty to create, and own, one’s own business.

As true as holding the principles of liberty close to one’s heart is near-and-dear to every American. What gets forgotten all too easily is what enabled many of those immigrants that fled here during its rocky beginnings, and still continues today, to shape and mold a better life for themselves and their families. That other foundational principle is this:

The ability to create, and pursue, a business idea that could, or would, allow them to acquire economic liberty based on their own self-expression made manifest via perseverance, and sometimes a little luck. And with that – create a foundation which could either be passed on, or sold, by their heirs, giving them possibly one further step-up, or ahead, onto firmer ground to take another. And maybe another, and another, and so forth.

Only through the pursuit of business was the true circumvention of any stigmatized political or economic class, ethnicity, and more so truly held in one’s own hands. Self-actualization, the pursuit of economic riches, the ability to ingratiated oneself by their own means to not only claim to be part of the American experiment, but to actually be American regardless of where one began, either from abroad or born within – was not inconsequential.

Being an American businessman, regardless of ethnicity, political class, economic class, religious persuasion, gender, or anything else, in many ways was the embodiment for something to be cherished and honored by the owner.

Being the sole-owner of one’s own economic future was either unattainable, or unavailable anywhere else.

It embodied everything the American principle was created for and rose upon. Without it – we would have just been another ruled monarchy; socialist; communist; caste; (fill-in-the-blank) or combination of all system under a different name with better topography. It’s the only thing that separates the U.S. from all others that came before and since.

(Note: The gender neutral term “business-person” just doesn’t flow and only emboldens the gender-sensitivity-police and I’m personally sick-and-tired of them. Women with true business fortitude understand there’s no derogatory slight in the term “businessman.” Period. For those wanting more on my thoughts about women in business see my article “The Bull On Bossy” for more insight.)

The term, as well as structure, that has allowed the U.S. to grow as to become such an economic powerhouse is called: Free Market Capitalism (FMC.) And its foundational starting point is the sole-person who decides to either create their own product, or work with (and yes even for) others who are in need of their talent. Then, decide where, and on what agreed upon price commerce takes place. (Examples of such are Family Dr’s., accountants, bakers, tattoo artists, waiters, waitresses, plumbers, electricians, salespeople, and far too many more to list. And yes, even bankers.)

Again, at its foundational point is the solitary person who decides to take matters and consequences under their own purview and either rise, or fall, on their own business prowess upon the battlefield known as business or commerce.

What is taking shape today, and what’s worse – growing – is anything but.

What most have no understanding of, let alone idea, that’s taking place today is the circumvention of Free Market Capitalism, and in its place, the insertion of its hybrid, ever-morphing, evil twin. e.g, Cronyism, aka Crony Capitalism (CC.)

I could go on for days explaining why this insertion of CC into the FMC model is not only egregious, but dangerous. However, all one has to do is look at the current economic landscape with an eye for truth – and its perversions and consequences can be seen everywhere.

It’s like a visible, metastasized cancer encroaching upon economic liberty. i.e., Forget about the “golden egg” its wrapping its hands firmly around the goose’s neck in broad daylight. And never mind those not bothering to look. What’s worse – is those who can’t turn their eyes away seem to think there’s anything wrong with this picture! e.g., Ivory Towered academics, main stream business/financial outlets, et al.

A few years ago I penned the following article, “It’s The Entrepreneur That Saves An Economy – Not The Fed” and in it I made the following point. To wit:

“The problem that’s taking place right now within the economy is exactly what you get when you take a free market economy and try to impose a command and control blanket over it: you smother it.

The Ivory Tower academics have no real understanding of what “free” actually entails when it’s expressed through the economy as a whole. The ability to build a better mouse trap, or, solve a previously unsolvable riddle all while charging a price two parties can both bear, profit by, and have satisfaction in the transaction does not, nor ever will take place within a command and control base. Ever.

Free markets allow for competition to find equilibrium as to provide and deliver a service or good someone will pay a fair price for. And yes, even for such an item such as a stock price.

Command and control fosters either the “State” to be the only provider, or, a fostered crony capitalism styled arrangement which is nothing more than another iteration of some communist system in prettier buildings wearing better suits. Harsh? Yes. Off point? Hardly. And that’s the problem.

The great capital formation experiment and enterprise known as Wall Street and its Exchanges, once the envy of the world, has now been transformed into nothing more than a rigged casino where Fed fueled “hot money” front runs orders in ways so egregious to the principal of fair play; walking into “a den of thieves” would be considered a step up.”

