US Diplomacy Needs To Be More Transparent

The Egypt crises has certainly caused some confusion amongst financial community, media pundits, political conservatives and liberals.  No one seems to know which side of the table to be on and who to support in the crisis.  Wall Street and emerging markets responded to the protest by dropping a few percent immediately and volatility spiked but for what reason?  What interests is the US trying to protect in Egypt and who do we trust? One important lesson from this power struggle crisis seems to be emerging and that is the "lack of transparency" in US foreign policy and support for Egypt.  I don't expect a full disclosure Wikileaks style, but when I hear that Hosni Murbarak is sheltering billions and worth multiple billions of dollars it makes me sick. The US Government seems to be giving a billion dollars a year to whom?  Egypt or Mubarak?  How does it get spent if at all and who receives the check?  How many other countries around the world do we support like this financially?  I would love to see an in-dept study of this because hedge funds who invest around the World will be all over this issue to find the next "smoking gun".   If anyone comes up with a InfoGraph to tell the story of US financial diplomacy please send it to me. 

Are Groupon Coupons Getting Spammy?

The latest Groupon coupon fad reminds me of the mailing list spam days back in 1999.  Back in the day companies like Yahoo couldn't get their hands on enough lists of emails and would use these lists to pump out advertising offers left and right.  Eventually consumers got smart and had to use spam blockers and finally the Government required companies to offer opt-in email programs.  Groupon is not much different, however, this time they give you a sense of urgency by saying that inventory is limited.  Not only do most offers claim to limit the inventory but they often give you 50% off for a limited time.  Yes, it seems like a good short term promotional tool but how long will it last and what will it do for customer loyalty?

Will Groupon become a victim of their own success always chasing the next deal and lose customer support?  I think coupons should be scare commodity and not available to everyone.  If everyone has a coupon it defeats the purpose of pricing anything and creates a sense of dishonesty amongst your loyal customer base.  I think at the end of the day when this local coupon bubble pops the winners will simply be just good at local display advertising.  I think Google gets this as well and will will likely start see display ads targeted on mobile phones that show offers like this.

Groupon turned down an offer from Google to buy them for $6 billion dollars apparently and it looks like they are headed for an IPO.  I think this is a blessing in disguise for Google and they should be thankful that this did not work out.  The competition in the coupon space is furious and there are literary thousands of Groupon clones that do the same thing.   When Groupon first received funding and their valuation was north of $100M I said it was a great investor ponzi scheme and still think this.  Its a big house of hards that is only held up by the huge pile of cash they have been able to raise.  Its also not surprising to see them acquiring several companies in order to try and consolidate their competition.  I also wouldn't be surprise to see some more controversy surrounding this company get publicized before it tries to go public.  Groupon has lots of "skeletons in the closet" that will come out and at the end of the day the winners will ultimately be small niche local companies like Boomstreet who will be successful.   

Did Google's Failed Acquisition of Groupon Prompt a CEO Change?

Did Eric Schmidt fail to consummate an important acquisition of Groupon that prompted the change?  I personally am happy that Google did not buy Groupon because I think the company is very spammy.  However, the category is growing quickly and Wallstreet doesn't wait around for excuses of why the advertising giant does not have a product in the category of group buying and coupons for local businesses.

Or is it more about control and does Larry Page want more control of the company to make more acquisitions?  Is Facebook's increased threat of taking market share from the search giant prompting some paranoia.  The war is now on between company founders Mark Zuckerberg of Facebook and Larry Page of Google.   It will be interesting to see how each will handle the growing mobile advertising industry and Google has a huge head start.  It's kind of scary to see Apple and Google CEO have leadership issues as they are the two of the largest technology companies. 

Who is More Influential on the Economy Steve Jobs or Ben Benanke?

There is an argument to be made the Apple's $319 billion dollar market cap and its' publishing, advertising, software, retail and venture capital ecosystem of entrepreneurs and companies might be more influential on the economy than the Federal Reserve's interest rates controlled by Chariman Ben Bernanke.  Here are 10 reasons why:

1)  History has shown that the economy only grows when there is an ecosystem of technology that creates jobs & Apple has fueled the growth of tech which has created millions of jobs Worldwide.

2)  Ben's 0% interest rates have had no effect on whether millions of consumers Worldwide have made emotional Apple purchasing decisions.  Two thirds of the US economy is based on consumption and Apple is driving it.

3)  Ben Bernanke is an academic that relies on historical data to make reactive decisions when economic history rarely repeats itself.

