Day: May 26, 2019

From Cash-Burn to Future-Hype: It’s Different This Time

As we celebrate the official kick-off for summer with barbeques and libations, all while remembering, honoring and giving thanks to those that made it all possible here in the U.S. There is another group of fallen “heroes” that were once at the forefront of every battle, armed with a superpower that would make an Infinity Glove® envious.

That power was the “It’s different this time!” chant-of-the-charlatans. Where any and all rational arguments for 1+1=2 math or, business ethics was sacrificed at the alter of a top line growth narrative, while reciting from the “gospels” of Tech such as: “P/E ratios of the Absurd,” “Net Profits are for Dummies,” “You’re Not Lying if You’re Never Caught” and last, but certainly not least, “Who Cares Who gets Screwed As long as I’ve Got Mine, Cha-ching!!!”

The truly funny thing about the above – is that it worked. The word “worked,” as in past tense, is where the now unfunny is rapidly becoming manifest.

I coined the term “future-hype” a while back to help encapsulate another phenom, where it seemed every-time a Silicon Valley darling found itself in trouble via a sell-off in its share prices, there would magically appear some new revelation how ___________(fill in your ticker symbol of choice here) was to transform the universe in the not so distant future, assuring one riches beyond compare.

The funny thing is that every time the “future” got closer? A new revelation appeared to fulfill what the other did.

You think I mean “did not?” As in the future thingy never materialized, so that means it was a flop. Oh, by no means did I mean such. Here’s what it did…

It did precisely what was intended. i.e., gave the narrative hope back to the next in rotation fund manager cabal true believers to sell tell their clients why they needed to (a) hold on for dear life or (b) buy more. And if lucky (c) Do both, proving that the word “sell” was, once again, banished to obscurity successfully.

Here’s how I posed it back in 2017. To wit:

What this term means is what I describe as the now near comical press releases, CEO jawboning, or anything similar that takes place right before earnings (usually a week or so, give or take) either from “The Valley” or tech space in general.

Usually what you’ll read, see, or hear (and echoed jubilantly by some next-in-rotation fund manager) is some grandiose announcement of some super-duper, sounds really awesome, coming attraction that has the potential to not only change everything, but also, to fill investor coffers with riches beyond the imagination.

All one needs to do, as to engage and embrace in this vision, is to use their own imagination, then buy into the “dream” with real legal tender, literally. Because, without those investor dollars continuing to pour in? The “dream” as they say – will be lost. Along with any earlier proceeds. Rinse, repeat.

Future-Hype Arrives Right On Cue…Again

What I was speaking directly to in that article was the latest revelation from the once lauded and seemingly unquestionable, Elon Musk. The issue then, or future-hype scenario as I like to now call it, is that people (as in, investors et al.) were, and once again, questioning the soundness of their “investment” as we’ll say.

And with that, just like clock work, another “in the future” moment appeared – to the surprise of all – that his Boring Company™ received verbal approval to build in NYC that would connect in Philadelphia, Baltimore and D.C.

The issue?

“This is news to City Hall.” “also, if you’re stopping by City Hall, please bring a copy of your proposal. That would help.”

Public rebuttal via N.Y.C.’s mayoral press secretary.

As brazing and stunning as the aforementioned is, the funny little thing as I said prior is: that it worked. All you need to do is look at a chart of Tesla-the-stock and you can see how it happened time, and time, and time again. Hint: need I remind you of this one alone? e.g., “funding secured.”

However, as I’ve also alluded, this happens everywhere across the entire tech space, whether it’s for start-ups or well established behemoths such as Facebook™ or Amazon™. i.e., the moment there’s a bit of news that could effect _______(insert ticker symbol of choice here) The future-hype scenarios appear. Another hint: “flying drones.”

And – once again – just as before, it seems Facebook wants back in on the action with none other than the mother of all future-hype canards: It’s planning (remember, I don’t call it future-hype for nothing) to launch a cryptocurrency named “GlobalCoin” with hopes for 2020.

Why now? Is it because the crypto “winter” is now officially dead as proclaimed by Tom Lee? Well, maybe that’s part of it. But I think that is secondary as to help fuel the narrative rather, than the reason for why.

“What’s the why?” you ask. Great question. Ponder this latest revelation right before the holiday weekend. To wit:

Facebook Inc. said it removed 2.2 billion fake accounts in the first quarter, a record that shows how the company is battling an avalanche of bad actors trying to undermine the authenticity of the world’s largest social network.

Facebook Removes a Record 2.2 Billion Fake Accounts (Bloomberg,com)

So, let me get this straight, they reported in Q1 they removed a number of accounts equivalent to the entirety of current users – because – they were deemed “fake.” e.g., 2.2 billion fake, as compared to 2.4 billion real.

Got that?

So, with that, let me ask you this: Why now, and why a sudden shift to roll out crypto-for-the-future when I thought the future was all about ads-for-eyeballs?

Hint: It’s different this time. i.e., No one’s buying (literally) the old narratives any longer. And by the looks of things, they might even be doing the once unconscionable: Sell.

The other tell-tale sign that may give a bit more credence to the argument that it truly is different this time, is this:

I’ll pose it using a quote from the prior referenced Bloomberg piece and ask you to do the calculating for yourself, ready? To wit:

“The vast majority are removed within minutes of being created, the company said, so they’re not counted in Facebook’s closely watched monthly and daily active user metrics.”

Now I’ll ask: Do you remember this one? Again, to wit:

“Facebook’s records also show that the impact of its miscalculation was much more severe than reported,” marketers allege in court papers filed in August, but only unsealed on Tuesday. “The average viewership metrics were not inflated by only 60%-80%; they were inflated by some 150 to 900%.”

The legal battle, which dates to 2016, stems from revelations that Facebook misreported two metrics related to its video ads. Two years ago, when the news first emerged, it was reported that Facebook inflated the average time spent viewing ad clips by 60% to 80%. The company has said its mistaken calculations did not affect billing.

Facebook Inflated Video Metrics By Up To 900%, Marketers Claim

Here’s my take: It’s different this time in the rationale that everyone’s starting to question everything. And that is not bullish for tech rather, it’s the kindling for the stock market equivalent of shouting “fire” in a crowded theater. i.e. Get out now, at any price, before this whole thing goes up in flames!

And for those of you are are thinking that’s hyperbole. Let me end with this last addition for your consideration.

Remember when anything “hyper-loop” was met with fawning and higher stock prices? Judge for yourself using the latest from none other than Mr. Musk and his own future-hype projections. To wit:

In regards to the once original idea of something like, sleds in a tunnel, it seems it’s now morphed into something that looks quite more like a glass bus on wheels (in a tunnel?) than anything else. Also, the only futuristic part of it appears to be in just how much glass it’s made from – not what it actually does.

Don’t take my word for it, here’s what the SFBART (San Francisco Bay Area Transit) said about it. (actually, more like trolled) Again, to wit:

We carry 28,000 people per hour through our Transbay Tube under the bay because of the capacity of a train. That’s nearly twice as much as cars over the bay. Why wouldn’t you prioritize something that carries far more (and safely with automatic train control) over cars?

via SFBART public Twitter™ account

Ah yes, it does seem that the once “it’s different this time” moniker that protected the tech sector, and Silicon Valley in general, with its once unquestionable superpowers has since been rendered to memorial status, where the only thing that’ll remain are the tales of Headless Unicorns and Electric Rocket-ship dreams in perpetuity.

Unlike the money that may vanish for all-time immemorial.

© 2019 Mark St.Cyr