Here’s a bit more from that article directed squarely at the Fed. (or central banks in general) and its interventionist policies. At the time my accusations were excoriated as derisive, uneducated, (fill-in-the-blank.) However, with that said I’ll let you be the judge as to just whom seems to be “uneducated” when it comes to economic theory and practices. Again, to wit:

“Business people know and understand this intuitively. Ivory Tower academics, intellectuals, and economists are not only clueless, it’s their wanton indignation of these facts that move their policies beyond destructive right into outright dangerous territory for any free market based economy.

The only one’s that can benefit from such a business environment are those that gorge and reward themselves via the availability current Fed. policy fosters. And the name for it is: crony capitalism.

Whether the Fed. wants to admit or not, that’s what their current policy and communication fosters and bolsters which is the antithesis of what the Fed. itself states as its primary objective; for there is no wage growth, no true job creation, no sustainable capital formations, and not stable markets.

The Fed. is killing the economy – not helping it. And as de facto proof I point to their own measurements of achievement. The markets, the labor participation rate, small business formation, wage growth, and on, and on. It’s all pathetic.

The Fed’s QE program has adulterated valuations so much it will be a wonder if we ever get back to a more normalized set of business values let alone their valuations and away from this calamity.

There are entrepreneurs along with CEO’s of companies who are quite literally chomping at the bit to try new or improved innovations – yet don’t dare for either their competitors are being kept alive via cheap money afforded them under current ZIRP policy, or worse, don’t dare hire or spend for who knows if the Fed. will raise out of the blue or announce some new program that runs anathema to basic sound monetary policies.

You don’t invest in cap-ex or hiring for the long-term if you don’t know what the rules might be tomorrow never-mind next year. Period.”

If you gauge the current economy via the abomination now known as “markets” (which the Fed. clearly does) this “success” is all but missing its own “Mission Accomplished” banner. However, if you measure the economy via its true measurements of health like jobs, small business creation, cap-ex, and more? You go from banner to tombstone. Yet – the epitaph reads the same as “banner.” It only depends on perspective as to what the words mean. Think about it.

To make my point even further on just how far economic “thinking” has gone off the rails. I was reminded of it by none other than Mark Zuckerberg of Facebook™ via his latest speech or commencement address.

Nowhere in my recent memory has the idea of small business, along with what it means for the economic health (e.g. Free market Capitalism) been so avoided, so adulterated, so perverted in its messaging and delivery than what I witnessed when viewing Mark Zuckerberg’s address to this year’s graduating class at Harvard University.

In my opinion: It was the epitome of everything going wrong in business today. I also viewed it as one of the most tone-deaf, quasi-political speeches ever given at a commencement speech via someone who should be the embodiment of this time in history’s most celebrated and espousing Free Market Capitalism entrepreneurs.

It was so dreadful, and full of what I view as socialistic laced mumbo-jumbo, I couldn’t listen to much more than a few minutes. Again, via my interpretations; it was agonizingly void of anything resembling free market business principles.

Only a speech delivered by Hilary Clinton compared for substance and delivery. And that’s being kind.

This so-called “address” was anything but “uplifting” for those who are supposedly about to enter the work force and help create the next wave of dynamism for economic growth for the U.S. and subsequently the global business environment.

No, instead, after listening about such themes as “guaranteed universal basic income”, “we are the world”, “save the planet”, and more; it would make perfect sense after receiving their diplomas they simply returned home to their parents basements and waited for the world to offer them a corner office, 7 figure starting salary, trophy-spouse, 2.2 children (gender to be determined) and world peace. Just make sure you’re logged into FB as you wait. Because that’s how Mark gets paid, even if you don’t.

It seemed when listening that in a Zuckerberg vision of the world: Don’t pull on your own bootstraps. Wait! Sooner or later they’ll be able to offer you Utopia. And you’ll thank him for it. Just remember to vote “Like” to show your support behind him if, or when, he decides to run for office. Because for what that speech lacked in spoken words of business ideals, it was laced with more unspoken terms of the political which could not be ignored even when trying. i.e., I couldn’t help but think at any moment I would hear something to the effect of: “And be on the lookout for Zuckerberg for (fill in the blank) in 20??”

Compare Mark’s recent with the one delivered in 2005 by the late Steve Jobs at Stanford University. The two could not be more striking in both tone, as well as delivery. The difference is utterly remarkable and is clearly visible:

One is a businessman explaining via his own words and experiences how one may go about changing the world for the better via FMC principles and ideas eschewing anything to do with the political. The other? The antithesis of the former, delivering a speech more in-tune as if it were written by Mrs. Clinton’s former speech writers.

Don’t take my word for it, view both of them yourself and come to your own conclusions. The differences couldn’t be more striking.

The only way forward for this nation (e.g., U.S.) is for the rebirth of quest and zeal for small business America. It is what built this nation, continues to support it (although it is being waged war upon by crony capitalist benefactors and devotees daily) and is the only way to reassert and preserve the foundations of the Free Market Capital system.

