Facebook IPO- huh?

Posted May 15, 2012 by gutlessnation
Categories: Uncategorized

The highly anticipated Facebook IPO has everyone on the edge of their seats.  Except me.  They just decided to increase their IPO price to increase the supposed value of the company to somewhere between $80B and $100B.  Here are some numbers I found from various sources.  The only logical conclusion I can draw from these is that no one really knows what’s going on, and the Executives at the company in question must have a very good poker face:

In 2010, they made $500M.  Or maybe $600M.  And this was on revenues of $1.6B.  So we’re looking at an operating margin of between 31% and 38%.  Not bad.

The “projection” for earnings for 2011 was $2B on $4B in revenue.  That was recently revised to $1.2B in REVENUE.  Yes, you read that correctly.  Their revenue = 60% of their expected earnings?  That sounds like a company falling off a cliff.

For the sake of analysis, let’s go with some friendly estimates:

40% operating margin.  Let’s assume the company became even more efficient than their previously highest estimate.

$1.3B.  We’ll assume the estimate was close, and throw in a little buffer.

1.3B X 40% = $520M.  This is about the same if not lower than the previous year’s earnings.  And this is with very conservative estimates, which means it’s probably down.

Let’s go with $500M in earnings, for ease of math.  For a company worth, on the low end, $80B @ $35 a share at the IPO, they’d be floating approximately 2.3 billion shares.  This brings EPS to about 22 cents, and a nice low and comfy P/E ratio of 159.

WHAT?  Did I read that correctly?  Yes, you did.  As a frame of reference, a P/E ratio of somewhere between 10 and 25 is usually a good range to consider purchasing a stock.  There’s also a few other variables, which are not empirical, but rather editorial.  Regardless, they’re still worthy of a mention:

1) Anyone who wants to be on Facebook is probably already on there.  I found I am on there a lot less than I used to be.  I believe I’m suffering from “Facebook Fatigue”, and I’m probably not alone.  I would assume at this point the rate of fall-off will exceed the rate of new users, hence reducing the user base and revenue potential.

2) They generate very little from advertisements on mobile devices, which are now surpassing PCs and Macs as the primary electronic communication devices.  If they start blasting people with advertisements on a 4-inch screen, people will exodus faster than drunk underage kids at a busted party. 

3) There is really no barrier to entry.  Look at MySpace.  It went from great to gruel in a matter of days after Facebook took off.  There is nothing to stop “the next great social media site” other than the fact that it hasn’t been built yet.  Not if, but when, that occurs, Facebook’s stock will plummet so fast there will be no buyers for the newly-minted penny stock.

4) Impending privacy lawsuits and/or hacking.  I foresee a whole bunch of these if they don’t get their act together.  As a public company they have to follow a completely different set of rules and are more accountable than a private company.  Even a small slip-up can cause major damage, and they’ve already had quite a few.  I’ve never seen a class action lawsuit involving hundreds of millions of people, but there’s a first time for everything.

In conclusion, a more reasonable offering price for this company should be in the $10 range, and that’s assuming you don’t believe it’s past its peak.  One last question for you.  If your $5 latte at Starbucks all of a sudden cost you $18, would you push people out of the way to buy a dozen of them?

There are some serious problems with the logical circuits of people in this country.  My advice – if you’re planning on buying Facebook stock at or shortly after their IPO, see a psychiatrist first to make sure your brain is functioning correctly.

Pepetual Energy? No Thanks, I’d Rather Watch Bieber

Posted May 15, 2012 by gutlessnation
Categories: Uncategorized

So I was scrolling through countless articles on Yahoo today, trying to find something eye-worthy.  After clicking “next” about a dozen times, and seeing useless drivel like “Kristen Stewart’s dress” and “Justin Bieber’s ugly shirt”, I finally found something buried in the back that caught my attention.

