Monday, November 29, 2004

E-tailing expectations climb: "But some e-tail stocks may be getting ahead of themselves, as investors price in even stronger growth. Such share appreciation suggests that investors are expecting a stellar holiday shopping season on the Web."—CBS MarketWatch

I'd like to welcome (OSTK) to the Bubble 2.0 Index.

Saturday, November 27, 2004

Irrational Exuberance Again?: "Seeking Alpha, a great stock blog, quotes from a weekly letter from mutual fund manager John Hussman in which he addresses our return to irrational exuberance. It sure feels that way in the market."—Fred Wilson (Flatiron)

Hussman's full article made me reach for the Maalox.

Friday, November 26, 2004

Google Saves The Bubble Fund: "Around the Valley, it's well known that VC funds raised in the late 90s (and hence invested at the height of the bubble) fared poorly. Such was the fate of Kleiner Perkins ninth fund. But that fund did have one big winner - Google. Silicon Beat has the details."—John Battelle

Wednesday, November 24, 2004

Economic `Armageddon' predicted: "In a nutshell, Roach's argument is that America's record trade deficit means the dollar will keep falling. To keep foreigners buying T-bills and prevent a resulting rise in inflation, Federal Reserve Chairman Alan Greenspan will be forced to raise interest rates further and faster than he wants. The result: U.S. consumers, who are in debt up to their eyeballs, will get pounded."—Boston Herald

"Are you gettin' it? Armageddon it!"—Def Leppard
Google rallies after Goldman sets $215 price target: "At Google's current price, Noto argued, the stock trades at a 23 percent discount to the average multiple of eBay, Yahoo, and"—CBS MarketWatch

Go go GOOG!

Tuesday, November 23, 2004

California home prices continue upward: "The median price of an existing home in California in October was 21.4 percent higher than it was a year earlier, according to figures released Tuesday by the California Association of Realtors. Sales were not impeded. CAR says they were up 0.5 percent compared with the same period a year earlier."—Silicon Valley Business Journal

Monday, November 22, 2004

Google sliding as insiders sell $1 bln worth: "Google shares slid below $163 on Monday, the week after 39 million shares became available for sale, including nearly $1 billion of shares sold by venture backers."—CBS MarketWatch

Sunday, November 21, 2004

Google co-founders, CEO to sell up to 16.6 million shares: "Google Inc. co-founders Larry Page and Sergey Brin each plan to sell up to 7.2 million shares of their stock in the online search engine leader during the next 18 months—divestitures that would generate windfalls of more than $1 billion apiece at current market prices."—The Mercury News

Emphasis mine.

Saturday, November 20, 2004

PortalPlayer plans IPO: "Fabless semiconductor company PortalPlayer, Inc., of Santa Clara, has announced an initial public offering of 6.25 million shares of its common stock at $17 per share."—Silicon Valley Business Journal

Gimme an I! Gimme a P! Gimme an O! What's that spell?

Friday, November 19, 2004

Dolby Laboratories Files For IPO: "Dolby Laboratories announced that it has filed with the Securities and Exchange Commission for a proposed initial public offering of its Class A common stock."—DesignTechnica

Bring the IPO's!

Thursday, November 18, 2004

Travelzoo CEO Reports Share Sale : "Traders who've sold short the company's stock have been waiting for Bartel to begin cashing in, hoping it would take some of the air out of the balloon. With about 80% of the company's 2 million available shares currently sold short, there are a lot of traders hoping for the Travelzoo bubble to burst."—

With TZOO shares down 12% on the day, it looks like the shorts don't have to wait any longer.
Google says growth rate may be unsustainable: "Google Inc. said Thursday its revenue growth rate from the second to the third quarter of 2004 may not be sustainable into the fourth quarter of this year and beyond."—CBS MarketWatch

Sobering news to all investors who thought that GOOG's revenue would asymptotically approach the global GDP.
Does Netflix have a handle on its business?: "If ever there was proof that Netflix management doesn't have a handle on it business, which is a nutty business at that, it came in the form of a press release Wednesday that raised and lowered forecasts. This is a company that in recent months raised prices, lowered prices, raised guidance, lowered guidance and now gives us a little of everything—and for the life of me, I can't understand why investors would cheer this news."—CBS MarketWatch

The drumbeat of negative press coverage of NetFlix is growing louder. If they go out of business, do I get to keep the three DVD's I have out?

