Wednesday, September 17, 2014

The Haiku of Finance for 09/17/14

Fed's distant rate rise
Protects bloated balance sheet
Must sell those assets

Tuesday, September 16, 2014

The Haiku of Finance for 09/16/14

Russia's oil price fear
Ruble hits another low
Effects of sanctions

Monday, September 15, 2014

The Haiku of Finance for 09/15/14

Crazy investors
Buying anything that's up
Ignoring the risk

Sunday, September 14, 2014

NioCorp Developments Bleeds Cash for Niobium

NioCorp Developments used to be called Quantum Rare Earth Development.  The name change from March 2013 has not changed the nature of the company.  They still plan to extract niobium in Nebraska.  Rare earth elements are crucial to the defense and high-tech sectors.  It is crucial that competent miners extract these elements for processing.

Their current CEO is the former CEO of Molycorp, the largest rare earths producer in the US.  It is usually good for a junior resource company to have experienced mining executives, but they need to have the right kind of experience.  Mineweb's reporting on this CEO's tenure at Molycorp mentions losses and legal problems.  Bloomberg's reporting on that period at Molycorp highlights operational problems.  Junior mining companies need a management team that won't bring drama.  Capital markets dislike drama and reward competence.

NioCorp's minor projects in Saskatchewan and Australia are too immature to deserve an economic estimate.  The main NioCorp project at Elk Creek has a 43-101 estimate of MII resources from April 2012.  The grades aren't exactly stellar but the size of the deposit matters.  The 43-101 report acknowledges the logistics trifecta that a mining project needs: roads, power, and water.  I could not locate any photos of this property on NioCorp's website but the 43-101 report indicates the land is mostly flat with some rolling hills.  Flat relief areas are good for the eventual construction of tailing areas.  The report's bottom line recommends an exploration budget of CAD$4.89M to further refine an estimate of the niobium deposit.

I checked SEDAR for their latest financial report dated March 31, 2014.  They had CAD$3.9M in cash on hand but lost about CAD$378K for the quarter.  That gives them quite a few months from that date before they will have to close another capital raise.  The problem I noted from that financial statement is that much of the expenses generating those losses are for administrative matters like management fees.  NioCorp needs to spend towards exploration plan as recommended in the 43-101 report.

I remember first noticing this company back in 2011 when junior rare earth companies were riding the media's fascination with the Molycorp story.  The share price of Quantum/NioCorp has always been in the pennies but crashed during September 2011 and did not really recover until April 2014.  It is still a high-risk prospect.  NioCorp must obviously raise more capital and dilute shareholders further just to prove its Elk Creek project is viable.  Creating a functional mine is a consideration far in the future.

Full disclosure:  No position in NioCorp at this time; no position in its predecessor tickers at any time in the past.

Editorial note:  I made a minor correction on 09/15/14 to the number of months their cash reserve will last based on their burn rate; the cash will last longer than I had first anticipated.  It does not materially change my assessment of this company's prospects.

Saturday, September 13, 2014

The Haiku of Finance for 09/13/14

Innovate that tech
Just make sure it fits a need
Don't look like a fool

Alfidi Capital at KPMG Technology Innovation Executive Summit 2014

KPMG held its periodic Technology Innovation Executive Summit this week in Silicon Valley.  I scored an invitation because, hey, let's face it, I'm all about innovation and I'm totally executive material.  The photo I took of my badge came out looking lame, so forget about seeing proof.  My genius is all the proof anyone needs.  I'll share my own observations instead of blindly recapping the summit.  

The firm's newest Global Survey on emerging tech trends is due out very soon and we got a preview of the results.  I won't repeat any specifics here, so read the full report when it's available.  I didn't see any consensus on which tech would drive consumer spending.  I got the impression that big enterprise clients in non-tech sectors are not super-savvy on spotting tech trends.  I did not see any real consensus on challenges facing enterprise IT integration.  The diversity of sectors canvassed in these types of surveys means different sized corporate clients have different IT needs.  

