The Haiku of Finance for 02/08/16

Second dot-com wave
Unicorns start going bust
Coders get pink slips

The Haiku of Finance for 03/03/15

Nasdaq regains crown

Highest price since dot-com days

Silly silicon

The Limerick of Finance for 10/27/14

Twitter growth hits another speed bump
User trends insufficient to pump
Some profit would be neat
After sending a tweet
Counting losses gives reason to dump

The Haiku of Finance for 10/24/14

Amazon letdown
All that growth for no profit
One more dot-com crash

The Haiku of Finance for 09/18/14

Alibaba price
Hard to trust a Chinese stock
Fu Manchu dot com

LiveDeal (LIVE) Versus Groupon (GRPN)

I got a glossy flyer in the mail prompting readers to check out LiveDeal (LIVE).  That's usually a bad sign; glossy mailers invite my sarcasm.  I can't see how this company differentiates itself from Groupon (GRPN).  They both allow retail merchants to push first-time discounts to customers.  They both have search functions that instantly geolocate the first-time user.  Their UIs both clarify final-offer prices, but LiveDeal specifies an expiration time to prompt that retail sense of urgency.  I guess that's their differentiator.

Let's glance at the fundamentals from Yahoo Finance and Reuters.  Here's LIVE first.
P/E:  N/A
Profit margin:  -114.42%
EPS 5yr growth:  N/A
ROE 5yr growth:  -84.0%

Now here's GRPN.
P/E:  N/A
Profit margin:  -4.73%
EPS 5yr growth:  N/A
ROE 5yr growth:  N/A

Both these companies have pathetic earnings histories.  They have lost money since 2011 and that's as far back as I need to go.  I am amazed that Groupon's market cap is 63x larger than LiveDeal's given their poor ability to generate earnings.  I guess sucker investors are paying a premium for Groupon's market share in the e-coupon vertical.  Groupon has 100x more revenue than LiveDeal and still can't make a profit.  That tells me that any business model solely focused on channeling retail discounts is not scalable.  A first-mover advantage doesn't mean jack squat in a vertical that offers no economies of scale.

I noticed that Groupon had more pics of attractive women and LiveDeal had more pics of food when I checked them out today.  Those are two of my favorite subjects.  This cursory glance at two sorry companies at least gave me some good visuals.

E-commerce is as crowded now as it was in the late 1990s.  Another shakeout is due and the survivors will have UIs optimized for mobile displays.  I don't care what either LiveDeal or Groupon look like on a mobile device because I don't need apps prompting me to urgently buy things I don't need, discount or no discount.  I also suspect the ultimate winner in the e-coupon vertical will have no more than a dozen employees and a marketing effort governed entirely by BRMS rule engines that automate the sorting and matching of offers.

Full disclosure:  No position in either LIVE or GRPN at this time.  

The Haiku of Finance for 10/23/12

Zynga cuts some jobs
Netflix numbers not so hot
Tell me, who got rich?

The Haiku of Finance 08/15/12

Facebook frees up shares
Unlock date brings dilution
Downward price pressure

You Can't See An Asset Bubble From The Inside

I can attribute some of my portfolio's success to the avoidance of asset bubbles.  If I had been invested in any of the crazes that hit the markets since the mid-'90s I'd be in a world of hurt.  Fortunately I don't follow crowds.  

I stayed in cash and fixed income while plenty of very smart people chased dot-com dreams in the late 1990s.  I remained in cash after that stuff peaked in March 2000 and wiped out plenty of people who thought they knew better than me.  I had a bad feeling about the Federal Reserve's stimulative monetary policy of the early 2000s and didn't want to pick the next bad thing by accident.  

In 2002 I attended a hiring conference in the San Francisco area (one of the Burlingame airport hotels to be precise) put on by one of the recruiting firms that love to place former military officers with large companies.  I sometimes wonder whether these recruiters collect the first-year bonus their candidates would otherwise get if they were hired on their own, but that's not germane to this article.  The clearest memories I have of that hiring conference were the pitches the recruiters gave for homebuilders, specifically Pulte and Centex.  The home mortgage bubble was in full swing and developers were busy paving over pristine farmland in Stockton, Pleasanton, and elsewhere to accommodate the Greenspan Fed's loose money policy.  The housing bubble sure looked great to the people inside homebuilders who thought they had it made.  I decided to pass on the homebuilding jobs available; they just weren't suited for my white-collar ambitions.

In 2005 and 2006 I was a trainee broker at UBS Wealth Management in The City, an outsider among the anointed children of our hereditary ruling class.  Some of top-producing brokers swore by real estate mutual funds tracking the Cohen & Steers Realty Majors Portfolio Index, thinking they were geniuses.  I went the other direction and bought a structured note (in my own portfolio) that bet on a decline in the homebuilding sector.  I was later fired from that brokerage job for having produced zero revenue, but I liquidated that structured note at a hefty gain when I was forced to transfer my account to another firm.  

My most loyal readers, all three of them, may be aware that I believe defense spending to be an unsustainable bubble.  I have tried in vain to convince my military friends not to pin their hopes on a second career with defense contractors.  The Pentagon itself is probably in denial about the bubble it helped inflate, with very little visible contingency planning underway for a radically austere future.  

Some things never change.  A lot of defense sector bulls are going to be let down.  That suits me just fine.  I'll be ready to buy the defense stocks they'll be forced to abandon.  

Full disclosure:  No positions in any companies mentioned.

The Haiku of Finance for 05/17/12

Facebook debut here
Lots of suckers piling in
Just like the '90s

The Haiku of Finance for 05/14/12

Facebook raises range
Buyer demand pushed it up
Investors are dumb

The Haiku of Finance for 01/02/12

Generation X
Started dot-coms that went bust
Now they own nothing

(Did I already use this one?  If so, I apologize.)

Mall Vacancies At Dot-Com Crash Levels

Check out just how badly commercial real estate is faring in this so-called recovery:

Mall vacancies hit their highest level in at least 11 years in the first quarter, new figures from real-estate research company Reis Inc. showed. In the top 80 U.S. markets, the average vacancy rate was 9.1%, up from 8.7%.

I guess all of those job seekers who've left the workforce (according to the government's figures citing an "improving" job picture) shouldn't waste time sending resumes to mini-mall owners.  The U.S. hasn't seen vacancy rates like those since the dot-com recession of 2000-2002 or so.  Developers built too many mini-malls in unsustainable exurban areas that will someday be farmland again. 

This kind of market is terrific for investors seeking bargain properties but horrible for mortgage note investors.  Note holders will be left holding the bag if mall owners default.  PIMCO doesn't agree and intends to launch a REIT focused on CMBS.  That may be the wrong move in this environment.  Instead of throwing my money at PIMCO, I'd rather watch the foreclosure listings in my area to see if any desirable properties are coming up for auction. 

Nota bene:  No positions in real estate or PIMCO products at this time.