Serious Industry

Posted on Thursday, 5th February 2009 by Cheyne

I am going to try and write an entire post on my blackberry during my commute to work and see how well it works as I haven’t really found the time to post in a while.

I follow the US stock market every single day, and pay particular attention to the big US banking stock prices. Obviously throughout this recent credit crisis they have been trending downward since late 07, particularly the final quarter of 08. I keep waiting for them to bottom out, but they never do, despite the recent TARP funds they have received from the US government.

The banks I watch the most are Citigroup (C), Bank of America (BAC) Wells Fargo (WFC) and JP Morgan Chase (JPM). JPM is faring much better than the other three so we will leave this out of this.

All three companies have seen their prices plummet greatly (see the three charts below) and are in the process of receiving the funds mentioned above to prop them with cash to pay off their huge amounts of bad debt. The Government has decided that they are far too big to fail, and wont be allowed to.

Now I look at the stock price, as shown below in a 2 year chart. They are getting as low as they can possibly get compared to where they were. There isn’t much room left to fall, especially the Government is trying to guarantee their future.

While the current financial industry looks very bleak, I just don’t see these big banks failing, especially Citi and Bank of America, and I don’t see their stock price being so incredibly low in 10 years time. Once we have weathered the current recession, at least two of these banks must be around to cater to this new growth and demand for savings and credit, and the US government will never allow them all to fall as this would open up too greater of an opportunity for foreign banks to hold US money. There will always be a need for banking giants in the United States, and considering all this, longing them all would be a very wise investment indeed.

If I had a billion dollars to long some stocks with, I would split it amongst these big banks and hold. Maybe one, or even two might fail, but the return on the stock of the remaining companies that are left with a likely US banking monopoly, would result in an enormous return.

Posted in Markets | Comments (0)

Posted on Monday, 5th January 2009 by Cheyne

Twitter was hacked overnight, allowing the culprits access to any accounts they wish. Obviously, they went for the bigger ones, like Fox, Britney Spears and Barack Obama. While they had full access to the President-elect’s account, they opted to simply post some basic spam rather than create something more authentic looking.

But what if they did?

They could post something about the current Israel/Gaza crisis, or something about the economy, another person, anything. If they posted it in a relatively professional way, I am certain that a decent amount of people would have believed it and some news organizations would have published it as news. Maybe a small comment on a financial bailout and rock wall street for a little while.

There has been some chatter in recent months on whether Barack Obama would be continuing to use his blackberry or Twitter (which he hasn’t used since the election) and would he be the first US President with a Facebook account and embrace new technology and social media.

Twitter’s recent security flaws prove exact why the president should never use these services. While I am sure that whitehouse.gov isn’t 100% secure for attack in the future, I feel that the US Government would do a better job of keeping it secure than a bunch of dev guys at a VC backed startup, holding an account for the most powerful person on the planet.

While it would be very cool to see, the past 24 hours have proved that this will not be happening any time soon.

Posted in Dot Com | Comments (0)

Posted on Monday, 5th January 2009 by Cheyne

I happened to notice this a few minutes ago which I thought was pretty funny. Yahoo Finance currently has a featured bullish and bearish section of the main page, and one of the bearish stocks, is, you guessed it, Yahoo (YHOO).

Posted in Markets | Comments (0)

Posted on Tuesday, 30th December 2008 by Cheyne

This was originally a comment to Mike Arrington’s post here about a probable 50% revenue slowdown for content sites this quater, but the comment turned out to be very long so it has spun into a small post.

There are positives to this. If you are a business with a decent cash reserve, this can be a very good thing if you are willing to bet that we get through this recession in the short term, think 2-4 years.

50% less revenue for a content site equals a 50% discount on ads for you. If you have the cash, this is a great time to get out there and buy some space to show off your company and its branding. I’m sure that you will be able to haggle for some very discounted rates to what you would have been paying 18 months ago.

You probably won’t see the revenue return on it in the very close future, but should we get out of this economic ‘rut’, than you will certainly come out on top so long as you can keep your business afloat in the meantime.

Posted in Dot Com, Markets | Comments (0)

Posted on Monday, 29th December 2008 by Cheyne

Cuil is back in the news again, not for a new feature release or another round of investment, but for TechCrunch blogger Robin Wauters’ post on how the site’s traffic has bottomed out since their very publicized launch in July. Epic fail, right?

I agree that as a search engine, Cuil has done nothing but fail. Their results are horrible and their category refinements are woefully incorrect, but this isn’t all that is going on over at Cuil. It almost seems that in all this time, search results have been nothing of a priority.

When Cuil launched, much of their press was related to how efficiently and cheaply they are able to spider the web. Why would they spin so much attention onto this for the launch of a consumer focused company. Consumers don’t care how well things get things done behind the scenes, as long as the searches are correct and the front end is pretty.

