Thursday, October 31, 2013

The Haiku of Finance for 10/31/13

Market trick or treat
Random walk with no candy
Goblins take your cash

Wednesday, October 30, 2013

Tuesday, October 29, 2013

The Haiku of Finance for 10/29/13

Build in the desert
Dubai foolish expansion
No way will this last

Dubai Won't Work

Dubai is building an airport that will be as big as a city.  The first passengers have started arriving.  I hope they take lots of pictures of the endless glass and steel towers in the middle of nowhere.  Those things will be derelict hulks and piles of recycling material within one generation.  There is no way Dubai's civic boom can be sustained.

Dubai is a city-state built on sand.  Anything built with sand or on sand will crumble but the rich Arabs building wild projects in Duabi never figured that out.  Developers built island resorts in Dubai that are crumbling into the sea due to natural erosion.  There aren't enough clueless rich people in the world to pay for perpetual sand maintenance on artificial islands.  

Dubai built its skyscrapers with imported slave labor.  The workers live in squalor and make next to nothing.  No one told these workers that they would be working for starvation wages under dangerous conditions.  When some of them finally got sick of their dire straits, they went on strike and now face mass deportation.  Dubai's major construction contractors are eventually going to make the country subject to a host of WTO sanctions that will make the country economically uncompetitive.

Dubai has no real competitive advantage, and its artificial advantages like low labor costs are temporary.  Dubai's historical role as a crossroads for Persian trade means little in modern times.  Geographically isolated city-states need to be about something to have longevity.  Singapore and Hong Kong are about seaborne trade and their natural deep harbors are excellent gateways to mainland Asian markets.  Dubai has no such natural advantage.  Even comparing it to Las Vegas is meaningless.  Las Vegas has an indefinite supply of fresh water and energy thanks to Hoover Dam, assuming the US government can manage demand from the dam's other customers.  Dubai has no such resource.  Hydrocarbon energy is a small and declining share of Dubai's GDP.  The city's physical size, population, and economy will contract to match its energy resources.

Dubai is a physical and financial impossibility.  The world's traveling classes will eventually tire of subsiding this high-cost, high-entropy boondoggle with their vacation dollars.  The world has plenty of financial hubs and tourist traps that aren't slipping into the sea.  

Monday, October 28, 2013

Getting Straight Data on Trade and FDI for Revealed Comparative Advantage

I recently read the Asia Society's report on Chinese Direct Investment in California and perused the Rhodium Group's China Investment Monitor.  Both products are excellent rundowns of where Chinese investors find the US economy to be most attractive.  Both of these sources got me thinking about the relationship between trade data and FDI in the US.  

Trade data should be easy to compile if sources agree on computation methodologies.  I'll forgo the US Census Bureau's USA Trade because it charges a subscription fee.  The stats at USITA's TradeStats Express are free and meet my needs.  The UN Comtrade Database purports to be a comprehensive source of worldwide merchant trade data but I don't know how reliable it is for developing countries.  

Figuring FDI for any country ought to be straightforward.  After all, you'd expect a single country to report the same data sets to every international organization in which it holds membership.  The difficulty comes when those international organizations change their definitions of FDI and end up with different methods of collection and assessment.  The OECD has good stats on FDI and the IMF has a complex methodology for defining FDI.  The UN Conference on Trade and Development harmonizes the IMF and OECD approaches to measuring FDI.  I looked at the BIS stats page but found nothing obvious for FDI.  

I mention these sources because I want to discover whether trade data determines a revealed comparative advantage (RCA) that will attract more FDI.  The World Bank has a handy-dandy RCA calculator called WITS and UNESCAP has a good RCA definition.  I suspect there is a relationship between a country or region with a high RCA and a high inflow of FDI, presumably because sophisticated multinational investors want to invest in a region that has a disproportionately high share of the world market for a given set of goods.  I can't prove this yet with data, so I'm thinking out loud to signal the start of my research effort.  I plan to use the US as my test case and start with an analysis of my favorite sectors - defense/aerospace, logistics, renewable energy, and natural resources - to see if this relationship holds in my home country.  

Foreign ownership of US Treasury securities has long been a vote of confidence in the US economy.  I want to discover whether the FDI demand for the US's trade RCA justifies this confidence.  Watch this space for the official Alfidi Capital special report, coming whenever I get through the rest of the stuff I have to write about.

The Haiku of Finance for 10/28/13

Build a better brand
Dig up archive for support
Five star history

Public Archives Can Build a Music Brand

Library science isn't just for geeky old spinsters anymore.  Information archiving and retrieval can be part of a brand building effort for digital properties.  Take the San Francisco Conservatory of Music as an example. Click on its Library Archives page to see the local music history they've unearthed.  Photos crammed into boxes from older students' attics are now online.  The SFCM's oral history project dovetails with other regional projects like UC Berkeley's Bancroft Library ROHO and the UC Regents' California Digital Library (specifically their Online Archive of California searchable database).

Uploading old folks' reminiscences is more than a way to keep their memories alive.  Mentioning the leading lights of modern music that have added star power to SFCM can help build that institution's brand when tied to an SEO campaign.  Impresarios like Kurt Adler, Frederica von Stade, and Midori Goto have made their joyful noises in SFCM's halls over the years.  Any performance materials they generated can be digitized.  Uploading their multimedia stuff to SFCM's website makes the whole site more attractive to Google's search engine.  Music enthusiasts worldwide will then have an easier time discovering SFCM's rich history.  The brand's value will rise and the school's graduates will be more marketable in music careers.

I wrote SFCM into my will because training young people in music is important to our society.  I don't want young musicians to go down the path of the San Francisco Symphony's stupid loser union musicians who deserved to be fired.  The Conservatory is exposing its students to entrepreneurial lessons that will enable them to produce and perform music in the free market.  Independence from collective bargaining may be one of the greatest gifts a musical education can give.  Archives of star performances can give an educational brand some superstar power in the marketplace.  

Sunday, October 27, 2013

Really Dumb Alternative Income Hedges

I frequently gripe about the nearsightedness of fixed-income portfolio managers and their investors.  It seems to me that the best they can do is eek out minimalist returns with ZIRP distorting credit markets.  Hanging on at the top of a bond market is dangerous when the only place interest rates can go is up.  Holding long-duration fixed income investments of any kind is suicidal on the cusp of hyperinflation.  Money managers look for alternatives to conventional credit products, like in Index Universe's ETF Report article on alternatives in fixed-income for October 2013.  They're not looking hard enough to impress me.

No way will I look at bonds, loans or notes that float with Libor.  That rate is still subject to manipulation and a few fines aren't fixing anything.  The World Bank should give me a call if it ever takes note of my GIBOR concept and wants to implement it worldwide.

I am sick and tired of hearing about variable demand rate obligations (VRDOs).  Those instruments were among the first to freeze in value during the 2008 financial crisis and most investors sold out of them in frustration as soon as they could.  I tried pitching them when I was a financial advisor in 2005-6 and none of the so-called fixed-income experts at my firm could ever give me consistent answers on how they were priced or how they paid interest.  Brokerages were labeling them as "cash alternatives" simply because they were subject to auctions that had not failed . . . until 2008.  The fine print of a VRDO prospectus mentions that the instruments' viability in auctions is backed by a credit facility known as a standby bond purchase agreement.  If an investment bank is unwilling to lend in support of such an agreement, the VRDO auction fails and the investor is stuck holding what becomes de facto a long-term bond.  That will be dangerous during the onset of hyperinflation.

International bonds might work if they originate in countries that have a strong rule of law orientation, a significant hard asset sector, and a low propensity to hyperinflate.  That rules out anything except bonds from Australia, Canada, New Zealand, and Switzerland (which lacks the hard assets of the other three, unless you consider Swiss chocolate).  I tune out the remaining China bulls who think dim sum bonds are China's ticket to reserve currency status.  That makes me LOL.  Investors who ignore China's debt-laden shadow banking system deserve what's coming if they love dim sum bonds so much.

I've blogged about BDCs before.  They work great in normal times by providing asset-secured loans to companies that can't qualify for low-interest bank loans but aren't in such distress that they need investment banks to underwrite high-yield debt.  These aren't normal times.  Hyperinflation will enable debtor companies to repay BDCs with less valuable future currency.  I expect the market value of BDCs to plummet in hyperinflation unless they supplement their loan portfolios with standby equity distribution agreements.