Perpetual Energy.  Well, not exactly, but close enough that I can’t believe this new discovery is not on the front page of every newspaper in the Country.  I guess since it’s not a reality-based TV show, and has nothing to do with if gay people should be allowed to get married, it doesn’t warrant much attention.

It turns out scientists at Berkeley have engineered a harmless virus that can produce electricity via piezoelectric (generating electricity using force) means.  It’s like a bunch of tiny hamsters running in their wheels, except it’s more like they’re dancing the polka.  At this point, it’s a very small amount of electricity, and then there’s also the issue that it’s a virus doing the polka.  But the idea that microorganisms could one day power our homes and businesses sounds pretty darn good to me.

Although as usual, the comments are the best part of the article.  All of the products of public education are out in droves making inane comments about things that they simply don’t understand.  Perhaps if they finished high school, or considered post-secondary matriculation, they’d understand the very basic concepts of physics and biology that most of us learn in third grade.  And for once, I’m not being sarcastic.  In third grade I hooked up a light bulb to a potato for my class, and it turned on.  In fourth grade I hooked it up to a generator, where it would turn on when I spun a wheel.  They don’t even have to go that far.  Just google “hoover dam”, and anyone can find out that by using “magic” the enormous amounts of water that fall over the edge via “gravity” spin turbines (big wheels) which then generate a significant amount of energy.  But I wouldn’t expect the average coddled entitled American to know how to read, so the drones will continue to prosper and ridicule scientists who may hold the future to the success of our Nation.

Oh well, I think American Idol is on tonight, and maybe Dancing With The Stars if I’m lucky.  I can’t wait to watch the people on those shows produce actual real sustainable economic value via an overload of advertisements.

Dimon = Coal

Posted May 8, 2012 by gutlessnation
Categories: Uncategorized

Jamie Dimon is a numbskull.  He recently stated that the U.S. economy is holding a “royal straight flush”.  This alone shows his ignorance.  If you’re going to utilize an analogy like this, at least consult someone who’s played poker.  No one has ever heard of a royal straight flush.  This is because, by definition, a royal flush IS a straight flush.  10,J,Q,K,A.  These are the only cards that can provide this fantastic hand, and what do you know!  They’re all in order.  This makes it a straight.

That being said, his other comments show a disturbing amount of ignorance coming from someone controlling so much money.  Here are a few excerpts:

“The world’s strongest military”.  Does he know we basically stopped funding this, and all of our F-22 Raptors are from 2005, have never seen active duty, and have issues with their oxygen systems leading to hypoxia and death of our fighter pilots?  Menwhile, back in China, they’re building aircraft carriers at a pretty serious clip.

“Best businesses”.  If he’s referring to the embezzling banks, well of course!  Except that when you take Apple out of the Fortune 500 earnings are zero, and if our businesses are so great why is our net GDP (adjusted for inflation) still negative after 4 years?  Employment rate?  Yep, still high.  So what are they doing that’s so great?

“Most entrepreneurial”.  This used to be true.  Until the existing administration added so much red tape and fees and taxes for small business owners that they can’t even get out of the gate.  Once again, if this is true, where’s the tax revenue?  Where is the job creation?  Sorry.  I haven’t seen any empirical evidence that ANY of this is taking place.

“Deepest Capital Markets”.  Deepest in what?  Red ink?  Great, the stock market is going up, and Facebook is about to have an IPO that puts the P/E ratio at about 99.  The problem with the stock market is it’s a secondary market that doesn’t create any actual real economic value.  And anyone over the age of 18 knows that the “wealth” created from it can disappear in a flash.  The truth is the stock market is at 1996 levels when you adjust for inflation.  In 16 years it has generated exactly squat in terms of returns.  But yeah, it’s doing great. We should all pray to the stock market Gods that this artificial ponzi scheme doesn’t collapse under its own weight.

