Thursday, September 06, 2012

Obama's Views About Business

Translation on Obama's Views About Business

Prop up all big crappy businesses (ie. Auto Industry & AIG) to protect middle class jobs that will crush all disruptive and innovative start-ups. Bigger businesses are better than free market innovation and smaller more volatile companies. Free market capitalism does not work so let the Government call all the shots about what businesses succeed.

Obama's business plan for the USA might as well have been written by a 5th grader.  His vision is incredibly short term, thinking that roads, bridges and now runways (ooooh) will somehow create sustainable jobs?  This is ridiculous since that was our business plan from the 1930's and has nothing do with wealth creation or capitalism.  How does this help the United State create jobs and new companies that compete with China, Brazil and Russia in a global economy?  It does not and has nothing to do with technology, education, healthcare or environmental innovation.

There is a huge disconnect and this is why IPO's, venture capital, start-up acquisitions are at its lowest lowest levels in decades.  The Democratic National convention should be a rude awakening for all start-ups and investors.  Put your money and checkbooks away if Obama gets elected because it will be a market of big businesses getting bigger.  Protecting middle class jobs will be more important than letting start-ups innovate that create sustainable jobs and long lasting companies.

The problem is capitalism is happening 100x faster than ever before and many Democrats are too stupid to get out of the way.  What would the auto industry look like today if we let GM go bankrupt?  We might have fewer jobs but better & cheaper cars?  Companies like Tesla might actually be an industry leader.  Think about all the companies that wanted GM to fail?  That's capitalism and preventing capitalism goes against the American ideals.  Democrats call it a "zero sum" game.  But no . . . the Government decided that GM is better.

Failure is good for business so they can be restructured.  GM was a huge shareholder cram down without restructuring by a shareholder (aka Gov't) with unlimited money. Some call this a ponzi scheme because the cram down shareholder (Gov't) can print unlimited money and prop up the stock in the free market. GM has the same union problems and will ultimately fail soon as smaller companies slowly catch up to compete.  Obama just delayed innovation by another decade. Slower change is better? F that.

This goes without mentioning that the capital cycle needed to start new companies is broken because of faulty taxation assumptions.  Millionaires and billionaires (limited partners in VC, Private Equity and Hedge Funds) need to be incentivised more to invest more.  Raising taxes on capital gains will kill the capital cycle flow back into companies drastically.  Making the pie bigger is far better solution that redistributing money through higher taxes.  Mediocrity will soon become a the middle name of the USA. 

Our Government is too big and needs to be restructured as well.

Thursday, May 24, 2012

Never Use "Honestly" in a Truthful Statement


One of my biggest pet peeves is someone who describes a statement using the term honestly. Why?  Because there is usually a hint of dishonesty to whatever is said.  Its a bad habit if you do it and usually a sign of insecurity about a statement or a sign that you are not telling 100% of the truth.  If you have to describe your statement as honestly it unusually means there might be a slight "white lie" in your statement.

This holds true especially in the World of Wall Street and politics.  I here statements like this often on TV and it immediately tells me this person might be full of shit.  Its a good thing to listen for if you are a contrarian investor.  I tend to run for the hills and avoid a stock or company immediately if I hear management use this.

"Honestly, I really like it." "Honestly, I really don't know the answer." "Do you want my honest answer?"

Pay attention to the next time you hear it and ask yourself what hidden agenda that person who said it might have.  Feel free to submit your examples below.  

The other statement I am starting to not like is also . . .  "Trust me".  

Tuesday, May 01, 2012

Intuit SiteBuilder Desktop & SiteBuilder Lite Problems

I have been a loyal customer of Homestead for over 12 years and something is very screwed up with the software and tech support at the company.  Ever since Intuit purchased Homestead recently the support and software has gone way down hill.  Ever since the update with the bug I have been unable to edit my sites and feel like I am being held hostage.

I run a few web sites that have heavy traffic and very tech saavy about how to use the software.  I have been trying for 3 months to inform Intuit Homestead that their recent SiteBuilder updates have bugs in them.  After numerous phone calls, emails and chat support nothing has been done to fix the problem.  My problem is very simple and its frustrating that no one at this huge company is aware of the bug or has been able to fix it.  

Intuit SiteBuilder desktop recently did an update to their software 3 months which is preventing me from uploading any lengthy html code.  The Homestead SiteBuilder software freezes and does not allow me to upload or change any of the code.  I have tried uploading 500 to 2000 lines of code into the html snippet and it does not work.


