LIFEHACKER WRITER SAYS YOU CAN'T LOSE WITH STOCKS

Today I came across a rather bad work published by Lifehacker, presumably to encourage young adults to speculate in stocks, which might make a cynic believe Western civilization is doomed.

A writer for Lifehacker told readers that it is mere pernicious myth that you can ever lose "money" in stocks. And then the hack for Lifehacker claimed that investing is "creating a diverse portfolio and riding the general growth of the market." He said doing practically guarantees that such a portfolio never can go to $0.

Brushing aside that no one uses money anymore as money is coined metal by weight and fineness, of course anyone can lose with stocks, the hack's main claim is this:

"[Y]ou don’t actually “lose” any money until you sell something."

By his logic, if someone pick-pocketed your wallet, you didn't lose your cash until you go to buy something. So as long as you don't try to buy anything, magically you did not lose your cash.

So again, according to that hack at Lifehacker, if your portfolio stays in the red to the remainder of your days, as long as you don't go to sell, you haven't lost. In effect, you can stick your losses upon your estate and your heirs.

That Lifehacker hack doesn't even seem to know the difference between investing and speculating. Investing means buying for cash flow. Speculating means betting on price.

These are investments:

• You bought an oven and utensils to bake pizza for sale to others.
• You bought a house to collect rent from others.
• You bought a stock that pays a dividend for the dividend.
• You bought a corporate bond that pays a quarterly coupon.

These are speculations:

• You bought 100 shares of AMZN hoping the price will rise.
• You bought one ounce of gold hoping the price will rise.
• You sold short 100 shares of TWTR hoping the price will fall.

Of course, if the sum of cash and bank credits rises faster than output of the economy because your friendly neighborhood central banker has engaged in the rather reckless policy of quantitative easing and your stock price stays the same or rises at a slower rate, you have lost buying power. Thus, you have lost on your stock.

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DID THE NASDAQ COMPOSITE HIT AN ALL-TIME HIGH ON JUNE 23, 2015 AS REPORTED? IT'S NOT EVEN CLOSE.

Google News returns 122,000 hits for the search phrase: NASDAQ Composite June 23, 2015 record or all-time

So is it true? Could the NASDAQ hit a high higher than the peak of Dot Com era when every American who wanted a job held a job?

In True Dollars™, which are the only dollars that count, the NASDAQ Composite is quite far from the all-time high.



The NASDAQ Composite hit an all-time high on 3/6/2000 peaking at $1,032.37 in True Dollars™. All who lived through that time as an adult will quite remember the Dot Com mania that abounded throughout America.

Americans were flush with jobs and with cash. Truly good times had been flowing for awhile for Americans.

There is no way the NASDAQ Composite today is at a true all-time high. Americans are far from good times. Many Americans have yet to leave hard times behind.

Today's NASDAQ Composite close is down -61.8% from the all-time high and a tinge higher (1.9%) than where it marked at true peak GDP hit at the end of Q4 2007, but down -16.8% from the peak hit during the Greenspan-Bernanke Inflation Bubble, the biggest credit bubble in the history of mankind.

Cash in circulation is up 150.2% since the all-time high and is up 52.9% since the March 2009 NASDAQ low. In True Dollars™, the NASDAQ Composite is up 116.3% from the March 2009 low.

Along with the quality charts I share like the one above, below is the kind of quality report I will be making on offer soon to subscribers that tracks ETF trading instruments.

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FEDERAL RESERVE BANKERS HAVE INFLATED U.S. STOCKS, MAYBE 70% TO BEYOND 100%

For those who follow stocks and stock markets, all too often, you'll hear or read a one pundit or another say stocks are overvalued or stocks are undervalued. What never you hear these pundits say is stocks are overvalued or undervalued relative to what.



Many use the S&P 500 as the benchmark index. The S&P 500 tracks 500 large firms, which having common stock listed either through the New York Stock Exchange or through NASDAQ.

Often, you'll get comparisons of the  S&P 500 relative to the U.S. economy. Many believe the S&P 500 signals the near future of the U.S. economy. Should they, though?

Since 2003, revenues of S&P 500 firms earn outside the USA has averaged a bit more 45%. Said another way, S&P 500 firms earn 55% of their revenues from foreigners living in foreign lands. According to a 2011 Wall Street Journal story, "U.S. multinational corporations, the big brand-name companies that employ a fifth of all American workers ... employed 21.1 million people at home in 2009 and 10.3 million elsewhere."

On the face of it, the S&P 500 does not seem to be a good measure of the U.S. economy. What we would need to know is of the roughly 20% of American workers employed by S&P 500 firms, what percentage of total private sector income is the sum of their incomes.

