Mark Cuban Blames Himself For Losing Money On Facebook IPO 186
McGruber writes "In a blog entry, American business magnate Mark Cuban explained who he blames for his losing money in Facebook stock: 'I bought and sold FB shares as a TRADE, not an investment. I lost money. When the stock didn't bounce as I thought/hoped it would, I realized I was wrong and got out. It wasn't the fault of the FB CFO that I lost money. It was my fault. I know that no one sells me shares of stock because they expect the price of the stock to go up. So someone saw me coming and they sold me the stock. That is the way the stock market works. When you sit at the trading terminal you look for the sucker. When you don't see one, it's you. In this case it was me.'"
FB shares (Score:3)
From Google Nasdaq FB [google.com]
18.98 +0.02 (0.11%)
Sep 7 - Close
Range 18.78 - 19.42
52 week 17.55 - 45.00
Open 19.10
Vol / Avg. 36.37M/51.68M
Mkt cap 40.66B
P/E 105.96
So down to well under 1/2 of the IPO opening price - if was Gomez Addams I'd be breaking out the champagne!
It's a $5 stock. (Score:5, Insightful)
I usually price stock at 1:1 price:revenue (a very traditional measure), in which case it's a $2-3 stock, reaching maybe $5 over the next couple of years.
In any case, Facebook is a dead-end for advertisers. They need to figure out a way to make money without advertisements, since social media is terrible for ads. Why would a company pay to have their ad next to a photo of your friend from high-school throwing up, when they can place it next to a fashion spread of Kate Moss? This is why social media will never compete against traditional media, because they won't be able to bring in the national advertising dollars, and will forever be stuck with local 10 cent ads.
They're trying to fix that with their edge-graph algorithm, to only shows you stories that are popular, but the problem with that is that it's a computed process, not an human-edited process that advertisers prefer. Also, this kills brand Facebook page views, so brands have less reason to care about Facebook if their stories only reach 6% of their likes. Twitter doesn't filter out your posts, so it reaches all your followers.
Facebook has an audience of 900 million, yet only makes $4billion/yr. Conde-Nast has an audience of maybe 20 million, yet also makes $4 billion, because professional human production & editing will always win over amateurs and computers.
Insightful (Score:4, Interesting)
So: If I had to pay for Facebook (as I pay for my Dropbox account) how much would it be worth to me? Well, to me it's worthless and I don't use it. Currently the UK paid-for nearest equivalent is BlackBerry services which cost around $5/month. But that includes an internet allowance, so the incremental cost is about $2/month. If 800 million users were prepared to pay $24 a year, that would come out to around $20 billion a year in revenue, maximum. Most people are unlikely to be prepared to pay that much. My guess is that realistically on present numbers that puts a limit on Facebook of about $10 billion, which suggests that it has nowhere to go except flat or down.
Its what advertisers think, not facebook (Score:2)
You are worth $45/year to facebook.
No. Advertisers think a facebook user is worth $45/year. If advertisers do not see that $45/year translate into well over $45/year of additional sales then that $45 value will drop as fast as the stock price.
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The reality, as I understand it is that this is a gross oversimplification. The reality is that very few users are worth anything at all, but there are certain users that are worth more than their gold plated effigy would be. Those are the people who everyone links to. Although this is usually celebrities or otherwise already influential people, sometimes these are people who have created their own sphere within social networking.
As others suggest, Facebook isn't worth fuckall for advertisements, even ta
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The reality, as I understand it is that this is a gross oversimplification.
Yes and no. That $45/user figure was an average of course. The problem is that the influencers are not really known, and anyone can be an influencer to a degree. That is why facebook ads are deliverd to anyone fitting the desired profile. The profile can specify things like gender, age and location but not things like social connectivity and some likelihood of providing "micro-influence".
I think what you are describing is more hypothetical than reality. It may be a direction that facebook could conceivab
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They've got access to the whole thing, though. They should be doing things like weighting whether or not the profile has ever linked to this video [youtube.com].
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I usually price stock at 1:1 price:revenue (a very traditional measure), in which case it's a $2-3 stock, reaching maybe $5 over the next couple of years.
I priced, and continue to price, Facebook shares at the value of a wet fart. No more, no less.
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Yes, but how do you hedge your counterparty risk?
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Toilet paper?
Re:It's a $5 stock. (Score:5, Funny)
$5 stock...
Damn! Is that what a penny stock costs now? That inflation thing is worse than I thought.
Google ads seem to work better ... (Score:3)
... Facebook is a dead-end for advertisers ...
For an iPhone/iPad app [perpenso.com] I find that google ads are more effective and cost less. I've run a rotation of google-only, facebook-only, google-and-facebook, and no ads. Maybe facebook ads work for web and desktop but they do not seem to work for mobile.
