Several top geologists quit big firms, and start out on
their own. The new stock pays 100%-2,000% a year. But As
usual...
Nobody Notices The Good News Until It's Too Late.
Early investors make all the money before Wall Street even
gets wind of the deal. The pattern is repeated. Again and
again. With the right tip you could have bet a whole lot
less than the ranch - and still made a killing. For
reliable hands-on intelligence - and your shot 1,000% gains
in stocks ignored by Wall Street:
*** Both the Dow and the Nasdaq rose yesterday. The former
climbed 93 points, the latter 86.
*** The day was book-ended by two announcements from two
very big techs - IBM and Microsoft. Early in the day,
investors reacted to IBM's news. The company beat
expectations by 2 cents. Investors gratefully drove the
stock up 12%. IBM is such a big part of the Dow that the
effect was to add 76 points to the index.
*** At the close of the day, MSFT, announced that it had
hit the lowered earnings forecasts that analysts expected.
While not exciting news, it was nevertheless enough to send
the stock up more than 6% in after hours trading.
*** GE also rose 2% in a gesture of solidarity and
insanity.
*** But outside of the tech world, that is, in the economy
of real things, Caterpillar said its profits would burrow
down between 5% and 10% in the year ahead. The stock
dropped 6.4%.
*** Oil rose 85 cents. And the HUI index of gold mining
stocks rose a healthy 5%. Silver has been up each day over
the last five trading sessions.
*** The euro was up a bit...bonds are doing well...
*** The Fed reports that industrial output fell 0.6% in
December...the 3rd drop in a row. Output for the 4th
quarter declined at a 1.1% annual rate, the first quarterly
fall-off since the recession of 1991.
*** But inflation seems to be no threat. The CPI core rate
rose only 2.6% over the last 12 months.
*** "This relatively low amount of inflationary pressure...
has left the door open for the Fed to cut rates in response
to the sharp slowdown in economic growth," says a
Washington Post article.
*** Most economists and observers continue to misapprehend
the nature of a bursting bubble. No inflation? No
problem...all the Fed has to do is to lower interest rates
to get the economy hot and bothered again.
*** The trouble is, low inflation is what you get when
asset prices collapse. And in a major collapse, neither
lower interest rates nor tax cuts nor government spending
can offset the effects of deflation.
*** Asset prices fall when investors run out of money, find
themselves too deeply in debt, and realize that the
expectations they have for their investments cannot be met.
At the corporate level, overcapacity and bad investments
squeeze profit margins. The only possible outcome - asset
prices have to fall to more realistic levels.
*** Nor can an individual company buck a major cyclical
downturn by spending more money. "Intel is on a suicide
mission," opined one analyst following the company's
announced intention to increase capital spending by $1
billion this year. "This is pushing the field of dreams
concepts to a new level," said Ashok Kumar, another analyst
who follows Intel. Intel can add all the capacity it wants,
he said, but that doesn't mean the customers will come.
*** A Financial Times article mentions research by James
Montier showing that stock returns are negatively
correlated with expected growth of profits. "In other
words," explains the FT, "companies whose profits are
expected to grow by the smallest amount, perform far better
than those where expectations are high. The differential
between the worst and the best amounts to more than 20 per
cent a year. This suggests an obvious strategy - avoid
those stocks where expectations are excessively high, and
where disappointment is highly likely. Just by cutting out
the losers, you can improve your portfolio performance."
*** According to an MSNBC newswire report Pets.com
announced on Tuesday it will change its name to IPET
Holdings, Inc. Holding what exactly, I'm not sure... except
for the sock puppet the firm used in its advertising
campaign. You'll recall, dear reader, the fledgling
Pets.com made itself famous by spending $2 million on a
single Super Bowl ad featuring the sock puppet...and in the
process earned itself a spot on the list of potential
recipients of this year's First Annual Darwin Awards.
Yes... more below...
*** Margin accounts fell to $198.7 billion in December, a
28.7% drop from their record high of $278.5 billion in
March.
*** PG&E defaulted on some of its commercial paper
yesterday, and according to the International Herald
Tribune, Californians began experiencing some blackouts.
The whole problem would go away instantly, of course,
simply by allowing the market to work. Power prices would
shoot up, allocating existing power efficiently to those
who wanted it most...and suppliers would rush to sell
California utilities more power to take advantage of the
higher prices. Soon, there would be a glut of power...and
prices would fall.
*** Alas, in Washington as in Sacramento, an opportunity
for demagoguery and chicanery is rarely missed. Having made
a mess of things by decree and regulation, politicians and
the chattering class supporting them will now find ways to
make it worse. And so it goes, dear reader, even at the
very dawn of this great new digital age, human beings still
shiver in front of open fires...hoping for mercy from the
morons who rule them.