Fixed-income investments remain a minefield for many reasons.  Rising US interest rates will lower bond valuations.  Hyperinflation will destroy bonds altogether.  Fiscal cliff wrangling makes non-US institutional investors more likely to dump US dollar bonds at any moment.  Very few coupon-based securities are going to tempt me to chase yield under these conditions.

The Haiku of Finance for 10/27/13

Capital access
Finding multiple sources
Micro-investment

Checking Out VEDC Access to Capital San Francisco 2013

The VEDC Access to Capital Business Expo in San Francisco has become one of my perennial favorite conferences.  I had to attend and check out innovations in raising capital for small businesses.  The Hyatt Regency San Francisco never disappoints with hospitality.  VEDC renamed the conference this year as "Here's the Money!" instead of just asking where the money hides in years past.



Check out the awesome signage above.  You just can't go wrong with signs like that showing you the way to money.  I would posts signs like that around my home office but they would just get in the way of my daily moneymaking.  VEDC comes all the way up to San Francisco every year to show us the money, which is a long trek away from their usual SoCal partnerships with organizations like Golden State Certified Development Corporation.  They've been reaching out for partnerships with Mission Economic Development Agency here in town and the Nevada Microenterprise Initiative.  Where's the money?  It's here, there, and everywhere.  I noticed that the conference also coincided with an unaffiliated event, EO Alchemy 2013, at the same venue.  The entrepreneurs doing their alchemy may have had no idea that Access to Capital was just around the corner.

The introduction from VEDC announced their new venture, Aquaria Funds, specifically to operate outside Los Angeles.  I think it's great that VEDC created a vehicle that entrepreneurs can use to obtain capital in addition to other local microfinance partners.  They also offer more conventional SBA loans.

I started my morning checking out the session on startup financing.  Interstate Business Capital mentioned cash advances on purchase orders and other merchant advances but I'm pretty sure those are only options for revenue-stage companies.  No one can offer advances for purchases that haven't been made if the business is still trying to launch itself.  There just aren't accounts receivable to accelerate or accounts payable to defer at most early-stage startups.  Kiva Zip is enlisting its microlenders as evangelists for the non-profit projects they launch.  That's great for Bay Area do-gooders.  The Green2Gold guy, Bruce Blechman, mentioned CCVF's Clean Business Investment Summit and their founder's radio show on new venture money.  Bruce is a genius and his rapid-fire rundown of non-bank lending, licensing, collaborative co-ops, advance order funding, and sweat equity is like a five-minute MBA education.

I slipped in to the concurrent seminar on financing for existing businesses but it was mostly a panel of larger banks discussing their established loan programs.  Banks look at an industry's default rate in addition to a business' specifics, which will disappoint a lot of the aspiring restauranteurs and beauty parlor owners attending this conference.  It's good to know that SBA-backed financing covers a ten-year cycle for equipment instead of banks' normal five-year cycle considerations.  That was all I needed to know before going back to the last part of the early-stage financing panel.  I was pleasantly surprised to hear that Chinese entrepreneurs were successfully pushing their government to crack down on IP infringement.  I'd like to see more confirming evidence of stronger Chinese IP protection before I revise my low opinion of the rule of law in China.  In the meantime, there is such a thing as insurance against IP infringement.  It works just like other policies with premiums and deductibles.  Yeah, just don't tell the ACA exchange folks about it, or they'll force us all to buy it with another mandate.  Startups who want to protect their IP as early as possible should file a provisional patent application with the USPTO.

Strolling the expo floor meant listening to bank loan sales pitches.  My eyes doth glaze over when I hear big banks say they have a community bank culture.  Sorry, but I'm not a believer.  Only two things determine a large corporation's culture.  Number one is the CEO's personality and expressed strategic goals, because other executives will model that behavior and push their business units to meet those goals so they can get promoted to the C-suite.  Number two is the HR department's policies on hiring, firing, promotions, and performance bonuses.  Those are the hard incentives that motivate human behavior.  Any big bank that aspires to live a community bank culture would have to devolve so much autonomy to its local branches as to make its corporate structure nonviable.

I sat in the next session introducing local resource partners.  The usual cast of characters from the SBA, SCORE, SBDC, Operation HOPE, and others were on hand.  The Renaissance Entrepreneurship Center, San Francisco Community Business Resources, Pacific Community Ventures, and OBDC's Bay Area Small Business Finance were also in attendance at the expo.   I would have preferred to see the San Francisco Center for Economic Development (SFCED) in attendance but alas, it was not to be this year.  Entrepreneurs from underrepresented demographics need to check out California's Veterans Business Outreach Center.  I'll give you this panel's best quote, free of charge:  "The one time a banker won't give you an umbrella is when it's raining."  That means banks won't give you a loan if your business is losing money or the microeconomic climate for your sector has a poor outlook.

The most valuable insights I got out of that local partners panel was from the SCORE guy who previously worked with Harvard Angels and Sand Hill Angels on early stage investing.  He said records of the term sheets and signed subscription agreements that support a startup's capitalization table are a must.  Banks and angel investors will want to review those documents during their due diligence phase.  Corporate structure is the key to determining capitalization structure because it must allow for selling equity shares.  The choice of an S-corp or C-corp IMHO depends on how rapidly the business expects to scale up.

One participant at "Here's the Money!" mentioned Wells Fargo's financial support of microfinance platforms, which I presume to be Grameen America.  I've blogged before about how SIFI institutions will eventually purchase microfinance and crowdfunding platforms to broaden their product offerings.  The consolidation won't start until the SEC finalizes the regulatory structure enabling the JOBS Act.  You heard it here first.

The keynote speaker after lunch was Kevin Harrington, a TV pitch innovator who brought you Ginsu Knives on shopping channels and infomercials before he joined the Shark Tank show.  I'll share his tips on "Creating Brand Success" pretty much verbatim because they apply to lots of different business types.

Kevin like the "Three Steps and a Stumble" approach to raising capital and growing a business.  Step One is "curiosity overload."  Deep market research reveals product trends, so collect industry publications and attend trade shows.  You know what . . . that's exactly what I do.  Step Two is "hijack your habits."  Think outside the box.  Make things happen.  Don't do something the same way forever because business changes quickly.  Hey, I do that too.  Step Three is "build a brand for both the company and yourself."  Man, this guy must be reading my blog because surely he recognizes the pure unrivaled genius that is both Alfidi Capital and Yours Truly, Anthony Alfidi.

Kevin also laid out five skills for entrepreneurs.  Here they come.

- Skill One:  Create the perfect pitch.  Show healthy profits, exponential growth, acquisition opportunity, strong market, bootstrap capital from founders, uniqueness, powerful presentation using his "tease / please / seize" structure, the industry gap you fill (which I interpret as the pain points you solve), and your exit strategy.

- Skill Two:  Publish.  The business plan must have an executive summary, industry overview, competitive analysis, marketing plan, strong financials, and an exit strategy.

- Skill Three:  Productize.  Show your product's mass market, problem solving ability, uniqueness, magical transformation, celebrity endorsement, multi-functionality, credible testimonials, documentation and clinical studies, publicity, and value proposition compared to cost of goods.

- Skill Four:  Profile.  New media accelerates publicity.  Smartphones now have multimedia production capabilities equivalent to a full broadcast studio.  Shooting smartphone videos for YouTube will go a long way.

- Skill Five:  Partnerships.  Find parties with resources you need, and offer them resources they need.

Now for the "stumble" Kevin mentioned.  If you must fail, do it fast and cheap.  Make it up on the next venture.  Kevin shared videos of a lot of his very successful infomercial products and few that were disappointments.  No one remembers your disappointments if you recover and follow up with new successes.

These VEDC events are highly condensed equivalents of college seminars in finance and marketing.  So where's the money?  Well, here's the money, in my wallet.  It's yours too once you line up investors and creditors who have confidence in your business prospects.  Don't ask me for money.  Go out and find it with the local partners VEDC lined up for you.  

Saturday, October 26, 2013

Friday, October 25, 2013

The Haiku of Finance for 10/25/13

Marketing some joy
Blogging hatred and insults
Sarcastic finance

Tina Sharkey Pursues Her Joy At Umpqua Bank

Umpqua Bank celebrates their brand spanking new presence at 450 Sansome Street in San Francisco by hosting luminaries for "Catalyst Series" talks.  My excuse for sitting in was a chance to score a free TCHO chocolate sampler, locally made and pretty darn good.  The speaker for October 24 was Tina Sharkey, serial turnaround exec and marketing evangelist for multiple brands.  Tina's theme is seeing everything through the filter of "pursuing joy" even within business metrics.  I'll run down her most important observations and show you, dear reader, how they apply to finance.

