Thursday, January 27, 2011

Market Currents

Another 10 inches of snow here. This is getting ridiculous. The snowbanks on the sides of the roads are about 6 feet tall. Massachusetts right now is 3 times over the usual snowfall for the period of December-end of January!

Forgot to add, get some requests in for Friday night!

Protect Yourself With Silver
Long time readers know I am a fan of the metals gold and especially silver. I wanted to take a minute and talk to you about a way to protect yourself day in and day out with the silver that you can carry with you without worry of theft. Are you ready for this? Ok, here it is:
Degree Silver Ion Deodorant
YES!!!!!!

Protect yourself with the unique antibacterial effects of free silver ions in this new stick just made for bullion buyers. I bought the arctic edge scent myself (far right of ad above), and it rocks! Not only do you feel you are protected from all things financial catastrophe, but your armpits actually feel like they have some real worth! Instant self confidence booster! With this I wake up in the morning and piss excellence! This stuff sells itself, but I would gladly endorse this product for Degree for a small fee. If I were Degree I would get this stuff on Kitco and Zero Hedge ads pronto!
Disclosure: No position in Degree, physical position in silver.

Difference of Opinion
I have to say up front I may be a 34 year old guy going on 65 when I am inundated with all the "this will change the world" type talk about various things. I just don't get it, or maybe I just don't use the stuff so it makes little impression on me. Herding behavior for the "next hot thing" is tangible it seems so there is always that. Take Facebook, a site where you can post pictures and talk to people in real time. Wow, blows me away. Nothing like it ever, just amazing. Think of the possibilities of such an application. Mindblowing indeud.

Another is the Groupon lovefest. Group buying coupons to generate sales. Ok, makes some sense. Network, get a deal, all are happy.

Leigh Drogen, one of the sharpest and dialed in to new trends guys I read, is a strong supporter of this business model (not just Groupon in particular) and he opines:
They’re all coming out of the woodwork now. From Priceline, to Travelzoo, OpenTable, and now even Facebook, the group buying revolution is on like donkeykong. Everyone wants a piece, and they will all get one. The list of Groupon clones is long and distinguished, there is even an aggregator of all these daily e-mails, Yipit.

Some of you luddites may confuse this for a fad.

This is a revolution in the way local businesses advertise and people consume. The buzz phrase is collaborative consumption, get used to hearing it. This is the underlying reason that this business model works. Sure, it’s nice to get served a discount to a nice restaurant, but this is so much more. I forward these things to my friends during the work day, we have an e-mail chain, and then we pick one and eat dinner together. It’s about social, it’s about doing things together, it’s about connecting people.

The valuations for these companies are sky high, as they should be. This is a new industry, one where many of these companies are cash flow positive from an extremely early age, have little overhead, and a huge chance to grow. No one has any clue in the world how big this industry is going to be, you can’t model it, impossible. What does all this add up to? High valuation multiples and huge price momentum.
Sounds good!
I thought Facebook connected us, but whatever. This does too, and with sales! In the comments I offered:
I will be up front, I do not get this kind of stuff but that does not mean it will not be huge. Thanks for the big picture look.
On a macro level, aren't these sites very deflationary? How does this impact bottom lines going forward? While Groupon may go sky high, by definition of the service they offer sellers will be pressed on pricing, no?
What makes a good blogger in my mind is interaction, connectedness with the readers and Mr. Drogen responded very quickly which I appreciate:
No, not deflationary. Think of the discount in terms of the cost of
customer acquisition
. The businesses that should be using Groupon and the
like are the ones that want to acquire loyal customers for repeat business.
This is a way to get them in the door and hooked on your product or
service. It's all a customer acquisition play for the small business owner.
Fair enough.
Not wanting to take up anymore time over there I thought about this tonight for a post here.

I still do not get it. As a customer grabbing idea it makes sense, but then what? If your business has a clone (and almost all do), they will offer coupon buys too. On any given day someone will be, what happens to you?

Add to this the nature of such a thing. Once you get something 20, 30, or 40% off you are not going to pay full price unless they drag you kicking and screaming. Best Buy did this a long while ago and buried the competition on price. Now they cannot raise prices! I think this is long term deflationary, but not in anything useful as usual. As always it is important to keep in mind one's own bias; I don't use this stuff at all and fail to see the utility. Others use this type of stuff and think everyone in the world will too by next week. If I had to bet, I am probably wrong!
Added:
My friend Mark from the now often stolen phrase of "Illusion of Prosperity" offered this anecdote when I asked his take:
I am 100% entirely in your camp! Of course it is deflationary.
I can even off you some proof if you wish to share it.
My girlfriend signed me up for LivingSocial. Ack. I gave her a really hard time about it. She even used my personal email address! Now I get spammed with daily offers.
However, they recently offered me a $20 Amazon.com gift card for just $10. No joke!
How much more deflationary can it get? Spend $10 to get $20? And what exactly is in it for Amazon.com? Do they need to get the word out? Has nobody heard of Amazon.com yet? Good grief!
Thanks Mark!

Market Currents
A market going up forgives all ills and this one has for some time. Over the past couple of weeks there have been some misses on earnings and Amazon (AMZN) missed by a bit tonight. It was the snow that hurt the biggest ONLINE store, but whatever. We will leave all that aside for now and we should.

Tim Knight had a video recap up tonight and the intro really jumped out at me. He said (paraphrasing!) that IF the markets went down 10% there would howls and cries for the government to do something about it. I have to agree 100% with Tim. This is where we are now. The recovery is real remember.

