Mark Jr.
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Posts posted by Mark Jr.
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Has anyone done the research on Banro (BAA)? There are 4 analysts covering it and they are putting 2014 earnings at around $1 against a stock with a $1.32 stock price. When you dig into the details beyond that the story gets more ugly. The mines are in the congo, management is going to issue 25% more shares, continued push for expansion, etc. However, if they can meet their targets and the gold bear market ever ends they could do extremely well.
caledonia is one that I am in that is similar with african exposure and low pe. While the PE is not 1x like banro, they have also paid significant dividends.
I don't know why all you guys are sniffing around these awful obscure juniors and exploration companies. The major producers are ON SALE. Barrick had an adjusted P/E of 5 on friday, it's lower today.
I held Caledonia for the first 5 or 6 years of the gold bull and it is a total dog. I dumped it and shifted to High River Gold, it was a 14X or 15X off the 2008 lows (no, I didn't pick the lows then alas). HRG is about to get bought so probably not much left upside left there.
But that said, the majors are dirt cheap! I did a workup last night and made a "report style" PDF for my website, probably a little simplistic for the likes of this board but it gets the basics across. But I wrote it before today's continuing crash.
Who knows where this is going to stop, I see various opinions shooting emails all over the place with technical support points, whatever. I'm just waiting for the dust to settle but the major producers are cheaper now than in lows of October 2008.
I'm attaching the PDF, but remember, these numbers use friday's closing data. Not today's.
The main thing I'm thinking about now is with gold prices this low, what does that do to margin compression (but I guess if it impacts too much, production will slow down),
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Mark, have you looked at the changes in all-in production costs since 2008? (not just the cash costs)
Not yet, that's round 2. I need to pull all the individual annual reports for that, I want to look at proven & probable reserves, total cost per ounce, etc.
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Ok, just a quick overview I did last night:
2008 lows
Ticker Price P/E EPS Yield Shares Out Market Cap ABX 23.61 11.15 2.04 1.54% 872.26M 19.84B NEM 26.34 22.71 1.16 1.52% 439.23M 11.43B GG 33.06 17.12 1.09 0.8% 728.67M 13.6B EGO 9.96 28.33 0.15 - 366.1M 1.55B KGC 17.65 19.31 0.54 - 664.74M 5.86B Now:
Ticker Price P/E EPS Yield Shares Out Market Cap ABX 22.62 - -0.66 3.30% 1B 22.65B NEM 36.37 19.07 3.63 4.30% 496.84M 18.07B GG 29.68 15.2 1.95 1.9% 812M 24.1B EGO 7.55 17.16 0.44 1.7% 713.83M 5.39B KGC 6.32 - -2.20 2.3% 1.01B 7.21B For the most part, EPS and dividend yields are higher now than in October 2008 (TTM) despite the shares out being higher across the board. I haven't looked at or normalized the losses on ABX and KGC to see if those are one-times (I think Kinross recently wrote down an acquisition or two).
Also, I added up the share price of these five and divided them into the price of gold. In 2008 it was 6.54, today it is 14.42 which to me indicates that the producers are lower now, relative to the price of gold than in 2008.
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I took a quick look last night at ABX, GG, EGO, KGC and NEM and right now they seem cheaper now for the most part in terms of P/E, Div yield and EPS than at the lows of October 2008.
I'll post a summary a little later.
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Since I discovered Bitcoin 2 years ago I have really liked the concept of a cryptocurrency. I believe in time one or more cryptocurrencies will replace fiat currencies. And no, cryptocurrencies aren't even remotely comparable to e-gold, if you believe that you haven't investigated it sufficiently.
I agree that they are very different, the failure of e-gold from an FBI shutdown of a few key accounts compared to the impossibility same for bitcoin makes that clear.
But there are similarities in adaptation and implementation insofar as digital currencies go, especially as compared to fiat currencies.