Wednesday, November 17, 2004

Countrywide Posts 47 Pct Drop in Earnings: "Countrywide told analysts on a call that profits were eroded by a shift in demand among home buyers to adjustable rate loans from fixed rate loans. 'Generally, fixed-rate (loan) products carry higher margins. Our product mix has shifted to more ARMs (adjustable rate mortgages),' Mozilo told analysts. Adjustable rate mortgages—attractive for first-time home buyers because they offer lower monthly payments initially—accounted for 61 percent of all loans Countrywide processed in the third quarter."—Reuters via Yahoo! News

When the oil business went south in the 1980's, Texas banks were swamped by loan defaults. Today, there aren't any Texas banks. A shift to ARM's at a time of rising interest rates seems like a recipe for mortgage defaults. Good luck, CFC.
Netscape Reborn?: "BetaNews reports that Netscape has been revived with Firefox backing. 'Despite media reports and industry pundits over the years relegating Netscape to Internet history books, AOL has restarted the browser's development. The company plans to bring back a refreshed Netscape browser based on Firefox.'"—Slashdot
Analyst says Netflix is 'fatally flawed': "In a report Tuesday, W.R. Hambrecht analyst Bill Lennan reiterated a "sell" rating on Netflix and called the company "fatally flawed.""—CBS MarketWatch

Ouch. Then again, a half-billion-dollar market cap does seem pretty steep for a video rental store—even a big one.

Tuesday, November 16, 2004

Form 10-Q for TRAVELZOO INC: "Our total revenues increased to $9.5 million for the three months ended September 30, 2004 from $4.8 million for the three months ended September 30, 2003. Our total revenues increased to $23.0 million for the nine months ended September 30, 2004 from $12.8 million for the nine months ended September 30, 2003. This represents an increase of 81%. The increase was primarily due to an increase in the number of advertisers."—Yahoo! Finance

Market cap: $1.7B. Annualized revenue run-rate: $38M. Reliving the irrational exuberance of Bubble 1.0: Priceless.

Monday, November 15, 2004

Is the Housing Boom Over?: "The housing market is rapidly losing touch with reality. Fueled by interest rates that have remained near record lows, prices have continued to soar, and the gap between home values and the underlying fundamentals such as personal income and job growth is greater than ever. The most alarming development, though, is the change in psychology. 'The market isn't acting rationally,' says Christopher Thornberg, an economist at UCLA. 'It's now an emotion-driven market where people are buying on the expectation of future appreciation.' Increasingly Americans view houses not primarily as places to live but as foolproof, can't-lose investments. The passionate faith that money poured into real estate will magically multiply is creating a self-fulfilling speculative frenzy that's bound to end badly."—Fortune
Housing Bubble, like every bubble, won't pop on schedule: "Today, for example, the following article by Alexandra Marks appeared in The Christian Science Monitor: Pessimists will have to wait, as housing boom rolls on Remember that great real estate bubble? It appears almost as buoyant as ever, despite the Federal Reserve's decision to raise interest rates for the fourth time since June. The piece echoes a common misunderstanding...."—AlwaysOn Network

AlwaysOn drives a two-bagger this morning. Glad to see Bubble 2.0 has some cheerleaders. Sad to say, they're the same ones from Bubble 1.0.
Asia ignites global IPO boom: "Newly listed stocks often carry high expectations, but nowhere is a worldwide surge of initial public offerings generating more interest than in Asia."—AlwaysOn Network

Sunday, November 14, 2004

5 Stock Time Bombs: "Wherever your investing preferences may take you, I encourage you -- no, beseech you -- to acquaint yourself with the factors generally accepted by the value investment community as sustaining a stock's long-term value."—The Motley Fool

To save you a click, the list includes Google, Travelzoo, Medimmune, and Computer Assciates. It also includes Taser, but with an upside prediction. Travelzoo, trading at 373 times earnings, is the newest addition to the Bubble 2.0 Index.

Saturday, November 13, 2004

The Pros and Cons of a Weak Dollar: "Left unchecked, investors fear a soaring deficit will lead to higher interest rates, lowering the value of U.S. stocks and bonds."—BusinessWeek

Repeat after me, "Sell as you vest, get out of debt. Sell as you vest, get out of debt."

Friday, November 12, 2004

The fed raises interest rates: "American households saved just 1.2% of their disposable income in the second quarter, and just 0.4% of it in the third. An absence of thrift and explosion of credit were, Wicksell said, sure signs that money was too easy—i.e., rates were too low."—The Economist
San Jose leads nation in risky housing values: "Of the country's 50 biggest cities, homeowners in San Jose stand the greatest chance of seeing their homes plunge in value, according to PMI Mortgage Insurance Co."—Silicon Valley Business Journal

Austin scored 133 out of 1,000, which is reassuring given San Jose's score of 509.