Any enterprises that thinks digital currencies (aka Bitcoin and others) will significantly disrupt banking and payment systems needs to wake up.  US-based enterprises have seen the most media exposure to Bitcoin and are aware of the IRS' regulatory response.  Other countries are clueless about Bitcoin's uselessness as a currency.  Maybe the rest of the world anticipates something better coming down the pike after Bitcoin, or maybe they're just ignorant.  

I do not expect serious IoT monetization to come from verticals closest to the consumer.  The next financial crisis will destroy consumer spending for years.  That places me at odds with some enterprise thought leaders.  They should look for IoT driving security and surveillance spending instead.  

The KPMG panelists following the survey results were definitely thought leaders in mobile, cloud, and enterprise IT.  The power budget limitations in IoT are obvious, which brings me back to my point above about IoT's limitations in an era where the consumer can't drive spending.  I look forward to IoT devices that scavenge energy from their ambient environment.  

Converging DevOps and the cloud drives a continuous process where every developer's code upload triggers a deployment of new enterprise tech.  Security still gets lip service but no one is making the connection with this DevOps capability.  CIOs must make it a continuous deployment priority.

I need to revisit Bitcoin enthusiasts in light of the panel's mention of cloud and document sharing.  There is zero analogy between digitally signed documents and cryptocurrencies.  The docs aren't governed by a blockchain that multiplies the computing resources needed for processing every time a new document is created.  It is crucial that IT professionals make this distinction before they look like fools by claiming block ledgers add transparency or security.  

I'll close with a quote from one panelist that really stood out:  "Computer science students don't learn coding anymore; they just move objects around."  There's a wake-up notification for all of the fad-chasers jumping on the coding literacy bandwagon.  Moving objects around means symbolic logic and systems analysis take educational precedence over programming languages.  Future CIOs should take note.  I have no intention of restarting an entire educational cycle just to learn code.  I'd rather keep coming to these thought leader summits, where I learn more anyway.  

Friday, September 12, 2014

The Haiku of Finance for 09/12/14

Sharing all content
Innovation springs anew
Across enterprise

Alfidi Capital Observes BoxWorks 2014

BoxWorks 2014 was the latest display of how Box builds its ecosystem.  I attended for insights into the secret sauce of how an upstart gets other firms to adopt its collaborative tech.  I have never used Box but I should probably give it a shot.  Find my original genius in bold text, as always.

The kickoff chat between Box CEO Aaron Levie and media mogul Jeffrey Katzenberg was cool.  They must have played some Disney film score when he came out but I didn't recognize it because I don't have kids to raise.  The big lesson was that a strong mission statement, a powerful brand, and great tech make a successful business model.  Okay, Jeff, but what about human talent?  The gene pool of talented writers and animators is only so deep, so the great tech among media giants will have to develop AIs that mimic those human abilities.  Jeff did confirm that the size of the movie going market and the talent pool of animators are limits on the number of movies that studios can produce.  I was stunned to hear Jeff say that the digital volume of a typical DreamWorks movie is so dense that they have to use collaborative software to track the edits.  I look forward to the rich video and user-driven animation that tech is supposed to unleash, but we get what we pay for.  Many of the amateur mashups on YouTube are so derivative and uninspired that they're not worth watching.  Jeff's best lesson from the start of his career is that exceeding expectations in any job or mission assignment lead to winning.  Okay, Jeff, but I tried that in large financial service firms and it only got me fired because no one would tolerate it.  Jeff got lucky and I did not.

Aaron and his top Box people had more announcements to share.  Their new platform offers content management to non-profits.  That follows the latest trend in Silicon Valley enterprises.  Enterprises want to do well by doing good.  Box has been in mobile file sharing since before smartphones and cloud servers made it easy and cheap.  It's only fair that non-profits now get in on the action.  The big product announcements were Box configurations for individuals using MS Office, cloud multi-users, and an upcoming annotation feature in 2015.  I have seen other purveyors push routinized workflow products and now Box Workflow is coming in 2015 for rule-based routinized operations.  I was quite impressed with the look of these products; the MS Office compatible Box display looked better than SharePoint as a knowledge management solution and the workflow looked like a wise use of BRMS.