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Are you worried about being able to move bitcoins to hard cash? Was looking at cash payment conversions and it seems like its difficult to actually get $1 bills in your pocket. paypal will give you a hassle by freezing your account from my understanding and also there is a problem with chargebacks.
As I mentioned earlier, a digital currency is viable so long as there exist fairly liquid out-exchange providers. There are a few bitcoin exchanges in existence already and a few are even dabbling in debit cards. I heard something about a bank in the US creating a bitcoin credit card and apparently a bitcoin ATM launched - in Cyprus of all places (this isn't as nuts as it sounds, I remember e-gold doing very well in Argentina during the currency collapse there)
Paypal has never been a viable exchange mechanism (paypal to e-gold, etc was pure suicide) as that's not the business they're in and their TOS specifically exclude using paypal to convert currencies, etc.
What are your thoughts if I said it looks like a Ponzi scheme? Looking at comments in articles I seems like its real easy to get the bitcoins but once someone starts asking how to cash out people get real defensive.
A ponzi pays out early investors with proceeds from the later investors. This is something different, there are no "early investors" who are getting paid out by later ones. There are early adapters who started mining when the complexity level was a lot lower, and thus amassed bitcoins with a lot less CPU (and thus at a lower cost), but their ROI on that isn't based on later investors giving them money, it's based on the value of bitcoin as a currency itself gaining steam.
Parties tend to be very wary of all sizable transactions as they are typically unable to be repudiated.
I think there are 13 million bitcoins outstanding right now. What is keeping whoever is responsible, from issuing more bitcoins to himself cashing out and crashing the market?
You need to understand the math behind bitcoin, you can't simply "issue yourself bitcoins", you need to come up with a hash value that corresponds to a "valid hash" and to do that takes immense computational power (this is called "bitcoin mining") - further, there is an upper limit of 21 million coins, at which point the keyspace is exhausted and no further bitcoins will be produced, this limit will be reached in the year 2140 or so.
Your trepidation about operators "simply issuing themselves more bitcoins" can't happen, contrast with our current monetary system, in which that's exactly what happens. Therein lies one of the attractions behind bitcoin, it cannot be manipulated the way our fiat currencies routinely are.
At the end of the day people are assigning value to a packet of data. I am having a hard time seeing how this is a viable alternative. Wasn't there somekind of e-currency during the internet bubble day that crashed and burned?
There are two things here: people assigning value to a packet of data, which as I mentioned, is pretty well what everybody does every day, all the time with the current monetary system. There are no fiat currencies in the world which are backed by anything tangible, thus everybody is assigning value to packets of data all the time.
Number two: yes, there certainly were a bunch of e-currencies that collapsed for various reasons. E-gold is still limping along but a shadow of its former self, Liberty dollar (silver backed DGC) got shutdown by the feds I think, there used to be one called e-bullion which seems to be toast. There were also a number of "real world" fiat currencies which have gone up in smoke over the last couple decades as well, probably with a few more to go :)
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I look at Bitcoin through a similar lense that I viewed e-gold around 10 years ago (quick primer: e-gold was a DGC - digital gold currency, backed by physical gold). I liked e-gold then and I like bitcoin now but I am loathe to part with actual "cash" to accumulate any, so what I did was start accepting e-gold as payment through my business (online web services, domain names, DNS).
The problem with e-gold then was that it was a governance nightmare, while other DGCs had far better governance, e-gold was the easiest to use and thus had a lock on the market of actual payments, while other DGCs (pecunix, goldmoney) were being used as stores of value.
I saw the governance issue as an eventual show stopper, so we made it a habit to out-exchange our e-gold into physical gold as fast as it came in. We amassed several pounds in this manner when gold was $400 - $700/oz and still hold it today (our actual out-of-pocket cost base on it was basically zero, since we were providing web services for payment in e-gold).
