Tuesday, September 30, 2014

The Haiku of Finance for 09/30/14

Cloud competitor
Race to bottom in pricing
Deepest pocket wins

Monday, September 29, 2014

The Haiku of Finance for 09/29/14

Buying bankrupt tech
On sale in court for bargain
Rock bottom startup

Financial Sarcasm Roundup for 09/29/14

Do you remember the last time I published something sarcastic?  If not, go back through my most recent blog articles.

Iron ore prices are heading down harder than ever as the leading low-cost producers force smaller competitors out.  Anyone who still buys the endless China bull story in the face of rising iron stockpiles is welcome to head down the tubes along with shuttered mining companies.  The remaining big producers will have no problems staying in business as market leaders.  Their pricing power should enable them to grab failed mines and grow their reserves.

Bill Gross' departure from the bond firm he founded caught major players by surprise.  I am not at all surprised.  He exited his firm on a high note as the US bond market remains at nosebleed valuations.  Seeking contrarian opportunities at a smaller firm enables him to build a new reputation after the bond market begins its inevitable slide.  Other company founders should remember that a firm they create is no longer theirs once larger investors steer it away from its roots.

I do track the "fin-tech" culture where financial startups launch.  A lot of them are focused on payments processing but there's only so much blood to squeeze from that stone.  These same startups will be among the many that vaporize (borrowing a word from one very prominent VC) because they can't reduce their burn rates.  I'll be in the market for some very cheap IP when these fin-tech darlings are on the street begging for spare change.  I'm certain I can figure out how to deploy their leftover tech after a bankruptcy court chops them up.

Catch me at Oracle OpenWorld this week if you want my sarcasm in person.  I have little time to spare while attractive women pursue me on the expo floor but I always have something cool to say.

First Experience with Larry Ellison's Opening Keynote at Oracle OpenWorld 2014

I am attending Oracle OpenWorld for the first time this year.  Tonight I heard the opening keynotes, where the cloud was everywhere.  The big show both inside and outside Moscone North was loud and bright.  Big Data, big video screens, big stunts, and big personalities are all over this big convention.  Go big or go home.

The Intel big cheese on stage was a familiar face from another conference I attended last year.  She knows her data strategies pretty well.  It is obvious that Big Data is taking over the known universe with its shear mass, though I'm not sure what metric Intel used to tabulate the number of data iterations our civilization creates.  The Intel people sometimes referred to Oracle as if their two companies were one and the same.  The love-fest aspect of these big conventions is always cute.  

The Intel talk reinforced for me once again that data centers are a pick-and-shovel play in the rush to create value in the data sector.  I want someone on a major stage to mention the following concepts:  Cloudonomics, data supply chain, and the DIKW pyramid.  Those should be factors in assembling an enterprise IT architecture.  The coming of software defined infrastructure (SDI) and the software-defined data center (SDDC) mean humans must design some very human considerations into these new IT architectures before they push the virtualization button.

Intel thinks hybrid clouds matter based on the combination of data centers built out for public clouds and the expectations for workload traffic in private clouds.  I've been watching the hybrid cloud evolution since 2011 and some data sets simply belong in private clouds for security reasons.  Public cloud providers have fallen down on their promises of security and this month's numerous high-profile data breaches are the data sector's indictment.

Intel's enthusiasm for new modalities in data transfer and virtualization gave me an insight.  Data centers that add virtualization into their cloud services should see higher ROIs as their costs come down.  Cloudonomics metrics should prove my theory.  The enhanced ROI relationship should also hold for the addition of remote resources and non-volatile memory.  

Larry Ellison pushed the cloud every time he mentioned Oracle's market position and new products.  He also pushed security as the fulfillment of his company's ethos.  It's no secret that Oracle battles it out for CRM and ERP market leadership with Salesforce and a few other contenders.  Cloud security is going to be in every vendor's sales pitch thanks to a year's worth of revelations and debacles.

Larry's Coke bottle on stage looked like it had an import sticker on the side.  I have only seen those square white stickers on bottles imported from Mexico.  Die-hard Coca-Cola aficionados prefer Mexican Coke because its use of cane sugar makes the taste more palatable compared to US-bottled coke, which uses beet sugar.  This has nothing to do with enterprise computing but I notice all kinds of little details wherever I go.  Knowing a key leader's biography down to minute personal preferences helps illuminate their leadership style.

Oracle is entering a price war with Apple, Amazon, and Google over cloud services at the same time it is moving its entire app family into its own cloud.  The other players either already had their cloud capability before they built their app product lines or built both capabilities out simultaneously.  They could build apps with no concern for legacy integration with on-premise products that had not yet migrated to their clouds.  Oracle has the more difficult road to pave as it must preserve support for on-premise legacy products while it builds out its cloud.  The competitor with the deepest pockets always wins a price war.  Let's compare the cash positions of these four giants to see who starts off ahead.