The special surprise guest at the keynote was Oscar-winning dude Jared Leto.  I had never heard of the guy.  He brought his Oscar to pass around in the audience, as if a bunch of tech middle managers had something to add to his artistic ability.  Arron compared the Oscar favorably to Box's Crunchy award and said it must be the height of Jared's career to appear at a software conference.  Jared stayed in character as himself throughout this cameo at BoxWorks, and endorsed Box's ability to share artists' content.  One audience member asked an excellent question about how the cloud can impact older art forms that are not digitized.  Aaron and Jared think it will help older art find new audiences.  I had a mental image of a bunch of artists around the nation collaborating on a sculpture in real time, directing some robotic arm in a studio by uploading diagrams into a Box workflow engine.

I spent some time at the 1st Annual Box Partner Summit that ran concurrently with the first day of the main conference.  The main theme of "commitment" was everywhere in the quotes from senior Box people.  I expect banality at most conferences but I did not know enterprise software managers were deep enough to quote Sartre.  Box leverages its partners' domain knowledge to identify pain points of prospective enterprise clients.  Properly incentivized partners of all sizes are willing to refer enterprise clients to box for SaaS solutions.  Partner rebates are great if they grow earnings first and revenue second.  That may be hard for some growing cloud companies to swallow because they need to impress Wall Street with pro-forma EBITDA if they want to go public.  I wonder how CMOs and CEOs calculate the effectiveness of such incentives.  Good programs should have upsell options with measurable ROIs.  Kudos to Box for positioning its offerings partly as KM solutions for knowledge workers.

I had to explore the finance and legal workshop because I know startups that need to collaborate in those areas.  Permissions management in box sounds a lot like SharePoint, which is really more a policy issue than a tech issue.  I am not clear on how Box is different from SharePoint or Google Drive.  It obviously does document management, file synchronization and sharing, and workflows.  I suspect the Box advantage is its API allowing custom-developed apps that do what competitors cannot do.

The keynote and fireside chat with Jim Collins was phenomenal.  He thinks senior corporate leaders will increasingly come from CIO and IT ranks because enterprise computing has become so important.  I only agree with him if he means the software sector; I'm pretty sure CEOs in manufacturing and energy need to know how to make physical things work.  He organized his talk around ten major questions, which I won't repeat here because the background he presented on each one is in his body of work in Good to Great and the works on his "Tools" page.  His bonus question was inspired by advice Peter Drucker gave him to think about being useful to the world.  Jim's answer was to give moments of kindness and encouragement to others.  Changing others' lives and making people better mattered to Jim.  That may be why the audience gave him a standing ovation.  I have never seen a standing ovation for a guest speaker at a business event.  Wow.

Aaron Levie's chat with Jim explored more of this work.  Jim thinks Information Age management science means different applications of the same principles he studies.  Selecting people matters more and leading a network has a less formal power dynamic.  Jim talked a lot about how enterprises must always adhere to their values.  That's great but I've always known that a company's stated values are less real than the values top executives model in their daily behavior.  Aaron Levie comes across as engaging, irreverent, and intelligent.  If he and his top team exhibit those values when they're not in the public eye then Box is on the right track.

The CIO panel reminded me of the work I avoid by being in finance.  They all thought that business process transformation opens a huge market for unmet needs in enterprise collaboration.  I have never worked on a waterfall chart-driven process but that's okay, because these folks say requirements-driven planning moving from waterfall iterations to collaborative iterations.  I need to see evidence that corporate boards demand more tech-savvy directors who can evaluate enterprise risks.  I think that may be just psychological projection coming from CIOs who aspire to board memberships.  All of the anecdotal reviews I've read on board performance is that they are mostly lap dogs asleep at the wheel, selected specifically because they won't challenge management.