While we’re at it, we’ll ignore the $15 trillion in debt, the dysfunctional Congress, the ridiculously high unemployment (shall we adjust for labor participation rate?), and the nearly 18% of the nation on food stamps and welfare.  Sounds like a “royal straight flush” to me.

Sheer Moronicism

Posted March 21, 2012 by gutlessnation
Categories: Uncategorized

I know it’s been quite a while since my last post.  I’ve been busy.  Deal with it.  I’d like to comment on the utter stupidity of today’s journalists, and how they should try to at least hide their support for our wonderful leader who has managed to spend more money in 3 1/2 years than all previous Presidents combined.

Here is the link to the aforementioned stupidity:

http://money.cnn.com/2012/03/21/news/economy/gas-prices-impact/index.htm?iid=HP_LN

There are so many incorrect assumptions and such poor data usage in this article that it makes me nauseous.

Where shall we start?  The first problem is comparing it to 1981.  In March of this fine year, the median house price was $66,700 and average price was $81,600.  Median is a better metric here, since the 1% obviously drove up the average, and they’re not too concerned about gas prices.  If we compare that to Oct, 2011 (the most recent data available), we’re looking at $212,300.  I don’t know about you, but I can buy a lot of gas for $130k.  And how much did your cell phone cost in 1981?  Or your extra car?  Or your computer?  Or day care for you child?  Or college?  Exactly. 

The next dubious argument is comparing the cost of gasoline to spending, as opposed to income.  There are many things that can assist with increases in spending (hence reducing gasoline’s overall percentage of the total).  Massive amounts of debt.  Trillions in credit card debt can buy a lot of stuff.  How about inflation?  Retail sales were up last month because the same crap costs more money.  It should be compared to net income (i.e. – what people have to actually spend), and even more so it should be compared to residual disposable income (what’s left after you pay all your bills).  Personal savings rate can be used as a proxy for this, and came in at 3.5% in November of 2011.  Median Household Income in 2009 was $49,777, and I highly doubt it has increased over $12,000 during the “Great Recession”.  For the sake of argument, I believe these numbers to be accurate (all were obtained from the US Census and BEA), and reasonably recent.   Using some really basic math, the “median” family is saving $1,742 a year, and drives about 13,500 miles a year at an average MPG of 25 = 540 gallons.  This means the current cost of gas is forcing a NEGATIVE savings rate among the median household.  No big deal, eh?  This is why credit card debt is back on the rise.

I haven’t even mentioned the inflationary forces because of the high prices.  Every product you buy off a shelf had to get there via a semi, barge, plane, or some other neat transportation device requiring fuel.  The high prices are going to force consolidation in the transportation industry, skyrocketing airfare prices (already occurring), and increases in prices of imports, while reducing exports.  Ensuing high inflation will force the Federal Reserve to increase interest rates, which will force banks to increase mortgage and other loan rates, further depressing the housing markets, and possibly forcing another taxpayer bailout of the “TBTF” financial institutions.  This will force an increase in taxes, an increase in the National Debt, or most likely both.  Companies will also be forced to lay off their workers in an already unstable labor market, increasing the number of people on public assistance with fewer people to support them.

Just a quick reminder – the title of the article was “Rising Gas Prices Aren’t As Bad As You Think”.  Perhaps these writers should try to use their brains a little before posting drivel.

Gross Incompetence – That We Have The Luxury Of Paying For

Posted November 8, 2011 by gutlessnation
Categories: Uncategorized

So we received a notice at my place of employment indicating we must re-register our company on an “approved vendor list”. Sounds easy enough. This is where the saga begins.

So our accountant attempts to register us, but is unable because she is “not the individual who set up the account”. So she contacts the help desk. They won’t speak to her because she’s not one of the “authorized points of contact”. She requests a list – which is provided – and it includes names of four people who no longer work here, and haven’t for a long time.

Upon mentioning there are no valid points of contact, she requests the help desk let us know who set up the account. They can not provide the name to her, and it is no doubt someone who no longer works here. The last time we were registered was over six – yes – six years ago.