In a similar manner, we are gearing up to accept Bitcoin payments on our website within the next month. We learned some lessons from the e-gold days (about the types of customers you attract from doing this: ranging from early adapters to nutcases and finally, scammers - we have better tools for identifying the latter now)
In my mind, a digital currency is viable so long as there exists fairly liquid out-exchange markets for said currencies. While we saw trouble on the horizon for e-gold well in advance, I knew it was over when my out-exchanger told us "this is the last time we're doing this", so we moved the rest to goldmoney.com and stopped accepting e-gold payments.
The price volatility in Bitcoin is unbelievable and could be a bubble, but the more important thing I am watching is the progression of exchange mechanisms into and out of Bitcoin, and other similar currencies like Litecoin, etc. Those seem to be progressing rapidly and I think the verdict will be that they're here to stay, and they're somewhat of a game-changer since they cannot be "shut down" the way e-gold was. The governance model is completely different here, it'll be the merchants and the exchange providers who have to provide it since there is no central authority to structure it.
The thing I can't grasp is how both e-gold and bitcoin in my mind run Gershwin's Law in reverse. If I believed gold backed digital currencies or bitcoin were intrinsically better than fiat (which I do, so to speak), then I wouldn't be spending any of it on staples, I'd be using my "trash cash" as much as possible and accumulating the DC (so I guess I prove Gershwin's Law while anybody buying in said currencies when they have the choice to use fiat is violating it).
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What I find interesting is that on this, probably the "most serious" and levelheaded board I frequent, there is a serious thread on the SHTF. It's not just for tin-foil hats anymore. I believe "The Cyprus Event" has been a game changer in this respect and it hasn't even quite happened yet.
I once read that during the (Brazilian? Argentine?) hyperinflation the banks had second clocks installed, one showed the time, the other showed the value of the currency. In a real honest to god hyperinflationary episode, I really don't see the government CPI (from which the TIPs rates are set) adequately reflecting what the inflation rate actually is (it doesn't now, why would it then?), or that it would reset fast enough.
Gold: the big problem there is I'm nearly 100% convinced that confiscation of private gold holdings is a lock, as in guaranteed-to-happen (remember, this has already happened in the US in 1930 and it didn't become legal to own gold for another 40+ years)
If you are really and truly worried about a hyperinflationary, or even very high inflationary episode in the US ( or your home country), one where gold would actually protect you, what you really need to do is get out of the country (or at least your gold) before the capital controls kick in.
You need to be setup and in-place long before it ever happens.
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They made a terrible mistake. Genie is now out of the bottle regarding confiscation of assets. Something that people other than gold bugs have never thought about before or even possible is now contemplated as a real practical solution by politicians. Markets around the world are now coming down. S&P futures are down 1.1%.
And remember that if you are on this board, you are the rich. You are the "enemy" of at least 90% of the people. You may not all be in the 1% yet, but close enough to be lumped in. Lots of people, an overwhelming majority that will not protest at all or drop a tear for you and could easily be persuaded to take over your assets by force if things get really out of hand.
I have warned about this before, especially concerning Obama who made a huge deal about taxing the rich more which provided next to nothing in terms of budget solution. I was not opposed to more taxation on the rich to ensure fairness, but I was opposed to making them THE target. His intention seemed almost entirely aligned to gain political points with the vast majority instead of resolving the issue. It has succeeded and now, the door is open for much nastier stuff. Highlighting a minority as the problem has led to terrible stuff in the not so distant past.
I wrote this a couple weeks ago and it seem very appropriate now and on the heels of what Cardboard said.
http://wealth.net/2013/03/05/the-tragedy-of-contrarianism/
The heart of it is the parable from Marc Faber's latest GBD report, I'll repost that part here:
“My friend Ahmed Ayob sent me the following wonderful story from a South African newspaper.‘A group of children were playing near two railway tracks, one still in use while the other disused. Only one child played on the disused track, the rest on the operational track.
The train is coming, and you are just beside the track interchange. You can make the train change its course to the disused track and save most of the kids. However, that would also mean the lone child playing by the disused track would be sacrificed. Or would you rather let the train go its way?’