Her career in marketing included stints at QVC, iVillage, Sesame Street, and AOL.  I didn't know the QVC producers coaches the on-air hosts in real time to address their live callers' needs until Tina revealed that TV tidbit.  Her observation that Sesame Street was a "multimedia alphabet" at its core applied her lifelong understanding of suing marketing to boil complex ideas down to one sentence.  I despised Sesame Street when I was a child because it insulted my intelligence but I can see how it appeals to busy parents as a substitute nanny.  Tina's early insights into the emergence of social media in the late 1990s reflected her enthusiasm for connecting people in communities.  She shared something on branding:  "A brand is about what a friend tells a friend, not what it says about itself."  I think that's great for brands that care about their identities as thoughtful service providers.  The Alfidi Capital brand reflects my obnoxious, brash, know-it-all personality and I couldn't care less what people say I am as long as they make my articles go viral.

Tina disclosed that multiple studies of brain chemistry reveal the effects that our experiences have on the production of oxytocin, serotonin, endorphins, and dopamine.  Those are the natural chemicals that make us feel happy and drive our emotional responses to stimuli.  I learned all too well when I was in sales that seemingly intelligent people make very important life decisions based purely on emotions and then rationalize them afterwards.  I rationalize first and then act, which makes me a genetic freak.  It also makes me unfit for employment because not a single human on this planet cares for anything I produce unless they can steal it.

Here come Tina's five joy factors . . .
1) Art of the Narrative:  Have a core thing to say when telling your story.
2) Living the Four-Star Life:  Let the crowd's wisdom on how they feel about some service inform your lifestyle decisions.
3) You Really Like Me:  People use social media's retweets and Like buttons to share validation of things they like.
4) Surprise and Delight:  People like nice surprises from their service providers.
5) How Can I Be of Service to You Today:  Always be ready for service with a smile (or something like that, because I don't quite grok this one as a perpetually sarcastic social critic).

Tina also gave us four helpful design factors in branding . . .
1) Focus on reception, not conception.  A user's feelings matter when they engage a brand.
2) Unlock emotional benefits, not just functional benefits.
3) Design for validation.  Audience will tell your story if they like it.  They need to evangelize you.
4) Always design for usefulness and smiles.

I can definitely apply those five joy factors to Alfidi Capital.  Check this out.
1) My core narrative in my financial commentary is my contempt for human stupidity.  Everything I write about finance demonstrates how much I despise Wall Street's corruption and the loser investors who tolerate it.
2) My four-star life comes from being a cheapskate and doing the opposite of what the crowd's wisdom indicates is wise.  I couldn't care less for mass opinion at all.
3) I've always known that people really don't like me one stinking bit.  I stopped trying to make them like me a long time ago.  I don't like people either.  My schtick is to provoke them into hating me enough to retweet and reblog what I say.
4) I try to surprise people by thinking of rude and sarcastic things on a daily basis.  That brings me delight.  Oh yeah.
5) I am not at all going to be of service to anyone today, or any other day.

Those of you who've never read my blog before might be wondering how I can get away with turning these joy principles upside down.  It's simple.  I make money from pure Web traffic.  I provoke people into noticing me and my more controversial writings have been the most widely read things I've published.  I can't afford to play nice and get along with people because the people I've worked with in life all prefer that I die.  Yes, I'm serious.  Human beings really are randomly malicious.  I designed the Alfidi Capital brand to insult the world, and that is what brings me joy.

I am not ever going to redesign my brand with any of those four helpfulness factors in mind because that will not help me at all.  I made the mistake earlier in my career of trying to be as helpful to everyone as I could and I was repaid with insults, ignorance, threats, and utter rejection.  Never again will I ever try to please anyone but myself.  Alfidi Capital is my raised middle finger to the profession of finance.

Tina's wisdom is definitely helpful to more conventional business models even if it can't help mine.  She thoughtfully answered questions afterwards and advised us to do social good so our success is significant, and that the most successful businesses create moments of joy for their customers.  Those are generous thoughts but they really only apply to people who are sufficiently connected and pedigreed to make their own significance notable.  Read Tina's Wikipedia bio to see her roots.  Her mother ran a large corporation while she was in high school, so of course Tina would be tapped for great things like lobbying early on.  It could never be otherwise.  I knew students during my undergrad days at the University of Notre Dame who could lobby at will because their parents were CEOs or politicians.  The plutocracy that now has America firmly in its grip is choking the life out of the Horatio Alger myth of upward mobility that once made our country so attractive to immigrants.

Tina offered a lot of brand examples during her talk but the majority of her citations looked like luxury brands to me.  The examples that stuck out in my mind were Uber and Lululemon.  Those brands offer Tina's transformational joy only to well-off consumers whose high six-figure salaries enable them to sustain conspicuous consumption patterns.  I am absolutely certain that the lumpen proletariat in flyover country has no idea what those brands are about.  Blue collar laborers don't take Uber to Wal-Mart in Fayetteville, Arkansas; they drive a fifteen-year old pickup truck.  They don't exercise in Lululemon's transparent tights because they can't afford to replace their old sweatpants.  I track enough economic statistics to know that inflation-adjusted personal income for most of the American workforce has not risen in decades.  The Pew Research Center has documented the American middle class's destruction.  The Wall Street Journal found a consensus among economists that American living standards will continue to decline.  I think Tina and other marketing gurus need to realize that the definition of joy for all of the socioeconomic classes below their own will be permanently redefined downward.

I noticed that the audience for this seminar was quite well-dressed and well-coiffed.  I didn't introduce myself to anyone because I'm certain they would have objected to my origin in a lower social caste.  I get that a lot in San Francisco.  I used to introduce myself habitually at every social event I attended in The City.  I don't do that anymore because it's a waste of time.  One-percenters and their progeny object to my existence once they ask very probing questions about my family's pedigree and my own net worth, and my answers have never measured up to their expectations.  The folks in the crowd for Tina's talk really identified with the upscale brands she mentioned.  This must be how an ancien regime appears before a society crosses one of history's inflection points.

Here's my final bloviation on the whole "joy" concept.  Elitists in San Francisco experience joy when they dismiss me out of hand at social events and discourage me from pursuing a career.  This isn't just projection on my part.  I've seen the smirks on their faces and the glints in their eyes when they've told me I don't deserve to make money.  I know this because they've told me so, especially when they've remarked about my military service.  My Yelp reviews of my academic experiences at ND and USF are my permanent record.  The only joy I generate for myself is the knowledge that I can survive until the inevitable market crash resets the net worth of countless snobs from the penthouse to society's basement.  The hyperinflation that will likely follow will put them on the streets.  I salivate over this coming role reversal and I have positioned my own affairs to benefit accordingly.  My dopamines and such will flow in a mad rush when I stand over the broken lives of my former social betters.  I will even thank Tina Sharkey for showing me the way to joy.  Umpqua Bank should have me give the next talk in their Catalyst Series, and they should read my LinkedIn bio to start their due diligence.  I will definitely catalyze action and share my joy.  

Thursday, October 24, 2013

The Haiku of Finance for 10/24/13

High-end retailer
Luxury goods and service
Plutocrat client

Alfidi Capital at MobileCON 2013

I attended the one and only MobileCON 2013 last week down in San Jose.  You know those old song lyrics about whether you know the way to San Jose?  Well, I sure know the way after several trips down there in search of ideas, wealth, and attractive women.  I had to miss the first day of the conference because of commitments in San Francisco but the next two days were worth my while.  Special kudos to whoever picked the alternative rock soundtrack for the wait prior to the morning keynotes.  I'm quite fond of hearing The Jezabels and The Killers whenever possible.



The CEO of CTIA introduced each of the keynoters on the second day.  Christy Wyatt, CEO of Good, was absolutely the best speaker at this conference.  My most important takeaway from her talk was the need to establish a valuation method for stored data that is compatible with the enterprise's balance sheet.  She compared the dollar per user, dollar impact when lost, and dollar value to someone else (mainly data thieves on the black market).  I plan to research these methods further because that's what finance types do but I need to find relevant references in FASB publications or CIO magazine that define data as an intangible asset.  I also learned from Christy that forwarding an enterprise's proprietary information to a personal email account or device can easily result in data leakage.  This is why enterprises set IT firewalls to disallow such forwarding and why they need firm BYOD policies.