The VC panel on innovations was my next stop.  Professional board membership must be lucrative for VCs and others, but it comes with the caveats I mentioned immediately above.  The VCs mentioned traits like effective communication ability and other successful things that mark good leaders.  They did not mention honesty and personal integrity as desirable executive traits, but they did admit the necessity of firing any key executive who does not embody a firm's core values.  One key insight for tech startups is that lead scoring algorithms now generate significantly higher yields from marketing spending.  I was stunned when someone said tech megacorps (i.e., Google, Facebook) spend $10B on a buyout just to defend their $100B market cap.  That blew my mind.  This amazing insight implies headline deals are driven partly by celebrity billionaires defending their net worth with mergers and acquisitions.  Their parting thought was that investors should favor startups where the cost of capital and other macroeconomic conditions won't affect a business model.

The health care sector still has an innovation curve even after the ACA, according to the next panel.  I do not understand how the ACA's payment reforms will work unless they are intended as a stalking horse for a single-payer system.  I learned that the government pays hospitals to adopt digitized record systems, which is probably more costly than a simple regulatory mandate for any provider who wants to access the Medicare or VA payment networks.  Like I said, I just don't get this kind of reform.  The biggest insurance plan underwriters are able to drive demand for optimal payment networks.  They can identify high quality, low cost providers and eliminate variance from their PPO networks.  Data on these pricing variances in treatments allows buyers to eliminate sub-optimal choices.  The private sector makes that efficiency work because competition for services remains strong in a free market with many choices.  It will be less efficient in a market dominated by government-backed exchanges.  This is one reason why providers can't prove whether they save money by using Medicare's Accountable Care Organizations (ACOs).  This may have been the only panel where none of the panelists mentioned Box, knowledge management, shareable content, or collaboration.  The experts were so contentious because the ACA has politicized health care and skewed the sector's natural tech evolution toward choices that favor top-down intervention.

The retail panel sounded interesting because it's a sector I rarely explore.  The panelists said they want real-time data from all channels on all platforms, and that's a big market opportunity for SaaS.  It was depressing to hear someone admit that most retailers still live in a company-driven data model (internal focus) and not a customer-focused data model optimized for mobile (external focus).  Retail or any sector reacting to real-time data must have a fast DevOps cycle.  Predictive analytics adds value in DevOps by showing where proactive IT fixes should focus.  The weakest link in any retail business model is the high-turnover, low-wage workforce.  The best IT innovations must reduce the cognitive load on those low-skill workers so they make fewer mistakes.  That's why automation will eliminate many fast-food jobs.  Bring on the social CRM and get rid of the minimum-wage workforce before unions can organize them.

My favorite panel was on government innovation, and not just because hot babe Karen Appleton was the moderator.  The federal government's approach to data management and innovation varies by agency.  The FCC wrestles with over 200 legacy systems while it maps broadband capability for the public.  DOD's high-cost early adoption of tech still makes waves when program expenses draw scrutiny, so other agencies should jump on board that gravy train while it's still on the tracks and ask to share in DOD's tech bounty.  Federal law hobbles innovation by classifying an agency spending money on another agency as a felony if said spending does not benefit the original agency.  Wow, that's depressing.  No wonder every agency has internal counsel.  The FCC panelist was extremely thought-provoking by wondering whether public scrutiny in a democracy combined with social media can harm risk-takers who might otherwise have productive government careers.  He said it's also worth wondering whether authoritarian governments can capitalize on high tech faster than democracies because they are under less scrutiny without checks and balances.  Wow, heady stuff.

I sat front and center for that government panel because I had to ask them my only question of the conference.  I asked the panel for their thoughts on two government programs with the word "innovation" in them:  the NSF's Innovation Corps and the use of the Presidential Innovation Fellows (PIFs) in GSA's 18F incubator.  Aneesh Chopra, the former White House CTO on the panel, loved both programs.  The I-Corps trains people in Steve Blank's methods to commercialize the vast research produced in the Federal Lab Consortium.  The PIFs in 18F have built some interesting tools for other agencies and anticipates the creation of the US Digital Service.  The panel experts had done tons of thinking on driving government innovation; now the world gets to hear my ideas for Uncle Sam to use.  I want to see these innovators push more agencies to advertise their needs on  DOD should use it to farm out simpler fighter aircraft concepts that won't violate Augustine's Law #16 on astronomical costs.  It would also be great if FedRAMP used Cloudonomics metrics.  Oh yeah, let's get veteran-owned tech startups into I-Corps' pipeline so they get the inside track on tech transfer to the marketplace.

