Am I Frontrunning The HFT Story?

I was asked the above question the other day. It was asked in a tone as if I just happened to write about the topic that now has both the financial, as well as main stream media in an uproar. i.e., right place, right time coincidence. I thought it was a fair question for the person asking was really not that familiar with me and they themselves just became aware of this topic. So, I figured I’d explain why I have standing in this story as opposed to many that suddenly are writing, speaking, and more on a topic they seemed oblivious to just yesterday.

I’ve written and spoken many times over the years on the dangers of what has been transpiring in the markets via High Frequency Trading (HFT) as its being implemented since the financial meltdown of 2008. So for the sake of brevity here is an excerpt from one of my articles back in 2012 where I opined my thoughts specifically on HFT, the markets overall, and why one needed to think or understand the markets and anything that can jeopardize them, for after all, they truly are the greatest bastion for capitalism via free markets that the world has ever known. They’re the life’s blood of capital formation and enterprise however, they seemed to be no longer exactly that.

Implying they just might be morphing into something or already have changed into something more along the lines of a casino I was warning when hurricane Sandy threatened the East Coast and I posted the article below. To wit:

Adding Fuel To The Fire: With Water

In the article I raised these points…

“How could the electronic markets be closed all day Monday when Sandy was off shore not due to reach landfall till near 8pm EST. Closed all day Tuesday when Sandy had passed and the aftermath apparent. Yet the switches are turned on at 6pm EST Monday night while Sandy was actually overhead wreaking havoc, flooding subways, businesses, and more. Only to watch the electronic markets operate what appeared as flawlessly overnight through all that destructive may lay causing massive blackouts and wind damage leaving millions of people without power.

And yet not as much as a blip. The only blips on the screens (or lack there of) seems to be caused by the continued hand wringing of whether or not to open Wednesday. Something just seems wrong with the reasoning given.”

Followed with this…

“Could it be that the markets were actually closed not because they couldn’t operate but rather that the HFT computers couldn’t operate because what they rely on for their advantage would be gone? i.e., Their proximity.

If the algo’s lost their advantage of order execution they would be at the mercy of efficient markets. You know, that thing they always say they’re responsible for. Heaven forbid there would be a Bid and Ask not generated by them with the ability to be pulled in nano seconds. Rather by an actual order placed with someone willing to actually Buy at said price or Sell. Oh the humanity if that is the case.

Would the markets themselves also have a stake in making sure the illusion of “deep markets” was perpetuated? Imagine if the markets opened and to what is normally reported 70% of all the markets trading didn’t show up because the HFT computers couldn’t play? Would something like this almost be more frightening to the markets than the chaos currently being dealt with in the aftermath of Sandy?”

At the time there were far and few between even bringing up this type of thought. Yet, as we now see, the few of us that were pounding our keyboards or fist making such claims were basically ignored. So much so that the industry itself couldn’t look in the mirror and see how much it was putting at risk the very nature we as a civilized world depended on for a way of life that allows companies to form, people to bring ideas to fruition, a bastion for retiree’s savings, home buying, computers, internet, you name it.

Everything we touch is somehow connected in one way or another to our capital markets. Sure, there will always be winners and losers, that’s capitalism, but what capitalism should never be is in bed with anything remotely resembling something “rigged.” I don’t care how much lipstick the so-called “smart crowd” wanted or wants to put on it. It’s still a pig and it stinks. Period.

As an entrepreneur myself and as one who tries and bring sanity to that field. Not saying anything is a kin to agreeing with it. And I do not. Regardless of how much money one can make in the HFT genre. Capitalism, and free markets are too damn important.

Level playing fields matter. You wouldn’t let your kid play a game where he was on the losing team game, after game, after game knowing full well they’re losing because the umpires are in the pockets of the winning side. So why in the world would you let your business, pension, and more play on a field where at any time – you can lose not because you made a bad decision, but because you were the new putz because the other team just paid more money to make you exactly that.

Truly think about that statement above. It’s not that far removed as an example of what I feel has been going on.

Personally I have no idea of exactly where or how I fit into this whole story as it’s unfolding. I am grateful for the sites that have carried my articles (e.g. Slope of Hope™, ZeroHedge™, and others) when they could have easily dismissed them as commentary running counter intuitive or unproductive to trading and all that’s related to it on Wall Street.

I am also grateful to the very few others voices that kept shouting and pounding in unison similar thoughts or observations I was making. Barry Ritholtz is one, Mark Cuban another and there are others however, there were very few. For a clue on just how few look at the number clamoring and circling the wagons that has taken place throughout the media in defense of HFT. It seems like a thousand to one.

It finally took a writer with enough intellectual and literary standing combined with the testicular fortitude to argue face to face with the financial elite and tell them honestly and forthright when they say: they’re making ice cream, to respond back – who are you kidding? That’s not ice cream and it stinks! And if it’s so good, here – you eat it!

Michael Lewis has been a breath of fresh air with his candor and his tenacity to not only defend his book and the positions he’s taken in it, but to throw all the detractors accusations back at them and make them defend theirs. To that I say bravo.

So again as to answer the initial question I’ll let that be up to you. For it doesn’t really matter what I think in the end as much as it matters what you think. But let me add the following for you consideration.

As of Sunday night of this week the issue of HFT wasn’t even on the radar screen for most of Main St. The issue itself of possible wrong doing or unfair tactics was blatantly dismissed by HFT, the financial media, and Wall Street at large.

By Monday it was topic De-jure across the financial media. By Tuesday afternoon it was still being defended wildly as a “necessity” or “providing a valuable service to the financial markets.” I wrote, then posted my article on this (my own) blog right about noon time and near immediately it was getting hits from across the globe. Then at approx 4pm EST it hit the front page of THE website of record ZeroHedge on this very topic. The headline?

If Algos Were People They’d Be Perp Walked

Nobody, and I mean nobody was making that type of statement. However, it seemed to have struck a chord. For only hours later Bloomberg reported the delay of the most anticipated HFT firms IPO. (link to original story here) And contained within that story the following line: “New York Attorney General Eric Schneiderman is examining privileges such as enhanced data feeds marketed to high-speed firms, while the Federal Bureau of Investigation is looking into whether those traders are breaking U.S. laws by acting on nonpublic information.”

Add to that as of today the following:

 

Screenshot courtesy of ZeroHedge
Screenshot courtesy of ZeroHedge

And that’s not all. Currently as I’m typing this post it is being reported: The Nasdaq OMX suddenly dropped in a mini-flash crash . Original story link here) Along with BATS you know that HFT company whose CEO took the airwaves and blasted Michael Lewis and Mr. Katsuyama for spewing untruths, only to have the firm publicly state and recant in the press the one who was lying was the CEO himself. Yes that company. (Link to article here) Looks like all that “efficiency” isn’t all that efficient. To wit:

Market Breaks: BATS, NASDAQ Declare Self-Help Against Chicago (link to original article here)

But don’t worry, they play a valuable service as they’re so vehemently wanting to tell everyone.

We all just better hope they have a line to the repair crew that’s just as fast to the exchanges for if not…

We’re all in trouble.

© 2014 Mark St.Cyr

Addendum: I was reminded by a reader after I posted the article of the exchange between Michael Lewis and Jon Stewart on The Daily Show® (Comedy Central) that evening. The exchange was quite candid but what was interesting were the points Mr. Stewart and the phrasing of them that caught this viewers ears. They said: “It sounded like he was reading the points you made in your article verbatim. I nearly fell over!”