I keep hearing from tech marketing advocates that "the smartphone is your authentication" in e-commerce.  Sure, that enables e-commerce but if your smartphone is stolen a thief can authenticate transactions using your identity.  Christy advocated Good's containerization strategy for mobile security.  She wants data isolated from encryption and an enterprise's security architecture.  The enterprise must set policy, not the user.  The other Wednesday keynoters pitched their enterprise-level perspectives and I definitely got the hint that enterprise-grade apps from the company's approved app store are the wave of the future.  These senior IT execs realize that distributed solutions have left big Iron behind but the mentality of many IT managers has not caught up to the tech reality.  The dude from CA Technologies said no amount of capex can buy management DNA that develops and controls IT architecture.

I headed out to the expo floor for some seminar action.  I also had to check out booth babes and score free candy.  One of the public cloud advocates from Xively wanted us to grow and optimize our businesses with IoT.  Sure, I'm down with that.  I'm just not buying the hype that IoT is going to be the biggest market for goods in human history.  That's what the IT and telecom sectors told us about the Internet, the cloud, and Big Data and nothing has ever lived up to its hype.  Xively thinks the network effects of transforming Small Data into Big Data matter more than just pitching device capabilities.  The analytics from consumption and delivery patterns will feed predictive analytics that allow supply chain optimization.  Xively also expects to access use cases hidden in "dark data" on consumer behavior that is currently unavailable to conventional monitoring of engagement patterns.  I heard a lot of this stuff before in the late 1990s and only now is tech sufficiently mature to even scratch the surface of intelligence hidden in data.  I will add that using marketing data with real-time geolocation enables a retail distribution system that is truly optimized for geography.  I heard a lot of optimism at MobileCON about crowdfunding and scalable load balancing that is probably too optimistic.

I caught the last half of CTIA's Cybersecurity Summit, and I was mightily impressed with the extreme hotness of Nico Sell, co-founder of Wickr.  I was also impressed with her knowledge of cybersecurity from the other side of the fence.  I wonder whether Wickr's business model will survive a national security letter in this political climate.  Perhaps the policy pendulum will swing back to pre-9/11 normality someday and national security letters will no longer be anyone's concern.  Nico shared what she observed at the most recent Defcon about hackers gaining remote control of a vehicle enabled with mobile access.  Automakers are proud of their in-vehicle mobile systems' ability to decelerate a stolen vehicle and avoid a life-endangering high-speed police chase, but the same system allows access from black hat hackers.  Telecom carriers face a similar problem; they can turn off a stolen smartphone's network connectivity but its stored data still has black market value.  Well, I say mobile device makers need to allow user-selected encryption for devices used outside of enterprise bulk purchases.  Nico said she want to see "cybertime" expiration dates on personal data with knowledge of its stored locations.  I'd be happy to discuss that concept with her in person, if you know what I mean.  The panelists advised us to Stay Safe Online.

I attended another seminar that was really a product pitch.  It reinforced my growing belief that business intelligence applications need constant human intervention to be intelligent.  Claims about leveraging crowd wisdom mean little if the crowd is misinformed.  I say data must be streamed and sorted through channels with KM-defined decision rules so execs can take action.  That is not identical to crowdsourced information from unfiltered "dirty data."  Executives must clarify the KPIs they want the data streams to fill.  I also discovered that MS Excel, as good as it is for working BI tools, does not translate visually into an effective mobile dashboard.  Effective mobile apps translate data into icon-sized graphs and charts highlighting KPIs in real time.  The funny part with all of this mobile stuff is that there's no way to make the desktop or notebook PC disappear.  Some human somewhere has to crunch numbers into a spreadsheet before it becomes available for translation into a pie chart on the CEO's smartphone.

I sat in the front row of the panel on public policy and capital in wireless because we finance types need to see investment trends.  I did not know that devices configured to broadcast information needed the approval of telecom regulatory bodies (TRBs) before the FCC will grant its approval.  Here's a handy map of NARUC's utility commissions in case you need to get a gizmo approved.  The recent government shutdown delayed that final FCC step even though the private bodies do most of the certification.  The panel wants the FCC to auction off more of the seldom-used parts of the spectrum but I'm pretty sure DoD and the FAA will push back.  I read enough to know that DoD will have its own spectrum crunch from connecting multiple sensor suites between troops, UAVs, smart munitions, and vehicles on the battlefield.  DoD supposedly has a plan to relocate its systems' use away from auction-eligible bands.  The FAA wants to reduce its reliance on radar and adopt more GPS guidance for aircraft.  Uncle Sam needs to figure out how to compress his bandwidth requirements pronto before the telecom industry starts lobbying for more spectrum auctions.  The guy from a smaller telecom carrier on the panel was concerned that auctions open only for large geographic segments limit bidders to the largest telecoms shutting out smaller carriers.

The policy panel clarified a few telecom investment parameters for its finance sector observers (okay, probably just me).  The main investment inputs for wireless telecom are spectrum (considered a natural resource) and cell tower sites.  The absence of available spectrum puts a premium on cell site management and fortunately laws encourage the co-location of new towers on existing sites.  I think telecom carriers will run into expansion problems from delayed spectrum auctions and local zoning that inhibits new towers.  They need to get creative if they want the finance sector to get bullish on their stocks.  Broadband includes fiber optic cable as well as wireless, and monetizing underused "dark fiber" in a cable company's assets can bring capacity to underserved areas with little capex and no added spectrum needed.  The FCC's incentive auctions are a policy innovation worth watching.

I'll make one more observation on telecom policy as it pertains to finance.  I've blogged about hard assets as an inflation hedge.  It looks like broadband spectrum, rights of way for fiber optic cable, wireless towers, and the products of incentive auctions are the telecom equivalent of hard assets.  I would seriously consider using these in a portfolio to hedge inflation if I had a way to invest in them.  The downside to these hard assets is they require large amounts of capital and are illiquid, placing them out of the reach of most retail investors.  Private equity fund could probably stomach the risk if they were sufficiently large.  I recall reading stories in the 1990s about doctors and lawyers who formed limited partnerships just to buy portions of the electromagnetic spectrum the FCC auctioned off to support the boom in cell phone use.  It must have been like the Oklahoma Land Rush of 1889.

I just had to sit in the seminar on the positive economic impact of increased wireless infrastructure.  Most people would be bored out of their minds in such a place but not Yours Truly.  The guy from Joint Venture Silicon Valley mentioned a PCIA white paper on "Wireless Broadband Infrastructure" and how it helps generate economic activity.  Investors should know that the FCC's "shot clock" ruling affects wireless access rights to utility pools.  The stringent rules for approving temporary towers make me think there's room for disruption in wireless infrastructure.  What alternatives exist besides temporary towers?  I think tethered aerostats and drones can carry wireless transmitters but they may need FAA approval.  There may be no way for wireless infrastructure investors to completely escape regulation.

One seminar on mobile payment fraud from Kount mentioned the Merchant Risk Council, but I wonder about that body's effectiveness if mobile fraud is such a problem.  Kount is counting on the large unbanked populations in developing nations to use mobile for transactions because their lack of legacy telecom infrastructure allows them to leapfrog ahead to wireless connectivity.  Folks, I've been hearing about that for a decade and a half.  Mobile transactions imply ability to pay and literacy, which a lot of people in developing countries don't have yet.  It's obvious to me that more payment methods demand more fraud controls but the stats Kount cited indicate mobile commerce isn't posing additional risks.  The biggest risks right now are the higher dollar purchases on iPads that trigger more manual reviews and disapprovals of transactions.  That shows me there's still room for disruption on the back end of ERPs because vendors need automated solutions to high-dollar purchase fraud that will eliminate those manual interventions.