What we are experiencing today is an adulterated, ever-growing, Frankenstein perversion of those once pristine principles that is growing ever-the-more unstable with each passing day and is showing signs that it’s about to break loose of its creators (The Federal Reserve) control at any time.

The current “market” is nothing more than a bull looking for a china shop. Ironically, it may be China that subsequently puts the “bull” into a place which no one “thinks”, let alone, believes.

For those of the newly minted “graduate class” let me offer you an example of just how cronyism works and is prevalent at the very core of what many of you use and treat almost as sacrosanct for entrepreneurialism in today’s business and “market” climate. e.g., Social media, and the companies that fuel it.

If you are one of the few that believed (or still does) Snapchat™ was possibly the next Facebook and invested in its stock, only to see your profits or initial investment go “poof” much like its core product? And yet – have watched simultaneously as FB shares rise and think there must be some “business” reason as to why this happens or “business acumen” you don’t fully yet comprehend? Hint: Welcome to central bank manipulation for picking winners and losers 101.

As I’ve stated too many times to count over the years: This is why having (or picking) a company with a stock price which has a central bankers “bullseye” on it is the only thing that matters. And guess what – Facebook does and Snapchat doesn’t. Want proof. Fair point. To wit:

Swiss National Bank’s U.S. Stock Holdings Hit A Record $63.4 Billion”

The real issue here as I’ve reiterated time, and time again, is this:

When your investment loses value – you lose money and net worth. When a central banks “investment” loses value – they just print more, and buy more, allowing the pretense of “health” to perpetuate inducing even more to buy alongside them furthering the charade of a “market” based price or demand. Rinse, repeat.

Hint: Facebook is on that “Bullseye” list. Along with a few other notables. Snapchat? See latest stock price for clues. And that’s just the SNB. You still have the Fed’s proxies, ECB, BoJ, PBoC and their proxies buying who knows what else.

Is it any wonder why small businesses are having such a hard time competing with these new-found business behemoths of today? For others, its having to compete with companies which are clearly “over.” e.g., See Sears™ for clues and why it has been able to stay open via cheap capital facilitated via Fed. policies unavailable to small businesses.

So with that all said: Long live small business! It may be badly banged up, battered, and bruised. But it’s far from dead just yet. We only need to remember its importance too all of us. Our nations health, and very survival depends on it. It’s a too often overlooked part of our fundamental liberties. Brave men and women of all stripes have, do, and hopefully will, continue to fight for its preservation along with our other sacred liberties.

Too all of them: past, present, and future – you have my sincere gratitude. Both military, as well as business people.

© 2017 Mark St.Cyr

Addendum to : The Fed’s Freestyle Returns

I originally posted this article using the math of 400 points (e.g., 400 ÷ 2400 = .16666) resulting in 17% for the example in the S&P. It should have been 300 at about 13%. (e.g., 300 ÷ 2400 = .125) I mistakenly used the lower bar of July (which was about 2000 points give or take) rather than the November low by mistake when typing. The post has since been updated. Yet, whether 13 or 17 doesn’t change the content or implications I made. The Dow at 3000 points and the NDX at 1000 are correct and have not been changed. Any misspellings or other typos? Well – that’s another matter entirely.

© 2017 Mark St.Cyr

Social Media: Stick A Fork In It

Let me make one thing clear before I start: It’s not that I’m saying “social media” is going away, as in no longer will be around or, will not have any use or value going forward. What I am stating is this: Everything that you’ve been told, as well as sold, about social media as it is currently argued and used, along with why the companies or platforms that supply it (i.e., the Snapchat™, Facebook™ Twitter™ et al) should be valued not just mere $Billions, but rather $10’s and $100’s of Billions is over. The signs are there for anyone paying attention.

The only ones (in my opinion) that have yet to grasp this are: the “experts”, fund managers, and analysts still telling, and selling its “So worth it!” drivel. Because, as I implied above: the signs are everywhere for those willing to look for themselves rather, than waiting for some “news flash” appearing in their “social feed” or “groundbreaking development” via the main stream business/financial media.

Hint: Remember when all the media went crazy touting why everyone needed to be on, and read their “expert” commentary on LinkedIn™? You know, right before its stock value suddenly plummeted facilitating the need or rescue via Microsoft™ for its very survival? It’s a point worth remembering for context.

Over the last few years I have not only taken the opposite view of what was once considered “gospel” in “The Valley” such as “the eyeballs for ads” model being the be-all, end-all metric for $Billion dollar valuations. But rather, in openly declaring such, I’ve been marked via that same congregation as a heretic for doing so. And that’s being kind.