4)  Steve Jobs relies on his vision to shape the future of the technology industry and millions of people are affected based on these decisions.

5)  The stock market always needs a leading growth stock story like AAPL in order for investors to get excited and put money to work in the market.  The Nasdaq 100 index QQQQ is 20% based on Apple and thus 99 other stocks are directly affected by how AAPL trades.

6)  0% interest rates over the last few years have done nothing but create a bond market and real estate bubble which does nothing for capitalism and growth.

7)  Steve Jobs has created wealth for millions of entrepreneurs who have started companies to feed off the Apple ecosystem.

8)  Ben Bernanke has put billions of dollars in the hands of bankers and bond fund managers to prop up the stock market and create a false sense.

9)  Foreign countries who invest in US Treasury Bills, like China, are not happy that the US is intensionally keeping interest rates low thus devaluing the dollar.  The Dollar cannot be devalued forever in order to finance the future and thus a long term bubble is forming if it were to rise suddenly.

10) Apple's stock (AAPL) has the largest market cap in the World at $319 Billion and if it were to lose value quickly it would take down a lot of hedge funds, pension funds who have jumped on the bandwagon of wealth creation and could be destruction if we are not careful.

Get well Steve!  We need you and Google to keep all entrepreneurs and investors excited about the future.  Technology NOT energy should be the basis of the World economy in order to leave a better place for our kids.

Register a Stock Symbol Without the SEC

A stock symbol or ticker symbol is a short abbreviation used to uniquely identify publicly traded shares of a particular stock on an exchange. A stock symbol may consist of letters, numbers or a combination of both.  Today, tickers are registered with the SEC and are used by primarily public companies.  Our Securities and Exchange SEC commission continues to fail in its ability to regulate the financial industry and doesn't have enough resources to do for the thousands of public and hundreds of thousands of private companies.  One way to help provide transparency is to help make information more transparent for private companies so the bar isn't so high for investor liquidity and we see more IPO's.  Here is one company that has a long term solution to that problem.  

Manhattan Beach-based CapLinked.com the development of software as a service tool for managing venture and angel fundraising run by Eric M. Jackson, reported Tuesday that it has started allowing companies to register unique "ticker symbols" on its site. The firm said that the symbols, which will be unique to private companies, can be used to identify companies on websites, in tweets, and also on such sites as SecondMarket and Stocktwits.

Previously, unique ticker symbols have been reserved for publicly-traded securities and traders tag the tickers using a $AAPL symbol in Tweets. CapLinked is seeking to make tickers something that is also typical in the world of private investing. Private companies will benefit from a unique ticker for use in branding, social media, and investor relations.

Companies signing up for CapLinked’s free service also will be able to register a unique ticker symbol that could potentially be used on SecondMarket and Stocktwits since our system is based on their models. Caplinked's goal is to take SecondMarket’s concept, formalize it, and create a ticker system that is universally accepted by the thousands of private companies and startups that register with Caplinked.

CapLinked gives private companies the tools they need to attract investment, share documents, and act like a typical CRM Salesforece.com system would for sales. Caplinked companies will grow large enough to be traded on SecondMarket eventually and possibly take their CapLinked ticker symbols with them to the Nasdaq or NYSE. Ticker symbols can be reserved on a first-come basis, and that the existing symbols already in use on Second Market’s platform or by publicly traded companies will not be available.

SecondMarket focuses are larger VC back and private companies and unveiled the ticker concept for private company ticker symbols earlier this year when it created tickers for the nearly 500 companies traded on its site, including the likes of Facebook, Zynga, Twitter, and LinkedIn. SecondMarket’s private company ticker symbols have already been adopted by Stocktwits, a professional community of investors.

CapLinked is not working with SecondMarket or Stocktwits, but said it is using a system based on their models for ticker symbols. Jackson is one of the early employees of PayPal. CapLinked opened up its service in October.

How to Pitch Like Baba Booey

They Call Me Baba Booey

Gary Dell'Abate (aka Baba Booey) is one of the greatest radio personalities on the planet is Howard Stern's producer. Gary was visiting Torrance, California this weekend for his book signing "They Call Me Baba Booey" and also appeared on the Jimmy Kimmel show to redeem himself to show everyone he can throw a baseball properly.   If you listen to the Howard Stern Show on Sirius / XM on a daily basis you will know about his famous pitch at the Mets game earlier this year and then now on the Jimmy Kimmel show.  In the 2nd video below from the Jimmy Kimmel show, he hits a woman in the head and an audience member catches the wide pitch. He has thrown 4 pitches and they all have been wild pitches.  I love him but Gary how can you possibly coach your son's baseball team? I hope you are not the pitching coach.  On a side note, Howard Stern's contract ends this year and it remains to be seen if he will stay with Sirius or move to a new company like Pandora internet radio.  Gary will likely follow him there having been together for more than 25 years.  This should be a great book to read given all of the goofy bits over the last 2 decades.