The second day's keynotes were a roundtable for CIOs to tout their wonderful solutions to all of our problems.  It's clear to me that BYOD policies give users too much leeway will tempt them to use apps that are incompatible with the enterprise's cloud protocols and approved interfaces.  This is why enterprises must deploy virtualized desktops before initiating BYOD policies.  These CIOs know there's a tradeoff between usability and security, and having more mobile access to internal functions degrades security.  I was dumbfounded when one of the CIO panelists said his organization deployed a mobile device to a cubicle worker who already has a PC.  His rationale was that it costs as much to send an IT staffer to re-image a $400 PC as it does to replace that PC.  I don't believe that at all!  IT pros know how to re-image remotely on networks now thanks to the cloud and it can be done overnight.  The only incremental cost for replacing a PC is the cost of gas to get across town and if the IT department has a lifecycle management policy they can schedule regular replacement trips for several PCs.  No way could IT leaders be so dumb as to put mobile in cubicles but a government agency would probably do that just to show senior leaders that "hey, we're going to the cloud, yo" for political reasons.

There was a panel on privacy where anti-NSA grumbling once again set the tone for market demand.  They said that trust has a higher correlation with willingness to pay than other monetization factors.  I don't think people conflate trust with honesty.  People trust service providers who share an affinity and they trust products that deliver value.  That has nothing to do with telling the truth.  Anyway, the panel thinks big businesses have an advantage in knowing the regulatory environment on privacy, presumably because they can pay a full-time staffer to watch regulatory moves.  I'll credit this panel as my source for discovering the FTC corporate privacy policy guidelines that hold businesses legally responsible for upholding their codes of conduct.  The Association for Competitive Technology supposedly has a templated short-form privacy notice that small businesses can use that will help them keep the know-your-customer advantage they have over large businesses.  I asked the panel for their opinion on blind privacy services like Tor; they answered that consumer demand for such services exist.  I didn't press them on that answer because I suspect that blind services like Tor pose too many legal problems to survive in the wake of Dread Pirate Roberts' takedown.  I also think the Silk Road's end spells the beginning of the end for the very stupid currency experiment known as Bitcoin.  At any rate, Alfidi Capital has no need for a privacy policy because it has no client data and no clients.  The panel made me wonder whether privacy has a monetary value.  IMHO one way to assess that is the cost avoidance of litigation or regulatory fines for privacy violations, data misuse, and identity theft.  I will eventually compare this privacy valuation to the data valuation described near the beginning of this article.  That is a topic for a future report, once I determine whether FASB guidance exists.  I'll also review policies from IAPP, EPIC, EFF, and ISO 29100 to figure out where my analysis can add value.  I probably ought to get something like out as a matter of record before the IoT revolution destroys privacy completely, making policy so impossibly atomized as to be unworkable.

I couldn't sit through all of Sprint's advertainment pitch because the MobileCON lead sponsors were offering up free pizza and I had to get my fill.  Sprint thinks machine-to-machine (M2M) tech will become IoT but I see it as just the initial gateway.  True IoT requires human interaction and manipulation; machine learning is just a mediation method.  Connecting the home, car, and all devices via telematics is going to overwhelm the average user unless these devices are very simple to use.  I think there's a big future for usage based-insurance; i.e. policies where coverage and premiums are iterated by use case data collected from mobile feeds.  Your car's driving history and your wearable medical devices will determine how much you pay your insurance company in real time.

Thanks to the Telecom Council of Silicon Valley for the final panel on corporate VC action.  I paid serious attention in this one but I have to add pithy commentary.  Corporate VCs need far less capital to launch early stage tech.  The Corporate Innovators Huddle has a Corporate Venture Forum that gets these folks together.  I've heard before from corporate VCs who differentiate between pure-play investments and startups expected to generate business relationships.  Well, they said it again at MobileCON.  Okay, here's my pithy comment.  I just don't see a corporate rationale for a pure-play investment that's unrelated to the enterprise's stated strategy.  I noticed during the talk that one VC said that corporate venture arms aren't the most high-profile business units due to their non-core functions, and that means they are neither the first to get more resources nor the first to get cut back in hard times.  Some old-time former telecom execs sitting around me in the audience laughed audibly at that observation, so I guess they've been there before.  Let me get off this tangent and back into the panel's insights.  The panelists said typical finance-only VCs (i.e., the big Silicon Valley named funds) can't be a startup's early customer and third party validator but a corporate VC can fill those roles.  They can also help with non-local market penetration because of their global presence and can host their digital and physical infrastructure.  I'll remember that the next time some startup asks me what to do if they can't find free servers at a co-working space.  The panel said corporations make a mistake by assigning inexperienced execs to run their VC arms.  Well, gee, that's what big enterprises do all the time.  Selecting some fast-moving junior preppie whose only skill is kissing bee-hinds is exactly why corporate venture arms stray from strategic investments into pure-play boondoggles.  Sheesh.  I noted that the Telecom Council of SV has speaking opportunities in front of its corporate VC reps.  That means I have a venue to run my mouth if they want free entertainment.  The panelists think that the corporate VC decision cycle on making an investment has become as fast as financial VCs even if their internal business units (i.e., their real customers) don't move as fast.  I still don't see how corporate VCs can justify leaping ahead of their internal business units just to chase ROI.  No way is an annual corporate audit of a venture arm's failure to meet strategic goals going to make that VC exec look good if his pure-play risk destroyed the ROI in one year.  The panelists did admit that the VC arm's ROI won't move the corporation's share price, but the C-suite often asks them to explore non-core markets.

Well, CTIA, your MobileCON 2013 impressed me.  Once I join the smartphone era I'll be tweeting #mobilecon and such all over the convention floor but that won't be this year.  I'd like to thank the floor show exhibitors for insisting that I fill up on their extra candy on the way out so they didn't have to ship it back to headquarters.  I'd also like to thank the attractive females who staffed the booths and flirted with me.  I know they can't help themselves, and I can't blame them.  

Wednesday, October 23, 2013

Tuesday, October 22, 2013

Words of Wisdom for One Very Stupid Assistant

An aspiring business person recently followed up on my recent chance meeting with him.  My assessment follows.

Learn to write in English with a proficiency that exceeds an eighth grade education.  Making repeat spelling and grammar errors in an email shows unfamiliarity with basic spell check functions.

Do not hand me your boss's business card and claim to speak for her or him.  That shows me how careless your boss is with business if they trust someone as illiterate as you.

Do not send me a report that is hundreds of pages long when I asked you to send me only the executive summary.  That shows me that you are unable to follow simple instructions and you enjoy wasting my time.

Do not tell me that your company has attended the largest conference of its kind in a certain country.  I have in fact attended the largest conference in that sector several times in the US.  The conference you cited isn't nearly as large.

I'm probably wasting a few precious seconds typing this blog entry.  I just had to get this on the record.  I will never do business with this very stupid aspiring business person or his associates.  I have high standards that idiots will never meet.  

The Haiku of Finance for 10/22/13

Mobile data mix
Sort stream from user to cloud
Seek valid knowledge

Monday, October 21, 2013

The Haiku of Finance for 10/21/13

Stupid investing
Do what everyone else did
Go ahead and lose

Down With People

The 1960s brought the apotheosis of a lot of cultural oddities that will never again see the light of day.  One such phenomenon was "Up With People," some kind of song-and-dance troupe that sprang from the Moral Re-Armament movement's ineffective actions in pre-war Europe.  I would like to initiate a counterpart gypsy troupe that captures today's zeitgeist.  I'll call it "Down With People."

The inspiration for encouraging people to feel bad about themselves is the stupidity I've been witnessing lately in our society.  People are greedier and needier than ever and they're too dumb to realize it.  A temporary EBT payment glitch encouraged bottom-feeding ghetto denizens to ransack a Wal-Mart.  They are too lazy to work for a living and would rather steal food.  Down with those people.  Middle-class Americans signing up for mandatory health insurance are learning its true costs.  Entitlement addicts never figured that the whole boondoggle was a swindle to redistribute wealth and protect health sector oligopolies.  Down with those people.  JPMorgan's fine has cleared the way for other incorrigible bankers to be smacked.  Overpaid preppies snort a few white lines and lose billions while bailout moral hazards support their bad behavior.  Down with those people.

Watching vacuous morons pump themselves up is one of my favorite pastimes.  I'll enjoy it even more when they're on the way down thanks to my Down With People demotivating campaign.  My first recruits for the performing troupe will be found among "life coaches," those sappy performers who already have some polished song-and-dance routines.  It's fun to watch an audience of suckers listen to these maudlin carny barkers.  Life coaches all have thin resumes, sympathetic stories of recovery from some unspecified crash, and outgoing personalities.  Their target suckers are a lot like Oprah's audiences of emotionally needy fools sharing feelings and seeking validation.  They'll get all the validation they crave and then some once they see themselves parodied in a Down With People troubadour review.