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Why revenue per share? That is such an odd measure. It has some fine points - if you are a start up or some other condition where it is hard to figure out profits - but for most companies it is worthless. Take a look Apple vs. Ford. They go off in completly different directions. Does this mean F is underpriced and Apple overpriced? No. This is because Apple (and FB) have low capital and input requirments and F has high capital and input requirments.
It is future cash flow to the shareholders that count - t
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Depends on how smart the advertizing algorithm is... If the add next to your puking Frat Bro is Peptobismol... then it makes way more sense than trying to sell that stuff with Kate Moss. Even Kate Moss puking. If you could use artificial intelligence to categorize facebook images and add metadata tags to them, then you could create who genres of advertizement specific to the images on a person's page and have a much better shot at capitalizing on the images. The problem isn't the social network, its the int
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Why would a company pay to have their ad next to a photo of your friend from high-school throwing up, when they can place it next to a fashion spread of Kate Moss?
Market data, that's why. By knowing so much about the person they are advertising too, they can create more effective ads. Facebook is an underutilized goldmine for advertising, and I think there's a good chance Facebook eventually figures it out and justifies their high IPO price. Then again, they may just fall victim to the "Next Big Thing". Time will tell.
Re:FB shares (Score:5, Insightful)
Re:FB shares (Score:5, Interesting)
Re:FB shares (Score:5, Interesting)
Amazon is different. Amazon is essentially making a land grab and has huge revenues. If you are in Amazon's position, you build revenues first, then later focus on profitability. It also helps that this strategy also demolishes your competitors.
Facebook on the other hand, is not seeing revenue growth anywhere near what it needs to be to justify its valuation. It is finding it harder to monetize its user base. Amazon is already the world's largest online retailer, with revenues growing faster than Facebook's by some accounts.
P/E is not everything, but an investor can make a reasonable bet that Amazon's P/E will come down without the share price going down.
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Both eBay [ebay.com] and AliExpress [aliexpress.com] are competing in this arena, and if I had my guess, AliExpress is going to be a formidable competitor because of the international nature of their operations.
Remember when "internet search" meant "Yahoo"?
Things can change damn fast these days, rivers of revenue change courses, and what was once a river becomes a dry bed of sand.
Just one tax law or regulation changes, then a business model based on the existing set of conditions becomes nonviable. Just
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Remember when "internet search" meant "Yahoo"?
Not really. I remember Lycos, Excite, Infoseek ... but I never used yahoo for search.
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Hotbot?
I don't remember the letters' colors, but the lime-green background -- yeah, that sticks with you like the bad taste resulting from a late-night case of acid reflux. (For those of you not so afflicted, trust me on that part.)
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Remember when "internet search" meant "Yahoo"?
Nope. I remember when 'Internet search' meant whichever your favourite search engine was, with Yahoo! and AltaVista being the ones that people I knew typically used, but Lycos and Infoseek were often also used. I don't remember any point when Yahoo! was close to a monopoly in the search arena.
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Not only that, but Amazon is also a service company: a lot of its revenue is tied up in recurring payments for recurring services (see Amazon cloud, etc). Those revenues are recognized in an entirely different fashion, and heavily skew the P/E ratio downwards. It's one of the reason why you see a lot of companies play stupid games in how they make you pay for such services: those games allow them to recognize revenue earlier, and have a better P/E ratio.
So when you look at service companies, P/E ratios mean
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True dat, but amazon's revenue is $54bn vs facebook $4bn quite a difference even given the recent shrinkage of FB's market cap.
Maybe if you buy FB at today's prices then you will smash it out of the park, but I'd still buy amazon. I am trying to be an 'investor' though, not a speculator.
If it hits $6ish it might be worth another look.
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Every small time investor trading a stock that doesn't pay dividends is basically a speculator. The stock has no value to you until you find someone willing to buy the stock for more money than you paid. You can't use it (as commodities), derive income from it (as in dividend-paying stock), or directly influence the behavior of the company (as with large institutional investors). Whether you wait 3 months or 10 years to unload it is simply a matter of speculation strategy.
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Someone said this when Google went IPO. There's only three reasons to buy stock:
1) because you want a say in the running of the company (the shares of Google that were available were all non-voting shares)
2) because the stock pays dividends (Google said their shares never would)
3) because you're gambling
If you're into gambling, then by all means, gamble. Just don't be surprised if the house wins.
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And the P/E of Amazon is over 300.
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True. But what you didn't mention is that until FB went public they didn't have to use General Accepted Accounting Principles in order the 'inform' their stockholders. It wasn't until AFTER the IPO that anyone could have calculated the PE for FB. Most the hype was fiction, just like the IPO for Groupon only more money changed hands.
