Monday, June 15, 2015

Twitter Fritter v.6

I have been heckling Twitter (the stock) since November 7, 2013. It looks like investors are finally getting the fact that Twitter only knows how to lose money, then make it up with stock diarrhea. They fired their CEO and are searching for a new one. After the IPO, Twitter had a market cap of $24.93 billion. Today, it is $23.51 billion. Still an amazing number considering they haven't made their first dollar of profit.

Twitter is seen as a valuable news source by millions of people, but as a company that can make profits, I concluded long ago it was not in their DNA. To make profits, they would probably need to tweet ads at people in about a 3:1 ratio to real tweets. The last time I tried to use it, I got mostly ads tweeted at me from news sources like the New York Times instead of news. I lasted one day before I quit. Good luck growing that user base if it turns into an ad spamming service.

Unlike Facebook, which has the richest set of user demographic data in the history of man, Twitter doesn't know very much about its users and I think will have a harder time with targeted ads. They also have to compete with Google for ads. Finally, there is evidence that millions of accounts are fake and that followers can be bought rather cheaply.

I think it is possible that Twitter could be scaled back and run profitably if they were made lean, focused on their core service, and stopped with the stock diarrhea. Maybe a new CEO will figure out how to do that, but the current culture is live large and poop stock certificates. A very dotcom bubble version 1 attitude that might be impossible to fix.

Tuesday, April 28, 2015

Twitter Fritter v.5

It's been awhile since I updated my chart on the corporation that specializes in hemorrhaging money, otherwise known as Twitter. They have continued their losing ways since they were incorporated, and since they went public. Today's earnings press release shows a loss of $162 million on revenue of $436 million. It costs a lot of money to handle 140-character text messages in this day and age. They also lowered projected earnings for the rest of the year.

The stock crashed after earnings (like it does after every miserable release), but the company is still valued at over $26 billion!?! Twitter is an amazing machine and while they have never and probably never will make any profit, they have mastered this sleight of hand:

1. Issue hundreds of millions of worthless stock shares
2. Sell stock to stupid investors
3. Pay employees with (temporarily) valuable stock
4. Lose hundreds of millions of dollars each quarter
5. Rinse, repeat

How do they do that? In DotCom 1.0, it was all about eyeballs. Twitter uses the term "Monthly Active Users (MAUs)" which is the same as, well, eyeballs! The more snake oil changes, the more it stays the same. Twitter stock owners can take solace in the ringing endorsement 4 days ago by Jim Cramer. Cramer thinks Twitter has room to run. Bet the farm, go all in, this is easy money. If you already own Twitter, now is the time to BUY MOAR. Hahaha.

Saturday, April 11, 2015

Amateur Economist Says It Might Be Time to Abolish Citibank

Would this save the world economy?

The world has a problem.

When economic conditions worsen, central banks react by reducing interest rates in order to trick stupid people to part with their savings. But, as has happened across the world in recent years, there comes a point where those central banks run out of room to cut — they can bring interest rates to zero, but reducing them further below that is fraught with problems, the biggest of which is they don't have absolute control over every human being in the economy.

In a new piece, Citi's Willem Buiter looks at this problem, which is known as the effective lower bound (ELB) on nominal interest rates. Fundamentally, the ELB problem comes down to theoretical gobbledy-gook that academics use to justify destructive economic policies. According to Buiter, the ELB only exists at all due to the psychedelic trips taken by economists in their early college years of drug experimentation.

An amateur economist, Billy Biter, claims that big banks and their poorly reasoned policies are the biggest threat to the world economy. Biter suggest three ways to address this problem:
  1. Abolish Citibank
  2. Tax commercial banks at 99%
  3. Remove the fixed exchange rate between currency and bank employee paychecks.
Yes, Biter's solution to evil banks is to abolish them altogether. (Note that he's far from being the first to float this idea.)

Biter is aware that his idea may be somewhat controversial, so he goes to the effort of listing the disadvantages of abolishing Citibank.
  1. Abolishing Citibank will constitute a noticeable change in many people’s lives and change often tends to be resisted.
  2. Citibank use remains high among the uneducated, poor and some older people.
  3. Citibank owners and creditors would lose revenue.
  4. Abolishing Citibank would inevitably be associated with a loss of campaign donations to government.
  5. Switching exclusively to credit unions may create new security and operational risks for oligarchs and their congressional cronies.

Biter dismisses each of these concerns in turn, finishing with:
In summary, I therefore conclude that the arguments against abolishing Citibank seem rather weak.

Thursday, April 9, 2015

Jamie Dimon blames everyone but big banks

In this Marketwatch story, JP Morgan Chase CEO Jamie Dimon
argued the crackdown on the financial sector, added to more-stringent requirements for capital and liquidity, will hamper banks’ capacity to act as a buffer against shocks in financial markets. Banks could become reluctant to extend credit, for example, and less likely to take on stock issuance through rights offering, which would essentially create a shortage of securities.
It must be opposite day again. As I remember it, banks mostly caused the last shock and refused to extend credit, especially to each other, because they knew each other. Everyone knew about the fraudulent accounting, the out of control risk taking, the dumping of worthless mortgage paper on investors and the government. All I can say is Bravo! Hubris, conceit, and lack of credibility have brought him great personal wealth and power. It's the American way after all.

Wednesday, January 28, 2015

Why large corporations suck

This Marketwatch headline exemplifies what is wrong with large corporations, and generally most corporations:

Citrix Systems beats profit expectations, to cut 900 jobs
Citrix also said fourth-quarter earnings per share, excluding non-recurring items, rose to $1.10 from $1.04 a year ago, and exceeded the FactSet consensus analyst estimate of $1.03. Revenue rose 6% to $851 million, topping analyst forecasts of $844 million.
Well done, Citrix employees and contractors. You not only hit all revenue and EPS targets, you exceeded them! Thank you for your hard work. Now, we are going to fire 900 of you so we can buy back more stock and pay bigger bonuses to the CEO that already makes $11.5 million per year and 150 times as much as you. Don't forget to buy a government health care plan now that you don't have a job, or you will pay a tax penalty.

Sunday, January 18, 2015

California Unemployment Insurance Trust Fund


The trust fund continues to look not-so-trusty with a negative $8 billion balance. Before the Great Mortgage Fraud Recession, it maintained an average balance around +$2 billion. It was completely wiped out in 2009 and bottomed at negative $11 billion in 2011. The state has only been able to pay unemployment benefits with enormous loans (at interest) from the federal government. At the current polynomial recovery rate, it will become solvent again around August, 2016 as long as there is no recession between now and then. If there is a recession before it recovers, well, let's not go there.

Thursday, January 15, 2015

Swiss Central Bank loses big

via MarketWatch:
LONDON (MarketWatch) — The Swiss National Bank took financial markets by surprise on Thursday, when it scrapped its euro exchange cap and lowered interest rates.
The move sent shock waves through the currency and stock markets, with the Swiss franc CHFUSD, +13.92% rallying more than 30% against the dollar and euro CHFEUR, +15.78% at one point.
According to Citibank's Stephen Englander,
By our calculation the FX reserves portfolio on FX alone will have lost in the region of 60bn CHF, assuming EURCHF at 1.03 and USDCHF at 0.88. Though some of this is likely to have gained on bond holdings, as per our above example, this would be far outweighed by losses on FX.
That's about $66 billion cost for another central planning failure.