My Down With People project bears one similarity to Up With People.  The UWP movement flourished under corporate sponsorship.  Big companies funded UWP as a cleaned-up brand to compete for cultural dominance with smelly radicals in hippie communes.  Thankfully, the hippies lost the culture war (with a little help from COINTELPRO) and UWP continued to dumb down consumers at Super Bowl halftime shows for years.  My DWP project will also be corporate-sponsored . . . with Alfidi Capital as the sole sponsor.  I don't want anyone else getting credit for this one.

I have yet to write the song lyrics, design set pieces, or audition cast members for my Down with People extravaganza.  I may never get around to it at all.  It's enough that I've identified a clear market need for a corrective tonic that will counteract 'Murican culture's self-esteem meme.  Postmodern performance art is best realized as an authentic presentation of self.  My authentic self is the persona of a rude, obnoxious, know-it-all.  Yay me!  Down with everyone else.  Up with Tony Alfidi.  

Updating the Alpha-D for 10/21/13

It's the weekend after options expiration so that means it's time for me to review my liquid portfolio.  My covered calls expired on FXF and I renewed them for another month.  I also noticed that my GDX holdings are still trading near their 52-week low with a P/E of 13.  I want to get rid of them eventually but not at this price.  I took an unusual risk by selling cash-covered puts under the GDX holdings in my IRA.  I wanted to generate a little cash while accepting the risk that more GDX shares could be put to me in the event of a broad market correction.  I would not do this with the GDX I hold in my taxable account; my time horizon in my IRA is much longer and thus allows for a longer recovery time from a downturn.

I made no changes to my holdings of FXA and FXC.  I'm still holding my long put position against FXE.  The Canadian and Australian dollars are my hedges against US dollar devaluation, as is the Swiss franc.  The bet against FXE is a bet against the long-term viability of the euro.  The market thinks the euro will hold together.  I'm betting my own money that the market is wrong.  

I am hanging on to a lot of cash, much more than a conventional asset allocation would determine for someone of my age and risk tolerance.  These are not conventional market conditions.  Janet Yellen's Fed will keep the monetary stimulus flowing and lay more kindling under a hyperinflationary fire.  All that her woodpile needs is a spark to set it off.  I'm still watching the valuations of RYN, PSA, and other hard asset hedges.  

I feel like I have to remind my readers that what I do with my own money does not at all constitute advice or recommendations.  I just love showing off my intellect.  Other people can do whatever they like with their money and I couldn't care at all about their results.  

Sunday, October 20, 2013

Brief Notes on Asia and Hard Assets in Hyperinflation

I'm adapting this brief commentary from a conversation I had today with another private investor.  We discussed the possibility of dollar devaluation as a response to America's continuing debt funding problems.  Hedging against devaluation is not difficult with a broad mix of non-dollar assets.

There's more to hard assets than gold.  Anything I consume - - food, energy, basic materials - becomes very desirable in a currency crunch.  Advanced purchases of raw materials become "secondary" stuff as additional inventory kept for future needs.

The need for hard assets as a hedge against the potential devaluation of the US dollar begs the question of where to obtain said assets.  Why buy stuff in China?  I think the renminbi is as likely to have high inflation as the US dollar.  On the other hand, Australia, Canada, New Zealand, and Switzerland have well-managed currencies.  China is the least transparent of the G-20 economies.  I believe all of that country's official economic statistics have been falsified for years.

My longtime readers know that I own John T. Reed's book on hyperinflation and depression.  I have implemented many of his ideas at little cost.  His free articles on inflation are worth my time.  Hedging my net worth with a hard asset component of my portfolio gives me peace of mind that I will survive a hyperinflationary depression in the US.  Consumers will have a difficult time shopping for necessities if our currency becomes worthless as a store of value.

Currencies do have value as units of trade, so the yuan may gain some temporary acceptance as a dollar alternative among China's trading partners.  The problem for those who hold yuan will be the same as for those who hold US dollars.  Inflation in China will make the yuan (renminbi outside of China) worth less in that local economy.  Malaysians, Indonesians, etc. will then dump remminbi because they want to preserve their ability to buy things locally.

The secondary effects of simultaneous US and Chinese hyperinflation on Pacific Rim economies are too complex to predict.  Countries that peg their currencies to the dollar will have to de-link immediately or follow through with their own hyperinflation.  Countries that have significant hard asset sectors - mining, energy, agribusiness, timber - and sectors that service hard assets (specifically pipelines, railroads, and barges) are hedged for a currency crisis.

I remember being in South Korea in 1999 just after the Asian currency crisis had passed.  South Koreans donated their private gold holdings to the government so its currency could regain value.  The US dollar traded at a very beneficial exchange rate for Yankees like me who spent money in the local economy.  South Korea suffered because its main sectors were automobiles, semiconductors, and shipbuilding.  Those sectors were fully exposed to export markets.  I don't want any exposure at all to dollar-denominated fixed income during US hyperinflation.  The Fed under Janet Yellen will keep is foot on the QE gas pedal.  

The Haiku of Finance for 10/20/13

Arrest BART strikers
High-cost racket shut transit
Indict the union

Arrest Striking BART Workers, Indict BART Unions, Replace with Symphony Losers

I am sick and tired of stupid losers ruining the Bay Area's economy.  BART's unionized pea-brain workers have shut down the region's train system for the second time this year.  They demanded pay increases that exceed the CPI, pension plan contributions lower than what the rest of us pay into social Security, and health insurance premiums lower than what subsidized low-income earners would pay under the ACA exchanges.  I am totally disgusted with the arrogance of semi-literate button pushers and ticket takers who believe they are indispensable.  They are no such thing.  They are instead leeches and parasites who hold productive citizens hostage.  This demands a legal remedy.  Our elected leaders are too cowardly to do anything other than run their mouths.  I have a much more robust action plan in mind.

BART management should petition the federal court system to issue a back-to-work order.  If the striking union idiots refuse the order, management should immediately terminate them for insubordination.  Terminated employees lose the right to loiter on their employers' property, so BART management should have their police arrest any union slobs still picketing at BART stations.  Management should continue their campaign for justice by turning over all of the negotiation materials they received from the union reps to federal prosecutors.  I believe a case exists under the RICO Act to indict, convict, and shutter all of the BART employee unions that have obstructed productive negotiations and sought extortionate concessions from BART.  I'm pretty sure the NLRB would be cool with this action.  Remember that a "racket" is a fraudulent solution to a nonexistent problem.  Demanding high pay for low-value labor IMHO constitutes a racket.  Remember also that BART is a publicly-chartered institution and is supported by both ridership revenues and tax revenues.  Every work stoppage that delays scheduled maintenance puts the taxpayer on the hook for costs that rider revenues can't cover while trains aren't running.

This mass termination and prosecution would demand a new workforce.  I have the perfect candidates in mind.  The San Francisco Symphony losers in AFM Musicians Union Local Six went on strike earlier this year and were forced to back down when they realized they had zero public support and no realistic chance of obtaining their demands.  The stupidity they exhibited makes them perfect candidates for employees in public transit.  Union musicians can presumably follow simple instructions and show up on time, which is all that is required of menial labor.  Since classical musicians are so upset with what are already extremely high compensation levels, they should jump at the chance to pocket some extra coin during daylight hours from a real job.  They might even gain some appreciation for the livelihoods of people who work for a living.  Read my outstanding analysis of the San Francisco Symphony union losers from March 2013 to discover how much they need to learn.

Replacing BART workers with classical musicians will not help the system's long-term performance but it will at least take lots of snobs down a few pegs in both groups.  These stinking union bottom-feeders have no idea how good they have it, and how little they deserve for what they do.  

Alfidi Capital Heard Roger Royse at Idea to IPO's Current State of Crowdfuning

I'm always checking out startup action in Silicon Valley.  The JOBS Act of 2012 was supposed to make that easier.  Performing due diligence online is one thing but actually closing an investment round is quite another.  The Idea to IPO Meetup group presented Roger Royse of Royse Law Firm last week down at Menlo College to give us all a rundown of the current state of crowdfunding.

The JOBS Act was intended to further democratize the venture investment playing field so that securities laws could catch up to technology.  Roger mentioned that the cost of fundraising has dropped in recent years and technology has expanded the types of offerings available.   He's published some good info on crowdfunding at his Royse University site.  The complications for startups raising money through crowdfunding portals can be tricky if those portals are open to any investors other than venture capital funds or angel groups.

