Internet Service Stocks - Once Again Facing Imminent Collapse

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The cyber world of dot coms has seen a rather tumultuous start to the 21st millennium.  It began with the dot com boom and bust that peaked in 1999-2000.  As the after market crashed, reality set in, and options morphed from retirement funds to wallpaper, most people believe it was a situation that was overdue.  There was no foundation to support the high flying stock values in the market place.  Seemingly overnight 60-70% of the value of many of these companies vanished.

What insidious dark forces were at work in the high flying tech sector to bring such chaos and devastation to the silver lining?  Well, where do I start?  Perhaps the most obvious can be found in the faces of the new tech Wizards.  Often what is not there is more telling than what is.  Their faces seemed too clean, too unblemished, and too confident.

They lacked the lines and scars of experience found etched in the faces of the Old World masters, meaning those people in business prior to 1999.  When the Wizards were still in diapers and cutting teeth, the old masters were setting in motion a sustained economic growth unparalleled in the history of the US, and the world.

Once e-mails became the staple of American leisure time, and the pc became the Source for all that is, then the Wizards declared the old economy to be a dinosaur and relegated the veterans of American capitalism to be ready for the museums.

That was how we ended the last millennium and the results were quite expected.  The wisdom of the Wizards of technology gave us a stock prices collapse, options evaporated, losses continue to mount and the seemingly endless money pit went dry.  Yes, the Internet certainly speeded up everything, including failure.

Where did the e-commerce Wizards go wrong?  If blame is to be assigned at all, it should be assigned to those that bought the hyperbole in the first place.  For a short time all rules of economic logic and reason were suspended.  For a short time greed dominated the marketplace.

Look at what we forgot.  Revenues were no longer important.  Profitability vanished.  Multiples were no longer relevant.  Market caps were established by smoke and mirrors.  Executive experience was no longer considered necessary.  At times being young enough to have zits was an acceptable substitute for training.

So what if there was no market for the new product or service, the "Internet" would fix all that with its vast new market of consumers.  The principle of supply and demand gave way to the concept of creating demand regardless of need and regardless of supply.

The same with using traditional media and advertising.  The power of the Internet would fix that too.  Conventional broadcast and print media would soon be obsolete, and certainly weren't needed for the e-commerce high flyers.

As for competition, copycats flourished as the new economists determined that the Internet would create such a massive new consumer market that anything and everything could be sold.  Have faith in the digital revolution and trust the cyber gods.

In one form or another capitalism has existed in this country for about 500 years.  We fled unfair taxes, traded Manhattan for costume jewelry, and beat up the English over tax on tea, all before we even had a country.  Now our capitalist system has been a dominant world force for a couple of hundred years.  Yet in the course of 12-18 months the high-flying Wizards of the new economy were going to change all that and bury tradition in the ashes of the cyber firestorm.

By the 4th quarter of 1999 it seemed the cyber gurus might be right as greed and need sucked the masters of the old economy into the furious world of dot coms.  Suddenly the names attached to the IPOs read like a guest list to a presidential fundraiser or Board meeting of the Metropolitan Museum.  Familiar names.  The backbone of the American financial infrastructure.

Well folks, the fad flopped.  Along the way we discovered the Wizards really didn't know it all.  A lot of people got burned, and a lot of people got hurt.  Many compromised their values for the quick buck.  Those rushing to jump on the e-commerce bandwagon, despite the warnings and suspicions of the old economy warriors, found the wagon missing when they landed.

Less than a year after the spectacular ascent of the cyber gods, came the even more spectacular fall.  In the vernacular of the cyber psychics, the ascension never quite got off the ground.  It will take years for the impact to be realized.  Make no mistake, through it all the cyber revolution has forever changed the American and world landscape.  Even in many positive ways.

So in the spirit of David Letterman, perhaps we should establish the top ten misconceptions from the coming out party for the cyber revolution, sort of a new millennium report card for the years 2000-2001.  Clearly these represent the views of the author and will be far from all-inclusive, but I would hope many contributions will be added by more informed readers.

Lesson #10:

The rules of capitalism do not apply to the new economy of the cyber world.

Sorry folks, but capitalism is capitalism no matter what the industry or technology.  The same rules apply to capitalism that always applied to capitalism whether we are in the industrial age, the service age, or the cyber age.  A business still needs a product, revenue and profits to succeed.

Lesson #9:

In the cyber world experience is not necessary for success.

There is still a need for competent and experienced management.  Having Internet access to more choices and information and bigger markets does not automatically result in management knowledge and wisdom.  As always, experience is a process of learning, not declaring.