Honestly I have no idea. Coincidence? Sure. All I’ll say too that is this. No one was making that case, put that way, using that terminology, especially within the time of the release of Mr. Lewis’ book and that interview to my knowledge, but me. If you look at the clips you can see Mr. Lewis himself seems to be hearing it put precisely that way for the first time as he thinks and answers. All I can say is my points were on the site of record that has been THE leading edge for bringing this subject to light for nearly 5 years and relentlessly making the case where no one else would. So would the writers of that show go there as to get background on this subject and possibly have read my points and decided to use them? Sure why not. But again, it doesn’t matter what I think, it’s what you think that matters in the end. I’ll post the 2 clips below and you can judge for yourself.

I tried getting the source code for the clips however for what it’s worth I’ll just post the link where they ran on  ZeroHedge and you can see them there. Sorry for so many links but in retrospect it’s just easier.

Jon Stewart On HFT: “It’s Not American; It’s Not Even Capitalism. It’s Cheating”

If HFT Algo’s Were People They’d Be Perp Walked

Suddenly the world is a buzz with the revelations that High Frequency Trading (HFT) may be doing more than actually harming the markets, it might be destroying the illusion they still are markets.

This past Sunday the world at large was introduced that maybe, just maybe, something was amiss in the financial markets. However, anyone with more than a passing interest in business, finance, and a little common sense could feel in their gut that something just wasn’t copacetic.

Between the Federal Reserves massive QE experiment amplified by the arms race of algorithmic technologies (aka HFT) to shave off a piece of that pie for themselves has been nothing more than breathtaking.

Currently I am staggered as I watch or read many in the so-called “smart crowd” taking to the financial media outlets professing their ire at (wait for it….) Michael Lewis’ assertion that: “the markets are rigged.”  This is where they have an issue? Really? I mean…Really?

Let’s put a few things into its proper perspective. HFT is currently a catch-all phrase or moniker. At one time when it was first introduced it could be (and was) argued it had a legitimate use in making markets more efficient. However that was some 10 years ago. Today’s HFT seems to have been on an evolution of exploitation and adulterated well past the point of resembling the good idea it once was hailed to be.

Efficient markets are when: real buyers, and real sellers meet, agree, and exchange with the least amount of friction to transact. Note the emphasis on real, it’s not there for style, real means an actual buyer or seller. Period. (Just so we’re clear and not falling down the black hole of what “is” is.)

This point is one of the underlying problems in the markets today. It’s not the only one HFT has adulterated, but it just might be the most important to this discussion. For what everyone seems to be missing as they defend HFT as the great market liquidity engine, that so-called “liquidity” more often than not is fake. So I ask: Is fake now acceptable in the financial markets? For if that’s true: Bernie Madoff might be looking for his get out of jail card.

We have laws on the books to protect the markets from people trading on inside information, fraud, and more. People get arrested and perp walked in front of the media as to make examples to show, “This can happen too you!” Yet, if machines are doing the same in an equivalent manner, that’s OK. For this is technology we’re talking here, and we all know without technology, the markets are nothing more than the pits. (pun intended)

Sometimes complicated issues have to be reduced to their smallest form to get an indication on whether or not something is good, bad, or indifferent. And once one reduces this all down to just basic common sense, you don’t need a supercomputer spinning algorithms near the speed of light to come up with the obvious answer of – Duh!

When someone within the financial markets comes across information that is deemed “confidential” then uses that information as to front run said information and profit by it, we throw them in jail for insider trading.

If a machine can detect you placing an order then within nanoseconds execute buy and sell orders throughout the exchanges as to skim a piece or to push markets in a beneficial direction to enrich itself. That’s fine. Are you kidding me?

Since when is it “legal” to insert oneself into a transaction they had no business being involved in? That is not “facilitating” that’s fraudulent skimming, for that “inserted freeloader” was not needed to transact. That’s front running pure and simple. And like I said earlier we perp walk people for that. But an HFT? Nope, that’s now looked upon as “improving liquidity” by the so-called “smart crowd.” Simply jaw dropping in my view.

Add to this the insane notion that these HFT outlets are providing, “deep markets.” Again, I’ll ask, what are we talking about here? Real buyers? Or, the illusion of real buyers? For if anyone remembers, the “Flash Crash” showed everyone just how real and deep the markets were.

All those quotes of illusive bids and ask were anything but illusive: they were illusions. The term “quote stuffing” and its consequences were first highlighted there. Now, it’s as if it never happened or better yet, is defended in an “ancient history” type dismissal.

Ancient history or not, if someone were to set up shop selling land deals at bargain prices touting that the demand was high and pointed to the surrounding landscape pointing out the row upon row of newly constructed facades as proof, you might think or find comfort in the notion, “Well if I need to sell there’s a chance I might find a buyer.”

Then you walked over unbeknownst to find all those freshly constructed home facades were just that – facades resembling a Hollywood movie set. Then what would you think? I know what one should be thinking: “How do I contact the authorities? These people need to be put in jail!”

But if it’s a machine rendering a “virtual reality” showing demands of large bids or asks in any given instrument that’s OK, they’re providing a valuable service to the community showing what it could be like if there were real buyers and sellers I guess. Just don’t think of ever trying to sell or buy one of them, for they disappear faster than a snake-oil salesman can close up shop.

The only good thing that has come out lately on this whole issue of HFT is maybe for the first time in years the cover has been thrown off exposing the parasitic beast that’s been living just beneath the surface passing itself off as a symbiotic entity, rather than the pernicious monster its grown to be.

Now the only question left to ask is: Can they invoke the death penalty for this creature…

Without killing the patient?

© 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)

Why I Say, What I Say, On The Topic Of Everything Social

I’d like to take this opportunity as to express in some other examples why I take such umbrage with so much I see across the web involving the whole social media space, and why I think it’s important to you.

I both see, as well as talk to a great many whom are not only putting the cart before the horse, but think this is perfectly fine because they’ve been convinced by others their horse – is actually a unicorn. It’s one thing to put one in front of the other, but when you start believing in mythical creatures to back up your business plans. You’re going to run into some real issues is all I can say.

The problem here has been the substitution of real business practices, (i.e., making real actual legal tender accepted by a bank as a deposit) glossed over for the proverbial “snake oil” by far too many, Many, that at first blush appeared authentic, but as time has moved on, appear more and more to look like nothing more than shills.

Let me add this for some clarification before I go any further. I’m stating here, some – not all. There are a few (although that number is very small) that truly are authentic, and genius as to their insights of the social media space. But tragically that number is far too few in my opinion.

The issue therefore is how many wide-eyed entrepreneurs buy the proverbial “snake oil” then realize once they’ve been, “had.” Never give the very people who can help them with their challenges a second look. e.g., Just look at the motivational speaker industry as one example.

If you think I’m just trying to express some form of made up outrage as to stand on a soapbox, let me illustrate using the following…

Just recently, I personally was left slack-jawed when I was perusing the web and found one of the so-called social media space “guru’s” website. As I looked I noticed he was critiquing others sites or their presence on the web, both naming names, and posting critiques publicly.

Maybe they asked for his view, maybe they didn’t, either way it had all the appearances to a casual passer-by this was him just “doing his thing.” However, that isn’t the half of it.

As I read further I was stuck that he had a video posted that supposedly was him ranting on why one’s feelings of apprehension on identity issues across the web were wasted thoughts. And, why he doesn’t care and is the reason why “he’s winning.”

Fair enough, only one problem. That video when clicked on has been made “unavailable” and is a blank hole. Also, it had been that way for over a month! I guess the privacy of that video was more private than we were led to believe. But I digress.

Honestly doesn’t it beg the question: If you are a social media guru, along with a self-proclaimed critic/criticizer of others web presence and more. Along with writing books, and charging hefty fees as to instruct others what they should be doing. How in the world can one allow something as obviously damning to one’s own word or ideas stay up for not days, but weeks bordering months? Unless it really is all – do as I say, not as I do. Which is deplorable in my view.