The JOBS Act was supposed to make venture investing easier for individual investors but the SEC's rule changes so far are intended to apply to accredited investors.  Roger mentioned that Title III of the JOBS Act for retail investors does not yet have the force of law because the SEC has not yet finalized regulations.

Roger noted that venture capital firms have already begun stigmatizing crowdfunded companies as being otherwise unfundable.  Crowdfunded companies may find themselves in a "market for lemons" if they cannot obtain a subsequent funding round, forcing them to focus on an exit strategy.  I've heard VCs on public panels mention crowdfunding as marginally useful in extending the life of a startup that could fail prematurely, but that is probably a minority opinion.

Companies can advertise on crowdfunding portals for accredited investors now that the SEC has lifted the general solicitation prohibition.  The challenge for startups is that the SEC's rules are still in a state of flux and FINRA is still working on certifying crowdfunding portals that comply with the rules.  The SEC may be considering easing some investor verification requirements.  Roger thinks this environment is why startups need to get more conservative and refrain from discussing their financial status until the SEC finalizes more rules.  Pitchfests in front of investor panels may be considered a general solicitation.

I appreciated Roger's revelation that the SEC now considers a one-time placement fee for locating funding to be a transactional relationship requiring a registered broker.  I used to hear stories from old finance hands about how they earned finder's fees for connecting deal flow to investment banks on a freelance basis.  I had considered doing that myself for a while but I elected not to keep my securities licenses active once I launched into public commentary in 2008.  I was very aware (during my financial advisor days) of the SEC's guidance on public commentary for those who maintained securities licenses and fiduciary relationships.  Assuming a role as public commentator required me to surrender any and all means of maintaining fiduciary relationships or mediating transactions.  There are ways to navigate conflicts of interest but I'd prefer to avoid conflicts entirely.  I don't play games with my career or the law.  All I do now is speak my mind and invest my own money, any way I like.

Roger's talk was awesome and he covered way more legal ground than I can summarize here.  I spoke with him and some other entrepreneurs afterwards on the future usefulness of crowdfunding in such a complex regulatory environment.  I now believe the main advantages of crowdfunding for startups are the reduction of friction in closing deals and the compressed time windows for feedback.  Friction is lower on those portals that have broker/dealer affiliations, because accredited investors can theoretically complete a transaction online.  Feedback times are shorter because a startup can now appear in front of the entire early-stage investor universe simultaneously instead of spending months getting on the meeting calendars of angel groups up and down California.  The speed of feedback from investors, either positive or negative, will help startups pivot earlier if they combine it with feedback from their CustDev efforts.  BTW, I'm still convinced that those portals showing early success in generating deal flow will become acquisition targets for major brokerages.  They will be even more attractive if they add microfinance and P2P lending functions.

I'm already applying some of the insights Roger shared.  I've been attending pitchfest and business plan competitions for years.  I even pitched a tech startup idea myself as an undergrad at the University of Notre Dame in 1995.  I didn't state any disclaimers back then and neither have any of the entrepreneurs I've heard since then.  That is all going to have to change very quickly.  I attended a pitchfest in San Francisco last Friday and noticed that the startups in attendance need to get legal advice, get their paperwork in order with the SEC, and start using legal disclaimers that investors like me will respect.  They also need to be mindful of the FTC's privacy policy guidance if they handle customer data.  Failure to do so can subject them to severe regulatory sanctions.  I care as much about my own portfolio as entrepreneurs do about their startups, which is why early stage founders need to mitigate regulatory risk by keeping top advisers like Roger Royse in their hip pockets.

Full disclosure:  I have received no compensation from Roger Royse, his corporate entities, or the Idea to IPO Meetup organizers for this article.  This article, or anything else published under the auspices of Alfidi Capital, does not constitute legal or financial advice.  

Saturday, October 19, 2013

Friday, October 18, 2013

Thursday, October 17, 2013

Wednesday, October 16, 2013

Alfidi Capital at iFabbo Conference 2013 in San Francisco

I obtained a rare opportunity to peek inside an industry totally unfamiliar to me - fashion and beauty.  I attended the iFabbo Social Media Conference in San Francisco this past Saturday.  I heard about it through the Meetup social media group I monitor and I couldn't turn down the chance to check it out.  I also couldn't turn down the chance to check out the very attractive women who work in the beauty sector.  Merchants Exchange Club, here I come.

The intro from Sinead Norenius and Tonia Korakis gave us all the lowdown on the social media handles to use  (namely #iFabboSFCon) and how to tune in to the live Web stream on Spreecast.  Right there was my first lesson in something other conference organizers need to provide.  I've attended finance, mining, energy, and tech conferences since 2005 and none ever conducted Web simulcasts with messaging even though the enabling technology obviously exists.  The beauty sector is ahead of them all.

The PR panel was up first.  They mentioned their favorite perfumes, and I had no idea women like to have a "signature scent."  The panelists were fond of guest blogging, which isn't my preference as it would dilute my brand, but it probably adds star power to beauty blogs that are cognizant of celebrity status.  PR people are also very cognizant of the "verticals" of specific cosmetics.  Not every eye shadow is created equal, and high-end positioning requires very different messaging from something aimed at the Wal-Mart crowd.  I noted the importance of a media kit and it dawned on me that I've never made one.  I shall remedy that in the near term with the template the panel suggested.  A good media kit contains downloadable PDFs covering a blog's editorial policy, marketing value proposition, professional bio, corporate fact sheet, target demographic, third party testimonials, success metrics, and video newsreel.  I may not need all of those elements but I'll have fun with the ones I can do.  The panel also expects beauty bloggers to build relationships with marketing and advertising agencies so they can be brand advocates, but that also means they need to meet their partners' publishing deadlines.  Apps like Muzio and RebelMouse can curate content that's easily shared in social media.

The social media panel featured the product managers from major platforms like Facebook and Google.  Those two platforms have analytics to help improve a blog's SEO but IMHO Facebook's page statistics just aren't as deep as the stats from Google Analytics.  The most useful thing I get from my Facebook page stats is a breakdown by time of of day, so the timing of article publication throughout the day probably has some merit for bloggers writing in English for a North American audience.  My stats from Google show me getting hits worldwide, so timing doesn't matter as much for me if people in daylight hours somewhere else are reading something I publish at midnight in San Francisco.  The Google rep said Google Search now shows content getting more +1 rating on Google+, so they've adapted their own algorithm to cross-sell another platform feature and incentivize users in Google+.  Smart move, Google.  Hashtags also appear in Google Search and Google+ hangouts "on air" can broadcast live conversations.  I did not know much about Google+ Communities but it seems that some are fertile ground for blog posts that match their interests.  Google's rep also said that multiple photos in a blog post work well with their ad buys, which Google's algorithm really likes.  Well, of course it does.

Our social media panelists did offer general insights in between pushing their respective platforms.  Using "call to action" language when republishing blog posts gets people to engage with content.  "Angry at Wall Street's corruption?  Press +1 if you agree."  That's an example of a call to action I would use with my finance blog articles.  The panelists like it when bloggers promote their posts across all platforms but they advised tweaking the "intro link" somewhat because followers are smart enough to notice identical things.  That's a mistake I sometimes make on Twitter.  I have noted that many bloggers like to engage their followers by enabling comments but that was something I gave up long ago because it added little value to my content.  I will probably disable comments for any other platform I use but other bloggers are welcome to allow comments if it adds value for them.  The panel mentioned that WordPress has a plugin to tweet old posts; I hope Google comes out with something comparably useful for Blogger.  I was dismayed to learn that Google Analytics cannot at present monitor or analyze Google+ traffic, which is odd if their algorithm works so well with the other platform features I mentioned in the paragraph just above this one.  They need to fix that capability gap.  The brand panelist advocated following Twitter users who follow you, retweet you, and respond to you but I think that can be unwieldy after a few hundred followers.  I use my Twitter feed to track new information from valid primary sources (central banks, government agencies) and bond fide thought leaders.  There's no way I can follow every Joe or Jane who RT's my stuff because my feed would then be cluttered with their random life observations and I would miss news that is critical to my financial writing.  It's a style preference on my part and I've noticed that many Twitter power users with huge followings also keep their own follow lists small enough to be manageable.