I tried using the SiteBuilder lite hosted version and this does not work either.  Whenever, I try and upload my code to the site it inserts footer code into my page even though the boxes below are unchecked.  The footer code that is mysteriously inserted into my pages creates formatting issues.  The correct format for my site is here (correct page I haven't changed this page in 3 months) and see the footer code that Intuit screws up the formatting of my test page here


The solution I was told by a customer support representative was to upload the page directly using the file manager.  However, all my pages are indexed in the search engines under HTML and uploading an HTM file is the only way to do this.   Why can I not create and HTML page and only an HTM page?

Another solution that an Intuit representative told me was to do a clean install of the software.  I did this on two computers and even went to the store to buy a new $1,500 Samsung Series 9 Ultrabook with Windows 7.  Same problem still exists and Intuit can't find a solution.  They can't even let me use an old version of the software which works correctly.   Very bummed and will likely be leaving the company soon.

Thursday, April 12, 2012

Why Did Google Issue Class C Shares?

Can someone please explain why Google did this strategy? 

Google plans to split its stock 2-for-1 in part to preserve its leadership's voting power.  However, they are  issuing a new class of stock to shareholders that won't have any voting power. All current stockholders will get 1 share of the new Class C stock.  Google said the split is something investors have been asking for but why the new class of stock and not just a straight cash dividend?  When will (Nasdaq: GOOG) issue new stock? Are people talking about the Google Class C shares having zero voting power aware Larry and Sergey currently have 60% voting power?

Investors will vote on the proposal in June. It's expected to pass because Google's senior leaders have most of the voting power.  Larry Page said, "It's important to bear in mind that this proposal will only have an effect on governance over the very long term," CEO Larry Page and fellow co-founder Sergey Brin wrote in a letter. "It's just that since we know what we want to do, there's no reason to delay the decision."

Employees given Google stock in the future will get the non-voting share, allowing voting power to remain with existing shareholders.  Also, management will have the voting stock tied to the non-voting shares through a "staple agreement".

Thursday, February 23, 2012

Romney Paul vs Romney Santorum

Which Ticket Can Win in 2012? 
    
  

Tuesday, February 21, 2012

Who is the Republican Establishment?

Can someone please explain who are the leaders of the Republican Establishment?  Please provide a list of suggested names in the comment section below.  I wish the "republican establishment" would explain themselves in front of a camera.   The more I hear this term, the more I think its the liberal media telling us who the Republican Establishment is.  

Wednesday, February 15, 2012

Vertical Incubators vs Startup Accelerators

What is the difference between a vertical incubator and a start-up accelerator?  First, let me preface my opinions by stating that, most entrepreneurs and investors don't have a clue about how much competition exists or have any appreciation for how long it takes to build a business.  Every entrepreneur and investor should always assume that 1,000 companies are doing the exact same thing and assume it will take five to ten years before the business reaches critical mass.

With this in mind I would like to share my opinion on the growing phenomenon of Southern California entrepreneurs turning to these organizations for help.  Before you sell a piece of your idea or company to one of these companies or investors you should have a clear understanding of the incubator / accelerators long term goals.  Do they have your best interest in mind and do you really need them to become successful.  Ideas are a dime a dozen in the startup world and its all about the execution of your idea the makes you successful.

vertical incubator is group of investors and entrepreneurs who collectively form companies that focus on a specialized industry vertical.  Specific examples include: mobile games, telematics, social media, advertising are some examples.  An incubator that proclaims they are focused on digital media, Internet or mobile is far too broad and unfocused.  Typically the mentors of the incubator have deep domain expertise and contacts within the target industry that can foster accelerated business and technology partnerships.  Also, most of the companies within the incubator portfolio focus on solving similar complimentary problems in the same industry where resources can be shared.  Most vertical incubators are designed to help "first time entrepreneurs" with the basics of company formation, technology, management, business development and provide a small amount of funding for a pretty big chunk of the company.

A start-up accelerator / incubator is typically started by a group of smart people who have a backgrounds in finance, investment banking, venture capital or successful entrepreneurs.  Accelerators tend to be technology agnostic or generalist.  They will look at lots of deal flow in order to find ideas and entrepreneurs to fund.  The founders and the portfolio companies do not necessarily overlap and there is typically no purpose or overarching mission to incubator.  This lack of a mission or goal is why I am not a big fan of accelerators.  Making money or giving back is not a reason to start a company or an incubator.  Having passion about a particular problem or industry is most important, which lends itself to fulfilling a mission.  Focus, focus, focus is everything!