Other indexes exist, like the S&P 400, which tracks stocks of firms total market capitalization that falls within $750 million to $3.3 billion. The Russell 3000 tracks stocks by market capitalization of 3,000 firms, which represent 98% of U.S. firms with publicly traded stocks.

The Russell 2000 tracks the bottom 2,000 stocks of the Russell 3000. The Russell 2000 represents only 8% of the total market cap of the Russell 3000. Said another way, the top 1000 firms of the Russell 3000 constitute 92% of the index.















As I showed in THE SECRETS OF AUTOMATED CLEARINGS, GDP AND THE ECONOMY. RECOVERY? WHEN?, no one should expect revival of the economy until true commercial clearings of banking transactions advance. No one should expect significant growth of the economy until true government clearings advance.

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S&P 500 MYSTERY NO MORE

Let's have a look at the S&P 500 in FRBUs.

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S&P 500 VS GOLD

Federal Reserve Bank Units (FRBUs), or if you like better, Federal Reserve Buying Units are what circulate goods and services in the U.S.A. and elsewhere on earth.

In ELECTRICITY PRICES. SHOCKING, ISN'T IT? THANKS, NIXON, I explain that Richard Nixon, then president of the U.S., through Executive Order 11615, closed the gold window, which put Americans on fiduciary bank credits as money system and thus the world on a floating exchange rate scheme for international trade settlement. It is these fiduciary bank credits which constitute Federal Reserve Bank Units.

What counts is buying power, that is, how much real stuff you can buy with an ounce of gold or a share of the S&P 500. Since inflation is a banking phenomenon, using a FRBUs-based deflator, we can compare the true price of the S&P 500 against the true price of gold. 

Here is True S&P 500 vs True Gold in True Dollars™.

S&P 500 in GWDs vs Gold in GWDs


From Q4 1975, through Q1, 1989, an ounce of gold let you buy more than one share of the S&P 500. Between Q2 1989 and Q4 1990, speculators struggled between the two. 

The True S&P 500 won that struggle by Q1 1991. Stock speculators and investors did not look back to gold for a long time. 

The peak of gold bettering the S&P 500 came in Q2 of 1980 when the price ratio of one ounce of gold to one share of the S&P 500 stood at $5.56.

From April 1, 1991, through January 1, 2009, one share of the S&P 500  let you buy more than an ounce of gold. The peak of S&P 500 bettering the gold came in Q1 of 2000 when the price ratio of one share of the S&P 500 to  one ounce of gold stood at $0.18.

During the Greenspan-Bernanke Credit Bubble, the largest credit bubble in history, the average price ratio of one share of the S&P 500 to  one ounce of gold stood at $0.41.

Between Q3 2011 and Q3 2012, investors and speculators once again fought between gold and the S&P 500. Twice in that period, gold bested the S&P 500.

Since Q4 2012, the S&P 500 has been pulling away from gold. In the two years, True Gold has fallen -35.4% falling at a yearly rate of -19.6%. Meanwhile, True S&P 500 has risen 17.4% rising at a yearly rate of 8.3%.

Sooner, rather than later the U.S. economy shall stop its fall, steady and begin a long run climb. It might be another decade and another banker-fueled inflation (credit bubble) before gold becomes a good speculative play.

Since 1993, SPDR S&P 500 ETF Trust (SPY) has let speculators bet long on the S&P 500 and since 2006, ProShares Short S&P 500 ETF (SH) has let speculators bet short the S&P 500. Likewise, since 2004, SPDR Gold Trust (GLD) has let speculators bet long on gold and since 2008, Deutsche Bank AG DB Gold Short ETN (DGZ) has let speculators bet short gold.

Here are ways you can play the S&P 500 and gold with ETFs.

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TWITTER VS DIRECTV; OR TWITTER REVEALS DOT COM 2.0 MADNESS IN THE 21ST CENTURY

DirecTV sells direct-to-home TV broadcasting  to Americans living in the USA and in Latin America (Argentina, Chile, Colombia, Ecuador, Venezuela, Puerto Rico, Brazil). Launched twenty years ago (June 1994), DirecTV has 35.56 million monthly paying subscribers (December 2012).

Twitter is a text chat service based on Internet servers that supports linking to Internet hosted photos and videos. Twitter launched eight years ago (July 2006). Twitter has zero monthly paying subscribers.


In 2013, Twitter earned $665 million. Direct earned a whopping $31.8 BILLION! That's 47.8 times what Twitter earned!

In 2013 Q4, Twitter earned $242.68 million but Twitter execs crazily spent $3.10 for every dollar earned. DirecTV earned $8.6 BILLION. The smarter DirecTV execs spent a mere 88¢ for every $1 earned.