Over the years their defence against such allegations were, of course, such things as IPO’s, stock valuations, and more. These “touchstones” at the time were touted to show why I was wrong – and they were right. Again, at the time, it all appeared or seemed irrefutable. After all, how could I question anything about what these “miracles” of tech provided, along with the near insatiable demand for their stock. For even an agnostic must surely agree, “tech” was proving and laying bare even the most skeptics’ arguments beyond the shadow of any and all doubt. However, that was when the manna-of-QE flowed freely.

Then – QE ended. And guess what else ended with it? Hint: “It’s different this time” went from holier-than-thou rhetoric to, “WTF is happening!” agnosticism. And it’s getting worse – much worse. Regardless of how many gnashing-of-teeth induced stupor one displays to the contrary.

Back in March I penned the article “Silicon Valley: From Rarified Air To Exhaust Fumes” which presented the following chart. To wit:

The reason why the above did as Rod Stewart famously stated “Every picture tells a story, don’t it?” Is because of just that. As I stated in that article as to why one needed to pay attention was the following. Again, to wit:

“The issue here is that process has one key attribute: It’s the same pattern we’ve seen before, but now it’s represented in days. From IPO to today. What had once taken well over a year has morphed from months to now days.”

What truly puts the stamp of reality on what it says today, is the fact, that even as the “markets” have since (once again) risen to never before seen in history all time highs since that post some 3 months ago. The above have done nothing but either vacillate right where they stood, or worse, have lost even more value. (See “IPO to save the IPO world” Twilio’s current value for further clues.) And two of the three were supposed to be the “proof” that proved all the naysayers such as yours truly wrong. In retrospect, it seems they have done just the opposite.

But making or implying such a blasphemous statement as “social media is dead” and not arguing the same for one of this “religion’s” most cherished houses of worship without addressing it squarely would be insincere. Of course that would be the “idol” commonly known as Facebook™(FB.) And yes, I still believe (and have continually argued) FB along with social media in general – is the AOL™ equivalent of the dot-com era. Here’s why…

Remember all the fanfare they released just prior to the latest earnings report? For those having a hard time it was a statement declaring they had reached “5 million” small business advertisers. Here’s what I stated in a subsequent article. To wit:

“As of today all the estimates are that they’ll handily beat and some analysts are raising their targets. It’s very well they could, especially in today’s world of earnings reporting alchemy. However, one thing which caught my attention was the sudden touting a few weeks back that they had hit “5 Million advertisers.” Small businesses noted as the “key driver.”

“Sound great!” many are saying, and, in-truth, it is a worthy milestone. However, I see the timing as possibly a little suspect, here’s why… (I make this point for it has become near laughable how nearly all upcoming “tech” earnings reports now suddenly coincide with an ever-growing list of preceding announcements of grandiose ideas that are alluded to be right around the corner (like next week!) of flying cars, self driving trucks, rocket rides to space, virtual reality, just to name a few.)

Facebook as of late has been in the news with nothing but negative reports with a slew of horrendous acts being broadcast via their platform. e.g., Rape, kidnapping, beatings, and others. One of the concerns over all this (apart from the issue itself) was a possible backlash from potential advertisers. And who could blame them, and there lies the possible rub…

As I implied with the sudden “5 million” hoopla, what I’m asking is this: Is the addition of these stated 1 million plus new small business advertisers a replacing (therefore a diversion as to squash attention) for the potential of 1 or 2 (or more) large buyers who may have pulled ads?

In other words, if they’ve added so many “new” small business users – shouldn’t the ad revenue explode this report with all things being equal? I believe this is the metric to watch for.”

As per FB CFO Wehner: He once again reaffirmed ad growth will come down “meaningfully.”

Is that a “Wait…what?” moment, “Oh…oh?”, or combination of the two? For it just seems a little confusing on how such a statement could even be expressed (via the CFO no less) when you’re told both the “buyers” (see above “5 million” reference) of those ads, along with the users (see the only metric that’s supposed to matter e.g. 1.94 billion MAU) to view them have both increased.

But not too worry. Because in what seems to be the now “playbook” (See Elon Musk and Jeff Bezos for clues) for all that is “tech”, there’s a reason why one should not pay attention to such things and focus on others. To wit:

Facebook now has a plan to eat another $350 Billion IT market.

Or said differently (as in my opinion) – Zuck and crew found another narrative they believe they can spend money on and keep all the “happy” talk perpetually happy. After all – spending $Billions on companies that seem to never produce a nickel in net profit warranting that spending is what FB has come to do almost better than anyone else. See WhatsApp™, Instagram™, and more for clues. Or, if you want to think of this way: Snapchat is supposedly the Instagram killer – and how’s that business model working out? Sorry, too soon?