*** "CA Dairy Farmers Brace for Chaos" says an AP headline
on a news website. Had the cows gone on strike? Were they
getting mixed up...backing into their stalls...knocking
over the milkmaids? I began to imagine the kind of bedlam
angry cows, utterly out of control, might cause. It might
be something out of a Far Side cartoon. So, I rushed to
read the article. Alas, the article was not posted. I'll
have to wait for further news.
SILVER ANALYST PREDICTS: "SILVER WILL SKYROCKET TEN TIMES -
OR MORE!"
"SILVER IS A TRULY RARE PROFIT OPPORTUNITY..." SAYS SILVER
EXPERT THEODORE BUTLER.
"YOU WILL NEVER SEE ANYTHING LIKE IT AGAIN."
Get your free 12-page Special Report on Ted Butler's silver
analysis and learn about your opportunity in this explosive
situation. Click here to learn how you can get in on the:
A fool and his money are soon parted, goes the expression.
Sometimes not soon enough.
Billions of dollars worth of good money are invested in
projects with no hope of success. And some of them, even if
they could be made to work financially, would merely blight
the commercial landscape like trailer parks and strip malls
along U.S. Route 1.
We tend to look down our noses at the fool who loses his
money. But what is often forgotten is that he performs a
valuable public service.
He is like the human landmine detectors used by the Soviets
in WWII. It was a low-tech approach to finding a safe path
through a minefield. But it worked. "Punishment
battalions"
were simply marched forward. Those who didn't blow up
showed the way forward. Those who did, well, they cleared
away the mines.
How grateful the troops following must have been! Their
comrades had cleared the way - and marked it with little
scraps of uniform, blood and bootlace.
This is our opportunity to show some gratitude.
But it is hard to do them justice...or even begin to
recognize them. There are so many...so many investment
landmines that needed to be cleared away...and such little
pieces left to identify them.
Yet, with no gun to their backs...no threats against their
families ...these selfless heroes marched forward on their
own - with only the cheers of the mob and media to spur
them on.
Investors in Bikini.com, for example, thought they were
going to have a party. According to Dotcom.Failure - a
website that tracks the progress of these ill-fated
investments - the site "celebrates the perennially popular
beach lifestyle."
Addison volunteered to check it out...
"What do they do," I asked. "How do they make any
money?"
"I'm looking... 'the most popular team of super-models in
cyberspace'...hmmm..." Addison replied, absorbed...
Okay...well, I'll return to that...
Here's one worthy of an award: Millionare.com. Alert
readers may think they have caught me in yet another
spelling error. But let me assure you, this error is not
mine. This is the way they spell it on the website.
The site promises to reveal the secret of making millions
of "Internet dollors" - again, not my error. How? Well,
send $10 dollors to an P.O. box in England and the secret
will be yours.
There is no further information. Nothing else to do at the
site. That's it. And yet, investors actually paid as much
as $4 for the shares in this company. Now, the shares can
be purchased, in bulk I would bet, for just 13 cents.
Thirteen cents seems to have some kind of magnetic
attraction for these exploded companies. As recently as
Tuesday, Pets.com was available at 13 cents, too, after
once trading as high as $14.
"Pets.com should certainly receive a Darwin Award," writes
Daily Reckoning researcher Rick Barnard. "In the first
quarter of 2000, they spent $21 million on advertising
(including $2 million on a Super Bowl ad) and only had $20
million in sales."
Hmmm...that has to be a winning formula.
Pets.com blew up this week. The company announced it was
going to put itself to sleep. "Now toy stores are filled
with sock puppet dogs representing a company that no longer
exists," Rick continues.
Rick also nominates furniture.com for a Investor's Darwin.
It was not the business plan that impressed our researcher,
but its execution. According to reports, says Rick,
"furniture.com shipped over $1 million in merchandise and
never billed anyone for it. ...It was so focused on getting
an IPO that it didn't consider developing the business."
And here's one for the 'What were they thinking?' column,
says Rick: FooFoo.com. The business plan was to be a kind
of parasite site, using the content and products of other
sites to sustain itself. It aimed to get a percentage of
the sales. But, of course, there was no reason for anyone
to pay a commission to FooFoo. Nor did customers have any
particular reason to go to the site. Still, investors put
up $5 million in seed money, with which, says Rick, "the
managers bought a life-sized, light-sensitive, talking
Austin Powers doll to greet employees at the front door."
FooFoo went belly up in May of 2000.
Have you ever been in the middle of nowhere and wanted to
use a cellular phone? No? Well, no one else has either.
People are in the middle of nowhere because they don't want
to spend their time blathering on cellular phones.
Still, you have to applaud the people who put up the money
for Globalstar, a company that "provides mobile telephone
service to regions of the world that are too remote to have
standard cellular phone service." Hmmm... at least here was
a proven business model. Unfortunately, it was proven not
to work. Iridium had already tried it. Its satellites came
crashing down to earth only a few months ago - after that
provider of telephone service to remote areas blew up
investors. Globalstar announced, this week, that is was
defaulting on its loans.
Finally, Addison looked up from his bikinis.
"Give it to me straight," I asked him, "What are they
doing?"
