One, Maybe Two, Trick Ponies

Virgin Enterprise's Sir Richard Branson has had some business success ... but some of this infant terrible's  recent promises have  been hollow. He previously had pledged  to contribute $3 billion to cleaning up air pollution ... he has delivered on less than 1/10th of this amount ... see: The Guardian Story. He also has set multiple deadlines for his traveling to the edge of space in his Virgin Galactic "spaceship" ... the latest date being this past August. Suffice it to say he has still not fulfilled this pledge ...  nor is this likely to occur anytime soon ... see: Space Shot.

One has to admire this man's chutzpah ... but, on the other hand, like Facebook's Mark Zuckerberg ... who has outgrown his bank account ... see: Business Insider Story, he sometimes seems to have much more money than brains. Success often does this to entrepreneurs ... give them one round of applause in the center ring ... and they think that they can run the circus.

Shorts

I strongly recommend NOT shorting common stocks.  That is a game for the well-connected in the canyons of Wall Street.  Rather, if one is convinced about the poor prospects for a company, buy “puts” on its stock.  The only problem here is that the longer-out are the terms for such puts  … the more expensive they become.  So benefiting from the poor outlook for a company becomes a very tricky game of timing.  However, there are some stocks that I am convinced whose longer-term prospects are quite dim and would short them if I had unlimited risk capital and unlimited time.

They are:

Amazon – With a capitalization of $133.1 billion, Amazon is deemed to be worth more than FedEx plus United Parcel or the combination of both General Motors and Ford.  The bald-headed Jeff Bezos has mesmerized Wall Street investors for over fifteen years even though he has yet to bring any significant profits to the bottom line of this Internet giant. He has done this with a stream-lined order-processing and shipping operation which is the envy of most. However, he has also benefited greatly from the lax sales-tax rules in the many states in which he has no bricks-and-mortar operations.  This advantage is disappearing with recent legislative proposals … and so will some of the panache that this company has enjoyed.  To counter this revenue and profit impact, Amazon has instituted a $79 annual membership fee in exchange for free shipping and some other media perks.  My wife refuses to participate in this semi-scam and so, to follow Peter Lynch’s advice, listen carefully to your wife when making investment decisions.

Also Bezos’s personal purchase of the Washington Post for $250 million suggests to me that he is losing his mojo.  Such a sidebar is bound to reduce his focus on improving Amazon’s prospects ... and so, I suspect that the apogee of this company has indeed occurred.  But be careful … it may take some time for investors to realize this.

Afterward: See: Wall Street Journal Article

Tesla. – With a capitalization of $16.9 billion, Tesla, as a company, is worth more than Harley Davidson or the combination of both Jetblue and Southwest Airlines.  CEO, Elon Musk has done a crackerjack job of creating a great-looking and well-engineered all-electric auto … which was named 2013’s Car of the Year by Motor Trend magazine. As such, he has captured the imagination of wealthy greenies who are looking for eco-bragging rights. However excellent this auto is, it still suffers from a driver’s anxiety about running out of power … say in the middle of the Holland Tunnel.  Supposedly this car has a range, when fully recharged, of 250 miles, but speed, ambient temperature, traffic density, and darkness can adversely affect this number.  And, if a recharging station is not handy, things can get quite dicey.  Even, if such a station is available, waiting up to an hour for some more electrons to get one to one’s destination might be a real downer.  I suspect getting around these engineering and physics limitations will eventually become a serious gating factor for this company’s longer-term outlook.

Also, I think Elon Musk’s recent touting of the pie-in-the-sky Hyperloop technology is an unnecessary distraction for this visionary … see: Spacex Story.

Afterward: See: CNBC Story and for another option in a fancy golf carts see: BMW i3.

Facebook   -- currently enjoys an unrealistic market valuation of $89.3 billion (in my opinion) … more than three times the market value of the CBS television network (another big advertising platform).  This is marginally near the value Facebook was awarded at its initial public offering last fall ($104.2 billion).  This is because investors now believe that the company may have solved the problem of monetizing its huge installed user base (possible close to a billion users)… particularly on cell phones.  This may or may not be the case but there is no question that the user-hype surrounding social networking is the reason for the high price on this stock … more than doubled from its low of $17.55 last fall to $36.88 currently.  One can reasonably assume that the analytic sophistication of this type of investor lemming is not the greatest.