Let’s take a pause to think what kind of decision we could make…
Most people might choose to divert the course of the train, and sacrifice only one child. You might think the same way, I guess. Exactly, to save most of the children at the expense of only one child was rational decision most people would make, morally and emotionally.
But, have you ever thought that the child choosing to play on the disused track had in fact made the right decision to play at a safe place?
Nevertheless, he had to be sacrificed because of his ignorant friends who chose to play where the danger was. This kind of dilemma happens around us every day. In the office, community, in politics and especially in a democratic society, the minority is often sacrificed for the interest of the majority, no matter how foolish or ignorant the majority are, and how farsighted and knowledgeable the minority are.
The great critic Leo Velski Julian as well as Sourav who told the story said he would not try to change the course of the train because he believed that the kids playing on the operational track should have known very well that track was still in use, and that they should have run away if they heard the train’s sirens.. If the train was diverted, that lone child would definitely die because he never thought the train could come over to that track!
Moreover, that track was not in use probably because it was not safe. If the train was diverted to the track, we could put the lives of all passengers on board at stake! And in your attempt to save a few kids by sacrificing one child, you might end up sacrificing hundreds of people to save these few kids.
‘Remember that what’s right isn’t always popular… and what’s popular isn’t always right.’
I like the above story because in today’s western democracies it is most likely that voters would have decided to sacrifice the child, who was prudent in order to save the children who were [not]“
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I find the Verisign one odd.
Verisign looked a lot more compelling a year ago, when it still had a 7% "baked-in" price increase annually and looked like it had the .com contract locked up in perpetuity. That made sense.
Now the DoC has rescinded the automatic price increases, while I would be surprised to ever find them challenged to run .COM, it looks like it's not as much of a "a lock" anymore, especially at these prices (Verisign has had a terrific run over the last year and change).
But they may suspect (as do I) that the new TLDs will be a big miss and .COM will remain to be king in the TLD space.
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Had a loaded glock in his luggage.
http://www.ksl.com/?sid=23769860&nid=148
I was actually relieved when I found out the reason, saw the headline and thought "oh no! not some sorta fraud thing!"
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Sorry for the delay replying.
Oddly, since the GFC (which I was bracing for long before), I have realized that nobody can predict the future. While it's true that I had the good fortune to be largely unscathed during the meltdown, even though I was "waiting for it" it still unfolded in completely surprising ways. Example: I thought gold would skyrocket, but it didn't, it got hit with the deleveraging just like everything else.
Since then I've realized that prediction is useless, even if you're right! Well for me anyway.
Out of that experience my methodology evolved: instead of predicting what is going to happen, I try to understand what is actually happening. In other words, I think the essence of successful investing is in understanding the present rather than predicting the future. I think this is the crux of value investing (which basically discovers valuation errors now, rather then speculating on the future price action).
What we are seeing now is a currency in the process of losing it's reserve status. There are new "theories" like MMT or MMR which rationalize away (like a drunk who wants to keep on drinking) on why this is not happening. Any critical examination of them show them to be pure bunk.
This destruction of the USD is happening against a backdrop of a worldwide race to the bottom in all currencies.
If this is true, then it means that somewhere in the future there will be a new monetary regime and a big reset. Who knows when, 10 years, 20 years. Next month.
Impossible to say when.
The other thing I realized since all that GFC stuff happened was that I was missing the point by avoiding US equities, which I did for years. If you are afraid of the currency, then don't go long the currency by holding cash, buy companies that can weather the currency decline better, either through having solid non-USD income streams, or having the ability to raise pricing in line with inflation or both.
It's my 2 cents.
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I was also about to mention Riverside Capital, Kyle Holmes is a membership here and sometimes posts.
Which brings to mind, George Athanassakos who teaches at Western and is the dean of the Ben Graham school there, which is where I met the Riverside guys and when I did, I realized that these kids (they're less than half my age) had already forgotten more about value investing by the time they were 20 than I will ever know over the rest of my life.