Cash positions, from Yahoo Finance . . .
Oracle (ORCL):  $24.2B (August 31, 2014)
Apple (AAPL):  $13B (June 28, 2014)
Amazon (AMZN):  $5B  (June 30, 2014)
Google (GOOG):  $19.6B (June 30, 2014)

Please note that these figures do not necessarily include the huge amount of cash Apple has sequestered in a separate entity named Braeburn Capital.  I don't have time tonight to dig through Apple's financials to see how they distinguish their various cash management programs.  Apple's massive cash hoard probably places it in the leading position to win a cloud service price war, assuming nothing else changes.

I noticed that I was the only audience member in sight who was taking notes.  I was nowhere near the section reserved for press, analysts, and bloggers so I can't tell which among them took notes or blogged live.  A few news outlets published their stories ahead of mine, but I caught a couple of interesting quotes.  I'm pretty sure Larry said "think different" (a Steve Jobs quote from his resurrection of Apple) and "at the speed of thought" (a Bill Gates quote).  Larry obviously admires his competitors.  I admit that I admire this guy too after seeing him on stage.

Sunday, September 28, 2014

The Limerick of Finance for 09/28/14

Minsky moment approaching with speed
Investors have failed to take heed
Some pending margin call
Could trigger the fall
So many will pay for their greed

Saturday, September 27, 2014

Momentum VC Offers Chats with Kairos Society and Ruckus Wireless Notables

The Momentum VC folks pulled off another good fireside chat last week at DG717.  I'm getting attached to these events for the peeks into how mobile startups make it happen from scratch.  I will try not to merely repeat the thought leaders' wisdom.

The entrepreneur dude who founded the Kairos Society explained his fascination with solving the world's problems.  He nailed Silicon Valley's insular tendency to build products for its own elites while ignoring the developing world's mobile market.  I'm pretty sure the average African will choose M-Pesa over Uber any day.  I am not as convinced that mobile devices have minimized their data security risks.  The celebrity photo hacking scandal of recent weeks shows that user-level security needs major work before mobile can truly be the front end of cloud storage.

If I were marketing some mobile solution in emerging markets, I would ensure it had a non-affluent, non-literate appeal.  It would have a non-text UI, allow for payments in small increments, and support an app ecosystem that targets verticals in the natural resource sector.  I also think M-Pesa would work in the US if the normal banking system were unable to transfer money in a crisis.  Apple Pay and Google Wallet are preparing the way for just such an approach.  Americans will have payment options in hyperinflation if those services can add digits up to a hundred trillion.

Mobile developers should also remember the Kairos guy's revelation that mobile use cases are not identical to desktop usage.  Smartphones bootup faster and are thus more responsive with functions like email that can't wait for bootup.  I await whatever developments the Kairos people can produce in synthetic biology, orbital space APIs, and platinum mining on the moon.  I guess tech people really do sit around thinking about going into space, based on what I heard at Momentum VC.

The Ruckus Wireless guy was up next.  I agree with his philosophy that money matters if it allows one to do great things.  His insight that the defense sector operates on a process orientation for Peter Principle managers is correct in my experience.  I will definitely follow his advice to always seek an unfair advantage in business.  I don't have as many academic contacts as I need but that is solvable with networking.  I may have aspects of the attention deficit disorder and laser focus that he endorsed.

I will repeat a couple of his best points verbatim.  He said to get a team of divergent minds who think differently from the founder.  Once they're assembled, get the smartest person in the room to ask the smartest question, then think of the simplest possible solution.  Well, I'm usually the smartest person in the room, so I will have to convene a panel of Nobel laureates for that level of input.  Extreme geniuses such as yours truly don't like organization charts or enterprise politics.  Thinkers live in the realm of pure ideas.  I much prefer that antiseptic approach.

I cannot name very many examples of a startup copying a market leader, aside from Google taking on Yahoo last decade.  It works if the leader chooses not to pull out all the stops on resources to fight back.  A market leader that does not fight back commits suicide.  Silicon Valley corporate development departments scan for emergent rivals they can buy or suppress.

Ruckus' guy also shared insights on how culture steers execution after management has stated its vision.  The US military is supposed to operate like that in theory but my experience revealed how culture often hindered execution.  Meetings that end in action items for specific staff members are IMHO the least evil type of meeting to hold.  I would like to see PayPal's anti-meeting culture in operation.  The good news I've been absorbing at many tech conferences is that automated workflows can direct tasks to the right action center with little in-person coordination.

I left DG717 thinking about how some Kairos reality hacker would write an API on the moon while a Ruckus Wireless techie was chasing some random, predatory disruption back on earth.  That's what they said they like doing.  I'll have to check in with Momentum VC again in a few months to see their progress.  

