We’re asking the penetrating question this morning about when a “social” disease outbreak is about to hit Wall Street. Not the crabs or the siff…No, the “social” disease may follow in the wake of the interesting moves last week in social media-related stocks and Twitter, in particular, that on Friday dropped 13%.
As we’ve reported elsewhere, when good companies like Apple (which actually makes physical products) are selling for 4.1 times their book value, how is it that Twitter can support a price to book of 48.8 times? Facebook’s book value is under 11, but that’s still mighty pricey compared to other stocks.
One reason why “social” could be facing a decline is – hints this report over here – because parents are starting to actually turn off child access to social.
Or, there could be something larger going on: Just as in the death of CB Radio (one of my favorite examples of how a tech-fad collapses), it could be that social media users are now coming to the realization that investing long hours in the Me, Me, Me land of social is not going to pay the bills in the real world.
Another reason that social may be in trouble was outlined in a recent Peoplenomics report for subscribers: How long will a business model persist that depends on corporations supplying content to social media, that develops a following, and then finds social media turning around and charging corporations to deliver information about their posts to what are really the customers of the underlying corporation?
How could corporations be so effing STUPID as to give their customers to a third party and then be forced to rent-back access to their own bloody market?
Well, no one ever said the halls of corporate America (or corporate world) were loaded with deep-thinkers. Brown-nosers and suck-ups for the most part with rarely a rock star or two per company, seems like.
Social isn’t going to go away tomorrow – or even this week. But, just like Tulips in 1634, the death throes of CB Radio, the massive decline in Hula Hoop sales, or Pet Rocks, fads strike all levels of society. Including, most especially, the ‘strike-it-rich” computer class.
Why anyone would invest in businesses that hold customers hostage and rent-back access, play nicey-nice with the NSA and thereby provide means to “social-map” Americans, that in turn is also sold to advertisers as part of the corporate master-plan to get you to spend every last nickel you have, is totally beyond me.
But it’s not beyond Wall Street, so the speed of awakening should be slow. It actually needs to be slow. Reason? So the Big Players and Strong Hands can unload their shares onto the Small Players and Weak Hands.
I’ve been the “cynic on the sidelines” on this one, for the most part.
This morning’s lesson is simple, so pay attention: Corporations are in business to make what? Products? No. Reputations? No. They are in business to make MONEY. (Don’t look so disheartened, yet. I’m just getting to the good part.)
To me, what I’m buying when I buy a share of stock is I’m buying a (tiny) piece of a company’s sales. And the metric for this is called the Price to Sales ratio.
Let’s go back to Apple: If I buy Apple (even though it’s pricey) I figuring I’m buying $0.3367 worth of sales for each buck I put in, looks like I’d be buying around 1.338 CENTS of sales for each buck I put in.
For the sake of comparison, one dollar buys around $3.12 of sales of ADM or 39-cents of sales of PG and people always gotta eat….or 50-cents of sales of IBM. Just saying there are lots of ways to look at buying stocks….
Now, these figures could be dead wrong, since it’s early and I don’t wake up until around noon. This morning’s column comes to you on autopilot.
Still, if it’s 1.3 cents of sales to 33-cents of sales, seems to me that hints there may be more of a drug problem in high finance than present headlines reveal.
Having said it, let’s see how long before the rest of the world (RoW) picks up on this outbreak of “social” disease. And if I’ve got this wrong and the quants have it right, I’ll be the first guy to…uh…clap!
Meanwhile, markets are looking to open flattish but down by the end of the day seems likely. Santa has been taken out back and been blind-folded, he’s working on his last ciggy right now. He may be able to stretch out the rally, but don’t count on it.
With oil back over $100 on the futures off and on this morning, and with gold getting a ten-dollar ass-kicking and Europe down, a close down 50 on the Dow would be a wildly thrown dart to start the week with. Could be swayed by a home sales report at 10 Eastern but that’s what makes it all a shootin’ match.
It is only your life savings, after all.
The Daily Bomber
You remember last week I was telling you about how I was thinking about a new website called The Daily Bomber? Well, here’s this morning’s list of why this is such a timely idea:
USA Today has this one as “2 suicide bombing hit Russian city, 31 dead” but there will likely be more to come because Russia has a whole southern flank is which contested by Muslims. Picture it as being like our border with Mexico, except Mexican’s don’t do suicide bombings (yet?) and the Russian Border Patrol isn’t neutered by the higher ups like ours is.
Yes, the outlawed Muslim Brotherhood is suspected of being behind the bombing of an army intelligence building. Got to admit, that’s a pretty damn strategic target when you’re running an outlawed party fixed on overthrowing the military government.
Tiki Bar Bomb Bombs
So this fellow walks into a Florida Tiki bar and says “I have a bomb….” We’d venture the Riviera Beach, Florida police department is showing the 59 year old [purported] perp a fine time.
This was in Allepo, Syria, which is just above the Antarctic and the Central African Republic on our list of places not to visit this week.
Nuke Bomb Shopping
A bearded fellow called an Indian Mujahedeen mastermind has admitted to shopping for a nuclear bomb to be set off in Surat. Apparently, he was trying to get the bomb from Pakistan which – correct me if I’m wrong here – is the world’s biggest nuclear wildcard/threat at the moment…
Of course, a nuke in Surat (population 4.5 mil) would have been more than a bad hair day: It has the potential to light off a baked people festival in India and Pakistan….and that one could light off any old time.
A former maybe of bullhead City Arizona is seriously hurt and her husband was killed by their family dogs.
According to a report over here, the dog involved was a boxer, not one of the pit bulls, who I figure ought to be registered as weapons…because they weren’t bred to play…
The point this morning is (again) that dogs are dangerous: They are carnivores and any minute they can remember that we’re meat. Especially when they get worked up.
“Not With My Cheerios” Dept.
I trust you’ve been following the misadventures of cavity searchers over in New Mexico.
And then there’s Customs and Border Patrol’s 6-hour cavity search of a 54-year old woman.
Say, this is a way to cut back on breakfast calories, isn’t it? Wonder if there’s a new “Gross News Diet” discovery waiting behind the headlines? Call now, operators are standing by…
Hot Trends Watch
Just out of the 30c3 conference in Germany this weekend: an outfit called Trezor is out with a hardware “wallet” for Bitcoins.
I’m gong to have to watch the whole video over here to figure out if it will work with other virtual currencies (VCs).
Coincidence or Plan?
Hmmm… reader David is thinking it’s pretty damn curious that along comes a Tamiflu resistant variant of the swine flu… Not enough revenue potential? Oh…sure…you betcha…just a natural mutation, uh huh….