Isn’t it funny when it comes to anything involving “The Valley” it always seems it’s about the next big “buy” that’ll be the reason why some insane P/E or valuation will be, “So worth it!” Never the core product that is/was supposedly its raison d’être. And it’s always just around the corner, or as close as the shareholders checkbook. Funny how that works. Or shall I say, “did?”

But then again it does seem so old-fashioned to worry about things like net profits when all one needs to do is use or follow the example below as a guide for growth in the #1 metric touted via “The Valley.” To wit:

“A Russian Went Inside A Chinese Click-Farm: This Is What He Found”

Makes you wonder how much further “value” all that “Asia” growth means to advertisers going forward. But then again…

It’s different this time, no?  Especially if advertisers themselves are beginning to see the light. See P&G™ for clues.

© 2017 Mark St.Cyr

‘Panic At The Disco’: The Fed’s Freestyle Reemerges

For the first time in what seems like an eternity the “markets” experienced a hiccup. And with it came a brief, yet far from terminal sell off. Declines of around 1 or 2% used to be viewed as average, routine, no-big-deal, and such. But that was then, and this is now. For today in a market that is viewed only as having one possible routine i.e., little to no volatility, buyers for every ask, fortified with an end-of-day ramp just to make sure if things have gone wrong, everybody gets healed by the close of the session. It’s been good to be a BTFD’er.

Then again, that was then, and this is now, And buying-the-f’n-dip every time from here on in just might be the worst learned, habituated, internalized, and institutionalized market strategy ever adopted. For the real pain of this “genius” trade will become self-evident when all those BTFD skills not only work against one, but fail spectacularly during real moments of panic selling when BTFD “genius” turns in “Catching falling knives” tragedy.

Remember: For all intents and purposes short sellers have been all but extinguished from this “market” for years. In other words: There’s no one who needs to buy to close out their position during panicky sell-offs which exacerbates turmoil. i.e., A “market” full of longs needing to sell to capture all that envisioned profit – and not a buyer needing, let alone wanting, too buy among them.

But wait – there’s more! as they say on late-night TV. And this “bargain” is something most have never thought through.

If, and when, short sellers (even at the margins) decide to re-enter these “markets” in earnest. i.e., They believe the Fed. or other central banks have lost control? Let’s just say the “dancers” become dear-in-the-headlights quicker than they can Foxtrot off. And the first taste of the “panic selling” has finally reappeared. And with it, for those paying attention, came a sight not seen in quite some time.

What was that you ask? Good question. But rather it was not “what”, but who? i.e., None other than a “panicked”, free-styling Fed. president to assure everyone to just keep-on-dancing. And just like that BTFD was once again in full swing. You could hear the music, popping of corks, and clinking of glasses everywhere.

I am arguing: Rather than “partying” at the reemergence of this form of BTFD exuberance. One should instead be cognizant of the underlying problem contained within. In other words: That a Fed. president felt the need to publicly contradict everything the Fed. is currently stating as its reasoning, and foundation metrics for raising in order to reassure the “markets” to keep-on-dancing. And the “markets” only hiccupped ~2% from all-time highs!

Again, for this point can’t be made more forcefully: A move of, a pull back from, a retracement of, however you want to phrase it, of ~2% from highs never before seen in the history of mankind warranted a Fed. president to break with the concerted, self aligning cadre of “Hawks are U.S.” to state publicly not only contradictory messaging, but rather, seeming more like “off the reservation” espousals that the Fed. itself, and its conclusions, may in-fact not only be wrong, but rather than tightening should be more inline with proposing more QE. Got that?

Mr. Bullard was doing some impressive “free-styling” and the “markets” took their cue and once again BTFD horns-over-hooves right back to those very highs, hence illuminating these two very big issues. First…

Although the act of St. Louis Fed. president James Bullard coming to the rescue and saving the “markets” whenever there’s been peril is nothing new. (see “Bullard Bottom” for clues) This time it’s less the “act” that one should consider, but rather, focus on the timing and its circumstance. This is where the real underlying issues present themselves. And this latest round is troubling not just for its implications to where the “market” now stands. But rather, to the reasoning why it stands there to begin with. e.g., Pure, unadulterated, hopium.

Since the election of Donald Trump the “markets” rocketed near vertical to the heights they are now poised. That accent constitutes some 300 points for the S&P 500™ alone, or said differently: Using simple math (e.g., 300 ÷ 2400= .125) nearly 13% of the entire S&P™ market (as well as the Dow™and NDX™ respectively) has been generated in just under the last 8 months.

