ratiman

This is a book from 1998/9 that lays out the Fool strategy for Rule makers (AOL, Amazon, Starbucks, Whole Foods) (companies that disrupt/create new consumer industries), Rule Makers (Coke, Microsoft, Disney) (indispensable consumer products) and Tweeners (Iomega, Yahoo). It's well done. The Gardner brothers are related to the Gardner in the Gardner, Russo, Gardner firm, so they grew up talking stocks. They also know a great deal about branding and marketing, as they turned their little website into a big brand in the 90s and now into a mutual fund company. It's interesting to look back now and see what the Fools got right and wrong. Here is a list of the Rule Makers, the established firms with dominant monopolies: Coke Disney GAP Intel Microsoft Nike Dell The book was written in 1998/1999, so many of these stocks and companies were at a peak. Coke is still below the April 98 high. GAP and Intel and Microsoft haven't returned to former glory. Only Disney and Nike are at new highs. I don't know the lesson to draw from that. The success of ESPN and Pixar and Marvel and Star Wars was not foreordained. The Fools (Gardners) come up with a good rule for a stock that's between a Rule breaker and a Rule maker: if you can imagine life without the product, then it is a Tweener. If there is an acceptable substitute and competitor, then the transition from Rule Breaker to Maker is in doubt. Yahoo is convenient but Google is indispensable. At the time, Dell was considered a Rule Maker, having graduated to a stable, dominant business, but we now know that Dell was not indispensable. Amazon turned out to be indispensable. Is Starbucks indispensable? Are there no acceptable substitutes? The Gardners explain the success of Starbucks in terms of brand, but I'm not sure that's the best explanation. If the Fools have any bias, it's that they overvalue consumer brand. Brand is certainly important in consumer packaged goods. Coke, Cheerios, Gillette, etc. But brand wasn't able to save AOL, Yahoo, or GAP. Steve Case learned all about branding at P&G but ultimately AOL didn't have the magic sauce, Facebook did. Brand alone isn't going to create a dominant monopoly. Cheerios is not the only cereal. If this book were to be written today, it would probably focus on networks and not brands. Facebook, Google, Amazon, eBay, Netflix, Uber, Microsoft, etc can all be thought of as networks/marketplaces that aggregate two sides and take a fee in the middle. It's interesting that the Fools were largely silent about eBay even as that was in many ways the business model of the future.

I'm waiting for Thiel to write the book about his hedge fund, One to Zero. BAM! Recently finished The eboys, about the Benchmark VC firm. Great stories from the last bubble about firms like Webvan, Priceline, and eBay. If you skip most of the book and just read the stories about Webvan / Priceline / eBay , it's a pretty great book. I'd like to read the book about Priceline, that sounds like a great story.

Look at the investment in Handy by Ashton Kutcher's firm and then look at the miserable Alexa ranking for Handy. Homejoy was already in the process of shutting down and Ashton Kutcher thought, yeah, I'll put $15M in the exact same disproven business model.

So I pretty much nailed this one. You guys are lucky to have me here.

So you seem to be agreeing with me. As the regime of low interest rates comes to an end, gold speculators shift into assets that actually generate a yield. Gold is not an industrial commodity but countries that sell industrial commodities recycle their dollars in gold. So two sources of demand are drying up: commodity dollars and the speculators shifting into higher yielding assets. Once that shift accelerates, gold will not be seen as a stable currency by buyers looking to hedge their own currencies.

According to google trends data, interest in gold in the US reaches a peak in months when gold is advancing (August 2011 and August 2012 and February 2014) and/or has a wide range (February 2015). https://www.google.com/trends/explore#q=gold&geo=US However that trend was broken this month, which has high search interest (88% of the old peak) but a narrow range and a price decline. This high level of interest combined with soggy price action is an inauspicious combination. It suggests a lot of inexperienced investors are looking at the headlines from Greece and China and the low price of gold and looking for some "cheap" protection. Gold has benefited from a multi-year run in commodities, including the industrial metals and oil. But that has come to an end. Copper, iron ore and oil are down big in the last twelve months, and the dollar is much stronger. Gold is the last man standing; even silver has recently put in a new bottom. Right now gold is a very poor value investment. The cash cost is in the vicinity of $800 and nobody is really talking much about the premium in gold even as other commodities are in deep bear markets. As mentioned, gold is benefiting from negative headlines. As soon as the headlines disappear, gold could disappoint the speculators betting on calamity. They could be the ones who find themselves in a violent rout.