Hilarious Video: The Federal Reserve Explained: Understanding the Central Bank of the United States

Kudos to Omid Malekan, who created this amazing video explaining quantitative easing to the average person to understand. This comes on the on the heals of a great video about why mobile phone consumers are so dumb the company has come . In this new video the two characters discuss the Federal Reserve's quantitative easing policy. The present it as a desperate and hopelessly misguided effort to save the world economy. One issue I have with the short film is that it also places the blame on Goldman Sachs which I don't agree with. They are simply helping to execute and should not be brought into this. 

The Federal Reserve, often simply referred to as "the Fed," is the central bank of the United States. Established by Congress in 1913 with the enactment of the Federal Reserve Act, its primary purpose is to provide the nation with a safe, flexible, and stable monetary and financial system. Understanding the structure and functions of the Federal Reserve is crucial for comprehending how the U.S. economy operates and how it is managed.

Structure of the Federal Reserve

The Federal Reserve System is comprised of several key components, each with distinct roles and responsibilities:

1. Board of Governors: Located in Washington, D.C., the Board of Governors consists of seven members appointed by the President and confirmed by the Senate. These governors serve 14-year terms, ensuring a degree of independence from political pressure. The Board oversees the operations of the Federal Reserve Banks and sets key monetary policies.

2. Federal Reserve Banks: There are 12 regional Federal Reserve Banks located in major cities across the United States. Each bank serves a specific geographic area and functions as the operating arm of the central banking system. These banks handle various financial services, including clearing checks, distributing currency, and supervising and regulating member banks.

3. Federal Open Market Committee (FOMC): The FOMC is the body responsible for setting monetary policy, including interest rates and the growth of the money supply. It comprises the seven members of the Board of Governors and five of the 12 Reserve Bank presidents. The FOMC meets regularly to assess economic conditions and make policy decisions aimed at achieving maximum employment, stable prices, and moderate long-term interest rates.

4. Member Banks: These are private banks that are part of the Federal Reserve System. They hold stock in their regional Federal Reserve Bank and are subject to its regulations. Member banks play a critical role in the implementation of monetary policy by lending to and borrowing from the Federal Reserve.

Functions of the Federal Reserve

The Federal Reserve performs several essential functions that help maintain the stability and health of the U.S. economy:

1. Monetary Policy: The Fed controls the nation’s money supply and interest rates to achieve macroeconomic objectives such as controlling inflation, managing employment levels, and maintaining financial stability. It adjusts the federal funds rate, which influences overall economic activity, inflation, and employment.

2. Financial Stability: The Federal Reserve monitors and addresses risks to the financial system. It acts as a lender of last resort to banks and other depository institutions during times of financial distress, helping to prevent panic and maintain trust in the financial system.

3. Regulation and Supervision: The Fed regulates and supervises banks to ensure the safety and soundness of the nation’s banking system. It establishes and enforces regulations that promote consumer protection, fair lending practices, and the stability of the financial system.

4. Payment Systems: The Federal Reserve operates the nation’s payment systems, facilitating the secure and efficient transfer of funds. This includes overseeing electronic payments, check clearing, and wire transfers, ensuring the smooth functioning of the financial infrastructure.

5. Consumer Protection: The Fed enforces laws and regulations designed to protect consumers in their financial dealings. This includes regulations on credit, mortgage lending, and the transparency of financial products and services.

Impact and Importance

The Federal Reserve’s actions and policies have profound effects on the economy. By influencing interest rates and regulating the money supply, the Fed plays a crucial role in shaping economic conditions, impacting everything from consumer spending and business investment to inflation and employment rates. Its decisions are closely watched by investors, policymakers, and the general public, as they can significantly impact economic growth and stability.

In summary, the Federal Reserve is a critical institution in the U.S. economic system, tasked with promoting economic stability and growth. Through its various functions and regulatory powers, the Fed helps ensure a stable and efficient financial system, supporting the overall health of the economy. Understanding its operations and objectives is essential for anyone looking to grasp the dynamics of the U.S. economy and its financial markets.

