Here in the Silicon Valley, until recently, the "spin" surrounding startup companies and the billions of dollars in wealth they generated rivaled the b.s. level of Wall Street. Here's one of my favorites, published in one of the raggier of the business rags, Business Week:
So to the untrained eye, it appears that a scruffy, pudgy guy in his late 20s was able to score $60,000,000 in cash in the brief span of 1.5 years. Not bad, not bad!
The truth isn't quite the same. He didn't make $60 million. Or $6 million. Or $600,000, for that matter. The financial picture at his company, Digg, is more along these lines (as reported by Valleywag):
Last year, the company took in $4.8 million and spent $7.6 million, for a loss of $2.8 million. In the first nine months of this year, losses grew almost as fast as revenues: Digg took in $6.4 million and spent $10.4 million, resulting in a $4 million loss. At an annual clip, that's more than $5 million out the door a year. Keep in mind that Digg has a lucrative three-year advertising deal with Microsoft, that pays the site a guaranteed rate for its inventory. Without that arrangement, struck last year, driven, most believe, by Microsoft executives' desperation to get in on the Web 2.0 craze, Digg's losses would likely be far worse.
The company raised a fortune in venture capital, which is what permits them to lose money year after year. But, just in case any readers here still might believe the streets of the SF Bay Area are paved with gold, let me assure you that they are made of the same broken asphault as your own town.
As for the markets……….I'm starting to question just how robust the rally in Jan/Feb might be. Perhaps my anticipation of such a rally was simply wishful thinking on my part. See, for a portion of this year, the markets were remarkably easy and profitable for a bear to trade. The past month or so, it's been real work. One of my three accounts is at an all-time high, but the big one is off its highs (it still has a multi-hundred-percent gain for the year, but it's definitely slipped some).
My view of a huge rally at the start of the year followed by a merciless grind lower is a little too picture-perfect. Looking at index action lately, the only word that comes to mind is "sickly."
The markets aren't plunging. They aren't soaring. They're just sort of gasping and wheezing, this way and that. No robust base is being formed. No thrilling top is in the works. This, I suppose, is how price discovery is supposed to work. The fireworks of 2008 definitely have had a bucket of water poured on them.
There is one market left, it seems, which does smell very toppy, and that is bonds. Look at this.
A retracement to the low 120s seems almost inevitable, wouldn't you agree? And although even a four-year old wouldn't call them "toppy", commodities definitely seem vulnerable to resuming their slide:
The real puzzler is crude oil. Looking at this multi-decade chart, one might conclude that this price is, Goldilocks-style, "just right." It has lost 35 months of gains in the span of 5 months (falling seven TIMES as fast as it rose!) yet it is at a major, major support level. Perhaps, like equities, this market has reached a level where it will just grind along at these levels until some major exogenous event gives the price a reason to change.
There are only 42.5 hours left in this trading year, 97.5% of it having passed by already. I've got a couple of very cool ProphetCharts features coming down the pipeline that I look forward to sharing with you in the coming weeks.
