The Market Ticker
Commentary on The Capital Markets- Category [Company Specific]
2015-05-28 06:00 by Karl Denninger
in Company Specific , 186 references

I know quite a few people who were enamored with this stock and had fairly large positions in it....

That's basically a round-trip from 2013.


PS: I suspect there will be many more cries just like this one in the coming weeks and months.....

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Broadcom is allegedly in "advanced" talks to be acquired.

Ok, except that it sells at forty-seven times earnings and more than three times sales.

Is this a good company?  Yes, and has been for a long time.

Is there any argument for paying nearly 50x earnings for a chip manufacturer?

That, my friends, is the question.

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2015-05-15 07:10 by Karl Denninger
in Company Specific , 1044 references

Heh heh.... it's starting....

I bought an Apple Watch. I didn't preorder it, because at first I didn't even want one. I warned people who asked me about the company's first wearable: These things (Apple things) always get much better on the second attempt. Apple's product history, perhaps even more so than other tech companies, is peppered with examples: the substantially thinner second iPad, the next iPhone that had 3G data, the MacBook Air sequel that had decent battery life and a slimmer design. Despite knowing that, something changed for me. I became an early adopter.

Sounds positive, right?  The watch changed his life and we all live happily ever-after.

Uh, no.

What the author's bottom line turns out to be is that it's not changing his life, it's not enabling things he was missing and he is out the $700, which truly stings.

Uh huh.

Unique?  Maybe, maybe not, but the beginnings of a nightmare (for Apple) may well be coming to pass.... as I expected it to.

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There seems to be some question as to what's going on here, but none of the potential explanations are very good.

If you use the Starbucks app with a linked credit card to pay for java with your phone, now would be a good time to change your account password. The Seattle-based coffee company confirmed Wednesday that some of its customers had funds withdrawn from the credit card linked to the app without their knowledge.

Starbucks is blaming the customers, claiming that the passwords being used were "poor."  The actual article doesn't have much more detail available at all, but the comments are arguably more important -- there are several people who have said they were hit, and more than a few of them state that their passwords were not weak.

Worse, apparently the problem extends to not just buying a cup of java or two, but mass-theft incidents where funds are being loaded onto a Starbucks card via their system off a linked credit card and then those funds are transferred to a new card which is then removed from the account.

Starbucks seems to be telling customers who this happens to that they "can't" trace where the money went too.

Let me ask a question: What happened to good old cash?

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I had to chuckle when Facebook announced its "instant article" initiative.

There is a basic problem with "web properties" like Facebook and ad value, which is that your "status updates" and cat pictures are hosted there, but how much is ad inventory sold against that worth?

On the other hand there are links that are intentionally designed as click bait all over the site, and they have a problem too -- some of them are simply inane "tests" (e.g. "what Star Wars character would you be?") that are designed to get you on the target site where it can sell your eyeballs to advertisers (poorly, I might add, since the so-called "test" is just more insanity) but others are links to actual original content.

Facebook's problem at a fundamental level is that there's little reason for a publisher to put that original content (like this article, for example) on their site and I can tell you from when I used to auto-publish tickers there that unless you craft the excerpts and headlines to be "click bait" the click-through back to your site, due to how they "demote" things you don't spend ad money on, is nearly zero.

I have over a year's worth of data showing that publishing Tickers on Facebook resulted in less than a 2% increase in traffic here.

Needless to say I'm not paying anything in ad spend for a 2% increase in traffic; that's lost in the noise.

But if you send the entire article there then you lose the engagement on your site, and all the ad revenue.

So what Facebook has done is give those "selected" publishers who are willing to send the entire article all of the ad revenue they source and sell, and the majority of it that Facebook sources and sells. In addition all the metrics data will go back to the publishers.

But that's not such a great deal for Facebook, is it?  See, now Facebook takes the cost of distribution (it's not zero) and gets none of the revenue.  They'll add some to their so-called "engagement" figures and time-on-site but if there's no money made from it that they get to keep it's a negative, not a positive!

But I'm not convinced it's a great deal for the publisher either, despite the infrastructure benefit to them, for the simple reason that disjointing your customer base and having some of them over on someone else's platform decreases your engagement.

There might be an argument for it if a publisher wants to use only Facebook as that distribution system.  Then you're giving up your cost and keeping the ad revenue, plus you're not fragmenting the userbase.  I could see that, maybe, provided the numbers work.

So here's my prediction despite the hype: This will (and has) spike the stock due to people's perception (which may well play) that engagement numbers will rise.  However, it will increase Facebook's costs more than the net gained from advertising because most if not close to all of the revenue gained from those articles will be paid to the publishers.

In other words it's a net lose for Facebook rather than a net win, and that leads to the next question:

Zuck has to know this, so why are they doing it?

What's "under the hood" in their numbers that you haven't figured out yet, and how ugly is it?

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