Lesson #8:

Acceptance of new technology will happen overnight.

It took 70 years for radio to mature in America.  Fifty years for television to take hold.  Vinyl records were around for 75 years before compact discs really replaced them.  Even eight track recorders died a very slow death.  Phones became accepted in the last half-century.  Computers have been in development since the 1940's.  Cable TV has been in use since the 1950's.  And still not all homes in America have phones, personal computers or even cable television.

Lesson #7:

Technology breakthroughs will benefit all related technologies.

So as long as the public buys a new technology, they will buy all new technology.  I don't think so.  The market explosion in video games and high tech gadgets was supposed to mean we are adapting to the cyber world.  Yet Sony sold 80 million Play stations (a high tech marvel at the time) but only 20% of the buyers had access to the Internet.

Lesson #6:

The new economy would render traditional masters of the old economy obsolete.

This is a bold and arrogant perspective with no historical basis.  In our system of capitalism winners and losers are determined by sustained performance, adaptability, access to resources, and staying power.  Often times the traditional economic leaders let others make mistakes before embracing new concepts.  Never will that be more apparent than if or when retailing giants Wal-Mart, K-Mart, Target and J.C. Penny suddenly become the dominant forces in e-commerce.

Lesson #5:

The millions and millions of new Internet users represent an entire new market for consumer goods and services.

This might sound logical but it is based on an unfounded assumption.  What in the world do we think these millions of new users have been doing before the Internet?  They still bought everything they needed from traditional sources.  The Internet does not represent a new market but an opportunity to shift the market share from traditional consumer sources to cyber sources.  To achieve that, the consumer must be given a reason to change buying habits.  Access to the Internet is not a reason, just an opportunity.

Lesson #4:

The Internet will foster unlimited new opportunities in audio and video broadcasting including interactive communication.

Well guess what folks, who in the world will ever have time to surf 500 video channels, 10,000 audio broadcasts, not to mention the hundreds of interactive channels for every major retailer and cause in America?  Already the many but still limited choices on cable television have left the public in a quandary.  Interactive tests have failed miserably.  Over 5 million websites exist before the real broadcast benefits of the Internet have been felt.

Lesson #3:

The Internet itself can provide all the advertising opportunities necessary for the new economy players.

With millions of users in the US one would think this could be true.  But the truth of the matter is the Internet has resulted in market segmentation and fragmentation on a level never before seen or experienced.  What the technology of the Internet has done is give the consumer the chance to exit or ignore ads like never before.  Our click happy culture has discovered the ability to spend an average of a few seconds looking at a screen before zapping along.  So while we are bombarded by more cyber driven commercial messages than radio or television ever dared throw in our face, reach and frequency no longer have meaning.

Lesson #2:

The Internet technology will render all current forms of communication technology obsolete.

This statement implies that the Internet, as well as existing communication technology, is good in the first place, which remains to be proven.  However, whether one surfs the web or works the remote, there is a furious competition for your attention.  Demographic analysis is more complex than ever.  The "known's" of traditional media remain much clearer than the "unknowns" of the Internet.  Don't look for this to change any time soon.

Lesson #1:

Thanks to the Internet, the world will never be the same.

Instant worldwide communications has indeed given us the opportunity to be better informed, better educated, and easier misled than at any other time in our history.  High technology has given us a new way to communicate.  But communications without morality and standards has created a whole new playing field for purveyors of fraud, deceit and corruption.

I count this as a misconception, but with positive leanings, for the power of information and education will, in time, result in a world with more truth.  In a Biblical sense, the Internet will finally bridge the horrible gaps in communication between people and races and maybe even religions.  Ever since we were cursed with multiple tongues as a lesson in ancient Babylon, we have been separated by language.  The cyber world is tearing down those barriers.

So What About Today?

As we sit on the verge of the Face Book IPO for $10 billion has much changed over the past decade?  Not really.  People now lose over $50 billion in fraud, credit card theft, cell phone theft and identity theft thanks to the digital revolution.

Now electronic banking has expanded digital crime to new frontiers.  As we clearly saw this past recession, the Internet age has greatly speeded up the creation of new crimes and the execution of those crimes on a worldwide basis.

Even today the Internet has become the haven for massive "Internet service companies" like Face Book, Google and Yahoo among many others.  With Face Book preparing to make a run at becoming the most valuable company in the world when the IPO is issued, it will leave Face book worth $100 billion, are we hell bent for another major Internet adjustment and market crash?

In terms of establishing fair market value for Internet companies, there is no justification for the Face Book valuations because it is just as impossible today as it was ten years ago to determine the real value of Internet advertising.