DirectTV's 2013 Q4 Net Income rang in at 3.34 times Twitter's total revenues ($810.00 million vs $242.68 million)

In 2014 Q1 Twitter execs spent $1.52 for every $1 in revenue. While Twitter's execs have tried to highlight that 2014 Q1 revs are up 119% year over year, revenues from last quarter barely grew at all, registering an on-life-support 3% ($250.3 million vs $242.68 million). 

In trends continue, in 2014 Q1, DirecTV should earn another $8 BILLION.

Yet, what is the tale of the stock prices for Twitter and DirecTV?  Well, have a look at the chart.

TWTR hit a peak of $73.71 on 2013-12-26, trading higher than DTV ($67.39) on that day. Today, TWTR  closed at $38.97 while DTV closed at $77.60.

DTV only trades at 1.99 times TWTR, but DTV quarterly revenues for the last quarter were a gargantuan 34 times TWTR!

In eight years, Twitter execs never have earned profit. DirecTV earns profit each quarter and for years now.

About 30% of all American Twitter users come from households with total household income under $30,000. About 50% of all American Twitter users come from households with total household income under $50,000.¹

Someone at Marketingcharts.com reports on a study conducted by eggheads at the University of Illinois who state  the top 1% of Twitter users published 20% of all tweets, the top 5% published 48% of all tweets and the top 15% published 85% of all tweets in a random period (39 days) studied.

Marketers need to get real about Twitter. Stock speculators need to get real as well.

For more on the ugly truth about Twitter, check out TWITTER TO DIE WITHIN THREE YEARS, FIVE TOPS. #OUCH

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¹ Sources: Pew Research Data, U.S. Bureau of Census, household data (2009)

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TWITTER TO DIE WITHIN THREE YEARS, FIVE TOPS. #OUCH

Twitter is like Central Park of New York City. Millions of visitors use the park every year yet the City of New York earns scant revenue relative to the massive expense incurred to run the park, the policing of the park, the clean up the park and so forth.

In truth, Twitter is a dead business. The pretend execs at Twitter never have turned a profit in eight years of business. Today's quarterly report release reveals Twitter's execs have continued their streak of 34 quarters of losses. 

Today (2014- Apr-29), Twitter execs released their required quarterly income and expense statement. The quarterly revenue report released today shows that Twitter kiddies spent $1.49 for every dollar of revenue between January and March of 2014.

While Twitter's execs have tried to highlight that 2014 Q1 revs are up 119% year over year, revenues from last quarter barely grew at all, registering an on-life-support 3% ($250.3 million vs $242.68 million). Compare that pimple against the 14 times higher 2013 Q4 revenue growth (43.96%) and an average revenue growth of 21.42% between 2013 Q3 and 2013 Q2.

Table 1. Quarterly Revenue Growth

3 months ending 2014-03-31	3 months ending 2013-12-31	3 months ending 2013-09-30	3 months ending 2013-06-30
3.14%	43.96%	21.03%	21.82%

Yearly revenue growth has been decelerating. Yearly revenue growth has fallen a whopping 151% since 2011. Should the trend continue with 2014 year end reporting, you might conclude that Twitter has hit the revenue growth wall. 

Table 2. Yearly Revenue Growth

12 months ending 2013-12-31	12 months ending 2012-12-31	12 months ending 2011-12-31
109.79%	198.12%	275.92%

If Twitter execs fail to get costs controlled, it's unlikely that Twitter execs ever shall earn profits for investors.

Most troubling is what Twitter execs failed to say in their 2014 Q1 report. The 2014 Q1 loss is up a whopping 390% year over year ($132.36 million vs $27.03 million)!

From Q1 2013 to Q1 of 2014, Twitter execs managed to increase expenses one and three quarters fold ($379.86 million vs $138.25 million). 

In 2010, Twitter execs spent $3.39 for every dollar earned. By 2012, these wannabes managed to cut the loss to $1.24 spent for every dollar earned. 

However, by 2013, Twitter execs managed to spend $1.96 for every dollar earned. Since the start of 2013, the quarterly trend of spending losses to gain any revenue has gotten worse — $1.21, $1.28, $1.37, $3.10. 

Q4 should be when advertising revs roll in for Xmas shopping. Yet, in 2013 Q4 Twitter execs manage to replicate 2010 dreadful performance.

From the fourth quarter of 2012 to the fourth quarter of 2013, Twitter exec kiddies managed a twofold increase of revenue but on a whopping sixfold increase in expenses! That isn't how anyone smart conducts profitable business.

Alan Wurtzel head of research at NBC Universal says Twitter fails to drive people to watch TV. 

Twitter has been little more than IRC for the SMS / smartphone phone age. No one ever could to run a profitable IRC service. It's not likely that Twitter execs ever shall run a profitable business.

Shockingly, but not surprising, pension managers of public employees retirement systems and mutual fund managers of many 401k holders made into billionaires Evan Williams, Jack Dorsey, Peter Fenton and made into a mega-millionaire Dick Costolo when Twitter went public. These guys laughed all the way to the bank. 

