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Author Topic: US Economics, the stock market , and other investment/savings strategies  (Read 146489 times)
Crafty_Dog
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« Reply #1000 on: July 09, 2015, 06:49:40 PM »


A Dearth Of Tech IPOs May Mask Bubble Trouble
Only eight companies backed by venture capital have gone public in 2015. That’s a long way from last year’s 115.
By Andy Kessler
July 9, 2015 6:49 p.m. ET


The latest bubble chatter in the tech industry came from Fitbit, the maker of high-tech pedometers. Fitbit went public last month at a $4.1 billion valuation, and the stock price has more than doubled. Is a company that made $132 million in profit last year worth almost $9 billion? Major Silicon Valley players don’t think so. Sam Altman, who runs the startup accelerator Y Combinator, called the market last month a “mega bubble” that “won’t last forever.”

But since fewer startups seem willing to submit themselves to the disclosure and discipline of the public markets, how would we know? The Wall Street Journal’s Billion Dollar Startup Club shows 100 private companies valued at more than $1 billion. Yet this year there have been only eight venture-capital-backed initial public offerings compared with 115 in all of 2014.

Aside from Tesla and a few others, most of the hot companies with eyebrow-raising values are staying private. Uber is rumored to be raising $2 billion in funding for a valuation of $50 billion. Blue Apron, which ships three million meal kits a month to hungry millennials, has taken in $135 million at a $2 billion valuation. Food-delivery companies Instacart and Delivery Hero are worth a few billion each.

Yet none is going public. The delay can perhaps be blamed in part on Sarbanes-Oxley, a 2002 law that beefed up oversight and made it more expensive to be a public company. There’s also the 2012 JOBS Act, which increased the threshold for public reporting to 2,000 shareholders from 500. Whatever the causes, there is no longer a rush to go public if companies can raise sufficient private capital. “Now, after the IPO, it’s much worse,” Alibaba co-founder Jack Ma put it in June. “If I had another life, I would keep my company private.”

As a shareholder and a lifelong bubble watcher, I’m disturbed. Public markets enforce discipline on companies and push them to improve. Look at Facebook. In the first full quarter after its 2012 IPO, the company disappointed Wall Street with only 14% of revenue from mobile—phones, iPads and other portable devices. Now mobile accounts for 98% of Facebook’s ad growth and almost 70% of its revenue. Markets rule.

That discipline can be tough. After its December IPO, Lending Club missed earning expectations and fell to $14 a share from $28. The stock price of the craft-selling website Etsy has halved in the two months since the company went public. The online advertising company Rocket Fuel went public in September 2013 at $29, soared three weeks later to $65 and is now $7.

But with Uber at $50 billion, surely we’re in a bubble? Remember: A bubble is not created by high valuations. A bubble is a psychological phenomenon in which investors are tricked—by the company or themselves—into believing that a profit stream is sustainable when it really isn’t.

Case in point is the dot-com bust of the late 1990s. Many companies told me at the time that Goldman Sachs or Morgan Stanley would take them public as soon as they could strike a deal with AOL. So AOL would invest on the stipulation that the company buy pop-up ads on various sites within AOL. Thus AOL turned its cash into sales. The madness stopped when companies ran out of money and AOL ran out of companies.

In 1999, Microsoft invested $250 million in the online ailment manual WebMD in exchange for WebMD paying $30 a month for thousands of physicians for dial-up Internet via, you guessed it, Microsoft’s MSN. Amazon invested $30 million in Drugstore.com in exchange for Drugstore.com paying $105 million over three years for a branded tab on Amazon. It all looked good, but it couldn’t last. It is no different from Bear Stearns using its balance sheet to spike mortgage-backed securities from 2005-08.

Today’s startups aren’t passing money in circles like this yet, though I suspect it will happen. With so many private firms holding wads of cash, the ability to use their balance sheets to drive sales will be too tempting. But without the disclosures required of public firms, this logrolling may be hidden from view. As such, Silicon Valley tycoons shouldn’t get jitters over big numbers. A deluge of IPOs would be just the sunshine needed to sustain this much needed reordering of the global economy.