Video: SNL Skit on US Debt to China at G20

In a world where political satire often provides a mirror to societal issues, Saturday Night Live (SNL) has once again captured the public’s imagination with its latest skit. This time, the focus was on the US debt to China, a subject that remains a critical point of contention and debate in global economic circles. The skit, set against the backdrop of the G20 Summit, cleverly intertwined humor with serious undertones, offering a satirical yet thought-provoking commentary on the state of international finance and diplomacy.

Ben Bernanke has Purchased Double D's

The Fed has spent most of the last two decades artificially inflating and deflating the stock market whenever they feel the economy needs a boost or is getting overheated. They know what they do has no direct effect on the economy but its a quick fix and doesn't provide any organic growth. Today, the only weapon the Fed has is the so-called wealth effect by driving the stock market up so people feel wealthier because interest rates are at 0%. The stock market went up 80% in 2009 so investors should be spending 2.4% extra of the entire value of the stock market, which is about two percent of GDP.  Here is a great video explaining the boom and bust cycles and is a warning to all entrepreneurs to stay current with stock and currency markets because it now directly affects you even if you are a small business. Maria Bartiromo sits down with Jeremy Grantham who has made some incredibly good predictions over the last few years.  Has the Fed lost control of the bond market?

The new $600B of quantitative easing goes into the banking and corporate sector of the economy who is largely sitting on the largest cash balance in business history.  They don't need the money at all and it's not the sector of the economy who is going to take our unemployment rate down from 10-15%.  Those who need the stimulus money the most, small business & private investors, can't get it. Seeing a company like General Motors go public again makes me want to puke.  I can think of 100 other companies who deserve to be public companies before GM and that creates far more future value, jobs and innovation in our economy.  GM going public is simply private equity, government money, and investment banker Ponzi scheme.

I was an apart of one of the largest business boom cycles in the late 1990s and there were a lot o great things about that time the US Government, FDIC, and Fed have forgotten.  Investors were pouring money into Venture Capital funds that were providing funding to companies who were providing real long term jobs and creating new markets of innovation.  Much of this money came from the Government in the form of FDIC subsidies and they made lots of money for taking this risk.  Once the bubble burst and hedge funds drove the market 80% lower there was no optimism or money left in the VC industry to spark new growth.  The VC industry has shrunk drastically in the last decade and almost 80% of the VC funds not based in Silicon Valley are virtually out of business (aka "the living dead funds").

Capitalism in general is kind of a Ponzi scheme but it can be done organically if the IPO market is fair and open.  Capitalism also works when Government regulatory agencies stay out of our way and don't favor big business monopolies.  I think if $100B in stimulus for struggling VC funds this would create another boom of optimism that we need.    The Fed and FDIC should also consider an Emergency Fund to fund to solve the overweight population epidemic that is slowing the US economy down.  Here are a few other ways President Obama could help create jobs.

Health & Wellness Venture Capital Funds

I heard an interesting investment thesis yesterday on CNBC that obesity is a major reason for our poor economy. The analyst said that fighting obesity with new health and wellness companies could add nearly $1 trillion dollars to our economy and create lots of jobs.  While at the same time taxing fat and food companies that are responsible for putting this in our diets.  Southern California would undoubtedly be the leading region of the US where outdoor activity and fitness are embedded in our everyday life.  When you travel East or to the Midwest, you begin to really notice how the Country has changed in the last 10 years.  Kids are fat and parents are lazy.  

Over the last 10 years, Venture Capital has become increasingly more specialized and VC funds have become much smaller. The idea fund size in my opinion is around $25-$100M in order to accommodate smaller funding rounds. Health and wellness companies have been criticized by almost every VC fund over the last decade because they are thrown into the category of lifestyle businesses. I think this could soon change if the US Government and Wall Street decide they want to take some companies public and a few private equity groups start looking to buy companies.

This is one reason I think the health and wellness category could emerge as a new investment category that could garner lots of FDIC or government subsidy money.  Are there any funds out there that have the thesis?  If there are I want to know about them because exercise is a passion of mine.   The types of companies a specialized fund would look for would be the following:

1) Running, triathlon, and race organization groups (Marathons, Ironman, 10K Races)
2) Health Food Manufacturing, Distribution & Marketing Companies
3) Exercise Equipment Manufacturing, Distribution & Marketing
4) Adventure & Health Travel Marketing and Organizations
5) Natural supplements and vitamin companies. No drugs allowed
6) Internet publishing - coaching, counseling, advice, therapy
7) Physical therapy, employee health, and chiropractic groups
8) A healthy diet and meal marketing & distribution
9) Software & mobile applications
10) Restaurants (maybe)