Think of this, 90% of the Face Book revenues come from advertising and Internet advertising has been dropping each year as businesses are developing the statistics to prove there is no value in the ads that bombard our computer screens.

With most ad revenues dropping at least 10% this past year, we are on the cusp of seeing a major collapse in the real value of such ads, the real impact on earnings, and the real annoyance factor from being blasted by ads.

Also, in an ad industry with few standards and no guarantees, how long will companies pay exaggerated prices for such ads?  As ad revenue continues to drop what will the Face Books of the world do to maintain stockholder value?

Increase ad prices?  Hardly.  Charge Face Book members a user fee?   Most certainly.  Sell more and more personal data of the members?  That has already begun as you will note from the massive new increase in junk mail based on the sale of your personal information and personal interests stolen from your emails, and web searches.

I predict a massive devaluation of Internet service companies because of their foundation of cards.  This Internet advertising base can evaporate overnight, was never based on loyalty to begin with, violates every accounting standard known in terms of determining the long term value of a company, and is so vague and unregulated those who profit from the stock price manipulations will never be prosecuted for the massive fraud they are currently using to concoct fair market value.

The stock market is dancing on thin ice with the highly inflated Internet service companies and the manipulation of prices and values.  How many normal people will ever get a chance to buy Face Book stock in this new IPO?  Who bought the initial $10 billion since it has all been pre-sold?  Why are certain Internet companies stock priced so high?

These and other issues relating to the rise and fall again of Internet stocks will be examined. In the meantime, you should think about it and study what is taking place so you aren't victimized like the millions of stockholders the last couple of times people operated in the Dark Side of the Internet with our money.

Maybe it is time to consider a break from the Internet world and enjoy what you might have left behind.

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Lost and Found - That First Cup of Coffee

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So I got up three times this morning, meaning I went to bed three times as well.  It was a typical sleep with my brain running wild when it was supposed to be resting.  That is a curse I face which I suspect ties in to the Salem Witch Trial curse already inflicted on my ancestors.

Let me explain.  Tests indicate my brain never goes to sleep like it should every night when it is supposed to go into a REM (Rapid Eye Movement) state and recharge your batteries.  Somehow it tricks my body into a REM state and then the wily brain is off to Alice's Wonderland where nothing is as it seems.

So while you might spend the midnight hours safely asleep and restoring your body and mind, my mind is off in the Land of Oz, Wonderland, Camelot, or where ever my fantasy wants to go.  Now who would want to miss a chance like that?

As for the Salem Witch curse, if you check the real records of what transpired in the Salem Witch Trials back in 1692 you will find many, far too many, references to my paternal ancestors.

For a time they were suspected of providing a sanctuary for the witches and wizards from the Puritans and several times they came close to getting caught.  But it was other family members, part of the Church hierarchy, who falsely testified, were part of the trial or part of the clergy condemning the witches.

Thus the sins of the father, mother or whoever most certainly can result in a powerful spell being cast against the accusers, and all future generations of that family, like me, for something that happened 320 years ago.

At least I used it as an excuse for failing to do something, like homework when in school or chores at home.  You need some bizarre family stories to make for a decent genealogy and to be able to mesmerize the kids with your spell.

Now back to getting up.  Here is my routine.  Pour a cold cup of yesterday's coffee.  Check my face in the mirror to make certain some alien walk in did not take place overnight.  Grab the remote control and sample the various cable news shows listening until I'm certain they are still in a mindless babble mode.

Then I ask my brain what I did last night and wait for the download.  My next physical activity, (until this point I only walked down from the bedroom to the kitchen, poured the coffee, and staggered to the front room to remote cruise the cable), is my daily radiation fix.

This is my second concession to modern technology having already subjected myself to the television radiation.  So I wander to the pc and check my emails, the comments and stats on my newspaper, and confirm that I again failed to win the lottery so my routine will continue ad infinitum.

Then I think, I write, I fantasize just so I can check my options, and finally eat lunch.  From that point on all measure of predictability, planning, foresight or productivity can and most likely will be thrown to the winds.

When we were kids my kid brother, one year younger, would get bored and come find me to conjure up our next adventure, we called them "capers"  Finding something to do was never a problem for my mind.  It did not matter if I was alone, with my brother or in group, an endless series of "what to do" possibilities were always waiting on the tip of my tongue.

I think that is missing from a lot of kids in today's world.  The desire for adventure, a thirst for knowledge, a hunger for understanding and a motivation to learn what you don't know and experience what you've never seen.  We should all help them.