The Haiku of Finance for 09/27/14

Do not waste money
Scams and trinkets don't build wealth
Save instead of spend

Masses Congregate for a Study in Contrasts

I witnessed the masses behaving normally today.  I chose to attend a technology conference in Santa Clara where entrepreneurs and serious investors pursued wealth.  The same locale played host to other events targeting a more downscale audience.  I did not attend the Herbalife or sports autograph events because the arriving attendees told me all I needed to know.  The differences were noticeable.

The tech conference people were dressed for business, at least by Silicon Valley standards.  The people at the other conferences were disgusting.  The Herbalife event attracted a large number of folks who looked like they brought their friends up from south of the border for a quinceanera.  I don't know whether they were documented appropriately but in California's current political climate it doesn't matter.  The sports memorabilia people were uniformly obese and dressed in sports team attire that made their lack of physical fitness all the more disgusting.

The Herbalife people looked like they were holding evangelical revivals in between their formal events.  They were loud enough to distract me as I made my way between the tech conference's seminars.  I don't have time to deconstruct Herbalife's marketing model right now, so go read what the Salty Droid and others have to say about their practices.  I saw enough faith-based nonsense from these people today to permanently distance myself from any Herbalife operative.

The sports memorabilia people were everywhere, flocking to meet their highly paid idols and generally getting in my way.  I could not avoid the posters for their event, and the prices they paid for a touch of greatness were LOL-worthy.  Former NFL players were signing autographs for up to $150 with a photo session.  The slobs come away with memories that will last a lifetime.  The real athletes come away with five figures of income for a few hours of "work" sitting and smiling.

Herbalife's cult followers and the Bay Area's fat sports fans have much in common.  They both strive for fleeting glory bestowed by an authority figure, just for showing up.  Their paths to the convention center led to the only extrinsic validation they may ever have in their sad lives.  I try very hard not to feel sorry for people in the left tail of the IQ bell curve.  They exist so the rest of us have a consumption base for our marketable solutions.

Our associations tell the world what we value in other humans.  I will never spend time with the clueless dupes buying into Herbalife and the fat losers overpaying for a minor celebrity's signature.  I am so proud of myself for picking the right crowd to join.  

Friday, September 26, 2014

The Haiku of Finance for 09/26/14

Meet product milestone
Sales increase with more clients
Investors line up

Thursday, September 25, 2014

The Haiku of Finance for 09/25/14

Apple and blue chips
Stocks sink on global concerns
Strong declining trend

Wednesday, September 24, 2014

The Haiku of Finance for 09/24/14

China bank head doubt
Political reshuffle
Blunting reform way

Tuesday, September 23, 2014

The Haiku of Finance for 09/23/14

Tax inversion fight
Treasury rules seek limits
Rethink that re-org

Monday, September 22, 2014

The Haiku of Finance for 09/22/14

Quiet in market
Lull in volatility
Hardly a worry

Updating the Alpha-D for 09/22/14

I experienced an involuntary change in my portfolio holdings last week.  The cash-covered put position I had sold under GDX in my IRA was exercised against me when the market price declined past the strike price.  My holdings of GDX are now slightly larger than before, at a purchase price that is very low for this ETF's historical price.  This is no problem for me.  I knew the risk and I don't mind owning a little more of a cheap partial hard asset hedge against inflation.

My other option positions on FXA, FXC, and FXF expired unxercised.  I am still long those ETFs.  I have decided not to write any new covered option positions this month on any of my securities.  I may have pushed my luck enough already given the macroeconomic headwinds building against this very calm market.

I am still long a put position against FXE, as I believe the euro is doomed.  The G20 is getting increasingly concerned about Europe's potential for renewed growth.  I believe they know more than what they reveal in public.

I sit mostly in cash, awaiting something that breaks with a loud noise.  The list of other potential hard asset hedges I have considered for my own portfolio will have to wait until their prices are low enough for me to revisit them.

Nota bene:  I am seriously considering getting a lot more cryptic with these discussions of my own portfolio.  Talking about my money might be more fun for me if I take extra steps to discourage people from copying my actions.

Sunday, September 21, 2014

Wasting Time at the Small Business Expo San Francisco 2014

I can't resist business conclaves.  I ought to resist that impulse once in a while.  I attended last week's Small Business Expo San Francisco thinking I could learn something from subject matter experts on the scene.  The people I met there have a lot to learn themselves.  They will probably learn it the hard way.

I walked into the Fort Mason Pavilion to the very green-lit sight you see above.  The first harbinger of woe was the general cluelessness of the vendor representatives on the expo floor.  The booth people I encountered mostly gave poor explanations of their services.  I asked one booth babe with a VOIP provider what her company offered, and she pointed to a flat screen TV while mumbling "Uh, five free phones."  Her babe pal tried to save her with a lame assist:  "Uh, it's security.  You can talk to this guy."  They were both blondes.  Whenever I get two lame handoffs at a vendor booth, I get the heck out of there.