Now you might be saying, Well maybe that was a bad time or he didn’t notice it because he was busy, etc., etc. I would agree with you if it had been a day or even a week. But- week, after week, after week? Sorry, not if you’re claiming people should listen to you and follow your lead. Along with charging them. However, there’s more to this that backs up what I’m trying to express.

This same person also was conducting an online class at a very well-known seminar site where, if people were to sign up and pay for the class, they would receive a free copy of his new book that was just released.

Again, I was left wide-eyed when there on the front page that advertised the class were listed the comments of people who had already both paid and/or taken it. Comments to the effect were (I’m paraphrasing) “Where’s my book? Weeks have gone by and the best answer I can get is a ,”Sigh, we’ll check into it.” from the XXXXXXXXXX customer service? It’s been weeks, and still nothing! If this is what it is – I want a refund!”

The above was the tenor or tone of a few of these comments. Again, smack dad front page for all to see and, these have been up for far more than weeks.

The issue? There they were – with NO response or contradiction from either the seminar site nor the author. Maybe there was a response to these on the authors own site? Nope – nothing. Zip, zero – nada.

Here’s my beef with all this. If this had happened to me I would be outraged. First off, if my people allowed anything as such to be to sitting  on my own website for weeks that was anathema to everything I profess – heads would roll – and they would roll publicly, right on my site.

Also, there is no way I would allow a third-party site to allow comments that scorned me for not doing something that should have been taken care of either by them – or me. If they were allowed to stay there, only one thing can be summarized. Nothing has been done by either. Period.

If the vendor messed up and didn’t fulfill their obligation you could rest assure at the very least, there would be a message on my own site front, and center to anyone that didn’t receive X or Y to contact me directly for fulfillment of my promise.

Then I would threaten the seminar site itself with legal action if they did not either make whole those who had issues, or take down the site and give me the names as so I could make them whole myself, for they would be purposefully inflicting harm on my good name if they continued to leave such things up making me to look bad for their incompetence. I – would not have any of it.

I would do all the above and more, even if it cost me money. Unless – I really didn’t care for the whole thing reeks of “snake oil” as in – do as I say, not as I do.

I mean honestly ask yourself truthfully:  This is the practice or examples one should expect from an “expert?” Hardly, in my view.

I guess all that really matters is – “How’s the book sales going?” And that’s where I take issue with a great many of these social media shills. For I have said over, and over again, “The only one’s making money in social media – are those charging you for their advice on social media.”

For what it’s worth this is far from an isolated indecent. The web is littered with these types of examples.

Again the problem for me is when many unsuspecting entrepreneurs hopes and wishes turn into disillusionment when trying to emulate or put into practice the advice many of these  so-called “guru’s” profess.

For its nothing but wasted time and/or money when the “experts” are saying one thing – and doing another. And that leads many well-intentioned, hard-working, newly minted entrepreneurs, or people with the entrepreneurial spirit disheartened. Which I find reprehensible.

Entrepreneurship is hard enough without trying to weed through the myriad of so-called “experts” telling them they should do one thing, while all the same not drinking their own “tonic.”

© 2014 Mark St.Cyr

What’s Up With Facebook?

Today, one needs to be literally living under a rock to have not heard about the Facebook® acquisition of WhatsApp™. Everywhere across the media spectrum heads are being scratched on why Facebook would spend (wait for it……) $19 BILLION dollars in total for a company that most anyone outside of silicon valley never even heard of.

Is this a move of brilliance and foresight, or, is there something else? I believe it’s a little bit of both along with the following caveat: Not all brilliance, is brilliant.

Let’s first put a few things into perspective. Today, there is a meme throughout the tech world (especially silicon valley) that a Billion dollars is pittance to pay for an idea. Yes, that idea may actually be in the physical world as in a working company or product, but (and its a very big but) until an idea generates a profit (as in actual legal tender that banks will take as a deposit) it’s basically still just an idea. However, “ideas” in today’s world are chump change. And change for chumps seems to start at around the billion dollar threshold.

What’s so glaringly obvious on this current move by Facebook and why, to me is this: More than a sheer move and acquisition of brilliance,  it seems more as an act of the brilliant, willing to throw billions out the window in desperation. Yes I said it – “desperation.” Let me elaborate.

It wasn’t all that long ago when everyone heralded the latest and greatest songbird of the social media coal mine; Twitter™. With great fanfare and more we watched its IPO (initial public offering) take to the skies well above its opening price.

Again the songbird was chirping like many before it with a vibrato in its tone sounding hauntingly familiar to many who “bird watch.” To my ear, the call of; “It’s different this time!” sounded much like the other canaries that came before it. Then a strange thing happened that hadn’t happened before – they had to report publicly, numbers that all these early investors needed to hear so that they too would rejoice in song. Only those numbers were nothing to sing about. As a matter of fact they probably wished they needn’t be spoken at all. That number? User growth.

What followed next was exactly what happens when new world meets the old world. When “free money” (as in Federal Reserve quantitative easing programs aka QE) is no longer as free-flowing as just 6 months earlier. The first sign of disappointment causes knee jerk reactions. Hence Twitter’s immediate stock price pummeling by the market. Welcome to the real world is all I can say here.

Once you go public, that sweet song everyone listened to had better be just as sweet at earnings time or – you’ll be singing a new tune. Yet this is far from the only worries the whole social media genre has working against it in my opinion. There’s something far more troubling and needs to be curtailed or this whole ruse of “social everything” falls apart. The issue? It’s all smoke and mirrors.

Now first off let me state this clearly as to not get everyone riled up in a tizzy as if I just insulted someone’s mother: The idea, infrastructure, ability, and the whole phenom itself that is all wrapped up in this thing known as “social media”  I believe is both genius, and exploitable. (exploitable meaning creating sustainable commerce or businesses)

And – the very people behind the companies formulating better, and far more superior ways of connection and interaction on a near daily basis is absolutely amazing and commendable. I’m speaking directly at the business side where money is to be made, profits to be dispersed, and general business models that are sustainable entities performing in and around the public markets. That is what I’m addressing, nothing more.

So with that out-of-the-way let’s get back to the whole user growth issue. Why is this such an issue or Achilles’s heel for the media space in general? In my view: It’s the key that can open the door letting in the unwanted wind that can knock down a very carefully built house of cards. The idea that ad revenues are the end all, save all, “Ace in the hole” will leave many an investor shaking their head when they find that card might not be a wild card – but a Joker.

What’s being brought to light more, and more about the whole “user growth” issue is what is a “user?” It seems more, and more that “user growth” can be found to mean, “click farm growth.” And that my friends is a very, very, very, (did I say very?) real issue to a publicly traded company if that story finds greater traction.

One of the stunning details to my ear when I listened to parts of Twitter’s investor report was the size of its user base outside the U.S. It wasn’t a mere percentage number, it was an exponential number as in over 2 to 1 or, more than 2/3’rds of all its users. You might say, So what! That’s great news meaning the world is using their service and will be growing it even more once the U.S. catches up. Ah yes, but I would like to through the proverbial cold water on that with just this fact: Nearly if not ALL the click farms are located outside the U.S,. and guess what these click farms do? For a price (a very cheap price I might add) they’ll give you thousands, if not millions of the very product these companies need as “product” to sell advertisers: Followers, Likes, and Users.

So prevalent is this now becoming I give it no more than another year (if that) before it’s reported en masse across old school main stream media. And that is another big problem for all these current Wall Street darlings. Why? Well…when you finally have something to throw back at the very advertisers that shunned you in place of the new kids on the block that crushed their business model, do you not think they’ll return the favor in spades?

Let me give you just a few examples that have come to light recently.

