Dave Gonigam – May 21, 2012
- Facebook investors do a facepalm… While the financial media ask what went wrong, The 5 scopes out tech opportunities further afield…
- Making money from the stuff tech customers don’t care about: “Invisible technology” that will power the Facebooks of the future
- Gold holds its own: One chart that indicates the bottom is either near… or here
- Readers slam a skeptical Doug Casey… An old shirt and a patch of concrete point up the folly of central bank engineering… an old-timer sees a “Berlin Wall” going up around Americans’ money… and more!
How badly is Facebook tanking on its second day of trading as a public company?
Enough that within a few minutes of the open, the vaunted “circuit breakers” kicked in to limit short sales.
The financial media are frittering away scads of bandwidth asking, “What went wrong?” Did the underwriters, chiefly Morgan Stanley, price the shares too high? Was the Nasdaq prepared for the volume? What about the electronic hiccups in which many of Friday’s orders weren’t confirmed for hours?
To which we pose a question of our own: What if those are the wrong questions to ask?
An answer to our own question might lie within the tech-heavy Nasdaq index… which at last check is up about 1.5% today. Hmmm…
Further, the other social-media darlings like Zynga and LinkedIn are slumping just like Facebook. Double-hmmm…
Within that divergence we find an interesting tale. To tell it, we turn to the fascinating world of tech startups… and see how the barriers to entry have crumbled in seven short years.
“You linger over every single penny,” says Christian Gheorghe of his startup effort in 2005. “I kept needing to pay for another license. It never stopped.”
Mr. Gheorghe tells his story in a recent issue of Forbes. He was chief technology officer at a business-performance startup seven years ago. Buying the equipment and hiring the personnel to get up and running cost $600,000 the first year.
Today such costs are a distant memory. You can be up and running for as little as $50,000. Consider…
- Servers: In 2005, you’d need to buy 15 machines at $7,000-10,000 apiece, plus hire five IT specialists for $60,000 a year each. Now you can sign up for Amazon Web Services starting at $250 a month
- Email and office software: Seven years ago, you’d buy Exchange and Office licenses from Microsoft for $50,000. Now you can use Gmail and Google Docs free
- Telephone/Web infrastructure: In 2005, you’d sign up with a telephone or cable company, forking over up to $3,000 a month. Now you can use “the cloud” and keep it to $5,000 a year.
Sure, the costs go up as you add more people. The point is that taking those critical first steps is easier than ever before. Mark Zuckerberg needed seed money from guys like Sean Parker and Peter Thiel; the next Zuckerberg could get by with savings from a part-time job and a loan from his parents.
So tech entrepreneurs can bring their innovations to market faster than ever. And here’s a critical point: With these new technologies, the customer doesn’t know the difference.
Consider the case of the first laser printer: Apple’s LaserWriter, in 1985.
“I remember seeing the first page come out,” recalled the late Steve Jobs, “and thinking, There’s awesome amounts of technology in this box.
“There’s the graphic engine, there’s the controller, there’s the PostScript software, awesome amounts of stuff.”
“And yet no one is gonna care and they don’t need to know; they’re gonna see this output, and they’re gonna go, I think that’s great. They’re gonna be able to judge for themselves.”
That is, the customer doesn’t much care what’s under the hood; they care very much about the high-quality result.
This is the sort of “invisible technology” that’s changing the world — quickly, brilliantly, but without the BIG BRASS BAND that accompanies phenomena like Facebook.
“When people get more productive, do more, save more — they create more data that must be stored somewhere,” says Ray Blanco of our tech team, citing one example of this “invisible technology.”
Storing that data is what the aforementioned “cloud” is all about — off-site storage, so an entrepreneur doesn’t have to buy a roomful of equipment and rent the space to house it.
“Think of the entire business world having an ‘external hard drive’ to back up their work,” says Ray. “Only this one, rather than a 1-terabyte model you can buy, will offer many thousands of times more power, stored remotely. With safety protocols good enough for the U.S. military.”
“According to an industry study in 2010,” he adds, “the first year cloud computing revenues topped $5 billion was 2008. Sometime in 2013, revenues are expected to top $20 billion.”
So we’re talking about an industry whose revenues will quadruple in only five years — and despite a crushing recession at the start of that span.
Ray has pinpointed the company that does this work the best, and is poised for the fastest growth. What’s more, he’s identified five more “invisible technology” opportunities.
These are real, tangible technologies that will power the Facebooks of the future… and build a lasting legacy of wealth. Ray is eager to help you get started; you’d do well to give his new presentation a look.
In addition to the Nasdaq, the other major U.S. stock indexes are also seeing solid gains today.
Not enough to compensate for all of last week’s losses, but the S&P 500 is back above 1,300.
Gold is holding onto last week’s gains as the new week begins. At last check, the spot price is $1,590.
But silver’s taking a hit; it’s down about 1.5%, to $28.29.
Gold’s run-up late last week might mark a turning point, in the estimation of Vancouver stalwart Frank Holmes from U.S. Global Investors.
“The chart below,” he says, “shows the 60-day percentage change of the gold price and the U.S. dollar. Gold’s recent weakness has triggered a -2.2 sigma event in standard deviation terms. Over the past 10 years, this has happened less than 2% of the time. Historically, each time gold has touched the -2 sigma mark, the precious metal has rallied.”