"I have no idea," he replied. "But the photos are
nice..."
The company, with no visible means of support, is
apparently out of business, though the website is still up.
Life's a beach. Then you file chapter 11.
I have been cogitating, this week, on the lack of
imagination that keeps people from seeing the unintended,
and often obvious, consequences of their actions. The
Soviet mine sweeper brigades knew exactly what they could
expect. And yet, they marched forward. Even a 1 in 10
chance of escaping death in the minefield was better than
summary execution.
Could investors in Angryman.com have been any less sure of
their fate? Angryman offered surfer-men an opportunity to
share their bile and lose their money online. But to what
end, other than a bad one? Courting the choler of the
masculine sex must have been the result of something worse
than a capital death wish. These guys must have had some
kind of emotional problem. Thankfully, they have removed
themselves from the financial markets. The only trace of
the project today is an emphatic announcement on the web
page that the site is OFFLINE! So take that!
But there were several strong candidates in the "men and
women with issues" category. Another manly site,
TheMan.com, was supposed to offer online sports and sex
chat. Rick reports that just to make sure they would not be
confused with legitimate businessmen or dignified human
beings, the founders went so far as to get the company logo
- a two-inch man in a suit - tattooed on their ankles. The
company went out of business, thank God, in November of
last year.
And, of course, there were the women's sites. iVillage was
such an obvious loser that I wrote about it 6 months ago.
You could have bought the shares then for $6.47. But it
would have taken a much less selfish man than I am to buy
them - someone who just wanted to finance a cyber home for
feminine kvetching...or blow himself up in a foolish cause.
In theory, women would want to go for a site "for women"
just as men would want to go for one "for men." But
investors in these sites must have experienced a total
imagination failure. Who could not have seen that the
concept was as flat as a California lawmaker's EEG? And
yet, at one time - scarcely a year ago - iVillage and its
sister site, Women.com represented as much as $2 billion of
investors' money.
Investors deserve an award for the scale of their losses as
well as the absurdity of them.
iVillage is still in business. But shares are down 97% from
their high...and at $1.38, nearly 80% from where I panned
it.
Investors ponied up much less money for AllAdvantage. But
the business model was at least as ridiculous. The company
hoped to make money by sending checks to college students,
layabouts, and shiftless people with time on their hands.
The idea was to pay people to use the company's
browser...and make a profit by selling them things. But who
would want to click around the worldwide web just to get a
measly check from AllAdvantage?
My son, a college student, alerted me to the AllAdvantage
business plan when he told me that his friends were all
getting checks for surfing the web. He then explained that
they had rigged up their computers to surf while they were
sleeping.
Hmmm...my quick wit thought it detected a problem. What
kind of commercial advantage could you get by paying people
to surf the net in their sleep?
Well, none. In the first quarter of last year, for example,
AllAdvantage sent out $32.7 million in checks to its drowsy
members. It collected $9.1 million in revenue. Hmmmm,
again.
And now, the company seems to have hit a landmine.
"The idiots owe me" says one comment posted on Dot.com
Failure. "I never got one cent from these dorks and I am
still waiting for the $14.53 they owe me."
Apparently, there are many people who are waiting for
checks from AllAdvantage. "Good luck," says another.
"They
owe me $50..."
"They raised the min. payout amount," explains a third,
"...and the pay rate to 10 cents an hour, 10 hours max. a
month. Looks like they are flat out of cash... These people
need to start over with a new business model."
Yet another poster offered this assessment: "Pay to visit a
site? Really? Is a little more research in order here?"
But a little more research is not the way of the landmine
detectors. They simply charge ahead, heedless of the risks.
It is dangerous work. But thank God, someone's got to do
it.
Your correspondent,
Bill Bonner
About
The Daily Reckoning:
Daily Reckoning
author Bill Bonner
Bill Bonner is,
in spite of himself, a natural born contrarian. Early each morning, Bill
writes The Daily
Reckoning—his take on the financial markets and what’s going
on in the world—and sends it off by e-mail before most Americans’
alarm clocks have buzzed. Many readers say it's the first thing they want
to read when they get up—not only because it's informative and thought
provoking, but also it's inspiring, in its own quirky and provocative way.
Of course, there's
much more to Bill than his daily market commentary. He's also the founder
and president of Agora Publishing, one of the world's most successful
consumer newsletter publishing companies. Bill's passion for international
travel and big ideas are reflected in the company he's successfully built.
In 1979, he began publishing International Living and Hulbert's
Financial Digest . Since then, the company has grown to include
dozens of newsletters focusing on health, travel, and finance. Bill has
vigorously expanded from Agora's home base in Baltimore, Maryland since
the early ’90s—opening offices in Florida, London, Paris, Ireland, and
Germany.
Agora's publication
subsidiaries include Pickering
& Chatto, a prestigious academic press in London and Les
Belles Lettres in Paris, best known as a publisher of classical
literature in bilingual editions.
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Last modified: April 01, 2001
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