Right now kids are trapped into delegating all their knowledge, wisdom, time, maturity and truth to the viral world of the Internet.  Talk about peer pressure.  If you don't have the latest I Phone, I Pad, Smart Phone and Apps then forget it, you are ostracized from society.

Add to that the parental pressure to keep up with technology, network with all those kids in case any of them might be kids of rich people who can help you some day, to finally to compete and do all those other things parents seem obsessed to do with computers.

So the phone can replace your teachers and social media replaces society, it has now become viral.  With the Internet you never need to personally know your best friends.  In fact, with the Internet, you can create any kind of persona for yourself you want, thus insuring you can never interact with people lest you expose who you really are.

Losers can have friends.  The lonely can find lovers.  The dumb can act smart.  And we can all live happily ever after as long as we never expose the person behind the facade.

The Internet has ruptured the fabric of family and societal structure leaving real people dependent on a machine for communication, companionship, knowledge, entertainment and all the creativity in your life.

On a national level we need to Take Back America and on a personal level we need to Take Back Our Kids from the precipice of self-destruction which comes when the mind becomes a useless thing and only follows instructions from the God in the Cloud of Cyber Space.

Save a kid.  Unplug him or her.  Teach them the real life meaning of knowledge, wisdom, caring and love.  Teach them their responsibility to be creative, sing, dance and be happy.  In the process we just might remember our long lost responsibilities as well.

Teach them to think, to be sociable, to be articulate and to be humble and all those other things our technology has not quite mastered yet.  Video games should be an occasional diversion, not a constant obsession.  Life is more than being bombarded with the latest videos, movies and music that somebody else decided you need.

I mean we can still do things for ourselves, can't we?

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Obamaville, February 7 - President Obama's True Colors?

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It is only Tuesday and it has already been a weird week in Obamaville.  Maybe it is the weather?  Maybe the fact the Super Bowl is over?  Maybe because today, February 7, is a full moon and the spirits are mischievous?

No matter, with the attention off the Republicans the Obama administration has a strange way of using the available air time.  So far the policies and decisions of the Obama gang the past few days has threatened traditional Democrat bases long taken for granted by the Democrats.

The Roman Catholic Church

First his Department of Health and Human Services under Secretary Kathleen Sebelius lowered the boom on the Roman Catholic Church by telling them the federal government now required all Catholic Charities and hospitals to offer free birth control through health insurance (Obamacare) to hundreds of thousands of Catholic employees.

The agency has the noble motto "Our goal is for all Americans to live healthier, more prosperous, and more productive lives."  Notice they say nothing about religion, morality, religious freedom, censorship, or politics.

It is important to note that one out of every six Americans get their health care from the Catholic Church.

Then the Obama Office of the Chief of Chaplains of the U.S. Army forbade Catholic chaplains from reading, in Sunday masses, a letter about a controversial Obamacare mandate from the Catholic Church’s military archbishop. The censorship move, which resulted in the head of Roman Catholic military chaplains calling the Obama administration un-American, sets the stage for a philosophical conflict between Catholic soldiers and their commander-in-chief.

Okay, so now the Obama boys have threatened to drive away the Catholics.

Wall Street and our Super PAC Populist President

Then there is Obama's wavering relationship with Wall Street.  Goldman Sachs led the way in getting Wall Street money to elect Obama in 2008.  In return Obama spent the last three years demonizing Wall Street, corporate America and big business and castigating the Supreme Court for allowing such demons to fund political campaigns.

Today, our trustworthy president who is devoted to his people's agenda reversed himself yet again and decided those demonic Super PACs have found God and can now fund the Obama political campaign.  So he has now gone full cycle, from pro Wall Street in 2008 to anti-Wall  Street in 2009-2012 to pro-Wall Street on February 7, 2012.

I'm not sure how all those liberals that he promised to take on the 1% fat cats will react to him once again embracing the very fat cats he characterized as demons.  This year is so crazy that the Wall Street Occupiers will have to occupy the White House next.

That means the Obama boys have threatened to drive away either the Wall Street fat cats or liberal populists or both.

Latinos and Immigration

The traditional support for the Democrats is also fading away as Obama has failed to bring about immigration reform, has failed to deal with illegal immigration, has failed to move the Dream Act giving illegal kids who attend American schools the right to become citizens, along with broken promises like helping Mexico with the drug war.  Isn't 45,000 innocent Mexican deaths from our drug war about enough?

The Latino population of the United States is expected to exceed 50 million, or roughly 1 in 6 Americans; among U.S. children, Hispanics are now roughly 1 in 4, according to Pew Hispanic Center analysis of U.S. Census Data.