“While gold may not go up vertically from here — as frequent readers know, the yellow metal historically has fallen in June and July — with the extraordinary events occurring in Europe, I believe investors will soon ‘friend’ gold once more.”
Hmmm… Even Mr. Holmes can’t avoid the Facebook references….
We hesitate to call it a bubble: For the first time, a parking space in New York is on the market for $1 million.
It lies inside an eight-story building that’s being converted from a parking garage into luxury condos. “The parking spot will go to the 8,000-square-foot town house or to the penthouse,” developer Morad Fareed tells the New York Post.
“The reality of New York City,” says broker Robert Knakal, “is that people are willing to pay more for a parking spot than the average person in the country pays for a home.”
Meanwhile, a jersey worn by Babe Ruth has set a record auction bid for sports memorabilia.
SCP Auctions says it was the earliest known jersey worn by Ruth, going back to around 1920. Bidding ended yesterday at $4,415,658.
The winner is Lelands.com… an online proprietor of sports memorabilia. Yes, the buyer intends to find a greater fool. And not at auction. “Such a spectacular piece will find a home with one of our private clients who truly appreciates its historic significance,” says Lelands president Michael Heffner.
Here too we’re hesitant to call it a bubble. Rather, we see real-time confirmation of Marc Faber’s forecast that the money created by central banks will flee in part to collectibles and high-end real estate…
“I find it almost a joke to hear Doug Casey state such stupidity!” says the first of several emails replying to Doug Casey’s skepticism about the most common gold-manipulation theories.
“Is he good friends with ‘the Boyz’? Or does his financial position dictate he not ‘ruffle the feathers’ of those he rubs elbows with? He CAN’T BE THAT STUPID? Can he?? It is funny how some folks with lots of $$$$ seem to view reality and truth with such tainted perceptions!!! So much for listening to ANYTHING Casey may have to say!!! I, for one, WON’T waste my time listening to an idiot like that!”
“Why would JPM manipulate the price of gold and silver downward?” writes a reader, throwing one of Mr. Casey’s questions back at him. “You must be kidding! I know you aren’t THAT stupid.”
“What was ‘money’ before fiat, fake, fraud, fiction, fantasy, fractional reserve debt-note ‘dollars’? Answer: gold and silver.”
“Therefore, the most obvious measure of destruction of the dollar, and theft from the lower-and-middle class via inflation, is the price of gold and silver in dollars.”
“THAT is why JPM, on behalf of the Federal Reserve, which it is partial owner, helps keep the illusion that inflation is much lower than it is, and that the dollar isn’t such a horrific excuse for money and savings.”
“I know you know this. Thus, I wonder why you baited us.”
The 5: No baiting here, just a lively exchange of ideas. It’s why we invite Mr. Casey to the Agora Financial Investment Symposium every year. And why Dr. Faber has agreed to join us again.
It’s a diverse bunch of people who attend, but they share one thing in common: They’re willing to listen to their assumptions challenged now and then, the better to make independent investing decisions.
If that’s the kind of thinker you are, there’s still room for you. But not much: Last year’s event filled up by the end of May, and today is May 21. Details and online registration at this link.
“The same thing happened to my teenage son’s ‘Young Savers’ account at BBVA Compass Bank,” writes a reader with his own story of getting nickel-and-dimed on the fees for a small savings account.
“He had about $65 in there. Because they sent statements only quarterly and we weren’t paying attention, that became $15 before we realized what was going on. Way to teach young people to save!”
“My son has learned that banks are evil and his money is safer in cash stashed in his room. And I closed all three of my accounts there and moved everything to a credit union.”
“I am so old,” writes a reader weighing in on Facebook founder Eduardo Saverin’s expatriation, “I remember the heartbreaking stories of people trying to get to freedom and liberty by getting over the Berlin Wall at the risk of their lives. Same for refugees from another shining socialist utopia Cuba — the ocean was that wall — and, of course, the ‘Boat People’ of Vietnam.”
“It seems that Schumer and his ilk are throwing up an economic ‘Berlin Wall’ around the U.S. (California, the U.S. version of Greece, has already tried it). I am understanding HSBC seeming to begin to divest itself of U.S.-based entities.”
“Mr. Saverin, like Jim Rogers before him, is residing in Singapore. My first Singapore visit last year included an airport tour guide explaining that a fountain we saw flowed inward to symbolize that Singapore wanted a flow of money in and that the city was about creating wealth.”
“Forget the long flight — that statement truly told me I wasn’t in California anymore.”
The 5: Addison has written for nearly a year now in Apogee Advisory about the “virtual Berlin Wall” that slyly aims to keep you trapped in U.S. banks and the U.S. dollar.
We see that over the weekend, House Speaker John Boehner was on the fence when asked about the proposals of Sens. Schumer and Casey.
The sound you hear in the distance is another layer of mortar being slathered on top of the wall… and a new load of bricks being dropped off at the worksite.
The 5 Min. Forecast
P.S. There remain several legal means to leap this wall; they’re among a total 47 ideas he has to preserve your purchasing power. You’ll find these ideas in Addison’s new volume, The Little Book of the Shrinking Dollar.
For a limited time, we’ve made arrangements so you can get a free copy.