I caught the tail end of Aaron Levie's chat with Vinod Khosla before everything ended.  Vinod thinks Jim Collins' work is bull-stuff.  Funny!  He advises people not to try to predict the future.  Just go out and build something.  I hope he means "fail fast" and move on.

I was pleased to notice that the Box employees working as show floor guides included some very attractive women in tight jeans and purple Box t-shirts.  I was hoping to see some more of that kind of box but did not get the chance, if you know what I mean.  I also prowled the show floor and asked several booth sponsors whether they thought the iCloud celebrity photo hack was a wake-up call for cloud security.  The collective shoulder shrug I got in response told me that I may have been talking to salespeople instead of DevOps people who fix security holes.

Box did very well with BoxWorks.  I did not have time for the Jimmy Eats World concert but that's okay.  Plenty of youngsters got to have fun.  I'll have more fun at BoxWorks next year.  

Thursday, September 11, 2014

The Haiku of Finance for 09/11/14

Work on startup pitch
Show path to capital raise
Key market milestones

Startup Pitch Coaching Lessons Learned in September 2014

I had a fun day down in sunny Palo Alto today, coaching tech startups through their Cleantech Open pitches.  I learn as much from these sessions as the startups learn from me, if not more.  I am morally obliged to share my incredible genius with the masses.  This stuff is totally random and chaotic, just like running a startup.

The opening slide is the ideal time for the pitcher to state their name and title.  It's usually the founding CEO, and there needs to be a really good reason if it's someone else, like if the founding CEO is off pitching top-tier VCs at a major pitchfest and the COO has to give this other pitch to a second-tier angel club.  The intro of a long pitch is also a good time to reiterate the 30-second elevator pitch.  The elevator pitch ought to be on every employee's desk, repeated like a mantra whenever someone at the startup meets the general public.

Technical specs on competing products are less compelling than describing competing enterprises' market positions.  Knowing the big competitors' market size, solvency, and ability to defend their market positions shows a mature understanding of competitive reactions to a disruptive entrant.

Describing the team's composition is very important.  I am not swayed by headshots unless they depict really hot babes, with cleavage and pouty come-hither looks.  Okay, seriously, the team slide must describe what each team member brings to the game:  the scaling / serial entrepreneur, the scientific co-founder's patents, the super-salesperson who grew a product from zero revenue to eight figures or more annually.  Venture investors like visual stimulation and VCs in Silicon Valley are often focused on brand-name pedigrees.  VC partners with tech backgrounds have lots of Berkeley and Stanford degrees, and the ones with business domain experience have lots of Harvard and Wharton MBAs.  Logos for prominent schools and corporations are easy ways to make statements about the quality of the team's experience.

Never ignore Big Data as a cost center, revenue stream, and source of liability.  It's all the rage anyway and competently addressing its many facets shows maturity.  Big Data has storage costs in the cloud and they will grow with app downloads.  It can be a revenue source if its predictive analytics offer enterprise clients some ways to optimize whatever they do on their own.  The absence of privacy policies and other regulatory compliance standards opens the door to lawsuits.

Founders who are fully invested in their startups impress the heck out of sophisticated investors.  This is one bullet point that is best mentioned in passing while briefing the team slide.  It shows do-or-die commitment.  Some VC is eventually going to ask about it.

Look at my wonderful picture just above.  I drew this simple milestone slide as a sample of how startups can portray their growth expectations.  I believe it links projected revenue over time to product achievements and capital raising needs.  It also displays some kind of exit event.  Later investors want to know what the founders plan to do once the startup is successful.  The startup's strategies for finance, marketing, and capital raising are adjacent lanes on a highway, and the startup will change lanes at high speed.  Pushing back a milestone in one lane also pushes the others back the same distance.  Just link them all.  Each inflection point on the S-curve to adoption is theoretically driven by some success that justifies more capital.