The population numbers released by the Census show the Hispanic population on track to be 900,000 higher than expected as their ranks surpassed census estimates in roughly 40 states. Many of their biggest jumps were in the South, including Alabama, Louisiana and North Carolina, where immigrants made large inroads over the last decade.

With over 60% of the 50 million Latino people Roman Catholics, whether they are from Puerto Rico, Mexico, Cuba or South America, this powerful electoral force also is interested in the Obama handling of the church on birth control and abortion.

I guess this was a week the president missed a few bases.
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Super Bowl or Social Blabfest - You Decide!

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The day after the Super Bowl is usually dominated by following the MVP to Disneyland and the David Letterman Show followed by a ticker tape parade through the Canyon of Legends in New York City.

This year was a classic battle of strength between gladiators and cunning between rival coaches, both of whom were out of the New York Giants organization and destined for the NFL Hall of Fame.

So what happened?  The Internet social network overwhelmed the Main Street and Lame Street media and drop kicked  the follow up stories about the game through the goal posts. Instead, Face Book and Twitter ruled the next 24 hours and we are still feeling the lingering impact 48 hours later.

What football game Super Bowl Sunday?  According to the Viral Jabbernet the Super Bowl was really the Social Bawl where people, millions of people, trashed about every trivial aspect of the event having nothing to do with anything.

Madonna lip-synching?  Gisele's lips moving?  Clint Eastwood endorsing Barack Obama?

Come on, I'm a Giants fan and watched the game and none of those three dominant game topics of our Internet social network bothered me.  I was interested in the terrific game between great rivals and the uncanny ability of New York teams to win the big ones, even when not the favorite.

Young Madonna

As for Madonna, she fought her way to the top of the pop world and people could always dance to her music.  I thought her show was great entertainment.  Now some of my friends in the music business pointed out some technical problems but they were things I didn't notice. I was focused on the game.

Madonna today

And Gisele, well I had heard about Gisele Bundchen as a model and just vaguely in the far corners of my memory banks I thought I had heard something about Tom Brady and a supermodel but I never put the two together.

I thought her pre-game prayer Tweet thing was kind of refreshing.  Asking her circle of friends to pray for her husband when he was going to go out and be beat up by the best, meanest and strongest linemen in the world seemed a good idea.

So after the game some Giants fans are hassling her, and no one is better than New York and New Jersey Giants fans at heckling, and she shots off a four letter word while defending her husband saying "he can't throw the @#@#ing ball and catch it."

Are you kidding?  She was dead right.  The Patriots receivers dropped four critical passes, including two huge gains on the last drive to try and win.  And how many men in America wouldn't be thrilled to have one of the world's most popular supermodels as their wife and come to their defense after such a stressful game.  What WAS wrong was someone eavesdropping on her private life and recording her private conversation on a cell phone, then posting it on the Internet.

The Internet is a great tool but it is also the greatest assault on the right to privacy in the history of the world.

Finally, we come to one of my favorite movie actors and courageous movie directors, Clint Eastwood.  The Quiet Man in the saddle did a Super Bowl ad for the City of Detroit about how the city was halfway recovered from the recession thanks to the recovery of the Detroit auto industry.

Before the next commercial started the viral airways were filled with Tweets about how Clint Eastwood, a well known and respected Republican supporter and office holder, a mayor, was suddenly backing President Obama.  Of course that was not said in the ad, just in the subconscious minds of the media manipulators.

Today Clint came out and said it was nonsense, he has no intention of supporting President Obama.  And he had every right to support the auto industry recovery and Detroit.  Damn right Dirty Harry!

In the end, maybe the tweeters had it right.  Just look at this Reuters news story after the Super Bowl.

(Reuters) - Quarterback Eli Manning and his New York Giants may have beaten superstar Tom Brady and the New England Patriots at Sunday's Super Bowl, but none them could outmuscle Madonna -- at least, where TV audiences were concerned.

A record 111.3 million U.S. viewers watched the Giants defeat the Patriots in the professional football championship, but 114 million watched the halftime performance by Madonna that drew mostly mixed reviews and a firestorm of controversy over a rude gesture by rapper M.I.A.

Ratings tracker Nielsen on Monday said the Super Bowl on the NBC network was the most-watched TV program in U.S. history, eclipsing the 111.0 million who watched 2011's game. An extra three million tuned in for Madonna's glitzy, Cleopatra-themed performance, giving the Material Girl the distinction of having the most-watched Super Bowl halftime show ever.

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