There is a book with a rather cheesy title: Stock Market Superstars - most of the guys in it are value investors, they're all Canadian and it's a good read.
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My main business is an internet company that does nearly 50% of our revenues in USD, so I think about this a lot.
Wrote an article about it, specific to my industry awhile back:
http://webvalueinvestor.com/macro/a-us-dollar-crash-will-give-us-based-registrars-huge-advantage/
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I'm not entirely sure why A) supporting deficits in a deleveraging environment is indicative of being a democrat (which I'm not...and FWIW, Bush ran deficits while Cinton ran a surplus.....PRESIDENTS DO NOT MATTER!!!) and B) why being a democrat would be indicative of my age....
The Clinton "surpluses" were largely mythical, the national debt did not go down, at best he narrowed the deficit, slightly. What really happened was that the "public debt" decreased (those were the claimed "surpluses") while the intra-governmental holdings increased, as the social security administration enjoyed higher inflows relative to outflows (boom years) and used the excess to buy government debt (as they are in fact mandated to do). The total national debt actually increased under Clinton, as it has under every president since Eisenhower (the last president to really, actually pay down on the national debt).
The only reason I know this is because we were talking about it on Facebook today. :)
Good article on it here:
http://finance.townhall.com/columnists/craigsteiner/2011/08/22/the_clinton_surplus_myth/page/full/
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Cringely predicts a new MSFT CEO this year:
http://www.cringely.com/2012/01/prediction-7-a-new-microsoft-ceo/
Could it be a catalyst to unlock value?
What if it was (as Cringely posits)...Eric Schmidt?
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Both RBC and CIBC are listed as HYPER-HYPOTHECATORS.
I barely understand what this means. I don't trade on margin, but I have margin-enabled accounts (because to be able to buy options you need a margin account).
Does this mean my securities can be already pledged? What about my cash?
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Just as a general backgrounder "the guy" or "this guy" who wrote the article is George Athanassakos who is the chair of the Ben Graham Center for Value Investing at Western's Ivey School. The position was endowed by Prem Watsa who personally selected Mr. Athanassakos.
What a lot of BS. The main reason Canada is not at risk right now is because we went through the deleverage cycle in the 90s. While the US was in the midst of the greatest economy in history Canada was in a 7-8 year recession. I lived through it. It was exactly like the US and Europe now.
This is pretty much what John Mauldin told me when I interviewed him and asked why his "Endgame: The End of the Debt Supercycle" had no chapter on Canada. His response was that "Canada has already had it's great financial meltdown".
His exact words were:
No. Your banks are in good shape, your government budgets aren’t… your deficits are not above nominal GDP. You are not doing things that are stupid.However, there has been talk lately that maybe Canadian banks are not as robust as widely believed (The ZeroHedge article, at least a few people on this board). And I have to admit that was surprised by the total government + private debt figure in the Athanassakos article.
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I subscribe to gurufocus, it's a fountain of good info.
With respect to Value Line, a few months ago I discovered The Value Guys, podcast via iTunes http://thevalueguys.com/ (its free as well). Every episode they go through Value Line small and mid-cap edition and look at 3 or 4 of their picks for the most promising ones. It's a good podcast to listen to in the car.
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My main business is a web services company and we do roughly half our revenues in USD, so I have been watching this and thinking about it for over a decade.
I personally think the days of a USD worth 1.35 CDN are gone and the new normal will be roughly par +/- 0.5, so .95 to 1.05 with occasional spikes higher on the USD side during financial panics (yet even those spikes will be to lower highs, during the 2008 panic it went back up to somewhere north of 1.15 and we've gotten nowhere close to that during the Eurozone crisis...yet).
I have been personally positioning/bracing for a much stronger Canadian dollar since around 2005-2006, when I was routinely being called "a nutcase" for positing that par would ever happen again in our lifetimes and being assured that in any case, .75 was about as high as the loonie would ever go.