So we are now required to register, but no one who still works here is allowed to register us. And even if we could hunt down he or she who set up the account, we can’t even find out who it was.

I, as well as all U.S. Taxpayers, are forking over our hard-earned money to ensure this process occurs. This is part of the Government’s efforts to be more transparent. The only thing that’s transparent is that there are too many dolts that need to find a new line of work, like fogging a mirror or converting oxygen into carbon dioxide.

I’ve Had Enough Of Financial Institutions

Posted September 19, 2011 by gutlessnation
Categories: Uncategorized

I received a letter from one of my credit union accounts recently.  It indicated that I must make a deposit, close my account, or incur a $10 monthly fee for the right to keep my account open.  I just called them to close my account.  That’s probably the best customer service I’ve had since I opened it.  The primary reasons for not using my account are as follows:

1) In order to pay my credit card I must first transfer money into my savings account, wait a few days for it to clear, then pay my credit card from THAT account.  This is not a model of efficiency.  And if I should somehow forget to do the second part and come back 3-4 days later, then I get hit with a late fee, get a black mark on my credit report, etc.  This is simply stupid.

2) I got kicked out of my online account monthly for failing to change my password.  Then they created a new security measure called an “authorization code” in order to retrieve my password.  Only problem is they never indicated what this number could possibly be.  I’m busy, and don’t have time to call all of my financial institutions every month to have my account unlocked for the right to pay my bills.

3) Their website is a piece of junk that a 3rd grader could have put together.  It’s ugly, non-functional, and they didn’t even have the courtesy to line up their text boxes.  It makes me wonder how it even works.  MacGyver could have put together a better website with chewing gum and a couple of matches.

That being said, it is obvious that the reason for them forcing closure of my account is because they are losing money.  Here are some suggestions, coming from a business turnaround specialist, that the bank could have followed rather than firing their customers:

1) Stop sending paper statements.  They invented these two things called “the Internet” and “PDF files”.  Use them.  I don’t want to know how much money they waste every month sending these stupid statements out telling customers what they already know.

2) Stop over-clustering your locations.  There are about five or six locations within a 10-mile radius of each other.  Rather than saving your existing customers about 18 seconds of driving, why don’t you put up some branches in areas where you don’t already have customers.  It’s not necessarily cannibalizing sales, since all the money goes to the same place, but it sure kicks up your overhead figures, which then have to be paid for by your customer deposits.

3) Per above – build a website that works, and doesn’t kick you out every month.  If you want to spend money, don’t build a branch, build a website.

4) Create Mint.com connectivity.  I use Mint to track all of my accounts – except this one.  While this is not necessarily a make or break situation, virtually every other financial institution in the country has done so.  Maybe it’s time to get on board.

5) Stop placing bets on stupid Wall Street crap with your customers’ money.  You’re a small shop, and should primarily make your money on the spread between loans and payment rates.  It’s unfortunate that new legislation has cut the interchange rates for smaller institutions, but that’s the way the cookie crumbles.  Find other ways to increase revenues and cut costs.  Firing customers is not usually the best way to achieve that.

So now I have one less account to manage, and my credit score will now fall due to the closing of my account and having lower capacity for my all-important utilization/capacity ratio, but it’s better than paying for the right to give someone else your money.  I’m relatively young, and have already decided I will never use banks and/or credit unions unless I have no other options.  I hope the rest of America feels the same way, follows my lead, and manages to shrink the number of ever-gluttonous financial institutions.

A Must Read

Posted September 19, 2011 by gutlessnation
Categories: Uncategorized

I’m sharing this article written by Jim at The Burning Platform.  It is an excellent, well-written op-ed piece promoting the merits of Ron Paul.  With all the tireless bickering between politicians these days, it’s a shame this guy doesn’t get more attention.  Enjoy.

http://www.theburningplatform.com/?p=21641


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