I did notice a common theme emerging from these first two panels.  Pinterest and Instagram are emerging as sales and branding tools in the fashion and beauty sector because their aesthetics enable displays of visually oriented brands.  The social media platform reps really like Instagram's design-oriented creative ethic.  Instagram content that is authentic, thoughtful, and genuine should get noticed.  Now I see why PR people like bloggers who personally use products they endorse.  Photos of attractive "power users" of beauty products shared on Instagram will probably go viral within the beauty community.

The next panel on photography and videography was a topic I've rarely touched in life, other than some random shots I've thrown up on this blog when I've attended special events.  I wish I had photographed some of the attractive women at this conference but I don't think they would have granted me permission.  I'll just have to cherish the memories.  Anyway, the panelists noted the availability of apps that enable embedding of metadata into photos and videos.  Hot diggity dog, that's the kind of tech that enables the geojournalist projects I blogged about recently.  One photographer said taking photos during the "golden hour" just after sunrise or before sunset captures a soft light tone.  I'll try that the next time some attractive woman agrees to be my photo subject for a financial blog post.  You may be wondering how I would work an attractive gal into a blog article about the Federal Reserve or investment banking trends.  Me too.  I think it would just be a cool way to get a gal to pose for me.  Anyway, back to the panel.  They like "how-to" content that generates good vertical use case data, so I'll have to begin more of my blog articles with "How To . . . " in the title.  I did not know that Adobe has moved many of its programs into the cloud.  I guess they learned from watching Salesforce that customers who don't need entire software packages will pay piecemeal for limited use.  They noted that viral videos are either inspirational or strange and quirky (but not creepy).  I would like to see someone write the equivalent of Cloudonomics for media production that quantifies the inputs (production time, equipment) and outputs (marketing channel action, ROI) of a viral media piece.  The experts said lighting matters.  I really dislike those YouTube selfie webcams in dark rooms.  Get some lights, YouTubers.

BECCA Cosmetics gave us a fireside chat and product demonstration.  Gentlemen, you haven't lived until you've seen your womenfolk discuss the application of their favorite makeup.  They have it down to a science and they even know how different types of application brush hair will interact with cosmetics.  This was all very educational for me as a heterosexual male who has never been married because I have no previous experience with how women approach personal care.  I only know that they worship me for my extreme manliness.  Okay, whatever.  I did learn a little about how foundation makeup relates to bone structure.  I also learned that this stuff about cosmetics is very important to women.  I don't ever want to get between a woman and her beauty goodies.

The legal zone panel wasn't your typical boring seminar.  Their perspectives were absolutely necessary for bloggers who want to stay out of trouble.  The Federal Trade Commission (FTC) regulates advertising and has guidelines for bloggers on disclosing sponsored content.  "Endorsements" sometimes look like personal opinions, but if there's a material business connection (even for one-time product swag in a gift bag) then it falls under the FTC's advertising rules.  Bloggers must disclose their relationships with products they endorse every single time on their blog or Twitter, so it pays to know Twitter's hashtag rules.  These attorneys said that commercial speech does not enjoy full First Amendment protection and the FTC's intent behind such requirements is to discourage false advertising.  BTW, I noticed that the FTC's operations have been subject to shutdowns and sequesters due to the budget shenanigans in Washington.  That does not mean Americans can break trade laws with impunity.  It means that regulators will work hard later on to find violators of current laws.

The attorneys thought that bloggers should trademark their blog's name and logo, provided they are unique and fanciful.  Bloggers can protect their visual content by putting the copyright symbol of their own watermark on photos they own.  It is extremely important to copyright only owned photos!  I will not ever copyright someone else's photo.  The panelists mentioned that stock photo archives (I'm thinking the likes of Getty Images and Corbis Images) make huge money collecting from violations of cease and desist orders their attorneys send to unauthorized photo users.  The Digital Millennium Copyright Act (DMCA) enables social media sites to instantly report copyright violations.  Always have permission to use an image before you publish it.

Next up was the monetization panel, and I must say that the Disqus gal was extremely attractive.  I recognized her from the Disqus booth at the DataWeek Conference I attended a couple of weeks ago.   Disqus is more than just the widget I've seen on news sites and other blogs that allow comments.  It links commenters to other media they may find relevant and offers revenue sharing from recommended content.  I had wondered how they monetized their platform.  VigLink monetizes links to merchants and Luvocracy monetizes endorsements (just remember the FTC's mission from my discussion above).  I noticed The Mad Video's exhibit at iFabbo showed how it installs an embedded data layer over an online video that can link to product information or a vendor's storefront.  I might use the services that monetize text links but visual overlays are probably more useful for bloggers pushing mainly visual content.  I also wonder how these services will display on mobile devices if they are used with Pinterest and Instagram visual product endorsements.

The best lesson I took from the monetizers was that search engines give higher rankings to blogs and media pages with video content.  Videos are shared more often and are more likely to be on Google Search's first page of results.  I have my own YouTube channel and one of the first things I did when I set it up was to enable the ad display function.  I admit that I don't have many videos posted but I can make time to record some finance-related monologues once I find a decent camera.  The panel also mentioned that the most important content must be at the start of the video because that medium has a high abandonment rate online.  I can attest from experience that they're correct.  I've given up on many YouTube videos before they finished playing because they took too long to load.  If audiences like authentic content, nothing is more authentic than me running my mouth about Wall Street to a camera.  I used to consider comments to be authentic but I took them off my blog when they became havens for abuse.  I may try Disqus comments on my Alfidi Capital website pages as an experiment.  The Disqus gal assured us that her service's users are among the most content-engaged people on the Web and are often other bloggers.  I'm a frequent commenter on Disqus myself.  One panelist advised us to make our blog ads look more like our content by adjusting the ads' color schemes and borders.  Okay, but some ad services may not allow that.

More hot women appeared on the final panel to discuss the future of fashion and beauty.  Remember all of those really imaginative futures we should have had by now, with flying cars and moon colonies?  Well, they haven't happened yet and I'm still waiting for a time travel conveyance or something.  I'm also waiting to see some futuristic Star Trek fashion become real today.  I would love to see the fashion industry's interpretation of the wearable technology movement, because that will be the next big thing attracting venture funding once VCs lose their infatuation with social media and Big Data.  Anyway, enough of my wandering.  The panel said web content is so heavily re-blogged that original content matters.  Getting your blog on networks and aggregators reaches new readers who follow major brands (look no further than my presence on Seeking Alpha, which got me my first big waves of Web traffic in the finance sector).

It will eventually dawn on technologists that the emergence of Pinterest and Instagram, and the Google Search algorithm's configuration to favor videos, mark the dawn of post-literate culture in the developed world.  Those two platforms are almost entirely visual.  Text, data, and links are embedded but appear minimally intrusive.  I can't see myself using either platform because I have to publish business commentary in a text-based format.

Keynote speaker Jacqueline Wales inspired the audience with her Fearless Factor approach to motivation.  She had plenty of great advice about presenting an authentic self, having a good attitude, being focused and disciplined, knowing your audience, and recovering from adversity.  Her most memorable observations were that people fail when they play small rather than big, and that the biggest failure is the failure to try.  Lots of struggling bloggers can probably relate to Jacqueline's personal history of overcoming obstacles.

You may be wondering how I'm going to tie all this in to the finance sector.  Wonder no more.  Here we go. I haven't written much on apparel companies but I did publish my analysis of Frederick's of Hollywood a few years ago when they were executing a turnaround strategy.  Bulge bracket investment banks do plenty of corporate finance work in the fashion and beauty sector.  The bigger i-banks usually consider fashion and beauty to be a subset of their consumer/retail practices.  California Apparel News tracks fashion sector deal flow on its finance page.  Just-Style also carriers fashion finance news and market intelligence.  There's even potential for entrepreneurial disruption in the fashion sector right here in The City.  Macy's Union Square sponsors Fashion Incubator San Francisco (FiSF), where aspiring designers can launch clothing lines.  I truly believe those incubating designers should connect with the wearable tech sector and make wonderful things happen.

This iFabbo conference for fashion and beauty bloggers was really something else.  I stepped outside the pinstriped finance sector for a day and wore one of my own more daring ensembles, red shirt and everything.  I met quite a few very attractive women but only time will tell if they find Yours Truly to be intriguing.  Normal women can't help themselves around me so I have reason for optimism.  Most importantly, I got a brief education on a business sector I've never experienced before.  The blog success tips were way cool, and success is always in fashion.