I will never understand why some founders want their pitch decks to look like works of abstract art.  Diagrams showing lots of internal references between business units invite confusion.  Successful enterprises have an external orientation facing customers and results, not internal orientations facing their own processes.

The "secret sauce" of some magic technology means nothing if it does not generate a product with better / faster / cheaper characteristics.  Patents are nice but the consensus I've seen from VCs is that IP protection is worthless for a company that can't sell a viable product.  Stating price points and market positioning helps investors understand whether some startup can truly reach its target market.

The overused term "partnering" begs questions about what these partners bring to the table.  I want founders to tell me which of those corporate logos are in the supply chain because they're affordable, which are effective distribution channels, and which of the non-profits are helping ease the regulatory burden.  If they're just on the slide because someone in their purchasing department thought the startup had a neat idea, well, then they're not really a partner.

Everyone makes mistakes.  Founders should tell me how great they are at problem-solving and not belabor their mistakes.  My biggest mistake was attaining a degree from the University of Notre Dame that later proved worthless.  I recovered from that error by cutting off all contact with Notre Dame snobs who want me to fail.  Founders are free to describe how they triumphed over adversity, just like any good college football team that defeats the Fighting Irish.

Someone who is very proficient in the English language must proofread the pitch slides before the founding CEO makes them public.  This is more than just slapping in a Safe Harbor statement now that the JOBS Act puts pitches to non-accredited audiences (including those on crowdfunding portals) under SEC scrutiny.  Fix the typos and make the fonts readable.

Venture capitalists are renowned for their pattern recognition abilities.  They compare unknown enterprises to known business models.  Self-identifying as the "Uber of something" makes sense if they deploy a free app that programs an affordable service.  Self-identifying as the "eBay / PayPal of something" makes sense if they control an online marketplace that reduces several friction sources.  Cleantech startups have existing markets as reference points.  Renewable energy feed-in tariffs, solar  panel rebates, biofuel RINs, and carbon credits are all valid aids in pattern recognition.  Use them wisely if they resemble something brand new.

I told you this stuff is random.  Alfidi Capital is your source for truth.  Entrepreneurs are responsible for figuring out how to display their own genius in Guy Kawasaki's 10-20-30 structure or whatever format they must send to some pitchfest.  I'm outta here.  See you all tomorrow, or whenever.

Wednesday, September 10, 2014

The Haiku of Finance for 09/10/14

Bull market going
Pumpers living the good life
Ignoring the end

The Tired Stories of Bull Market Pumpers

The US financial markets are on overdrive thanks to the Federal Reserve's magic ZIRP juice.  Blowing up the Fed's balance sheet works wonders for hedge funds, mutual funds, penny stock pumpers, and anyone else with more pedigree than brains who's willing to ride this gravy train right over a cliff.  The bull pumper stories are everywhere and I'm tired of hearing them.

Want an overpriced hedge fund?  There's plenty of those on the loose.  Rocket scientists with no rockets to launch are paid millions to write algorithms that churn the market.  Net neutrality doesn't slow their servers down but a super-slow exchange routing their orders can eliminate their unfair advantage.  The typical hedge fund bull story is full of swagger about exclusivity and leverage.  It's still just bull.

Up for an underperforming mutual fund?  They're everywhere.  The anomalies from American Funds, Dodge and Cox, and a few others will eventually find their alpha arbitraged away.  They're squeezed from one end by HFTs seeking order flow speed and ETFs at the other end that lower costs.  The typical mutual fund bull story is full of assurances about buying dips and staying with brand names.  It's really just bull.

The penny stock universe is always on my radar.  Tiny companies with no recent successes trundle through town raising PIPE money while their share prices are in the basement.  Going public even with no assets or revenues is a crafty way for founders to cash out of a losing proposition.  The typical penny stock bull story is all about explosive growth just around the corner.  It's pretty much just bull.

The expiration date for this circus is anyone's guess.  I guessed incorrectly that the bull market would have ended over two years ago.  Anyone guessing it will continue indefinitely is probably even more incorrect than I could ever be. 