Cuil’s success is in its technology. If their claims are true, it doesn’t matter so much what happens on the front. They aren’t looking to compete with Google, they know the likelihood of success. VCs know this too. Their 33m investment is in the possibility that while attempting to take on Google, Cuil can also build a better backend technology, the backup plan is to sell the business to Google/Yahoo/Microsoft for the technology, not the whole thing. The buyer would apply their algorithm to Cuil’s better spidering.

This would certainly explain why most of Cuil’s management team are all experts in the web crawling, architecture and storage side of the business, and not so much on the algorithm and front end.

Posted in Dot Com | Comments (0)

Posted on Thursday, 11th December 2008 by Cheyne

Techcrunch is reporting that venture capital  firm Accel are to announce two new funds that amount to about $1 billion. In this economic downturn, most VC firms have greatly toned down their number of investments and are focusing on ensuring that their portfolio companies are conserving cash as much as possible for this ‘economic winter’.

While it is obvious that the current economy is not a positive thing for any business, lets look at some of the positives that could come out of this if you were a VC firm continuing to make investments.

a)  VCs can get larger equity in a company for cheaper as a result of less funding competition.
b) A recently funded company could be able to acquire other businesses for considerably less due to lack of other suitors.
c) There is currently a lot of talent out there without a job and looking for something to do, such as take a chance at a new start-up for stock options or start their own company.
d) Work is cheap. People who have recently been laid off are unable to command huge salaries.

Accell are to use this new money to invest in later stage rounds, which means that they will be able to acquire a nice chunk of an already established business for a lot cheaper than they would have a year ago. It’s a big risk, but that’s the VC model. Accell have the opportunity to come out of this downturn very successful indeed.

Posted in Venture Capital | Comments (0)

Posted on Tuesday, 9th December 2008 by Cheyne

Everyone has their own opinion on the best way to bail out the auto industry (or not to). Here is my plan.

Let them all go down.

Use the money that was not used for the bailout to start a government owned auto company (as a GSE) and set it up in Detroit, hiring workers that were let go by GM, Ford and Chrysler.

Manufacture fuel efficient / electric and affordable (even if its at a big loss for a long time) cars using American labor, American parts everything. This will:

a) Keep the public happy about not bailing out yet another large company who were in the wrong

b) Keep as many auto workers in work as possible

c) Keep all of the other effected industries in work such as the steel industry

d) Create cheap cars that Americans can afford in tough times, which will stimulate the economy

e) Jump start the process to ease America’s reliance on foreign oil.

After a period of time, I imagine it would take perhaps ten years, IPO in a similar fashion to what Fannie Mae did in 1968 and release all government equity to the public markets, possibly in tiers. From than on it would operate as a regular public corporation. There is also the possibility of spinning the business into two competing companies so to avoid a sole monopoly.

The plan isn’t perfect, I am sure there are many things missing here, this obviously hasn’t been fully researched, but these are my general ideas on how to handle the current crises that the American auto market is facing.

Posted in Markets | Comments (0)

Posted on Tuesday, 9th December 2008 by Cheyne

Today The Tribune Company filed for bankruptcy. They are the owners of the Los Angeles Times and Chicago Tribune newspapers, a bunch of TV stations, as well as the Chicago Cubs baseball team and their Wrigley Field stadium.

This was not unexpected, however the main issue would be that this could only be the beginning, following concerns for the financials of the New York Times and other large newspapers, due to very low ad revenue and bad credit.

The Tribune bankruptcy is not the same. The problem here is solely that this business was acquired by real estate investor Sam Zell only last year, and the acquisition was a leveraged buyout, so the majority of the cash used to purchase the company was debt. Debt which far outweighs the businesses assets and had to be payed back quickly and punctually. Media companies pay back debt by selling advertising on their properties, and when ad dollars are are at record lows, debt cannot be paid.

Don’t get me wrong. This is certainly a bad thing, but other major industry players like the New York times do not have the same level of debt obligations. As long as they are very careful with their cash (yes, sadly this means laying off employees) and sell off anything of value that isn’t a part of their core business (like NYT’s about.com) for cash, they will not run into these immediate problems like The Tribune Company has.

Anything that is not a part of the core business needs to be sold off quickly. Tribune were trying to sell their sporting assets last year which didn’t come through, not that it would have been enough to save them. In these harsh times businesses are selling cheap, which isn’t ideal, but some cash is better than no cash and bankrupt.

Posted in Markets | Comments (0)

Posted on Tuesday, 9th December 2008 by Cheyne

Serious Industry my blog about things I read and feel I should have some sort of commentary on. I just started, the design sucks, there will be bugs, and things could change very quickly while I settle in.

Bear with me, or is it Bare with me?

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