There is a consensus that "Canada doesn't work with a dollar higher than the US", to which I personally think "It's going to have to". One way around having to worry about it would be a North American currency union - an idea I expect to see floated with more frequency over the coming years - but which I don't think is a terribly good idea (maybe we should ask some Eurozone policymakers to weigh in on that)
The Canadian dollar is considered a "commodity" currency, so if you think commodities are going up, it'll mean a stronger Loonie.
But I am also seeing more and more references to it as another type of "safe haven" currency. I think Peter Schiff recently called it one of his favorite currencies worldwide. There is a perception that the banking system here is "safer" (which may not be true, on a relative basis, compared to some of the US banks post-restructuring there and pre-housing-crash here)
Having said all that.
For the longest time I just flat out wouldn't touch US Equities because of this fear of a declining US dollar, but lately I haven't been letting it stop me because I think I was mistaken in avoiding the entire spectrum of US companies based entirely on currency risk.
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I am not inherently bullish by any means but I have a good grasp of market behaviour.
I think it is instructive for me at least to review the comments of Buffett, Baruch, Livermore, and others from time to time. When there is blood in the streets etc, etc, etc.
I too have been creamed this year - guessing about 30% drop right now and headed for my first down year in about 8. Nearly all my losses are related to Leaps at the moment so they can rebound quickly.
I get tired by the constant macro investment topics on the board to the extent I dont much read them anymore. It seems people are looking for the perfect value investment. Well, they dont exist. To paraphrase Francis Chou: sometimes we go into some real stinky places to find our investments.
Francis has a significant position in BAC which he has held for 1.5 years via warrants. Do you think he fully understands BACs derivatives, EU exposures, etc. Unless he is psychic I truly doubt it. For one thing, not all info is available to the public. When your value investing one needs to accept that there are a certain amount of things we dont know and will never know. What we know about BAC is that it has a huge cash generating franchise, one of the two or three top investment banks in the world, a lot of measurable legal and mortgage liability, and is interlinked throughout the world with derivatives and CDs. Not an ideal situation, I will agree. But that is the nature of value investing.
It is also insanely cheap. The same applies to a lesser degree to Jpm, and wfc.
Best buy generates nearly 1 b per year in FREE cash flow. Yet its stock has been pummeled. The perception is that their stores are too big, their earnings aren't sustainable, there is a depression coming, blah,blah,blah. The stock is dirt cheap and cash is still pouring in.
UCCMAL this was a fantastic post..I concur with everything you said.
To follow on this sentiment: I personally am wary about banking on things like "QE3" to make the stock market go up. I mean even if it works, what happens when it stops or peters out. QE doesn't fix any of the systemic cracks.
BUT, the truly good businesses who are being hammered down and available cheap, they're out there and will be out there. The only problem is that their stock prices may go nowhere for the next decade. What I would hope is that they start paying out decent dividends or raising any existing dividends and then you actually have a reason to own these things instead of just digging a hole in the ground and hiding in it with a gun and tins of dog food.
The big question I wrestle with every day: Is it cyclical or is it secular? Is this just "Yet Another Financial Crisis" or are we really hitting the wall on something that was overdue and on an unsustainable track for a long time. And if so, what does that mean?
I still think owing a good business or three will get you through better than pretty well anything else.
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Dazel, you think it's too late to short Groupon? say on a bounce back up to the IPO price?
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Demand Media (DMD) is another one I missed the boat on, considering how well I know this industry. (Actually I hastily bought some PUTs over the summer but kind of screwed up my execution, buying cheap out-of-the money puts, when I should have bought closer to in-the-money.) Oh well. Next time.