How pervasive has this perpetual motion move up been? Amazing really. I am hoping very much for tomorrow to be flat to slightly down and more of that on Monday. Why? Because that would mean the market is oversold by the new normal standards. What good would that be? BTFD! Check this out.

Using the screen I set up looking for oversold (loose term) stocks that have some other parameters I look for, here are the returns over the past month IF I had bought when I screened them and held them to today. There were more that I screened out on other factors:
Screen on 1/7/11 and hold until 1/27/11
NFLX +18%
EW +8%
Screen on 1/24/11 and hold until 1/27/11
FICO +10%
TRCR +2%
ABCO +4%
AFSI +4%
PBTH +2%
Scary, yes? I am not cherry picking. These names I had in my trading notebook (yes, I write stuff down!) I posted most of them the 24th. The few losers were selected against by other criteria, namely sometimes a stock is oversold because it is going to zero (FLML).

So if we are flat or ever so slightly down for a couple days I am running this screen and doing some buying!

Going Long Rock Salt
First is was the GDP of the UK going negative. Then it was weak Amazon numbers, an online retailer. Then it was Monster.com, an online job search tool. The culprit in all cases? Snow! Bad weather is the murderer of growth dreams and the grim reaper of bottom line growth. Who knew?

Thanks to a poster over at the 12631 (gappingandyapping), we can all go long rock salt (via CMP):

You can use this as a hedge should online streaming media firms report misses due to snow slowing down the Internets. Wow, nice breakout.

Have a good night.

8 comments:

GawainsGhost said...

You know, GYC, when I was an undergaduate the personal computer didn't even exist, let alone the word processor. You had to go down the library, plug quarters into a typewriter that vibrated violently and loudly. Try writing a paper on something like that.

3 mistakes were allowed on an A paper. 6 on a B, 9 on a C, 10 and it was an F. There was no D.

And my father was a computer programmer! Yep, back in the day when main frames that took up entire floors of buildings ran on punch cards. We've come a long way since then, but haven't progressed very much.

I am way long rock salt. I remember when I was a kid over at my grandmother's house, making homemade ice cream. She would make the cream, then stuff it in a mixer full of ice and rock salt. We had to take turns sitting on the creamer while she cranked the mixer. Best ice cream I ever had.

The next best is Blue Bell's Natural Bean Vanilla, by the way.

getyourselfconnected said...

Best we have up here is Breyers. I suggest Breyers Black Raspberry, very nice.

Stagflationary Mark said...

The power of coupons!

"Tabatha's Salon Takeover" Season 3, Episode 6 Recap: Dear Abby, I mean Dear Debbie

It's staff meeting time and it's not pretty. Distress exudes from their pores. The salon has experienced massive walk outs with those remaining convinced this is an unhealthy atmosphere; code for crazy biotch owner. The staff is completely confused, still Debbie demands those who work for her fit into her promotional wavelength because in her mind, coupons are key. The staff admits they cannot keep up with 20-40 promotions. I'm beginning to see keeping my checkbook in balance is cake compared to this cluster****....

My girlfriend was watching it so there I was watching it too. It was more amusing than I thought it would be. Cluster****s can be that way, lol.

Or how about this one?

Groupon’s Marketing Disaster in Japan

You've got to check out the pictures of what was promised vs. what was actually delivered.

Repeat customers my @$$, lol.

Stagflationary Mark said...

Check this out!

LivingSocial Gets Attention for Amazon Discount

But LivingSocial’s Amazon discount has an unusual wrinkle. Unlike with other deals, LivingSocial might be losing money selling the Amazon coupons.

Crazy talk, lol.

Though Amazon certainly isn’t hurting for customers, it has invested $175 million in LivingSocial, so an increase in business for the deal site is also good business for Amazon. And it looks as if business is increasing.

The more they spend the more they save!

Well, sort of.

Amazon.com stock drops on earnings miss

SAN FRANCISCO — Amazon.com stock price plunged late Thursday as investors evidently fretted about a narrowing gap between the online retail giant's revenue and operating costs.

getyourselfconnected said...

I saw the Japan Groupon fiasco thing. Never posted on it because WHO CARES! I guess some think discounts are a new way to make money (???) but it is just part of the deflation in crud you don't need but want, and inflation in things you actually need. Nice trick.

Rock Salt said...

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GawainsGhost said...

Yeah, I read about that Groupon scandal in Japan. Thought it was really stupid, especially the lame excuse afterwards.

What do you get for a discount? Cheap products and poor service. You pay for quality. That's all I know.

It's just like in real estate, or the business side of it anyway. Every couple of years some idiot comes up with the bright idea of selling houses at a discount, for a reduced commission of 2%. Uh huh, try it.

Office space, equipment, utilities, signage, advertising, gas, not to mention board membership and MLS dues--that all costs money. After those expenses, how do you expect to generate a profit after selling your service at a loss? Just asking.

All commissions are negotiable, but our company charges 6%. We pay for prime advertising space and offer competent service and advice. Oh, and the houses we list actually sell.

Would you rather enter into a contract at 2% and get no offers on your house, or would you rather enter into a contract at 6% and get multiple offers, sell your house quickly for real money? Just asking.

Yeah, you can complain all you want about the price of our service, and you can haggle all day long over the commission. When you want to sell your house, call me, then pay me.

For Friday Night Entertainment, I recommend Black Sabbath, "Wicked World."

http://www.youtube.com/watch?v=AMkgiJSnYLI

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