In my opinion an accelerator / incubator with limited capital resources (under $500M) cannot be a generalist.  It may be a lot more fun to see tons of ideas and deal flow but I guarantee you the incubator that focuses on a niche will be more successful.  The 80/20 rule applies to just about everything in life and especially investing in the technology businesses.  The incubation game is about focusing on what the people within the firm know and do best.

Putting all the energy of the firm into one particular area of focus is paramount.  Why, because there are only so many experts in a particular field and the best always rise to the top.  Its impossible to be an expert at everything despite what most VC's might claim.  Yes, investors can make bets in lots of companies to hedge risk in an incubator, but at the end of the day 80% of the fund will likely come from 20% of the companies you start.  Focus will be demanded as the incubator matures and some companies fail.  So, it probably makes sense to have a common mission deliberately at the beginning because someday all the jockeys might be riding on the same hoarse.

Our monthly Venture Capital Alliance meeting this morning was particularly interesting as a sign of the  changing times once again in Southern California. We met with the founders of MuckerLabs, Startup EngineLaunchPad.LA and had some discussion with investor friends of Amplify.la.  It encourages me to see the renewed energy in LA since the 40 or so VC funds started in the late 1990's are all but virtually extinct.  However, LA still lacks the critical mass of capital resources that the Bay Area has and so it makes it that much harder to create a billion dollar ideas down here.  LA doesn't have the financial resources to create "ponzi scheme like VC companies".  (ie. Groupon)

Ponzi scheme VC investing is when angels and VCs form cult like groups that bid up private stock in illiquid private companies.  Ponzi VC scheme companies rely on constant fund raising in order to keep the business afloat and never have any intension of making money.   Financial engineering is common as most VCs participating have multiple funds (early and late stage) to create a false sense of growth.  Soon private equity funds and hedge funds take the bait and then Wall Street investment bankers sell the stock in an IPO dumping all the shares on the retail investor.   Groupon is a great example of a VC ponzi scheme as bigger dumber money kept pilling on top of early investors without any intension of making dime of profit.  There were 1,000 other Groupon competitors in a company that had no IP or competitive advantage when it received a $100M VC valuation from a few Bay Area VCs.

The VC game has become an a very tight lipped investor club controlled by a half a dozen funds who only bet on their friends deals.  If you are not in the club that don't try and get in because most the time you will get screwed unless if you have something very special.  So, I would encourage the incubators based in LA to build hyper focused niche businesses that sell for $5M, $10M $50M, $100M and not $1B.  Bay Area billion dollar ideas don't work in Southern California yet so lets start slow.  Digital media companies based in will LA will kick the crap out of the Bay Area in the next down business cycle built on VC ponzi schemes.  Smart people will come here and join the wave on Silicon Beach.  Lets get back to the basics of business and ask the hard questions like, "What pain are your companies trying to solve?"

I would also encourage you to read Ryan Born's article: LA Startup Incubators/Accelerators/Mentorship Programs as Compared to NCAA Football Conferences

I encourage your comments below!

Tuesday, February 07, 2012

How to Be Smarter Than The News Media

Financial & Political News Media
Most smart people know that the mainstream media is controlled by huge companies at the highest level and they are simply puppets and not news reporters any longer.  The majority of what we hear is not news but simply filtered PR and sensation stories that have filtered their way to the top of the pile in social media. If you take the time to read these blogs daily below, it will guarantee you to become smarter about interpreting the mainstream liberal news.

Social media is merely a representation of what is popular and not necessarily what is important.  This drives news reports to talk about stupid things that any normal intelligent person would just ignore as a waste of time.  Bloggers have taken over the role of reporting the news in finance, economics and  politics.  Bloggers do the best job of dissecting and interpreting the mainstream liberal media news, which is very hard to do.  Some bloggers are reckless about not checking facts but information does have a way of getting filtered out eventually.  

Here are the best blogger news sources I read that help support my conservative views about politics, economy and finance.  I read them daily because the mainstream news is typically old, non-original and derived from blogger sources.  At the same time it is virtually impossible in depth coverage of to get quality news coverage from NBC, CBS, ABC and even Fox.   You can also follow this list on Twitter at Smarter Political News.  Here are two other Twitter lists I am building that do a good job of interpreting the biased financial press and technology news. Smarter Tech News Smarter Financial News

Tuesday, January 31, 2012

Facebook's IPO Valuation Should Be $25B

I would like to take you through a simple math equation for determining the fair value of Facebook before its IPO filing tomorrow without comparing growth metrics.  Here are my assumptions when comparing Facebook, while using Google as the benchmark.  Google's annual revenue is $37 billion with a market capitalization of $188 billion currently as of January, 31, 2012.