So who backed the IPO? Morgan Stainley and Goldman S(u)chs were the biggest underwriters. Why did the they let the cat out of the bag with so many fleas? Goldman walked away with
Trading is different than investing ... (Score:5, Insightful)
Stupid, the average price/earnings ratio (P/E) of Nasdaq is about 21, Yahoo 17, Apple 16, Microsoft 15, see, Facebook is 105. You do not have to be an investor to see the company is hugely overvalued, the stock should be heading south.
The people who lost on facebook knew it was overvalued. However they expected it to become even more overvalued. They were thinking along the lines of "I'll buy at 30 and dump at 50, no way can it sustain that price." They were half right, facebook would have an unsustainable launch and bounce, they merely got the entry/exit points wrong. Had there been fewer shares it may have made it to 50.
Everyone trading knew there would be "irrational exuberance" and they thought they could make a quick buck off of it. They were not investing.
Re:Trading is different than investing ... (Score:5, Insightful)
"So someone saw me coming and they sold me the stock. That is the way the stock market works. When you sit at the trading terminal you look for the sucker."
I am so utterly astounded that even businessmen have this perception of stock markets. It is extremely telling. The perception is in some ways completely accurate but in others it is entirely inaccurate.
Centuries ago, the process of investing in a company to hasten it's expansion became formalized in trading markets. Older retired workers in an industry lent their knowledge to newer businesses by funding those who were doing things right. Rather than individuals working out deals themselves, the process of selling shares was formalized by the introduction of institutions that would deal with much of the logistics of operating a genuine stock market. As these stock markets became more organized and accessible to outsiders, the knowledgeable investors who worked directly with the company in advisory positions or in stock holder associations were joined by speculators. I define speculators here as those who aren't knowledgeable about the particular business and workers whose shares they buy, but rather at best the industry, and more often only the market trends themselves. They are focused not on the productivity of the company, but the growth of the shares themselves.
For quite some time, these speculators were insignificant in effect and number. The vast bulk of trading was done by investors. Because there were so few investors, gross trading volume would usually be about 20% of GDP (figures are for the US). The market had no place for speculators. No one would take their trading signals seriously because they knew better and the speculators had only their own money to squander. The stock market was a mechanism for investment. That isn't to say it is perfect, no group or individual is, but the only times it showed serious problems was when it was in fact only responding to the actual problem(for example, consider the sharp expansion and then contraction of the money supply that caused the stock crash under Hoover). It was a relatively healthy institution and mechanism for promoting productivity, even when the environment it operated in was not. The concerns of irrational exuberance were unfounded and in fact it was only under Keynesian central planning that the worst and longest failures of these stock markets took place(Robert Murphy pointed out that even Krugman himself admits to this fact).
So what happened to change this process? What distorted this exchange from the description I gave into the one that I quoted? At the most general and fundamental of principles, it was violence. Not the insignificant violent actions of individual thieves and con artists, but the accepted and unrecognized violence most still cannot see even today. It was the violence that threatened us all with increased theft of wages unless we put money into the stock market that turned it into the disaster it is now. I'll describe two specific actions here.
The first really set the stage for the second. When FDR and his fellow new dealers were playing with various schemes to control labor, one was to jail people if they peacefully offered certain salaries to potential employees. This was not limited to price caps. It targeted all manner of incentives. One thing it explicitly permitted was retirement mechanisms. This was how all sorts of completely unrelated services have become tied into employers wage offers but that is another topic. For this matter, just understand that the groundwork had been set for connecting employer pay to retirement plans and investment related offers.
The second action is really the final piece that started the whole slide into destruction. In the beginning of the 1980s, a whole number of laws were passed to the delight of investment banking corporations that threatened greater taxation upon workers who did not put money into the stock market. Both they and their employer would see more of their money taken by the government sho
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the question is where they go from here. they have a solid userbase, and astronomical opportunities in mobile if they can get their collective head out of the collective dark area. at some point there will be an inflection point. i'd buy now probably.
Okay, quit it with the cool aid talk for just one second. The mobile industry is just the tech industry but even less understood by business people / investors in general. FB has to compete against who exactly? Apple, Samsung, Google, Microsoft, Motorola, etc etc
Frankly HP has more potential than FB in the mobile market because at the very least they are TRYING to make a product worth anything (failing but they are trying), What's FB doing? They are creating AppStores to work on platforms and compete agains
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HA! If I buy FB shares mate lock me up okay :) In the meantime, let me know when and how much you bought, I'd love to know how much you're destined to lose after FB's next insider seller release date or next quarterly figure release date.