First, you can go on to any search engine you choose and type: “Buy likes followers” and you’ll get a myriad of places to shop to look just like that celebrity you want to emulate. All, at discount prices. And if you think others aren’t on to this let me share with you a great video as to explain this very subject. It was made this month by an outfit named Veritsium and is only 9 minutes long. (You can view it here) For anyone that’s just the slightest unsure of what I’m proposing here, this is a must see as to put it in real world context quickly. Along with understanding why my thesis on this subject is making calls of what some might see as preposterous. Personally, I believe I’m being more prescient than preposterous, but only time will tell.

Which now brings us me back to the prior subject. Facebook buying WhatsApp for $19 Billion dollars. What’s up with all this? Well… I just read a 2 part wonderfully argued piece by Sarah Lacy the editor of Pandodaily™.  In her article she bases her insights around 3 words, “follow the photos.” (you can read the full article here) I absolutely agree with her insights however, I would add 3 more that mirror them: Follow The User. As in, being able to justify with smoke and mirrors if need be they are actually “users.” For if that get’s questioned with any real rigor – all bets are off for these darlings of Wall Street in my view.

So one might be asking; “Just what do you mean or implying by that?” Easy…

If user growth or monikers such as followers, likes, and such are the product you need to sell advertisers so they’ll spend their money with you rather than some other media outlet. If the user generation, user origin or more begins to become more of a hurdle to defend rather than an asset to entice. Then a smart company would do what’s needed to be done if they were both bold enough – and rich enough…

Buy the threatening potential revenue killing narrative at any cost before there may be no more money to do it.

Think of it this way (or as to understand how I view this whole deal) WhatsApp is being reported to have more than 350 million active users. And here’s the key – all outside the U.S. or for lack of a better term, in emerging countries.

And why is that so important in my view? Well if I was in charge of sales at FB I now have the perfect insulation or inoculation from the virus of “click farm user growth.” Now when one looks at my user base all those emerging countries (you know, the ones that have the high amounts of active click farms) suddenly disappear beneath my overlay of real user based on the folded user acquisition of WhatsApp.

You think that narrative at a sales presentation or earnings announcement isn’t worth $19 Billion? I would suggest you think again.

Let me put it into a visual to make my point. First is a price chart of Twitter and their stock valuation. Look at the drop when they announced their earnings report and the reaction to that stocks valuation. For many it wasn’t a bad report however, for the speculative crowd or investor, that user growth figure was a key figure on whether to stay or go. And by the looks of it, not only did they go – they haven’t come back.

Songbird? Or Canary?
Songbird? Or Canary?
And What If The Same Here?
And What If The Same Here?

You think $19 Billion is expensive compared to what is at stake in market cap losses if such a premise and disillusionment to the meme of “social everything” is lost? I could be absolutely wrong (and a great many will gladly tell me how I am) But here’s what I’m not wrong about: Thinking that I may just possibly be right. And the reason for that is at least I’m thinking about the possibilities and implications. Rather than just allowing myself to be mesmerized by numbers that in the end could actually be worse than ever imagined.

Because they might have been imaginary to begin with.

© 2014 Mark St.Cyr

Addendum: For those wondering why I’m making this argument, I use as exhibit A, another of these former Wall Street darlings that seemingly were the “brilliant of the brilliant” in their decision-making prowess. Remember when Groupon® turned down Google® for $6 Billion dollars? Well look at what happens when the market of today’s “new reality is the old reality” meets user growth problems or uncertainties. That  22% sell off? That is just this evening’s move. Not some trend of days, weeks, months, or years. Think this isn’t first and foremost on Mr. Zuckerberg’s mind, let alone everyone at Facebook itself? I would prod you to think again.

Chart courtesy of ZeroHedge™
Chart courtesy of ZeroHedge™

More On The Subject Of Net Neutrality And What It Might Mean To You

It would seem my ideas or the possible implications about the upcoming (hypothetical) changes in the way the web is both used and/or allowed access, to or by service providers is becoming more prescient than I first envisioned.

Today it was announced that the cable giants Comcast™, and Time-Warner™ have plans to merge with Comcast buying the former for around $45 Billion or there about. One might look at such a merger through the same prism as earlier media giants joining, then basing their presumptions on why things will be better in the end for shareholders through “synergies.” Which we know from example after example never seem to materialize.

The landscape is littered with these types of mergers. Need I remind anyone that Time-Warner itself was once part of the AOL® family via such a scenario and how that went? However, this one just might be a little different, and more meaningful to everyone. (And I mean everyone. i.e., Content providers, web-sites, blogs, all the way through the chain.)

For years these providers (the broadband owners) for good or ill have been at the mercy in some ways by being responsible for the infrastructure and delivery vehicles or methods to the public at large, much like a utility company. Yet, unlike most utilities, the revamping or updating of the infrastructure used by the very companies (content providers) that both use, and at times, can tax the system with through-put to the end-user seemed as if the infrastructure wasn’t part (nor should be) of their concern.

More or less these providers acted or thought they had no monetary responsibility to pay extra for anything else in the way of user charges as to help cover these costs. After all, they were the “content” and if they didn’t have something customers wanted to see, then the cable companies wouldn’t need to improve or expand. (Yes I know this is a gross oversimplification or generalization but for this argument it makes it simpler to contemplate the bigger picture in my view.)

In some ways it’s a little, “chick or the egg” type scenario. i.e., If no content, why the need for cable? Butted up against the argument; if no cable who sees your content?

Although both have a responsibility to each other in the end for one is dependent on the other at this point in time. One thing has changed and becoming a little more than clear: With the change in the Net neutrality decision: The power of who, how much, when, or if, has gone from a neutral hand to the providers hand. i.e., The broadband infrastructure owners.

In my post: The Next Segment Of Luxury – Subscription Everything (You can read the full article here) I made the argument that everything as far as the way the web now works, and or is made to work in the future changes. And not a subtle change either. Everything as far as pricing, availability, delivery, and more – changes or, can change. Period.

Let me make more of my argument using just this one example…
If this merger is allowed to go forth. (There’s always congressional approval and other stumbling blocks that must be made in deals such as these.) The new combined entity will control 1/3rd of ALL U.S. households broadband cable service. Does one think with the new law passed which now gives them the authority to treat URL’s differently, or proportionately as they see fit any coincidence on why such a deal is made now?

Sure it’s been in the works for a bit, however, that is how these things work. If you get the favorable ruling you march forward, if not, you say, “Oh well” and move on. Well, the ruling is now – law. And that law does one thing different from any laws previous. It gives the cable providers dominion over their pricing models via URL’s access/speed . And that is a game changer.

In many ways content providers have had the edge. Now? This turns those tables. As I’ve stated before, think of it from this perspective: ESPN® wants all their new and fancy fantasy stats, video replay options, ability to watch multiple games in multiple picture in a picture capabilities, reports simulcast from other areas and more, all on one television screen or through a mobile device – live. (This is all hypothetical for this argument)

Last year ESPN could build all the backroom technology to do it, then just pump it out in a firehose type fashion to the cable operators and, let them be responsible to get it to the end-user. (That would be you or me) Today? The broadband providers can say: “Ummmm, Hey that sounds like some great stuff you want to do. But it’ll now cost you. And, as far as all the bandwidth you’re pushing at us currently? Ah, well, we need to sit down and maybe renegotiate our fee schedule.”

You can make this argument for Netflix®, Amazon Prime®, Roku®, Apple TV®, and the myriad of others. Suddenly, the web that was putting cable operators into the back seat has found that quite possibly this new law hasn’t just allowed them to ride shotgun. Rather, has put them into a brand new vehicle they control with a shotgun! As I said, this could be a change of dramatic consequence.