I sat in several workshops that were nothing but regurgitated pep talks and asinine product pitches.  The first scheduled main stage speaker was a no-show, so a "business coach" filled in.  Maybe ten people attended in a seating arrangement set for a couple of hundred.  I don't know what the guy's qualifications were to be a business coach because he displayed pictures of his family instead of describing his credentials or professional history.  That told me he was aiming for a low-information audience that could relate to his storytelling ability.  Folks, that's not how I interact with tech startups run by educated professionals.  Wait, it gets more entertaining.  The coach dude asked me about my ideal client, and I said, "Myself!  I'm sick of Wall Street and Silicon Valley, and I enjoy making the world angry because I'm sick of humans."  He did not get the message and asked me twice about my biggest challenge (hint:  it's to get web traffic); he forgot what I told him the first time even though he wrote it on his white board!

The coach dude continued to amuse me with non sequiturs quoted from such business luminaries as . . . Michael Jackson, the freakish pop star.   The whole train wreck reminded me of other free teaser seminars I attended that were sales pitches for very expensive "coaching" programs.  I have never ever paid for coaching because I'm the best coach I've ever known.  He asked the tiny crowd to name a leader's single biggest mistake; I thought my biggest mistake was attending this talk.   His reasons for leadership failure were kindergarten level gibberish, not the results of peer-reviewed scholarship.  He cited a "Law of the Lid" that came out of nowhere, with no data or references.  I walked out of that talk after about twenty minutes of nonsense (it started about seven minutes late).  I could not take any more amateurish "business coaching" that was nothing more than a motivational pep talk for the vulnerable fools in the audience.

I ate a nine dollar sandwich at the very limited concession stand in the Pavilion.  An event of this size should have at least had some food trucks outside.  Alas, it was not meant to be.  Picking a spot in the Pavilion's upper corner where I could view the Golden Gate Bridge was the highlight of my day.  Staying far above the nonsense below was the best decision I made at the expo.

I had to venture back down to the workshops just to gauge the general intelligence of the attendees.  If the content was lame and the people ate it up, they were morons.  Sure enough, other presenters allowed me to lower my expectations by the minute.  One presenter discussing Web optimization said WordPress wasn't a robust enough platform for a business website.  Say what?!  Does he even know how thoroughly WordPress has penetrated the Web?!  Wow, such stunning ignorance.

Another presenter's slide show didn't work so she read from her printed slides verbatim.  She obviously had not prepared to do anything other than rattle off stats without context.  Her talk was supposed to be about the power of integrating social media with mobile tech.  None of her points came across well or made sense.  I have heard about social and mobile at countless events from true experts, and her effort did not even come close to clearing the first step on a stairway to competence.  She was at least a hot babe, so she was fun to look at even though she wasn't showing cleavage or bare legs.  I imagined her stripping off because it would have made my time in her workshop worthwhile.  Her best line?  "The last time you left home without your smartphone, you felt naked."  I sure wish she had felt naked right there and then.

I thought the talk on venture funding would at least be recognizable, since that's the space I inhabit.  I was wrong.  The speaker had a couple of prepared bullet points about how VCs invest in the "leader and plan" of a business.  Huh?  That's it?  Really?  He did mention the goal of a 10x return, but nowhere did I hear the distinction between scaling up a tech startup into a billion dollar segment and the challenges of something more prosaic (like a restaurant).  He also revealed his inexperience by stating he liked to invest in a business plan with (I kid you not) . . . "ups and downs . . . the outsourcing team . . . the unemployable experts on the advisory board."  Folks, none of that makes any sense to experienced venture investors.  The dude was talking out of his hindquarters.  I was really amused at this circus.

Much of what the "venture funding" guy said was really another disguised sales pitch for business coaching.  I hope my intelligent readers see a pattern emerging.  The offers for special discounted fees and vast co-investing networks were all over the place.  The name-dropping of famous "friends and partners" came fast and furious.  Blink and you'll miss a celebrity.  I asked him what he thought of crowdfunding, and he galled me by saying it was illegal!  Say what, bro?!  If he had actually read the JOBS Act and the SEC's latest rules he would know about the legal protections in place.  I was right in the front row and clearly stated that he was incorrect, loud enough for him to hear me.  He did not even break his stride.  I was amazed at how many imbeciles stayed through his entire talk, lapping up everything.  P.T. Barnum was right about suckers, and a lot of them are now being born in San Francisco.

The only useful information I picked up was a rehash of bank loan tips I've seen before at much better conferences.  I still cannot believe I wasted half of a perfectly good day attending this expo.  I could have spent that time productively blogging.  Instead I ended up as the only real thought leader in a pavilion full of aspirational ding-dongs.  You won't catch me at this thing next year.  Buh-bye.