Though i will admit, the way they are in desperation mode over at FB, I'd say there may be gains this quarter but only because they have filled the site up so heavily on ads people mistakenly click on them because there is hardly any room left for anything else.
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Re:FB shares (Score:5, Insightful)
Everyone knew FB was overvalued. Well everyone who watched the news, or read anything about it for months leading up to it.
People weren't trying to invest in FB, they were trying to ride the "bump" they expected when it went public. They hoped that it would bump up to some dumb number and they would sell off at the ridiculous price before it went down. The problem is... everyone did that and there were not enough suckers to propel it above the IPO price for any appreciable amount of time.
That's what happened to Cuban. He knew a lot of these companies get bumps up from suckers who think it is the next big thing and then they fall. He expected that this would happen here. He did not count on the fact that probably all of the news coverage and people going "this seems very high for an IPO valuation" effectively removed the optimistic suckers, leaving only the opportunists who would, on no account, pay much more for FB stock than the IPO value. Of course, at that point, the opportunists realized that it wasn't moving and some of them probably sold at just over or just under IPO to gain back some liquidity for a better investment, and the price would have started to drop from there as more and more had to get out or got out before they lost their shirts.
Man, I wish I had the capital at the time to short sell the fuck out of FB.
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If it makes you feel better, there are such heavy restrictions on short-selling new issues (within 30 days of IPO) that you probably wouldn't have had the opportunity even if you had the capital.
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More like, everyone
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I predicted FB stock to fail....Everyone predicted the stock would do well but Warren Buffett and he was right.
You're Warren Buffett?
Frankly, as someone who uses FB a lot (Score:2)
We serious investors did. (Score:5, Informative)
Many of us did stay away - far away. Facebook and GroupOn were a no brainer for me NOT to invest. I'm mostly a "value and growth investor" and those two companies had neither of those. It seemed to me that those IPOs were to cash out the VCs and original investors; not to get more capital to expand or invest.
The folks who bought the stock after the IPO were folks who either didn't look at the financials or folks who were hoping for the Greater Fool Theory [wikipedia.org] to work for them. In either case, if they paid attention to the late 1990s, they would have been a bit more careful.
Although, I don't want to seem too cocky/arrogant/know-it-all because I thought the same of Apple a few years ago and I think it's too late to get in on the APPL gravy train. Investing can be real humbling .....
what a boring collection of platitudes (Score:4, Insightful)
I feel like I might actually be dumber having read that series of comments.
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Chabenisky is one of those odd fellows who doesn't seem to have done anything at all of any interest yet has ended up very rich. He seems to have repeatedly started up and sold uninteresting firms for a lot of money.
I expect he is just a fucking brilliant salesman.
But that doesn't make him a good investor.
Reminds me of "Rounders" (Score:5, Interesting)
I'm sure that it isn't the first time that this quote, or a variation has been uttered, but Mark's quote sounds an awful lot like the opening scenes of "Rounders"
Mike McDermott: "Listen, here's the thing. If you can't spot the sucker in the first half hour at the table, then you ARE the sucker."
(Thank you, IMDB)
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Yes, it's an old, old saying he was paraphrasing. Believe it or not, not everything in Rounders is original.
The bounce is the problem (Score:5, Interesting)
When the stock didn't bounce as I thought/hoped it would, I realized I was wrong and got out
The bounce is the problem with the IPO market - if the stock was priced correctly, there should be no bounce (and no crash either). If the stock bounces, it means the company left money on the table that should be in their pockets. If the stock crashes, then it means that investors lost money that never should have gone to the company.
An IPO auction [marketwatch.com] would be more fair, that way everyone who wants to buy shares can get some if they are willing to pay the auction price. With prorata distribution they may not get as many as they wanted (and they may try to game the system by asking for more than they wanted), but you don't need to have special ties with the company to get IPO shares at the opening price.
Re:The bounce is the problem (Score:4, Interesting)
"Correct" is a matter of interpretation. Underpricing the IPO is one of many clever ways of compensating angel/venture capital, stock-compensated employees, and the investment bank in a manner that doesn't have to be costed on an income statement and will be taxed at favorable capital gains rates.
Re:The bounce is the problem (Score:5, Insightful)
"Correct" is a matter of interpretation. Underpricing the IPO is one of many clever ways of compensating angel/venture capital, stock-compensated employees, and the investment bank in a manner that doesn't have to be costed on an income statement and will be taxed at favorable capital gains rates.
Right, which is again part of the problem. The purpose of the IPO is supposed to be raise capital for the company, it's not supposed to make millionaires out of investors and employees, and certainly not supposed to make multi-millionaires out of well-connected millionaire investors. Adding all of these other aspects to the IPO makes it harder for an investor to know whether it's really a good investment or not. An IPO should not be used as a lottery ticket for those connected enough to get in early.