Another voice on this very topic is Mark Cuban. Recently he posted an article on his blog titled: App Neutrality Should be Part of the Net Neutrality Discussion Jan. 19, 2014 (You can read the entire post here)

I believe this is a topic that anyone who either aspires or takes entrepreneurship seriously should keep up to date on. For as many know. The web can more than empower a business when used effectively, however, in today’s rapidly changing regulatory environment – It can cripple the uninformed or naive entrepreneur just as quickly.

One needs to not only know what’s going on today, but where things may go tomorrow as to be ahead of your competitors to adjust properly or proportionately.

© 2014 Mark St.Cyr

There Will Be Crying

A funny thing happened to the financial markets since the new year. Suddenly, a great many unicorns are pulling up lame, and what about the rainbows they were paraded across you might ask? Well, they seem to have been painted with watercolors, for the reign of reality has shown they were far from anything naturally weatherproof. Let alone permanent.

The issue at hand isn’t something to gloat on, nor some version of, “See I told you so.” What must be made clear is for all the people who chuckled, sneered, brushed off, or anything else the warnings from people like myself, as well as others is this: The new reality is nothing more – than the old reality. And nothing brings on tears faster than reality.

Over the last 5 years the consummate “bear” or short side player in the financial markets has been used as a virtual piñata for the so-called “smart-crowd” paraded across the financial media landscape, along with a newly minted herd of indignant to reasoning “bulls.”

Over, and over, and over again. (did I say over?) Month after month, year after year, any type of weakness in the markets has been met with nothing but buying action. The markets have been up, up, and away on nothing more than a “free money” buying spree. Although the a fore mentioned “smart crowd” incessantly argued otherwise.

Fundamental analysis has been absolutely worthless. Most charting patterns or technical analysis (primarily in the main indexes or correlated ETF’s) has been near worthless on holding any positions overnight – unless one has been a bull. Nearly every technical setup of a bearish nature has been nullified within nearly 48hrs for years. Bullish setups might be more statistically favorable to positive resolutions. However, not at the rate they have been over the last few years. The statistical odds just don’t work that way. Unless – the game has been rigged.

The issue front and center is if one has allowed themselves into believing their success has been from skill rather than just the beneficiary of Lady Luck. For this is where Lady Luck can also show; she can be one mother of a heart-breaker to the uninformed. (let alone make a gold digger blush with an unrivaled swift and thoroughness as to empty one’s account.)

Statistically speaking the main indexes sported a sell off this past month which not only has been near nonexistent for years, but also rather uncommon in decades past. Many have pointed to these occurrences and are expressing “bullish” outcomes or resolutions. i.e., Far more upside to come. I however think something is far different this time.

I could be wrong, and many will point to the recent bounce as proof which has worked every-time since 2008. So why would this time be any different? I believe it’s different because of 2007 thru 2008. All those other times people were actually getting in, or back into the markets. Today, not only are they not in, at every chance they take more out to reduce exposure or increase their safety in cash. (I know cash is a relative term, just think, “bird in the hand vs two in the bush” for this argument.)

To back up my thesis I use the following article that was posted on ZeroHedge.com. (for full article click here)

Equity Funds Have Largest Weekly Outflow In Over Two Years

One may think the data irrelevant however, since the charts, amounts, and other data points are supplied than none other than Bank Of America®. It should at least be taken into account that something has changed. And not for the better in my view nor would it seem one of the worlds, “Too big to fail” protected banks.

Data like this isn’t something a financial adviser at one of these banks is going to whip out in a PowerPoint™ presentation to conclude why you should turn over your assets to them with confidence. Is it?

The real issue at hand here is as I said before: “The new reality is nothing more – than the old reality.” But what exactly do I mean by this. Well, its two-fold. First – Its beginning to once again look, sound, and a few other things exactly like when we were all supposed to take comfort in the financial media “smart-crowd” as they reassured us over, and over, and over again that there was; “Nothing to see here people. Please keep moving (or contributing to your 401K) Please!” Only to then be hit with one of the greatest financial shocks in modern-day history.

The second which I believe and have said on numerous occasions is far worse: “Nobody’s going to wait around if there’s even a chance of another hiccup. Let alone plunge.” The data above seems to support my first inkling. Whether I’m right or wrong remains to be seen. Although what has also changed this time from last time, is the reality of trusted voices who argued on the same side of the issues as myself and others, not only capitulated, but seemingly are crushing their integrity in the minds of many as they seemingly became “bullish.”

Hugh Hendry was the latest, and seems to have done it at the very worst of times. Just when he was about to be, quite possibly, proven correct. Only time will tell I guess. Yet, as I said in previous articles: “Capitulate doesn’t mean you then go and join the other side.” A side many great intellectuals and people I admire made great arguments and reasoning’s why thinking that way was a fool’s errand. To then have them say the equivalent of; “Well can’t beat them, might as well join them!” shines a duller light on the credibility side of the ledger after that in my view.

Since January the Federal Reserve (Fed.) has shocked (shocked!) the financial markets and players with doing precisely what they said wouldn’t happen: Cut or reduce QE. (quantitative easing) Not only did they do it by $10 Billion per month in reduction, but then followed that with another reduction matching the first for a total of $20 Billion dollars per month. What followed next? Immediately our financial markets sold off in a meaningful way not seen in years, followed by absolute chaos beginning to take shape in the emerging markets.

Remember when every financial media outlet was professing with writers and talking head guests that what the markets needed to go higher was for the Fed. to simply get out-of-the-way of the markets because; the underlying economy was picking up steam and was well sufficient in strength and more to take the reins from here? Ooopsy, is all I’ll say to that. It would seem not only has that tune changed, but the band that was on the wagon seems to have vanished also.

Now suddenly China’s shadow banking system is running amok. Liquidity that was fueling the economic boom in China is seemingly overnight turning into a drought. How can that be you ask? You thought (and were told ad nauseam) it was China’s GDP and more that was the cure to all our ails? Seems like they were more addicted to the Fed. than the “smart-crowd” let on. Well, there goes that scenario I guess. But the flip side of that scenario isn’t quite finished, and has probably more real teeth than the paper tiger many thought earlier.

As I stated in my earlier essays: The issues to watch for as to what happened here, was when we “broke the buck” in the money markets. That’s when all bets were off. The place to watch out this time that can ruin the day for everyone is – if it begins happening in China. Well guess what? Yep, it’s starting.

How far it goes is anyone’s guess, but if Argentina is showing us anything (Oh yes, another it seems reliant on our Fed. interventionist policies) as it’s going full tilt towards monetary pandemonium. Who knows what lays next for the others. I am shocked of how little media coverage any of this is getting. But then again, most news now falls into the; “We don’t want to upset the children now, do we?”

All I know is the following: Back in early 2007 I remember both reading, watching, and listening to the so-called “smart crowd” hem and haw about why there was nothing to be nervous about. 5%, 10%. even 20% corrections from lofty prices were healthy for markets. But when they started reasoning the 30%, 40%, and more were even “better” times to get back in to see the market drop another 20% days later was when I knew these people really had no clue of not only what to do, but what was actually transpiring.

I could be totally wrong (and I have been and willing to state it) but, (and its a very, very, big but) this time seems hauntingly similar to last time. And if that inkling proves correct. The crying has already begun behind closed doors.

And if true, just wait till they open those nursery doors fully. For that reality will be more than tears can bear.

© 2014 Mark St.Cyr

The Next Segment Of Luxury: Subscription Everything

If there’s one thing that will always be in fashion, or in vogue it’s this: Someone having something others don’t by one of two means – “in the know” or, they can afford it. Followed with the willingness to flaunt it.

Over the last decade or so brands have been the item du jour of this expression. Although having or using the “correct” branded item has always been sought since probably the cave days. Today we’ve seen just about everything that could have a brand – get a brand.