Mr. Kessler, a former hedge-fund manager, is the author of “Eat People” (Portfolio, 2011).
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G M
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« Reply #1001 on: July 09, 2015, 07:46:58 PM »

It is almost like there has been some sort of fundamental change.
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G M
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« Reply #1002 on: July 10, 2015, 08:20:45 PM »

http://www.marketwatch.com/story/these-lurking-debts-may-turn-us-cities-states-into-greece-2015-06-30

Next.
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Crafty_Dog
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« Reply #1003 on: July 10, 2015, 11:08:51 PM »

Reads to me like the bond holders pay the piper.
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objectivist1
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« Reply #1004 on: July 17, 2015, 10:33:22 AM »

I've been noting this for the past couple of years, as strip malls shut down and remain vacant.  Major retailers are shutting down stores, and the media is not reporting this, as they try to prop up consumer sentiment and give people the impression that everything is actually improving under this disastrous Obama economy.  You ain't seen NOTHING yet.  See below:


Major Chain Stores Shutting Down As America Faces “Birth Pangs Of Retail Apocalypse”
Wednesday, 15 July 2015   Mac Slavo

Reduced consumer spending is heralding a looming economic downturn, if not collapse, with an unprecedented shutdown of major box stores, restaurants and grocers underway.

It doesn’t bode well for the millions of Americans who are already seriously struggling, and will only accelerate the death of the middle class.

Along with this massive shrinkage of the retail sectors will go thousands of jobs. Natural Newsreports:

There is chatter across the web about dozens of major retail chains that are expected to permanently shutter a large number of their store locations this year. Popular names like Abercrombie & Fitch, Barnes & Noble, Chico’s, Children’s Place, Coach, Fresh & Easy, Gymboree, JCPenney, Macy’s, Office Depot, Pier One, Pep Boys, and many others are named as soon-to-be casualties in what some news sources are now referring to as the coming “retail apocalypse.”

The Economic Collapse Blog pins 2015 as a significant “turning point” for the U.S. economy, ominously warning that at least 6,000 retail store locations are expected to close this year based on company announcements. Many American consumers are already witnessing the birth pangs of this retail apocalypse as brick-and-mortar department, specialty, and even food shops close their doors for good.

The list of store closures (see here) is truly massive, and in no way accounts for everything that’s coming.

But Americans are still buying one major retail category — technological gadgets like iPhones, wearables, smart devices and computers. As technology purchases soar, shopping malls that have long specialized in clothing and fashion retail are falling in on themselves.

Business Insider calls it a slow and painful death, noting the collapse not only of thousands of stores from dozens of chains, but even the fall of giants like Gap:

Gap once ruled the retail world. But today America’s largest apparel retailer is closing a quarter of its stores and laying off hundreds of workers after disappointing sales.

Gap’s closures are indicative of a larger trend in American retail.

According to National Real Estate Investor, more retailers are planning to close, but are holding on for the end of the holiday shopping season:

After a tsunami of store closing announcements during the first half of the year, experts forecast that the remainder of 2015 will be relatively quiet as retailers focus on getting through the holiday season. However, retailers will continue to shutter stores throughout the year as leases expire.

[…]
The most recent store closing data available reports that retailers and restaurateurs announced closings of more than 3,500 establishments totaling an estimated 19.9 million square feet, according to the U.S. Retail Real Estate Supply Conditions report from ICSC Research and PNC Real Estate Research. The planned 1,784 store closures announced after Radio Shack’s February Chapter 11 bankruptcy filing represented half of the total first-quarter tally.

And the tenants aren’t being replaced by new stores; the retail sector is just shrinking.Business Insider notes:

More than two dozen malls have shut down in the last four years and another 60 malls are on the brink of death, The New York Times reported, citing Green Street Advisors, a real-estate and real-estate investments trust analytics firm.

The elephant in the room in clearly online sales, with major sites like Amazon undercutting and dwarfing brick and mortar box stores.

And with online sales impacting on-the-ground retail, local jobs are destroyed as well. The future of retail will be more compacted, less physical and more out of reach for those with shrinking pocketbooks and dwindling means.




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"You have enemies?  Good.  That means that you have stood up for something, sometime in your life." - Winston Churchill.
Crafty_Dog
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« Reply #1005 on: July 17, 2015, 11:39:46 AM »

This is an interesting point.  I wish the piece discussed more the role of the internet in this process.
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G M
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« Reply #1006 on: July 22, 2015, 06:32:42 PM »

http://www.usatoday.com/story/news/nation/2015/07/20/more-children-living-poverty-now-than-during-recession/30415391/

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