Twitter seems to be a bigger swindle than all of the Dot Bomb era IPOs. Twitter seems to be a bigger swindle than Bernie Madoff by many magnitudes.

Within five years, should the stock of Twitter (TWTR) trade in the single digits, expect Yahoo or Facebook to buy Twitter. Unless execs at Twitter can produce successive quarterly profits within a year or so, I don't expect Twitter to be around in five years. Do you?

If Twitter is around in five years with another 20 quarters of losses upon the 34 quarters of straight losses, then all of the stock speculation world truly are mad.

Today, TWTR closed at $42.62, losing 41.9% of its peak of $73.31 hit on December 26, 2013.

Click here for the latest TWTR price quote.

Analysis data courtesy of Google Finance.

UPDATE! For more on Twitter right here on Bizarro Theater: TWITTER VS DIRECTV; OR TWITTER REVEALS DOT COM 2.0 MADNESS IN THE 21ST CENTURY

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FROM THE DOTCOM ERA AND BEYOND, AMAZON TRUMPS ALL

According to GeekWire, a $1,000 investment in Amazon from the IPO would be worth $239,045. That is 239 times return on money staked.

eBay and Yahoo end up as great investment decisions. Google ends up as an OK investment decision. Comparatively speaking, LinkedIn ends up as a weak decision and Facebook ends up as a quite bad decision.

Now let's take those numbers above and truly put those numbers into perspective. Look at those surprises!

On a yearly basis since the respective IPOs, Google ends up being the second worst investment though yielding a bit more than 1.5 times Facebook. Yet, for years, the chatterheads on CNBC, Bloomberg and elsewhere on blogs have decried Yahoo! as a poorly run business while singing praises for Google.



What is the lesson here? Jeff Bezos and the succession of execs at eBay have proven the real money on the Internet comes from selling goods packaged in boxes along with brokering sales of goods packaged in boxes.


Social media fail to make good investments. The costs associated to run social media are high. Yet, in spite of growing revenues, revenues fail to exceed costs.

Look at Twitter. The kiddies who run Twitter never have been able to turn a profit in seven years! According to 
Bloomberg, in a recent filing, Twitter execs reported doubling revenue in its third quarter of accounting, yet those execs could only do so by quadrupling their losses.

All should be surprised even when professionals take over Twitter after the IPO, that Twitter ever turns a profit.

By wasting untold resources on G+, Google execs have drifted far from their model as a digital billboard by pushing ads on anyone's internet property through Doubleclick and AdMob. For the hundreds of millions Google execs squandered on G+ and G+ related acquisitions, these same execs could have added an alike functionality to Blogger for pennies per blog. Blogger already supports advertising welcomed by tens of millions of Blogger users.

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GOOGLE. SERGEY BRIN, LARRY PAGE. INNOVATORS OR ACQUIRERS?

Google? Innovators or acquirers? 

Almost every important Google product, execs at Google bought outright. For their own, homegrown products, Google execs have bought other firms to make their products work. 

• YouTube came from YouTube for $1.65 billion
• Blogger came from Pyra Labs

• Android came from Android for $50 million
• Motorola Mobility (cell phones) came from a spin-off of Motorola for $12.5 billion

• Picasa came from Picasa 
• Picnik came from Picnik

• Maps came from Where 2 Technologies
• Earth came from Keyhole
• Latitude came from Dodgeball
• Panaramio came from Panaramio

• Docs came from Upstartle's Writely
• Spreadsheet came from 2Web Technologies' XL2Web
• Sites came from JotSpot

• Feedburner came from Feedburner for $100 million
• Google Analytics came from Urchin Software

• Offers came from DailyDeal for $114 million

• Voice came from Grandcentral for $45 million

• Groups came from Deja News

Primarily, Google is an electronic billboard advertising business. Everything that goes into Google's key business would not exist and could not work without acquisitions. 

AdSense, a key product offering, came from a mash-up of Applied Semantics, Sprinks, dMarc Broadcasting, Adscape, Teracent, Invite Media, Admeld.  Google's billboard model came from Doubleclick on the desktop and Admob for mobile.

YouTube couldn't run without key acquisitions of YouTube itself along with On2, Omnisio, fflick.

Almost everything that goes into G+ to make it cool has been acquired by Google execs. 

• GTalk voice came from Gizmo5 for $30 million
• Hangout came from Marratech
• Hangout also came from Meebo for $100 million

And now Google has swallowed well-liked and easy functioning Bu.mp. 

Google is more like Berkshire Hathaway rather than an inventor and seller of products. It is hard to make the case that a couple of grad school nerds who hit life's lottery and became billionaires are innovators.

Enjoy the big list of acquisitions by Google execs.

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