Tuesday, September 09, 2014

The Haiku of Finance for 09/09/14

Hourly trading
Stupid technical voodoo
No indication

First And Last Hour Trading Is a Stupid Gimmick

Stupid ideas frequently pop up on my radar whenever I troll the depths of the Internet for investment knowledge.  Some ideas just don't belong in the realm of sensible investing.  Trading for advantage in either the first or last hour of an equity market's trading day is one such bad idea.  

Quickly perusing the top articles in a web search of "last hour trading" reveals that the concept relies heavily on folk wisdom, technical analysis, and gut feeling.  None of those forces incorporate any fundamental analysis of a stock's underlying value.  All of them play to emotions that get investors in trouble.  The ETF revolution isn't helping here because day traders just use them as more random playthings.  

Here's an illustration of just how dumb traders can be with hourly trading stats.  The so-called smart money index gained popularity in the 1990s because it supposedly compares morning trades to evening trades.  The index proceeds from a basic construction flaw.  It is impossible to set a normal baseline value for the index because it begins with a previous day's close.  That one flaw is enough to invalidate any claims to validity.  It gets even dumber by assuming evening trades are more rational, as if intraday news doesn't move prices and large institutions with internal crossing networks aren't jamming the close.  Sheesh.  

NASDAQ's Extended Hours Trading data display does the investing public a disservice by feeding traders' appetites for this nonsense.  It formalizes the baseline construction flaw I identified above.  The exchange's Pre-Market Indicator (PMI) and After-Hours Indicator (AHI) offer little proof that they are reliable sentiment estimates.  What's the baseline value for these numbers?  Where's the historical data for each indicator, so we can compare sentiment changes to the NASDAQ's turning points?  What's the date where they start at zero?  This data is absent.  These indicators are just voodoo.  

Advocates of short-term trading in first hours, last hours, after hours, or any other hours bear a burden of proof that their concepts add value.  Day traders should produce an audited portfolio that consistently outperforms market benchmarks over time using these hourly strategies.  Hedge funds running HFT use nanosecond trading strategies and even they can't outperform the market over time, net of fees.  The myth that traders can gain pricing advantages by focusing on hourly trading flows persists with no peer-reviewed data in its favor.  First and last hour traders are losers.  

Monday, September 08, 2014

Biofuel Startups Need Attention

Biofuel gets a bad rap for being more costly than petroleum and less efficient.  The science behind biofuel is inconclusive only if it doesn't account for costly inputs like fertilizer.  Ammonium nitrate in fertilizer adds energy inputs to biofuel feedstock crops that make the biofuel a net energy sink.  Exchanging those inputs for smart agriculture makes biofuel more competitive.  Startups in this space have options worth pursuing before they go to market with an inefficient solution.

Energi's insurance products are designed for the energy sector.  I do not know whether their policies offer discounts for brokers or producers who incorporate biofuel into fuel cycles.  It's worth a look if insuring a biofuel feedstock takes some risk out of crop failures.  Project finance for biofuel might be more difficult.  Joule Assets finances efficiency projects, and I believe a comparable model could cover biofuel projects tied to facilities like grid sector fuel cells (yes, such things are more than just drawing board dreams).

The Joint BioEnergy Institute (JBEI) underwrites some tech development with help from major labs.  The whole DOE Bioenergy Research Center effort touts the numerical output of patents filed but I don't readily see numbers for commercialized success stories.  If biofuel incubation is another process-oriented bureaucratic runaround it will turn off results-oriented entrepreneurs.  I hope these centers implement the NSF Innovation Corps standards or they'll have a hard time getting respect from VCs.  Meanwhile, someone with less patience could take a biofuel idea from the US DOE Algae Testbed Public-Private Partnership (ATP3) and run it through the Carbon War Room to see if anyone in the ecosystem endorses it.

The phrase "attention capital" is not so new.  It dates to design articles from the last decade and beyond.  The important thing is that startups draw attention to themselves early enough to gather buzz.  Leveraging the biofuel ecosystem is one way for startups to get that buzz.