(The corollary to shorting DMD is to go long Tucows ticker: TCX or TC.TO)
I just started thinking this week that over the next year, shorting Web 2.0 darlings may be the way to go. I'm talking the profitless wonders with no business model, not the googles. \
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Our internal forecast shows two different types of marketing: what I'll call "normal marketing"—which is NOT excluded from ACSOI—and "customer acquisition marketing," which is. The way Groupon spends on marketing is unique in three ways:
1. We are currently spending more than just about any company ever on marketing—in Q2, we spent nearly 20% of our net revenue on marketing, while a typical company spends less than 5%. Why do we spend so much? The simple answer is "because it works." But that's only part of what makes our situation special.
When it comes to internet businesses (my day job is running one) I look at this exactly the opposite. I think the amount spent on marketing is an inverse indicator of your moat. And spending a lot on marketing doesn't make your situation special, because all your competition has to do is also spend a lot and then presto, everybody's special.
2. Our marketing—at least the customer acquisition marketing that we remove from ACSOI—is designed to add people to our own long-term marketing channel—our daily email list. Once we have a customer's email, we can continually market to them at no additional cost. Compare this to Johnson and Johnson, McDonald's, or most other companies. If I'm a Johnson, and I'm trying to sell you a box of Band Aids, I have to keep spending money on commercials and magazine ads and stuff to remind you about how sweet Band Aids are, even after you've bought your first box. With Groupon, we just spend money one time to get you on our email list, and then every day we email you a reminder of the sweetness of our metaphorical Band Aid. There is no cost of reacquisition—that's unusual (and we created ACSOI to point that out). If Johnson wanted to follow the Groupon strategy, he would have to start a free daily newspaper about bandages and then run Band Aid ads in it every day.
I think they are overestimating the staying power of their subscribers. They think that once somebody is in their list, they will stick around, keep reading the emails and convert at some measurable rate. A daily mailing list is a pure saturation level mail blast. Especially if the content is all marketing. They have nowhere to go from there (unless they want to start emailing their subscribers hourly?)
They are measuring their repeat customers cumulatively but they are only subtracting their unsubscribes from their gross subscriber counts. I think they think that once somebody buys from them more than once, they are a "repeat customer" and will be in perpetuity. I'd have to read through the S-1 in detail, but it's also the sense I get from this bit of quoted material.
3. Eventually, we'll ramp down marketing just as fast as we ramped it up, reducing the customer acquisition part of our marketing expenses (the piece that we remove in ACSOI) to nominal levels. We are spending a ton now because we're acquiring as many subscribers as we can as quickly as we can. We aren't paying attention to marketing budget (just marketing ROI) in the way a normal company would, because we know that even if we wanted to continue to spend at these levels, we would eventually run out of new subscribers to acquire. So our customer acquisition spend drops severely to reflect the fact that eventually we'll run out of people we can add to our email list. We view this internally as a very large one-time expense and then our job forever after will be to continually convert these subscribers into customers and to make sure our customers keep buying from us. Ongoing, the normal marketing dollars we spend are not something we would remove from our internal calculation of ACSOI.
I don't think this will pan out the way they anticipate. They seem to be saying "we'll outspend everybody to get all the subscribers available onto our list, then when we have them and they're buying repeatedly, we can stop spending on marketing and our profits will go up (or materialize)"
But what will likely happen is that even the repeat buyers will have a lifespan: they too will eventually fall off, probably stop reading their emails. There will be competitors also marketing to them, they may be getting multiple offers from multiple companies (it's not like the bargain hunters are going to cultivate a brand loyalty to groupon, they just want deals).
In other words, I think list fatigue will set in hard and heavy and they never will be able to radically decrease their marketing spend and "coast" on the list. In fact even by their own admission, they're growing so fast, what will likely happen is that they'll find they cannot lower marketing and their acquisition costs will even increase, as the universe of potential subscribers depletes.
Groupon has always reminded me of the traffic arbitrage and click arbitrage plays I've commented on before - the model isn't sustainable and in the case of the arb players, they tend to go *poof* in a very abrupt manner.