Facebook founder and CEO, Mark Zuckerberg, has recently been immersing himself in the immigration reform brouhaha … see: Daily Mail Story.  This, to me, can be nothing but a distraction for this 29-year old entrepreneur ... and I doubt that too many of Facebook's H1B visa recipients are coming from Mexico.  I am also sure that the challenges facing Facebook’s establishing the kind of revenue and profitability that would justify its current market value will be huge and not-easily solved.  The smirking Zuckerberg might well be advised to give these challenges his full-time attention.

Phony Boloney

Local TV and radio have been barraged of late with ads featuring Marco Rubio and other Republicans who, in selected sound bites, seem to be urging Americans to back the new immigration bill that is wending its way through Congress.  Somehow these ads and their voice-overs seemed suspiciously left-leaning to me … so I looked up the sponsor of these ads, “Americans for a Conservative Direction,” on Google.  Sure enough this group (whose tax-exempt status was probably approved by the IRS in a matter of weeks) was founded and funded by California liberals … multi-billionaire Mark Zuckerberg of Facebook fame being in the forefront (see: Before It's News Story).  The misleading naming of this group strikes me about as slimy and underhanded as one can get.  It is clearly an attempt to deceive the uninformed conservative voters into supporting this new immigration bill.  This then must mean that the bill contains lots of liberal goodies ... of which I am suspicious, see: Carrying Water in a Sieve.

In a related matter, there is also an evangelical Christian group that is also backing this same immigration bill.  One small problem … this group does not legally exist … see: Breitbart Story.  I am now even more suspicious due to the full-court press (fraudulent as it appears to be) surrounding this legislation that the left is urging on the American public.  I have a hard-and-fast rule that I never buy anything that I see advertised on television.  Now I am even more averse to this new Gang of Eight immigration proposal.  Perhaps, in response, I now should form a PAC called “Progressives for Closed Borders and Against Amnesty?”

Anyone want to join?

The $30 Billion Man

Mark Zuckerberg just refinanced his $6 million+ Palo Alto home with a 1.05% mortgage (see: SF Chronicle Story).  This clearly proves that old adage:  "To those who expect much, much is given."

Faceplant

I have an incurable disease ... old-fogeyism.  As a result I have no business blogging about Facebook.  I don't understand its popularity.  And I don't understand its intricate mechanics ... nor do I care to learn.  Somehow I have gotten registered as one of its billion or so users and keep getting those annoying messages that there are things pending for me there.  Yawn ...  It is just one more cyber-technology I would prefer not letting into my life.  Ditto Twitter.  Texting has me perplexed.  Why would one take the time to type a message to someone when one's voice message is oodles more efficient?  And I keep hearing ominous things about how Facebook is using or is going to use all the dumb things (I must be careful here ... my daughter is a big user) that its users post on its tens of thousands of racked computers to invade their privacy bubbles.  No thanks.

Now, this stupid company is going public this spring with a stock offering which will probably value it close to $100 billion.  That's billion ... not million (see ENews Account) ... enough money to rescue Greece from its financial predicament. And that 27-year old puke, Mark Zuckerberg, will become a multi-multi-billionaire (sidebar: I haven't seen the movie, Social Networking, either, nor will I).  Is this rational?  Not to me ... but it clearly is to the millions of Facebook aficionados who will be clamoring to buy this initial public offering (IPO) which might value Facebook at something like twenty-five times its trailing annual revenues (see: IPO Details).  This clearly is insane ... but then so was Google's IPO that came out at $85 per share and is now selling for $580 per share (= a market valuation of $188 billion).  So Facebook should get this hyperbolic initial market valuation which will likely then be even more insanely eclipsed by its soaring stock price during its first day of trading.

Caution to all of you who want to take part in this Wall-Street mania ... yes, you might make a pot of money if you buy this stock early-on.  But caveat emptor ... at some point this bubble will burst and Facebook will take a faceplant ... it might take days or months or even years.  But, be assured, it will happen ... mainly because Facebook's product is so ephemeral.  (It might take somewhat longer, but the same fate should also eventually happen to Google.)

Gotta go ... I have to take my Studebaker in for an oil change.