The only thing fueling that move? Hopium. i.e., All in the “hope” the economics of the nation will turn and “Make America Great Again” via tax cuts, policy changes, and more. For the economic fundamentals that are supposed to support markets have long since vanished or resemble anything prior used for assumptions of good too great. Actually, just the opposite has happened where more hard data goes from bad too worse which fuels that other form of “hopium” that central banks will once again begin the IV of QE. e.g., Enter Mr. Bullard.

One can’t help but marvel how “markets” have not just shrugged-off things which only a few years ago would cause, at the least, reasons for caution. Yet, today? It seems to laugh and BTFD horns-over-hooves at every possible cautionary signal such as: Brexit, Italian political fallout; Greece, Brazil, Venezuela turmoil; China threats, Russian threats, Turkish threats, N. Korea threats; escalation in Syria, Iraq, Yemen, just to name a few; market rigging bank scandals (see LIBOR and more), saber-rattling, missile deployments, missile launches, nuclear threats, aircraft carrier deployment, reinforcing aircraft carrier deployments, more missile launches.

I’ll stop there, for that’s only within the last few weeks or months. Nothing has phased the hopium trade of reflation. Until now, and it’s just one word but the implications are legend. That word?

Impeachment.

This word may be cheered by many of the President’s political foes. However: It should (and seems to have done just that) strike terror into the hearts of anyone believing this “market” has ever been based on anything resembling fundamentals. That said, I believe the first ones to finally realize the terrifying situation awaiting them once this idea truly becomes understood and resonates within those very markets – are the ones who were up until a month or so ago cocksure they knew everything there was to know about how to control them. e.g., The Federal Reserve. (“idea” meaning “impeachment” talk signals all legislation DOA)

This is the reason why I believe Mr. Bullard made his subsequent remarks. Personally, I do not believe Mr. Bullard expressed his opinions out of vacuum. Yes, this is all conjecture on my part, however, with that said, I believe the Fed. used this expression as some form of trial balloon as to see if its efficacy was still as prevalent (and reliable) when employed during any form of correction as previously noted.

I also believe this latest result or “trail balloon” will be not only misjudged, but also misused, resulting in just the opposite effects going forward.

Some are thinking right now, “Yeah, but the Fed. has raised twice so far and look – nothing’s happened!” Which is precisely my point. But that’s about to change, and I believe the Fed not only knows it, but when the “I” word hit the main stream press, it did what Paul Tudor Jones implied they should. e.g., “Be terrified.” Because “I” all but guarantees the idea of any reflation trade legislation passing, then signing into law in 2017 is DOA. Period.

And with that so too goes the cover for the Fed. and its reasoning for hiking. For it will become self-evident if the reflation trade does, in-fact, fall apart here that all their tough talking, and rate raising, has been a colossal misjudgment for policy error. Because for all that “data” of a so-called “data dependent” Fed. is not, and has not been there. (See Fed. president James Bullard’s own take on the economy and data rather than taking mine.)

Should the weekend effects of this latest BTFD induced “The doves are back in town” subside and the realization once again reassert itself that the reflation-hopium-trade is indeed DOA? You have some 400 points respectively of S&P, 3000 of the same for the DOW, and some 1000 for the NDX just sitting there levitating, and purchased solely, on the premise of one singe idea: That the subsequent legislation Trump promised would overcome, and cure-all sins, including – the raising of rates faster than anytime since before the financial crisis, (well over a decade ago) along with no QE, and a reduction of its balance sheet.

I believe the Fed. (much like the “market”) didn’t understand just how precarious of a position it found itself till the “I” word was bandied across the main stream press, closed-door meetings, cocktail parties, conferences, and symposiums they attend.

Up, and until that moment I don’t believe they truly comprehended just how fast what they took as a “teflon market” could turn into a “panic at the disco” fiasco.

When warning signs appear smart people don’t just keep “dancing” – they begin moving towards the exits before the rest of the crowd even comprehends what may or may not happen next. I believe we witnessed that first move. Where we go from here? Who knows. But all I’ll say to that is this…

Mr. Bullard’s freestyle should not be taken as a cue to hit the “dance floor” once again. (e.g., Another manna-from-heaven BTFD opportunity.) No, it should be taken for what it may portend: A reason to be in full-view and close proximity of any and all exits should the need arise. For if time should have taught everyone by now – Hope is not a strategy. And you have some 13% of the entirety of the main indexes levitating on just that. Not counting the 100’s of $TRILLION’s at risk via derivatives.

But not too worry we’re told. For if you listen to any Fed. official, communique, Ph.D economist, next-in-rotation fund manager, et al…

“They’ve got this!”

© 2017 Mark St.Cyr

Addendum: I originally posted this article using the math of 400 points resulting in 17% for the example in the S&P. It should have been 300 at about 13%. I mistakenly used the lower bar for July (which was about 2000 points give or take) rather than the November low by mistake when typing. The post has since been updated. Yet, whether 13 or 17 doesn’t change the content or implications I made. The Dow at 3000 points and the NDX at 1000 are correct and have not been changed. Any misspellings or other typos? Well – that’s another matter entirely.

