Today, being Thursday, is probably one of the most important days one needs to pay attention to, whether you own a business, run one, or you’re employed under your own version of the entrepreneurial mindset. e.g. What I coined “The Business of I.” For this may be unlike many times prior for its potential ramifications to roil “markets”, hence releasing shock waves throughout the entire business complex.
Yes, I feel today is shaping up for just that – no hyperbole intended. Doesn’t mean it will, but the potential for it is extremely high, in my opinion.
I use the above “trifecta” reference, because I feel there are three specific finish-line-crossings, if you will, that are setting up for a complete change of what everyone believes, or thinks, about the current state of the “markets.”
If, or when the “roses” are presented at the conclusion, if I’m correct, the scent of roses are not going to hide the rotting stench of just how dead and bloated these “markets” truly are. (Cue: STP’s – Dead and Bloated – here)
The first of the trifecta happened yesterday after the close of the “markets” with Facebook™ (FB) reporting earnings. To the casual observer, and next-in-rotation fund manager, as usual, “They hit it out of the park.” In fairness there were “beats” everywhere. Although, I will contend, if you look closer and use the lens of “are these numbers the result (e.g. benefactor) of a last gasp consolidation throughout the entire social media complex”, still applies. Yet, that’s not where the real action, if you will, currently is.
What suddenly appears to be becoming far more obvious to many is something I asked almost a year ago. e.g., The ‘Real’ Question: What’s Facebook’s True Valuation Without “Fake”? To wit:
“There are two hot topics post the U.S. presidential election. One is “fake news”, the other is Facebook™ (FB), and its involvement in it.
The accusations and the defenses against have been all over the board. Both figuratively, as well as literally.
Management from Mark Zuckerberg on down have been professing when it came to anything “fake” it wasn’t of their doing. And gee-whiz-by-golly they’re going to do whatever it takes to make sure anything “fake” never sees the “like” of day again.
Sounds great, in theory. But there’s a very real fact that must now be considered…
If “fake” news was so wide-spread, and so devoured on FB that it had the ability to not only influence, but rather, to overturn political norms and ruin the election of what everyone in media on down believed; that this election was merely a formality on paper because, it was clear to all of them, Mrs. Clinton would win not just walking away, but running?
That would mean FB now has to alienate (i.e., by now not delivering “news” these people wanted to see) millions, upon millions, upon millions of now current users. What does that imply to their now “real” (ooopsy, again!) metrics going forward?
If the above hypothetical has the ability to be true (and from a business perspective it sure has) the very fact that FB will now openly censor, mark, tag, possibly defame (whether intentionally or not), and more articles of news, or anything else shared on its platform. Two questions have to be asked:
First: How many FB customers decide they don’t need or want a “mommy” deciding what they can, or can not, read or share? Second: How fast does that process begin, and by how many?
No matter what side of the political fence you’re on matters. The only thing that matters is what all this means from a business perspective to FB’s bottom line. For as much as everyone likes “free”, without Wall Street (or the Swiss Central Bank) buying? FB moves to AOL™ status quicker than you can say “You’ve got mail®.”
The immediate reaction to their earnings was the typical moon-shot higher, then suddenly, it reversed with FB closing in the red, or down, in after hours trading. So far, in the pre-market, that selling has remained. What happens next is anyone’s guess. But this is where, “its different this time” might show its hand a little differently. Here’s why, again, to wit:
“We’re investing so much in security that it will impact our profitability. Protecting our community is more important than maximizing our profits.”
That quote is from Mark Zuckerberg during the report. Congress, or others, just might think that line of corporate “oh gee golly whiz” contrition drivel sounds just fantastic. However, you know who doesn’t want to hear that “profitability” is less important than anything else? Hint: Wall Street. How much further, or longer, the so-called “profit taking” continues today is something to keep an eye on. Let’s now get onto the second.
It’s already been released that the President will name Jerome Powell to succeed Janet Yellen as Chair of the Fed. Until it’s made with an official statement, it’s still unresolved. However, once the official statement is made (expected at any time today) the place to watch is the $Dollar and all its correlations and pairing (e.g., USD/EUR et al) watching for any signs of stress that may affect sectors that are closely correlated. (Think shipping, and trading partners and such.) This is where the real action may take place over the coming days, weeks, and months.
Then there’s the third, and it is here where everything can go awry: The release of what is, and what is not, in the so-called “Tax Cutting Bill.”
If, and I don’t say this lightly, if the proposed cuts are seen, or show, they’re nothing more than specious talking points? This entire rally since the November election lows is at risk. And by “risk” I mean of falling apart in ways similar to falling off a cliff.
With the healthcare fiasco still fresh in many a mind. If the supposed “tax cutting” resembles anything of the sort as was unveiled during the healthcare debate? All I can say is: look out for what “it’s different this time” can mean in reverse.
There is one last “finish line cross” to watch, for those on the lookout to see if some rendition or possible “fourth horse of the financial apocalypse” is to be seen on the horizon. And that comes after today’s market close when Apple™ reports.
If the reaction to whatever the report is negative? That would cause concerns, because that would fill the criteria of what’s known in horse-betting parlance as a “Superfecta.” And if that takes place? All I can say about the “markets” going forward from here would be this is:
All bets are off.
© 2017 Mark St.Cyr