Which is why the auction format is so rarely used - Google had the clout to force underwriters to do an IPO auction, but they sure did grumble since they lost much of their ability to reward clients with a big bounce.
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Wait, but if the price of the Google IPO didn't go up, how is it that Brin & Page are billionaires? Not to mention the Google chef phenomenon [wikipedia.org]?
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In a truly free market you are chattel.
Re:The bounce is the problem (Score:5, Insightful)
Which is really fairly naive. If you're Facebook and your IPO is set to rake in ridiculous sums of money, why should you care about the post Facebook IPO IPO market? You won't need the money from those later IPOs. Facebook priced this one perfectly. They weren't selling shares to make you money. They were selling shares to make THEM money. And they did.
Re:The bounce is the problem (Score:4, Informative)
Which is really fairly naive. If you're Facebook and your IPO is set to rake in ridiculous sums of money, why should you care about the post Facebook IPO IPO market? You won't need the money from those later IPOs. Facebook priced this one perfectly. They weren't selling shares to make you money. They were selling shares to make THEM money. And they did.
It's not supposed to be just Facebook's call on what the initial price is. If Facebook were able to just run their own IPO without any underwriters, that's what they would want to do: maximize quantity sold times price.
The underwriters perform multiple roles in the IPO, but one of the biggest ones is that they're supposed to be signing their name on the deal saying that everything has been adequately vetted. As it happens, they can sign their name by an IPO price that's implausibly optimistic that their client pushed for, but doing so caused a lot of damage to public perception of IPOs, and especially tech IPOs. So now they've done a great job raising capital for Facebook, but are they going to be able to do a great job raising capital for the companies going public in the next few years?
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I dunno, is your argument really that because they did a stellar job raising money, they probably won't do a stellar job of raising money in the future? I don't buy it.
The bottom line is that the price of something doesn't have nearly as much to do with the value of something as people would like to believe. It has a tremendous bit to do with the demand for it. Take Coke or Pepsi for example. It's sugary water with close to zero intrinsic value, but people like it, so they pay vastly more than they woul
Re:The bounce is the problem (Score:5, Insightful)
The bounce is the problem with the IPO market - if the stock was priced correctly, there should be no bounce (and no crash either).
- the problem is with all the regulations around investing set up by the government, which prevents normal people from making money.
Normal people do not place their money into VC funds and companies are not allowed to go IPO before they comply with so many laws, that are set up in order to 'protect' the investors. Well, they 'protect' the investors from making money, that's what they protect investors from.
PayPal co-founder made a billion bucks on a half a million investment on FB, same with many other people - various early investors made money, because they had a lot of upside when they put their money into that company.
Ahh, so you think that companies are inherently altruistic and if only there were less government intervention, then everyone would be better off. The last minute disclosure of Facebook's updated financial information to key investors was probably not illegal (there's some debate, but it appears to be an ethical lapse rather than a legal lapse). So you think if only companies didn't have to comply with all of the filing and other regulatory regulations then the small investor would be better off?
What are some of these pre-IPO regulations that make well heeled investors rich in an IPO? Definitely investing in pre-IPO stock when the stock is available at a fraction of its ultimate IPO price is valuable to an investor, but it also comes at some risk. Would you have invested money in Zynga a year before their IPO, knowing that they were dependent upon Facebook for almost all of their revenue? Those pre-IPO investments are how companies fund their operations before they are ready for an IPO, they have great risks, but also the potential for great rewards. There are hundreds (thousands) of companies out there looking for cash, many of them never make it to an IPO.
By the time all of the regulations are complied with and the company can go IPO, guess what: there is NO upside left.
If the IPO is used for its stated purpose (raising capital for the company), then there is not supposed to be any short-term upside left after the IPO.
Re:The bounce is the problem (Score:5, Insightful)
Not really accurate. The strongest period in American history, the mid-to-late 20th-century, was when it had the biggest government. The U.S. wasn't much of anything in the 1850s compared to what it was in the 1960s. And among Western countries, those with larger governments tend to be more successful; for example, the Nordic countries are the most successful economies in Europe.
Re:The bounce is the problem (Score:5, Insightful)
I consider a country to be stronger that has more private enterprise, more productive output
By those measures, the US of today is vastly - orders of magnitude - stronger than that of 1913.
and stronger money,
Only someone who looks at exchange rates as an olympic sport sees a high exchange rate and thinks "Jackpot!". Everyone else looks at it in horror and tries to figure out how to reduce the exchange rate. Higher exchange rates mean exports suffer, because international prices are higher. Tourism suffers, investment suffers, and all kinds of other things go down. The only thing that thrives is external investment and tourism to other countries: in other words, money is leaving the country.
