Posts filed under “Contrary Indicators”

Barron’s: Social Networking a Bubble. What Does This Mean?

Bubble Trouble: This week’s Barron’s cover story by Mike Santoli proclaims “Yes, its a bubble.”

Before we delve into the article, recognize that 1) This is not your mainstream publication, so it has no validity as a contrary indicator; 2) the definition of social is rather stretched, including Pandora and Zillow, which are not really pure social plays.

That said, let’s look at Barron’s:

Depending on how you carve up the industry, eight leading companies that have either gone public, filed plans for an initial stock offering or are widely expected to do so by the end of next year are now estimated to be worth a combined $200 billion. Together, these eight companies—Facebook, Groupon, Zynga, LivingSocial, Twitter, LinkedIn (ticker: LNKD), Pandora Media (P) and Zillow (Z)—collected $3.5 billion in 2010 revenue. That’s $1 billion less than, say, Washington Post (WPO), whose market value is $3.4 billion. Leaving aside Facebook, which seems to have the best shot at supporting its hypothetical $100 billion value through its market position, growth and profit margins, the rest have negligible profits at this point.”

Three issues leap out to me from that paragraph:

1) Tight float: The trick we have seen already is to only sell a small amount of stock to the public between 5-15%. It take very little public buying to send that stock soaring. These companies are “Semi Public;” put the other 80-95% on the market, and see how much interest — and valuation there actually is.

2) Second Markets: The $65, $75, or $100 billion valuation for Facebook comes via the exchange of shares on a very small, uninformed, opaque market. No public disclosures required, no transparent pricing, just blind fumbling. I have yet to see any evidence that these markets come anywhere near pricing equities accurately.

3)Facebook: Assuming the data is correct, Facebook trades at 100 times revenue. Not earnings, revenue. Unless you expect their profit growth to be historically unprecedented, its hard to see how that $100B ism not terribly expensive.

All of the above are interesting, but not telling as to what is or isn’t a bubble. 8 Stocks do not typically make for a frenzy . . .



5 Questions for Facebook Investors (January 12th, 2011)

Has Facebook Missed Its IPO Window? (July 15th, 2011)

Bubble Trouble
Barron’s, July 23, 2011

Category: Contrary Indicators, Psychology, Valuation

Is Crude Oil About to Collapse?

The cover story in this week’s Barron’s is a canary yellow screamer: Ready for $150 Oil. (click cover at right for larger graphic) Normally, the magazine cover indicator does not work with business press; it only applies to mass market magazines (think Time or Newsweek). In the present case, Gene Epstein is forecasting a new…Read More

Category: Contrary Indicators, Economy, Energy, Financial Press, Really, really bad calls

Window Dressing Proceeds Apace

With 6 of the past 7 weeks in the red, the markets have managed to string together a series of winning days. Daily gains both this week and last have ranged between 0.50% and 1.25%. Indeed, the Dow’s gains on Monday and Tuesday represent the first consecutive triple digit gain for the Industrials  since December…Read More

Category: Contrary Indicators, Markets, Technical Analysis, Trading

VIX: Where is the Panic In the Markets?

Click on chart for larger image > Despite the concern about the economy, Greece, China, etc., and general sentiment readings, the VIX remians surprisingly low: BusinessWeek: No Panic in Options After VIX Takes Six Weeks to Exceed Average It took six weeks of equity losses, a series of lower-than-estimated economic reports and political turmoil in…Read More

Category: Contrary Indicators, Markets, Psychology, Technical Analysis

Checklist: How to Spot a Bubble in Real Time

Are the Linked In/Groupon IPOs proof we have a new bubble in Tech? Are US Treasuries a bubble? Commodities? There have been numerous attempts by many Fed economists to argue that bubbles cannot be seen as they happen, and they we can only spot them after the fact. I believe they are incorrect. We can…Read More

Category: Contrary Indicators, Psychology, Trading

Uh-Oh: Gold on the Cover of NYT Magazine ?

I am not quite sure what to make of this NYT magazine cover. On the one hand, it is gold on the cover of a mainstream magazine. But its less convincing as a magazine cover contrary indicator. Compare it to the Housing peak covers in Fortune (May 2005) or Time (June 2005). The focus here…Read More

Category: Contrary Indicators, Gold & Precious Metals

Short Memories (Fade the Inflation Hysteria, II)

Flashback to June 2008 (only three short years ago): Headline CPI was running very close to 5.0 percent.  The Fed funds rate was at 2.0 percent.  Brent crude was $132/barrel.  The Fed’s June 2008 minutes mentioned the word “inflation” 110 times (“deflation” and “disinflation” combined:  zero), and also contained this caveat (emphasis mine): With increased…Read More

Category: Contrary Indicators, Cycles, Data Analysis, Economy, Federal Reserve, Inflation

World Gold Bug Article on WSJ Front Page

Front page WSJ story today — World Is Bitten by the Gold Bug: “Gold continued its upward march in a time of global financial tumult, closing above $1,500 an ounce Thursday for the first time as investors seek safe haven in the metal. In a remarkable performance for any sort of asset, gold has notched…Read More

Category: Contrary Indicators, Gold & Precious Metals

Michael Burry: Notes from Vanderbilt Speech

Hunter is the author of the Distressed Debt Investing blog. His commentary has been seen in online versions of WSJ, FT, and BusinessWeek. Hunter currently works as an investing professional at a large money manager, focused on the credit markets. Previously, he worked at two large hedge funds, as an analyst working on distressed debt…Read More

Category: Contrary Indicators, Investing

Top 10 Signs Silicon Valley is on Tilt Again

It’s apparently that time again — the Valley has gone on tilt. Consider the following top ten signs. 10. Conferences are selling out 9. Venture capitalists are launching blogs 8. Everyone you know has a startup 7. Harvard MBAs are trekking to “hot” events, like SXSW 6. Harvard MBAs are fundable as CEOs 5. Private…Read More

Category: Contrary Indicators, Venture Capital