June: The Trifecta For Policy Error?

In about 30 days the Federal Reserve will hold its scheduled June (13-14) meeting of the FOMC to either give a thumbs-up, or thumbs-down to increasing interest rates in earnest once again. The odds that the Fed. will indeed raise again now stands at about 99%. In other words – it’s all but a near certainty.

With that said, one can’t help but marvel at not only the “markets” sheer abandonment on volatility with such a near certainty on its doorstep. But rather, the only thing to rival it is the sheer arrogance being displayed by the Fed. itself that such another increase is warranted as every data point to a self-professed “data dependent” consortium is not just flashing, but screaming danger with every passing day. e.g., B.E.A. Q1 GDP 0.7%, Atlanta Fed. GDP Now™ 0.2%, JPM Cuts Q1 GDP to Just 0.3%, and more.

In days of yore (i.e., Ancient history circa 2016) whenever the odds of hiking approached anything like the levels they do now, the Fed. would take to the media in any manner possible and try to supplant soothing tones of, “Hush now little ones and not too worry…” as to make it evidently clear the Fed. had no such intentions going into their next meeting. After all, as history has shown time, and time again, just the “idea” that a rate hike could be imminent sent the markets reeling needing for an ever incessant response of one Fed. official after another to shout, “Don’t worry! We’re here with ever more potent QE should the need arise!” i.e., This is why we now have such a thing being worthy of its own moniker. e.g., “Bullard Bottom.”

Today, the exact opposite is the case. Not only are there not any soothing tones, but rather, there are tones emanating from what can only be described as an outwardly defiant, all seeing, ever proficient collection of “Hawks Are U.S.” for any and all questioning.

As an example: In what can only be taken at first glance as a “Wait, what?” moment. The New York Fed. has concluded that the more than $500 TRILLION dollars (and rising – again!) of O.T.C. derivatives outstanding remain (wait for it…) “an important asset class.”

For those of you having that “Wait…what?” moment as you’re reading this and just can’t remember why your brain just froze from the absurdity of such a statement? That’s because “derivatives” was that phrase you recalled as the center for every reason which caused the great financial crash. (For those of you wanting more on this topic, I highly recommend this succinct breakdown by Wolf Richter of Wolf Street™.)

So why is the above important other than it’s “ticking time bomb” factor? (As if that isn’t enough.) No, the reason why it stands out for me is how it’s viewed by members of the Fed. itself. i.e., “Don’t worry, we got this!” And here’s the reasoning…

If it’s now on the books (see above) openly stating its acknowledgment with its size and scope, along with, that the Fed. itself sees it as an “important asset class?” That makes the case (or allows for it) that the Fed. itself not only allowed, but rather, with eyes-wide-open helped facilitate its further ballooning. Hence: If (or when) it “pops” the Fed. has no one else to blame but itself (along with the potential hordes carrying “torches and pitchforks”) for they have now openly stated (again, and inserted it into their report) they not only knew of it, but rather, considered it as an “asset class.” e.g., Giving it their blessing and endorsement.

Remember how that other all important “derivative” class of assets backed securities worked to facilitate the “Great Financial Crash?” Hint: CDO, MBS, CDS, just to name a few? That too was another “We got this asset category.” Feel better?

The real issue that sits squarely in-front of the “markets” is the realization that the entire “reflation” trade may in fact be D.O.A. much like the legislation that was supposed to foster its existence to begin with. Let me put it this way since we’re talking about “derivatives” and their potential for highly correlated monetary wealth destruction vehicles.

The “reflation” trade that is now omnipresent in the “markets” which has facilitated the non-stop rocket-ship ride since the election of Donald Trump is nothing more than a “derivative” vehicle (or expression) of the underlying legislation that was to be its foundation or “backing asset.” e.g. Signed into law legislation.

In other words – If the legislation (i.e., tax cuts, Obamacare repeal, et cetera) don’t become signed into law legislation amounting to precisely what the “value” of those cuts and more represented (i.e. $1 TRILLION in infrastructure, Obamacare total repeal equivalents, massive corporate tax restructuring et cetera) the entire run up from Nov 2016 to today becomes de facto null and void. e.g., The “derivatives” (as in the profits made) based on “the trade” become? Hint: It’s not good.

The only thing that could (or will) make matters worse was if the Fed. had raised interest rates in anticipation. Again, hint: Not only have they raised, they’ve raised twice, and looking to raise for a third. All into further deteriorating economic data.