I also find it sadly hilarious that the only two data points you consider valid are the US and the USSR, and all other government comparisons are invalid. Somalia is funny, because you don't understand that the warlords are a direct consequence of a weak central government, and Scandinavia is funny because you just moved the goalposts from "small governments" to "shrinking governments". Your analysis is sad because as someone else succinctly said, you're just lying right and left: lying about what the data is, what the data means, what data is valid and what others are saying about your data. The worst part: you're lying to yourself just to preserve your ideology. You're nothing but a cult member trying to preserve their world. Sad.
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The crime that is the government system, not the market, has set up.
The crime is that the special interest groups/lobbyists/etc have captured our government and forced this system into place. Until you understand that, and get that money out of our government, you will continue to suffer from these 'crimes'.
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You sound like someone who's invested a lot into an ideological argument without bothering to consider it's real value. - Anyone with half a brain knew FB were shares were overhyped, loosing money on that does not mean you are a "victim", the world does not owe you a living, you b
idiots (Score:4, Insightful)
I have no respect for anyone who's business model is "there are a lot of suckers in the world". I know most rich people use this business model, but I am convinced that humanity as a whole (including them) suffers a lot because of these nearsighted selfish idiots.
Wasn't (Score:5, Funny)
Wasn't there are a US trade embargo against Cuban and his cigars?
Refreshing comment... (Score:5, Insightful)
He's publicly stating that much of the stock market is about finding the bigger bagholder- the poor sap you stick with the losses to gain thereby.
It's about time one of the high-rollers owned that reality.
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Let me guess which one is a Republican and which one is a Democrat?!?
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It's an allegory for the drug war.
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What's the point of being god if he can't dominate over his dominion?
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Perhaps it was a test to see if mankind could understand the concept of private property. The argument made is that Adam and Eve had more than enough food to eat, and it was this one tree that God wanted for himself.
Think of it not as a Bible story, but in terms of a common story -> who here on /. has gone to university? Did you ever live in the dorms, or an apartment? Did you share it with other people? Has anyone ever had the problem of their roommate (or themselves) taking food or toiletries that were
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I think the problem was that you shared an apartment with inconsiderate douche-bags. There are plenty of people in the world who aren't, it is just a case of making sure that you know one way or the other before you let them move in.
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A great example on why having your roommates assigned by the University is a bad idea.
No wonder only the freshmen live in the dorms; everyone else learned that lesson their freshman year and moved on to arranging their own housing with roommates of their choosing.
But I digress...
I like your idea with the private property concept... I've always viewed that story with a different light. God created Adam and Eve as perfect beings, since that's what God does. It was up to them to choose to corrupt themselves
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And a great truth is revealed (Score:2, Informative)
When you sit at the trading terminal you look for the sucker. When you don't see one, it's you. In this case it was me.
And there is the great truth of the stock market, revealed by someone who knows how the system works.
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Yep, a bunch of cons trying to out con each other. Such a fine and morally upstanding pursuit!
Cynical view of the stock market (Score:5, Interesting)
His view of the stock market is cynical. The guy selling you stock might really be taking a vacation. He might be a 'boomer selling down his IRA to make ends meet.
Cuban sounds like yet another Internet mind-reader in this piece.
As for FB, I smelled trouble before it even went IPO. It boggled my mind to think anybody would have an interest in it. At 44 though, I forget that when I was new to investing I was avidly interested in Netscape.
Cuban should have been able to see this a mile away. It was held private for so long. A PE of 100 is fine if there's room for growth, but FB is already claiming a billion users in a world with single-digit billions. Any additional monetization degrades the experience and reduces that count, perhaps dramaticly. The site has some value, but HTF could I know? The only winning move is not to play.
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Nonsense. If I have to sell some stocks to pay my mortgage, the benefit is to the buyer of the stock, and to myself in paying off my mortgage. That I am selling it for not the highest price of all time does not mean I am not receiving a great benefit.
But yes, the entire Web 2.0 thing has been a joke derided by many learned techs over the past few years. It is the DotComs all over again, but without the tech, and with more marketing. And without developing some real ground-breaking technology, the value of t
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He says he was not buying the company on the firm foundations principle. He was buying it because he thought it would get a momentum pop and he could sell it off at a higher price.
And often, even with sketchy companies, getting in on an IPO affords you the opportunity to make money off the imbalance between supply and demand on day 1. It's been this way a long time, see the IPO craze of the 1970s.
The only big problem is sometimes this won't happen and you will lose money on your trades. That's what happened
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His view of the stock market is cynical.