Do you think Bitcoin is a safe store of value?
in General Discussion
Posted
It is not possible to fully grasp the ramifications of bitcoin until one reads The Onion's
U.S. Economy Grinds To Halt As Nation Realizes Money Just A Symbolic, Mutually Shared Illusion
http://www.theonion.com/articles/us-economy-grinds-to-halt-as-nation-realizes-money,2912/
...realizes the truth behind what makes it so funny, and goes on to realize that the truth behind it is more fully applicable to the US Dollar than it is to bitcoin.
At that point, you will realize that crypto currencies are a true game-changer and that the price action of bitcoin is but a mere side-show.
Money evolves over time, who can deny that? And it usually evolved along lines of expediency and in a counter-trend to government policy (which is always in one direction: inflate and debase). Today the official national currencies are again being systematically destroyed by their governments, and this is happening across all currencies simultaneously. Given the needs of a global, interconnected, highly abstract economy facing these circumstances, crypto-currencies were pretty well inevitable.
Yes, new crypto-currencies can emerge (there already are hundreds of them and most of them are dying on the vine - the most comical one I've come across is zimcoin, which actually claims to be pegged to the Zimbabwe dollar at the rate of $10 trillion $Z to one zimcoin)
The important thing about this is it puts currency itself back where it should be: subject to market forces. Thus, if one currency elects to destroy itself via mismanagement or dilution (a.k.a inflation), the market participants can and will move out of it. This is as it should be.
Fiat currencies like all national currencies are currently engaged in a worldwide game of dirty pool. We're in a global currency war, there is open talk of ZIRP becoming NIRP, governments and central banks are basically screwing everyone in an effort to keep an unsustainable paradigm going.
Nearly every single criticism I've seen leveled against bitcoin is more accurately applied against the US dollar, or the Canadian dollar, or the Euro or the Yen. You want to talk about "meaningless numbers in a computer somewhere?" look no further than those currencies. You want to talk Ponzi? Look at QE, Abenomics and other "wealth effect" gimmicks that enrich those closest to the politically connected and screw everybody outside the beltway.
That "the government will eventually shut bitcoin down" is also easy to deflect: they can't. Shutting down bitcoin would be about the same as banning prime numbers. Sure they may go after exchange providers, maybe they drive it completely underground, but then they just create it as a black and grey market. Further, to make a real go of "shutting down bitcoin" it will require a push into global totalitarianism that makes today's situation (with it's global surveillance and the suspension of most civil rights) look tame.
The reason for all this is because pretty well every global government, and their complicit central banks, especially in the US, especially in the UK, especially in Canada, especially in Europe, everywhere, with their desperate economic rigging and central planning, with their pervasive global surveillance on their own subjects, with one illegal war, police action, "peace keeping", bail-in, bail-out and nationalization after another have lost all legitimacy to rule.
So the emergence of something like bitcoin, necessity being the mother of invention, was just one big F.U from the free market to the system that it's been holding its head underwater for decades. It had to come out somewhere, here it is.
Crypto-currencies are inelastic forms of exchange, which put them in the same league as gold or silver, and no, they will never replace them, rather they have emerged as a perfect compliment to them. Totally portable, frictionless and largely immune to capital controls, crypto-currencies have become the official lubricant of the free market (I mean the real free market, the one where price discovery actually takes place between buyers and sellers, not dictated by central planners).
This isn't a curiosity, this isn't tulipmania, and no, I'm not recommending you run out and buy bitcoin (it'll probably crash down to about $100 or $200 any time now, maybe lower) - but I would recommend setting up a bitcoin wallet somewhere, getting an exchange account and obtaining the ability to move funds in and out of it as needed so you are comfortable doing so.
If you own a business, start accepting bitcoin. I've been accepting it since spring of this year, so that's how I've accumulated all of mine. Sure, it's nice to be nominally "up" on the exchange rate, but that isn't why I'm doing it. I've sold a bit of it just to familiarize myself with the ins-and-outs of converting to cash, and I have a debit card which I can load up with bitcoin and withdraw dollars from any standard ATM.
End rant.