Google's annual display ad revenue from Double Click is only $5 billion + they have $32 billion of additional revenue sources.  That means if Google only had the display ad business similar to Facebook their valuation would be 1/8 or less or around $25B.  Here is the scary part when you start to look at Facebook's proposed IPO valuation of $100B with 88% of its revenue coming from one source.

Facebook simple valuation equation based on current estimates:

Google Market Cap = $188B at $580 per share
Google Total Annual Revenue = $37B
Google Display Ad Revenue = $5B

Facebook Market Cap = $100B
Facebook Total Annual Revenue = $5
Facebook Display Ad Revenue = $4.8
Facebook Fair Value Equation = ($37 / $5 = .135) x $188 = $25B

The latest news sources reported that Facebook annual display ad revenues were around $3.8B in 2011 and so I will assume this revenue number has grown to $5B in 2012.  $5B in annual revenue for Facebook is 1/8 the the size of Google's with $37B.  Facebook has 88% of its revenue coming  from display ads only which is not very diversified if you ask me.  Keep in mind this does not factor in growth rates but they cannot be that dramatic to change my valuation estimates. 

S&P Low 666 (2009) x 2 = High 1332 (2012)

S&P Low in 2009 of 666 x 2 = 1332 High in 2012
The rigged stock market will undoubtedly become a key issue in the 2012 Presidential race.  The Obama administration will promote the fact that the stock market is up almost 100% since he took office in 2008.  Mitt Romney is going to attack the fact that the market is up 100% but so is the unemployment rate that went from 5% to 10%.  Pick your poison.  The Federal Reserve's balance sheet is bloated and helped to rig the stock and bond market game.  How will it end in the next few years and what is the best path to long term free market prosperity and organic economic growth in the U.S.?

The stock market has become a rigged game in the last few years.  It is be propped up by the Federal Reserve and Ben Bernanke's team by printing unlimited dollars to buy futures and bonds in the open market.  Bond prices are artificially low in order to encourage people spend and not save.  However, the smart people running big corporations are sitting on hoards of cash earning 0%.  Its because the market has been propped up in a phony way and there is no organic growth.  Executives are expecting a stock market crash of grand proportion that will wipe out all of the Government businesses that have been propped up.  Cash will be king in the future and there will be no safe havens.  Its just a matter of time before the huge "House of Cards" bonds and stocks all fall at the same time wiping out the wealth that has been artificially created.

Yes, the United States can print endless amounts of money in order to create inflation and promote growth.  The experts think we can grow our way out of the debt crisis and reduce the current 100% debt to GDP ratio that has doubled under the Obama administration.  However, the austerity in Europe is nothing compared to what we might see in the U.S. if Mitt Romney gets elected and the Federal Reserve money printing press is halted.  It will be painful in the short term but the long term gain for my kids and grandchildren will be tremendous.   The U.S. Government must feel the pain of overspending and let the free markets take over their bloated and egregious spending habits.   Don't forget Mitt Romney has been a private equity / restructuring guy in the private sector and will have the biggest turnaround project of all time on his hands once he pulls the Fed plug.

Mitt Romney knows that a healthy economy will grow through organic investment and capitalism at the local level.  In healthily economies the Venture Capital & Private Equity industries thrive and so do quality IPO's that foster the cycle of wealth that has built the foundation of the United States.  However, the recent financial crisis has led the Government to step in and act as the market "Big Brother" to prevent big investors from losing money.  The VC industry and private equity industries are shrinking drastically because large LP's (limited partners) have no incentive to invest with below 0% annual returns due to overbearing Government regulations.  We all know in healthy free markets there are winners and losers.  However, now the losers are being prevented from losing and this is not capitalism.  Bailouts have been preventing huge bankruptcies and progress towards creating new and more efficient businesses.  

Thousands of banks should have gone out of business and so should have many of the auto companies like General Motors.  Restructuring and bankruptcies are all part of the free market cycle and we have yet to go through it on a large scale downturn.  The 2009 downturn was prevented by the Government by double its debt load in the trillions and now the next recession could be even worse and deeper.

In summary the only thing that is going to help the economy in the long run build a foundation of growth that is sustainable is if the Government simply gets out of the way.  We investors are all "Big Boys" and taking loses is part of the game.   Trying to impose regulations on the financial services industry to prevent loses only restricts the free market capital flows and prevents investors from doing anything.  We need investors to be excited about investing and now restricted.  These two bills / laws need to be repealed by the next President and then you will see healthy organic investment growth come back to the private sector.

1)  Repeal Sarbanes Oxley
2)  Repeal Dodd Frank Bill  

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