So is almost anyone who knows anything about it.
Here's part of why: The guy selling you stock to finance his vacation, the 'boomer selling down his IRA, etc are not even close to the majority of the market. The very large institutional investors like Goldman Sachs and Bank of America basically set the prices on everything, for whatever reason they so choose.
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If BofA and GS want to set prices arbitrarily, good! They almost certainly won't set them to fair market value. They almost certainly can't do so indefinitely, since the cost of maintaining disequilibrium across the broader market has to be astronomical. It's either a tremendous buying opportunity, or a tremendous shorting opportunity if you're patient.
This kind of talk is loudest in the precious metals community, and usually takes on a "glass half empty" kind of view wrt to "price suppression". For som
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His view of the stock market is cynical. The guy selling you stock might really be taking a vacation. He might be a 'boomer selling down his IRA to make ends meet. Cuban sounds like yet another Internet mind-reader in this piece.
Maybe, but unless you're going to make a company takeover and go private then you're dependent on what other people will pay for the stock in the future. If you think a stock is under/overvalued, fine. When is the market going to realize that? Or is that stock still going to be under/overvalued in 1, 2, 5, 10 years when you want to get out? If you realize that the next product Apple is launching is going to be an iFlop, you can short stock now and cash in a year from now when it's obvious from market report
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His view of the stock market is cynical. The guy selling you stock might really be taking a vacation. He might be a 'boomer selling down his IRA to make ends meet.
But 75% of the time the other side is a brokerage's computer trading system placing its bets based on information you don't have yet, and 24.9% of the time it's someone who's paid handsomely to trade other people's money. Unless that 'boomer is selling to you directly it's the market that will be taking advantage of him, not you.
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A PE of 100 is fine if there's room for growth
You do realize that most people would consider that to be an absolutely crazy PE to buy at, right? For historical comparison, the S&P 500 P/E was 45 just before the dotcom bust in 2000. The Japanese stock market reached a peak P/E of 68 in 1989 at the end of a 15 year long bull market before the crash and property value deflation of the 1990s gave Japan their "lost decade". The US housing bubble exceeded P/Es of 50 (the price of the home vs the income that it could generate as a rental) at its height i
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That's why I said if there's room for growth. Amazon was probably not a bad deal when it had a PE of 100 and people were transitioning towards shopping online. You were paying a trailing PE of 100 because you expected today's price and tomorrow's earnings to equal a PE of 15, by which time the stock's price would probably continue to reflect a PE of 100... you get the idea.
Now yes, that's pure speculation. It's not my kind of trade because it's risky; but at least I can understand it and I don't think i
Facebook could charge $1 a month (Score:2)
Think about that. All those facebook addicts out there. I bet that most of them would be willing to pay $1 a month to use it. That's about $800,000,000 a MONTH in revenue. Even if only half of them sign up that's still $400,000,000. If you pay the dollar you get an add free version and maybe a little more control on how your data is used and shared. People pay to use Dropbox why not facebook?
Re:Facebook could charge $1 a month (Score:5, Informative)
Think about that. All those facebook addicts out there. I bet that most of them would be willing to pay $1 a month to use it. That's about $800,000,000 a MONTH in revenue. Even if only half of them sign up that's still $400,000,000. If you pay the dollar you get an add free version and maybe a little more control on how your data is used and shared. People pay to use Dropbox why not facebook?
Half of them won't sign up, i'd be surprised if 1% would sign up. Facebook needs critical mass. It they take a dollar to let you post stuff on your wall, there will be a huge outcry among all the users, even or especially the fans. Facebook will lose a lot of its fans and the mass will go to the next free social media platform: Google+
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Think about that. All those facebook addicts out there. I bet that most of them would be willing to pay $1 a month to use it. That's about $800,000,000 a MONTH in revenue. Even if only half of them sign up that's still $400,000,000. If you pay the dollar you get an add free version and maybe a little more control on how your data is used and shared. People pay to use Dropbox why not facebook?
Facebook already makes almost $4/month/user. An extra $1/month/user wouldn't significantly change their financials. To get in line with comparable stocks in terms of P/E, they'd need you to pay around $20/month. Would you do that?
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Certainly not. And for the record I don't use Facebook. I wouldn't pay $0.05 a month for it. But I know a lot of people that use it every day and they well might be willing to pay. Who knows? I just thing it's an interesting conversation. This is what everyone seems to be trying to figure out - you start up some free service and get lots of people using it but how do you actually make money on it?