To re-emphasize just how precarious the “market” now sits, below is a chart I feel puts it into perspective. To wit:

(Source)

As one can see, that red rectangle represents the turmoil the “markets” had portrayed once the QE “IV tube” for all monetary woes was removed. Again, not only did the “market” suddenly halt its ever-ascending journey, but it suddenly produced ever-increasing bouts of near-death experiences needing ever the more dovish tones from the revolving cast of Fed. speakers hitting the media in ways that would make a Kardashian envious.

Again, for I can’t mention this enough, right before the election in October 2016 the economy was on such shaky footing (and as the “markets” were rolling over once again) the Chair of the Federal Reserve gave what I call her most contradictory speech when juxtaposed to today’s raising into weakness stating (paraphrasing): Running a “high pressure” monetary policy may be the only way to heal the damage still residing within the economy via the crisis. An “ultra-dovish” insinuation if ever there was one.

And yet, as the above shows, just 30 days later with the victory results of Donald Trump now into the books the Fed. morphed into “Hawks Are U.S.” and have been ever since.

I made note of this and was subsequently mocked via the mainstream business/financial media as something that “Ain’t gonna happen” using the prior 2 years as evidence. i.e., Directly after the meeting most analysis was, “They’ll probably not raise again till mid year, if then.” Then, all the jawboning for more began in earnest via one Fed. official after another including “balance sheet reduction.” Then March happened, and now June is about too. Here’s what I wrote in Dec. of that week. To wit:

“I implore you not to solely take my word, but to watch the presser for yourself and draw your own conclusions. I believe it’s one of the most forceful expressions made, or conveyed by The Federal Reserve that it may in fact act aggressively via monetary policy should it decide – It (“It” being the Fed.) seems fit. i.e., The implications seemingly being sent are that they’ll decide what a “good” economy is – fiscal implications be damned.

Now is where “fiscal implications be damned” might be far more relevant than the Fed. (as well as “markets”) ever imagined prior. The reasoning?

All that “fiscal” seems to now be damned to not seeing the light of day as far as 2017 may be concerned. And that’s something I feel the Fed. hadn’t calculated into their conclusions. (never-mind the “markets”) After all, with both the House, Senate, topped with a president all controlled by the same political party; how would legislation not be passed swiftly? (Although many others wonder that exact same thing, but I digress.)

However, with that said, the economy was/is in no shape (just using the “data” we’re all told influences a supposed “data dependent” Fed.) for incessant hawkish jawboning followed up by raising twice within 90 days. Again: All while arguing (and allowing the inclinations to be held via the futures fund) that indeed the Fed. is “hell-bent” on raising once again – in June!

That would be 3 raises in all but 6 months with balance sheet reduction arguments still front and center in Fed. communications when speaking in open forums. Are you beginning to see the implications for “policy error” more clearly?

I’m sorry to keep repeating, but it’s something which can not be repeated or stressed enough: With further deteriorating GDP and other metrics, along with no fiscal stimulus possibly seeing the light of day (meaning actually signed into law) for the rest of 2017, along with a potential government shutdown and more. June is now to be considered (as via the Fed. not saying or refuting anything to the contrary) a done deal? And a prudent one at that?

Oh, and for those who may want even further examples for contemplation? Here’s just one of the items that can be classified under “and more.” Hint: China.

But not too worry, for if you listen to current Fed. officials and their assessment of global economic conditions, you know, where the “reflation” trade is the “derivative” of the underlying asset of passed legislation (which has gone from “passed” to all but DOA) that the entire recent run up is based on?

“They’ve got this!” Just like they’ve got those other “derivatives” under their watchful eye. So June is now a shoe-in.

Feel better?

© 2017 Mark St.Cyr

A F.W.I.W. Moment

I won’t go into much detail here, for as the old saying goes, “A picture’s worth a thousand words.” To wit.

(Source)

As of this writing there’s another saying which helps put the above (as they like to say in “The Valley”) “picture” in context. That saying is, “If misery likes company, fear not, for you are not alone.”

The above is, of course, a chart showing Snap™ (aka Snapchat™)  abutted by Twilio™ current share prices. Currently, if you invested 1 dime in either of these companies at their IPO launch, that dime is worth less. Far less. And for those who bought when the shares were higher? All I’ll say is “You have my condolences.”

And for those who believed all the recent analyst recommendations that Snap and all the others were a “screaming buy!” Not to mention all the recent tech press still using the “Snap is up 30% from its IPO pricing.” You’re now finding out “It’s different this time” as I’ve tried warning too many times to mention: is now, indeed, just that.

And for those who were told they were “lucky” to get in at $17? They’re now seeing that “up 30%” is now closing in on being 100% gone.

All in about 90 days.

© 2017 Mark St.Cyr