All one has to do is truly pay attention to what people are wearing or using, and you’ll see the branding everywhere. Yes I understand many are thinking right now, “well duh!” However, what I’m trying to express is when you really pay attention, really look for clues as if doing a science project, the amount of it and the relationship with the wearer or user is absolutely breath-taking. People it would seem have not only brushed aside, but rather – have eschewed their own singular identity for a culmination of brands as their identity.

So again is this a, “well duh” insight? It is if you don’t extrapolate where this phenom can move or morph to. If the basis for “branding” is formed from the tenons of having or using a product that is exclusionary by either price or knowledge, that would inherently suggest anything basically free or accessible to the masses isn’t worth branding or bragging about. Then as anything, that category will get overlooked until someone sees what others may be missing. (Yes, that’s an over simplification, but I’ll trust you get my point.)

So where would the next area of branding look if it were wanting to branch out? Another designer line of clothes? Car? Zip Code? Well, it could always add to, or improve a brand within a category. However, if you really wanted the explosive growth area that any self-respecting brand dreams of; it’s taking what once seemed worthless, and transforming it into something not only sought after, but has both exclusionary and aspirational characteristics contained as well.

Just look at previous everyday items for clues of this phenom. Can you say shoes? Handbags? Sunglasses? Computers? _______fill in the blank. (again either by price or “in the cool crowd”) Suddenly it seemed over night a great set of women’s shoes needed a red sole. A handbag now needed someone else’s initials to be sought after. A computer needed to have a fruit attached and so on.

So where could this next area or product category be? Maybe, its right under our very noses. (or fingertips might be a better example)
The entire web or internet as we now know it via the humble URL.
Let me explain…

The web and everything about it; what people have access to, the speed of that access, the curation of that information, along with the amount of it has been handed a serious new set of rules never before thought plausible. i.e., The web is (or will be) no longer an unenforceable, unrestricted vehicle in both information as well as speed.

For the first time the rules of the web as we have known it, have been inverted. i.e., The web and your access to it can be both restricted as far as what information, along with the speed delivered, with a now monetary enforceable pricing mechanism. It used to be if you wanted better, faster, more – you just bought the equipment you needed, hooked up, and you were off. Now? You still might need all that however, if you don’t pay or have the proper subscription it may not matter.

We live in a world currently under the guise that every URL (aka a web address) across the web is equal. That no longer is, or will be the case going forward. Depending on what today’s menu of search engine algorithmic criteria are ( and will change tomorrow) one may, or may not even wind up in the results. You can pay to be higher, i.e., sponsored ads. And, currently, more traffic means diddly. Just ask any SEO (search engine optimization) veterans.

Remember when the more traffic or search inquiries a URL received meant or implied a higher ranking given on a search page or inquiry? That’s been a misnomer for a while but, the vast majority of users have no idea.

How about just plain ole generic privacy? With all the new “privacy changes” and more happening on platforms such as, Facebook®, LinkedIn®, Google®, et al  or their products; how can one not consider deleting any and all accounts one may have with them? Unless you have to use them because they’re – free. (catch my drift?)

What if I can have all that access or benefits but under a branded pay for banner? One that’s decisively, or more importantly distinctively shows I have something, or better access to something – than someone else.

Hard to contemplate and more than improbable if by law every URL had to be treated equally. However, change that law as to invert it? Then contemplation turns into realization near instantaneously.

So where could all this be leading us, and why in the world did I use the word “luxury” in my opening line? It’s because of the ruling handed down this past week by the courts. Below is an excerpt from an article on Net Neutrality.

Net Neutrality: What’s at stake and what comes next
By Cale Guthrie Weissman On January 16, 2014

“Earlier this week, a ruling from the DC Circuit federal appeals court was passed stating that the FCC could no longer regulate broadband Internet providers as if they were common carriers. In essence, this meant that Net Neutrality — the belief that all content diffused on the Internet must be treated equally — had been struck down.”
(Link to original article here)

So I’ll reiterate; what does all this mean? It means this: If content no longer must be treated equally, then ipso facto – one can now charge a premium (That’s enforceable! Remember that’s the big sea change here.) for not only what you get, but how much, and how fast. Think about the ramifications of that one revelation very carefully. It affects everything  you now know, or once took for granted, about anything and everything. And I mean everything!

Let me try to put this into an analogy of what I see on the coming horizon. Currently today’s social media darlings are based primarily on the assumption they’ll become profitable in the future based on advertising revenues. However, if ad revenues never materialize (which by all accounts they never do) how can these curators of information of any and all kinds make money?

In a world that’s no longer based on everything being equal, access will have its price, and that price will be a paid subscription. For if one no longer needs to treat every URL the same, by law, that means just as an advertiser needed to pay to get seen by the most eyes on a platform, so to will a URL. And if one can charge an access premium to a URL then exactly; who, what, and so much more will, or will not, be found or seen on the web as it currently stands?

The internet based on search engines as well as broadband providers can morph electronically into the same curation based models they decimated over the last decade: Brick and mortar businesses.

Hypothetically let me ask you this. Let’s say all you were allowed was to visit and shop at a Macy®’s department store. Then I suggested if you were bored with that choice just go on the web and search out other clothing brands. As you do what you’re not totally aware of is that this search only delivers (or shows) you the exact same brand URL’s in your results found in the store itself. Almost in the same order as if you were walking the aisles. So what have you gained?

Based on this ruling hypothetically, if those brands were chosen for what ever the criteria a search engine decides, based on how much it has to pay your broadband provider access to deliver that information to you. The results may be based on nothing other than your past search or buying habits, with those brands paying to be on that search – that paid the search engine – to pay the broadband provider – to then make it available to you.  As laughable as it may sound today. This ruling – opens that door. Think that has value to an advertiser?

Another is the amount of data you receive and how fast. Need a result quick? Maybe you need to pay more for that. Need more than only a limited amount of results? Again, maybe they’ll be a premium due for that also. Think of the “value” in selling that to an ad agency over some pop up.

With an ever more increasing disdain for intrusive ads popping in and off of one’s screens, if the suppliers of information can now charge extra for access and delivery? Just think about the implications. Want no ads? Sure, but (and its a very big but) you get limited access to X.Y. or Z.  Or, the results you get will probably be “paid” placed URL’s. (Can anyone say “native content advertising?) Want real information as opposed to Wiki? It’s all yours instantaneously and worthy of rigid scientific analysis with your paid subscription to _________fill in the blank.

Just one example of how deep and far-reaching the implications of all this goes is this: Why would any advertiser spend a penny of Facebook® or the like for an ad, when one can pay and have sole dominion via a search or subscription model?

Would you rather have full access to a free Wikipedia® if your child has a sudden ailment because it’s free with your service to Google? Or, would you pay to have let’s say Bing® as a paid subscription service if it comes with unlimited access to something like “www.Ask A Real Doctor” because only real doctors are allowed to post or approve text on the site?

Take away the theory that ads will supply the revenue of these platforms by allowing those very advertisers to move funds into what could possibly be the greatest bang for the buck customer interaction or engagement since the start of the web as we now know it, and $1 million dollar valuations seems too much for many of today’s Wall Street darlings let alone $40, $100, $200 Billion, and more.

The term “walled gardens” once attributed with distaste to companies such as Apple® and others might be just as brand centric and sought after as the very devices themselves. The world as we now know it could really change in ways unforeseen in shape and scope as smartphones and tablets themselves revolutionized everything digital. I think the implications are that great. I’m not trying to be hyperbolic. I truly believe the implications are staggering. Whether they turn out to be true is another matter.