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Lose your customer base or have the pay service re
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Sure, someone else could come along with a competing free service but I think you're underestimating the power of momentum. Take Google+ for example. Technically it's a very good site. I like their approach to privacy and the elegance of the circles. But compared to Facebook they have very little traction. I would be willing to bet that many of the people with Google+ accounts also have Facebook accounts. Plus, it's not that easy to get all your content off Facebook once you have invested a lot of time putt
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Are you not aware of the practically unlimited storage Facebook provides every member in the form of photo albums? Facebook is where most people keep their pictures, it is one of the first mainstream places that people can actually put pictures in order to allow all of their friends to effortlessly look at them. For a lot of people it has changed their photographs from something that is looked at on the back of a camera and then filed away, or something that is
Re:Facebook could charge $1 a month (Score:5, Insightful)
The problem is that the decay would be exponential. If 50% of the users signed up for the paid subscription to "try it out", they would quickly notice that (about) HALF of their friends are now gone. So when time comes to renew the next month, those who lost a significant amount of friends (making the service useless) would quit.
Then, the remaining 30% would have less friends subscribed and would cancel the next month. When you're down to 10% of the original user base, what incentive is there to stay? You can talk to about 1 of your 10 "friends" on the service. That would be pointless.
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Lots of unsubstantiated claims in there.
First off, if they charge, some percentage will stay. I don't know if it's 50% or not. It's not 100%. For those who DO stay, which? In my experience, there are creators and consumers on facebook. A small subset say interesting things. A large subset consume them. If the interesting people leave, the consumers will also leave. A fair amount of the producers don't necessarily say interesting things, they just repost things. If facebook charges money, Tumblr wil
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"It's not 100%" - Agreed.
" For those who DO stay, which?" - Good question. My guess would be the people that have the most invested in it in terms of friends, photos, posts, etc.
"A small subset say interesting things. A large subset consume them." - Right again
"If facebook charges money, Tumblr will get a massive influx of users." - Unsubstantiated claim. Some will stay, some will use a similar social media tool, some will just give up on it all together. I don't think anyone really knows what would happen.
Revenge of the Nerds (Score:5, Insightful)
Throughout the recent history of the last couple of decades of tech IPOs, the story has been that Wall Street underwriters screw the founders, programmers and other stockholders of the company that's going public by forcing them to UNDERVALUE the stock tremendously so the underwriters can give a free but valuable gift to their best customers who get in at the cheap IPO price, and flip the stock for a quick painless gain when the undervalued stock pops on first day of public trading. This basically cheats the original shareholders by giving them less than they should have gotten if the stock was priced fairly.
This time, the tables were turned as the nerds managed to screw Wall Street, by hypnotizing the underwritersinto setting the IPO price way too high thereby screwing the favored investors instead of the tech company. It was so satisfying to see the 'gift'' that the underwriters gave their best buddies come back to bite those greedy weasels who got a price crash instead of the quick pop and sellout. Actually some of those let into the IPO (if they managed to get the broken Nasdaq to execute for them on that day) DID manage to flip FB and so a lot of the stupid investors were the second wave that mindlessly bought into the stock on the first day at close to the IPO price then watched it slide from there.
As others have noted, FB's PE is outrageously high and there's was and is no obvious reason why it's going to be become very profitable (Google, by comparison, certainly DID have a real revenue model when they IPO'd). The problem is that there is a lot more money sloshing around in in the pockets of the US wealthy than brains in their heads.
if only other financial types were as responsible (Score:2)
rather than dependent on the socialist corporate welfare supplied by our government
oh wait, i'm sorry, such condemnation only applies to poor people
This guy *is* the problem... & why (Score:2)
Let's just repeat this, with some editing down:
>'I bought and sold FB shares as a TRADE, not an investment. ... It wasn't the fault of the FB CFO that I lost money. It was my fault. [N]o one sells me shares of stock because they expect the price of the stock to go up. ... That is the way the stock market works. [Y]ou look for the sucker. When you don't see one, it's you. In this case it was me.'
Well, it used to be, that when you bought a stock you made an investment... a long-term one, which required
Sad (Score:2)
When you sit at the trading terminal you look for the sucker
What an immensely sad comment on the nature of Capitalism, but very elegantly summed up.
Re:The entire problem is lack of dividends (Score:5, Insightful)
It depends. Let's say a company makes a profit. They can either hold it on their books which makes them worth more and raises the stock price or give it out as a dividend. What typically happens is if a company is in a mature market like a Utility they will issue dividends since there isn't much use keeping the cash on the books. On the other hand if the company is trying to grow the best use of that cash is to reinvest grow which increases the overall value of the company.
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Yeah, there's really no point in going public and then issuing a dividend since the whole point of going public is, at least in theory, to raise cash. (although these days it's really just a way for the founders and VCs to cash out)