I can just visualize the various commercials to accentuate all this:

Two people sitting at a desk or bar…
First person: Did you have a chance to look up that vacation area we overheard that couple talking about the other night? I couldn’t remember the name and it sounded great the way they were carrying on. But when I looked on-line I couldn’t find anything remotely near what they were talking about. I typed in what I thought was the name and where but still nothing. How about you?

Second Person: Oh yeah! I couldn’t remember it exactly either, but when I typed in what I vaguely remembered it popped right up. I couldn’t remember the name either but I guess I was close enough. They have everything there! Great shopping with designers like X,Y, and Z. Great restaurants, shows, and more. That place seems incredible! We should book something together with our spouses they’ll freak on how great the place is.

First person: Wait – what did you use for the name when you searched?
Second person: “vacation hot spot island paradise.” You?
First person: Same thing. Only all I saw were free Wi-fi addresses to use when on vacation, and liquor recipes for “island drinks of paradise.” Followed by cheap rates to motels with or without wi-fi hot spots.

Second person: Tell me, just how long are you going to keep acting like you’re 26 years old and get off your parents plan, and pay for your own? Or start realizing being cheap isn’t being frugal – you’re being left out. What good is gobs of free useless information? That’s why I use Bing-a-rooni. It may cost more but based on your latest “free” search on Google-riffic (or _______fill in the blank) you want a real vacation or know how to get free wi-fi cheap?

Fade to a logo followed with: Subscribe today at www… And join the rest of the adults. Corny? Yes. Plausible? Absolutely!

Who knows what, where, why, or how things transpire from here. However, what you thought you knew about the internet, branding, and their relationship to each other; as well as whom pays for what going forward just re-entered the great unknown in my view.

Yet if history is any guide. Once you allow anything to be “exclusionary” with a component for entrance to that club to be money:  Some, “gotta have brand” that people will pay for as to show they have it and you don’t will emerge – one way or another. And that changes everything.

Again!

© 2014 Mark St.Cyr

Gauging The Gauges (Final Thoughts)

(Links to Part OneTwoThreeFour)

I started this series with the stated goal as to make not only entrepreneurs, or people with an entrepreneurial mindset rethink, or realign their thought processes. But more importantly; to get what I believe are far too few as to question exactly where, and what, true relevancy their data points provide.

Whether I’m speaking to a crowd or speaking with someone one on one, I have come to believe the most disrupted area regardless of the subject is this: It’s not for a lack of information, it’s the overload of useless information. Not only do many not know what they should pay attention to; rather, it’s what they should avoid altogether!

I found it quite humorous that during this week when I decided to make these arguments and push this point home nearly every example I opined has landed center stage across the media landscape the very same week as never before.

Suddenly Twitter®, China, the unemployment report (UE), and others were covered both in main stream media, as well as the financial, with an eye seemed stricken by jaundice. Suddenly this past week all the unicorns and rainbows were being questioned. For instance: When did (or has) the media ever questioned the impact of,  “good news” in the UE# going down? Suddenly everywhere good – was bad.

The real reason I believe is this: The report was so blatantly misleading, even a preschooler could see you can’t get 1+1=2 using their formula. Also it seems that suddenly China came into question across the media where even stories from George Soros and others are now questioning everything China. I thought we were told anyone questioning the China narrative of saving the world economy didn’t know what we were talking about? Looks like maybe we knew (or smelt) more than anyone thought.

Today’s issue at hand is this: Information is only that – information. It’s one thing to use information to gain an edge. However, if you don’t know what questions to ask about that information; it can turn that edge from a useful tool in hand – to a hand with an edge at your throat.

To be successful in this day and age as an entrepreneur where the web has not only obliterated information scarcity, it’s transformed it into information overload: Understanding what you need to pay attention to, as well as what not to – is just as imperative a skill as knowing whom too listen to, as well as, who not. Followed by – where to find it.

Just because someone’s on television, radio, or print means absolutely nothing in terms of credibility today as it did just 10 years ago. The sometimes illusion of credibility we bestow comes from the “legacy effect” where previously most figures in media had a near unquestionable authority, or credibility. i.e., Did we question Walter Cronkite’s sincerity? Or 60 Minutes® reporting?

Whether we should have doesn’t matter. Back then if it were stated by them we took it on faith it was accurate. If a person appeared on, with, or was even mentioned by them, we took it on face value there was some form of reputable vetting process going on behind the scenes for creditability while more often than not, there actually was. Today? I hope you see my point.

If you want a glaring example of this just look at the stories that can be found if you wish to look, where financial media personalities actually receive monetary bonuses from their networks for news or generating news that moves the financial markets. Can someone explain to me why this is a good thing? (Actually don’t. I mean it. Pleeeease – don’t!)

Forget financial how about just plain old media itself. At one time if one read it in Forbes®, The NY Times®, and more there was a certain sense of implied “excellence or content authority” awarded. Yet today?

With “native advertising” now the buzz phrase and all media desperately seeking dollars anyway they can garner it for their very survival – never mind relevance. Is it any wonder Steve Jobs insight just before he passed has more meaning today than when he first made the observation? (I’m paraphrasing) “What will be more important than the content of the future – will be editors. We need editorial more than ever.”

Honestly ask yourself: If it’s on television, radio, or print. Is it truly factual, credible, or relevant any longer? Or, is it just spin spun by whomever?  If it’s in the Times, does it mean what it once did? Forbes? My view is absolutely not. Today these publications are destroying their once highly held brand cache’ by allowing virtually anyone with a keyboard to contribute content. What’s more troubling is the way they are viewing the “editorial” process.

What is informative news, or insightful information you can act on if more and more of what you read is just a story that’s paid for, then placed as to look like real news? Can you always know what is insightful or truthful as opposed to just shilling? Welcome to the new world aka, “native advertising.” (for more on this subject I recommend beginning with some great insights written on this exact topic at PandoDaily.com)

So as I end this series what is it that I’m trying to say in the larger context? One person expressed: “For a person who’s in the motivation business, you sure don’t sound all that motivated about the future.” Actually nothing could be further from the truth. Besides, being motivated to pursue one’s goals based on seriousness and truth, trumps rah, rah, rah, along with unicorn and rainbow thinking. Just ask any former multilevel marketing participant.

In contrast to the sheer ridiculous readings and interpretations many are inferring from today’s gauges, or what many still regard as a “gauge.” I believe we are entering one of the greatest times in probably a generation or more where opportunities for real advancement, real growth, real wealth and riches are going to bare themselves in front of entrepreneurs that can see what everyone else is missing. Let me illustrate using one example.

If one were to take the UE# and use it at face value the way it has been presented both previously, as well as today by all the “intelligentsia.” Then use it as a gauge on what, where, or why to start a business or more. Those projections, formulations, and reasoning could end up being disastrous, or worse.

How does one contemplate moving, expanding, taking on more debt, or gearing up in the direction of supplying gadgets, do-dads, clothing, housing, and more based on these reduced roles of the unemployed? Just 5 years ago the number had some informative value. Today? It’s so adulterated if it were a movie it would need an X rating.

The Great Wayne Gretzky famously said (I’m paraphrasing): “I don’t go to where the puck is, I go to where it’s going to be.” Though many believe they are watching the proverbial puck (all the so-called “smart crowd”) I believe they’re oblivious to the fact they may be watching the wrong game!

This is precisely where: The understanding of conditions, not looking where everyone else is, reading information correctly, and verifying their accuracy or relevance, is what will both define, as well as make the average entrepreneur –  into the extraordinary.

You must not only know how to read the writing on the wall, you must also verify the message written is both intelligible, and actionable.

Not the equivalent of graffiti where people see what they want to see as if it were painted by Hermann Rorschach himself.

© 2014 Mark St.Cyr

Gauging The Gauges (Part Four)

(Links to Part OneTwoThree )

If there’s one gauge a great many are convinced is “The” gauge as to whether or not a company, person, idea, or anything else is relevant, along with the equivalent powers of a sorcerers stone: It’s the phenom of social media. Along with the metrics used by the companies responsible for it.

This is where I believe many in the end will find not only was it never as it seemed or claimed. It will make the term, “smoke and mirrors” blush.

Not only are the giants like Facebook® and others showing underlying issues, the ancillary platforms such as Twitter®, LinkedIn® and more seem to be having difficulty in delivering (or describing) all that “value” promised to both investors or advertisers. However what seems glaringly obvious to my ear is the near exclusionary lack of focus for pleasing – the customer.

To give you some indication of just how removed from the end-user experience I believe these social darlings to be, I sat here for minutes debating with myself whether using the term “customer” above would be inferred as I meant it because: who really is “The customer” in the social space?

When I state “customer” do you know definitively whom I mean? Is it the user as in Dick or Jane posting? (Which is who I wanted to show) Or, is it the big data purchaser, advertising company, or Wall Street? Just having that pause as in needing to actually think or choose which, should be a tell-tale sign to anyone truly looking for understanding of the whole social space, along with its value as an indicator.

Currently all that matters across this spectrum is having the proper story to tell (eyeballs for ad dollars) as to please (or quell) Wall Street in justifying current outrageous market caps and stock prices.

When a firm needs, or feels the need, to place Wall Street concerns over their customers user experience or privacy concerns, you may have a business model, but that model is destined for failure. Time is all that’s needed to bring on the inevitable. Sooner or later – you’ll run out of it.

If this business model is the end all be all, shouldn’t we all be, “Liking” – “You’ve got mail?”

How about Twitter™. The now newest, greatest, revolutionary new platform to come along since sliced..I mean FB. In under 3 months since its IPO (initial public offering) its jumped from the hopes of making money, to a company worth some $40 BILLION dollars. (remember it currently doesn’t make a profit)

If one listens carefully, they now seem to be desperately jaw boning any and all types of advertising plans to justify why all this new-found wealth (share prices) needs to remain there in this increasingly nervous market.

This may be more difficult than first imagined with it being reported across the media space, the tweeters themselves are expressing down right contention to any so-called advertising pushed into their tweets. If that’s true where’s the model to support $10 Billion let alone $40 Billion?

Problem with all this is the very real fact that all the “free money” being pumped into the markets fueling speculation by investment funds from the Federal Reserve is suddenly being reduced. All these speculative bets fueled by “hot money” will be the first to suffer à la 1990’s style. And anyone with any financial acumen knows it.

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

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

Advertisers and users want to know exactly what they are getting. As well as – what they’re not. Just a few years ago that was looked upon as only something the “uniformed” would ask. One had to just have “faith” in all these concepts for it was such a new industry. Well – not anymore.

One of the fastest growing sectors within social media oddly enough are companies whose sole purpose is to prove all those ads the social media giants say is being seen by real people actually are. Along with verifying (or trying to) legitimate users as opposed to fake.
What a nerve, where’s the trust I say! Oh the humanity!

Don’t get me wrong, social has its place. However, that place must be put into its proper context. Along with real, understandable, verifiable metrics to warrant the allocation of real money.

Just remember this if nothing else: As of this writing, I know of no bank that accepts, “likes, followers,” et al as payment, deposit, or legal tender to pay the mortgage. Period. And what shouldn’t be lost on this is neither do these companies.

Yet, if you would like to purchase a “Like,” well, you can buy them for pennies by the thousand. Need Twitter followers? Again, no problem – about $10 per thousand. Or, if you need that big time, look like your someone important – you can get a million, for around $600.00.
You can read a ZeroHedge™ condensed view on the latest from an AP® article here.

It seems all these business models based on anything and everything advertiser related will be coming under even more scrutiny. It seems “big media” may all of a sudden be realizing their getting smoked by these new kids mirroring or taking a page from their old tactics.

With such revelations now being reported, exactly what takes place when “big advertising” no longer accepts social medias metrics?
Ad placements and revenue allocations are based on these very (now highly questionable) metrics they’ve been touting or using as to bludgeon their competition in enticing ad dollars away from them, and into their coffers.

They’re not alone in questioning current models, IPO’s, acquisitions, and more. It seems since we are in this new blood chilling climate, aka “QE tapering.” The very crowd that cheered the cheers the past 5 years, is now pondering the “brilliance” of their earlier calls. Along with a more pointed glare towards the “brilliance” of some others. Just look at what was shown and hailed as evidence to support the brilliance or prowess of these titans of social.

Another gotta have company of social media? Well Instagram® was bought by Facebook for $1 Billion because? Well, I guess you gotta have it so no one else can. Right? So scared it seemed that users were leaving FB for Instagram the need became self-evident. Or, so was reported.

What else has been reported? Well, its been stated by reputable sources after the purchase of Instagram they began losing nearly half their daily users per month over a privacy backlash, a fury over ad placements, and more. Hmmmm.

So, what is the touch stone of all social media giants to do with not only a diminishing base on its newly acquired platform but, is once again losing the narrative? (the narrative, they are the model because, they are FB)

Well don’t spend another billion dollars. Go full-bore in offering $3 BILLION for a company that seems even more implausible to turn a profit based on logical (verifiable) metrics: Snapchat™.

All I’m going to say on the matter is this: Tell me, in this day and age of the NSA and all that suggests. Does anyone believe there’s going to be “no record” of your snap or chat? If you do, I have a bridge in Brooklyn and I’m prepared to make a deal if you act today, and you’ve got cash. (Sorry no “Likes” regardless how many)

Yet, the media were all abuzz regarding the prowess of the Facebook hierarchy in offering such a buy out and the implications for growth. All this backed by the astonishingly obscene disregard for cash money shown in the face of – well – cash money by the CEO of Snapchat.
Again in Groupon like fashion – he turned down the offer.
(I’m still shaking my head in disbelief as I’m typing this)

The so-called “smart crowd” across the financial media landscape hailed both sides for prowess and brilliance. But – something happened.

It seems before the ink was even dry on the rejection letter Snapchat and its reason for existence, i.e., privacy without a trace. Was hacked and made public via a data breach exposing if not all nearly all its users private information. What could possibly top such an awkward embarrassing (along with devastating) issue to also be revealed?
Seems they knew about the possible threat and took it as, no great threat. I’ll bet they wish that story had gone “poof” like their products were supposed to.

Did I also mention FB is currently denying or countering reports teenagers don’t like using them any longer? Funny to have to defend something which only yesterday was a given this demographic would grow ad infinitum. But hey, it’s not like the business model was based on that demo right? Wait…

Now sure, I’ve thrown a lot at this space and some of the largest players involved here. And yes, maybe I could have cut this article in half. However, I thought it was far more important to bring back into light a couple of scenarios within a sector for which there are too many people running around seemingly trying to shut anyone down or brush them off as nay-sayers who questions their story, metrics, or anything else in this space.

I also believe social media is in danger of ruining itself by its own hand by the outrageous over-promising, and under delivering taking place by the very companies stressing why, “it’s different this time.” Again, it sure sounds a whole lot like, and looks a whole lot like the 90’s to my eye.

The entire social media space I believe can become something greater and better for everyone going forward. But only if everyone dumps the unicorns and rainbow treatment – and gets serious about where it goes from here.

It’s both fair, as well as prudent, to understand and question everything – and anything – in this space. Even though you may be looked at as some “doubting Thomas” or worse, some “social illiterate.” For if you’re going to put both your hard-earned money,  as well as your time, and more importantly, reputation into this space. Understanding these gauges along with the ability to read them correctly, then use them accordingly isn’t heresy. It’s called business.

And being an entrepreneur should demand you treat them as such.

© 2014 Mark St.Cyr