Thursday, November 11, 2004

Insiders cashing out of Net stocks: "Relative to the Nasdaq market, it's been a year of great returns for Net stocks, as well as for the insiders who own massive amounts of shares and are selling into these nosebleed levels. 'There is some serious cashing out,' said Jonathan Moreland, director of research at 'The sales do raise an eyebrow.'"—CBS MarketWatch

Let's all close our eyes, take a cleansing breath, and repeat the Bubble 2.0 mantra: "Sell as you vest... Sell as you vest..." NetFlix (NFLX) insiders seem to know to get while the getting's good, earning them a spot as our newest Bubble 2.0 stock. Charts at right.

Monday, November 08, 2004

Second Internet IPO Boom Is More Modest: "Quietly, the IPO market has entered the second coming of the Internet age. It's a far cry from the dot-com boom years that led to the most buoyant period for initial public offerings, only to be followed by the new-issues market's most dramatic collapse. But Internet-related companies are playing an increasingly more important role in IPO issuance this year."—Yahoo! Finance
Traders Raise Bets on Fed Rate Increase in December: "An interest-rate increase at the Fed's Nov. 10 meeting is a foregone conclusion, a Bloomberg News survey of the 22 primary dealers of U.S. government securities showed."—Bloomberg

It's like watching a train wreck in slow motion. Rate hikes affect the massive number of people who have taken out adjustable rate mortgages in the past few years, raising their monthly payments beyond their already maxed-out budgets, leading to widespread defaults, crippling the banking industry, resulting in a global recession. Oh man, is it Monday or what?
Collateral Damage From a US Housing Bust (PDF): "After the U.S. stock market bubble burst in 2000, there were massive corporate bankruptcies. U.S. banks were clever enough to offload a lot of their commercial credit risk to other parties before the bankruptcies occurred. Thus, the U.S. banking system was bloodied by the bursting of the late 1990s stock market, but unbowed. Banks were willing to able to keep lending – if not to corporations, then to households with their homes as collateral. All of which brings me to where I came in. If the U.S. housing market goes bust, the U.S. banking system is likely to fall on very hard times as the value of all that housing collateral drops. "—Northern Trust

The report has some simple graphs that illustrate the magnitude of the danger.

Sunday, November 07, 2004

Internet boom is under way: "'The enthusiasm was well placed, it just got ahead of itself in many respects,' Ms. Meeker said, speaking at the Interactive Local Media 2004 conference in Jersey City, N.J., Friday. 'As we have said for a long time, from a wealth-creation standpoint, we believe we lived through a boomlet, followed by a bust, followed by a boom.'"—The Wall Street Journal

So maybe Bubble 1.0 was really just a "bubblet" and this one is going to be the real bubble. To quote John Kerry, "Would that it were!"

Friday, November 05, 2004

UBS Sees Google Falling: "UBS took a daring stance on Google, initiating the gassed-up shares at reduce on grounds the popular search engine could see slowing growth and margin deterioration in the coming year."—

Is it really daring to suggest that Google is in fact worth but a measly $43.39B? If the very suggestion that the company is $7B overvalued trims $4B off its market cap in one day, I'd say the boys at UBS are barely scratching the surface. Bubble on!

Wednesday, November 03, 2004

Even the Winner May Be a Loser: "Morgan Stanley's Stephen Roach, one of the few Wall Street economists still willing to admit to caring about current-account deficits and consumer debt, is now forecasting a 40% chance of global recession next year as high oil prices interact with the existing vulnerabilities of the world's big economies (such as America's consumer-debt overhang) to bring growth to what he calls 'stall speed.'"—Fortune

Mmmm... global recession.

Tuesday, November 02, 2004

VC funds rake in $5.5b in quarter, prompting alert: "Venture capital funds raised $5.5 billion in fresh capital in the third quarter, 78 percent more than in the prior quarter, prompting a warning by the head of the industry's national trade group that too much money in the system could water down returns and lead to the kind of excesses that sparked the last boom-bust cycle."—The Boston Globe

Monday, November 01, 2004

Here Comes the Crash: "Talk to Jeremy Grantham about the stock market, and you get the impression the sky is about to fall. For years the chairman and chief strategist of money-management firm Grantham Mayo Van Otterloo has been gleefully rattling listeners' nerves with his claim that the excesses of the dot-com bubble still haven't been unwound and that the market is headed for another precipitous drop."—Fortune

Maybe this site should be called Bubble 1.1.
Blog Business Summit Has Launched: "The summit will be the gathering place for hundreds of entrepreneurs, marketing professionals, and current bloggers who want to leverage the latest in Web publishing tools and technologies."—Blog Business Summit

I cried when they cancelled Comdex. Maybe there is hope yet for my T&E budget.
The I.P.O. Succeeded. Who Was Rewarded?: "'The question we're asking,' said one former Epinions employee who asked not to be identified and who plans to be part of the lawsuit, 'is how this company supposedly worth only $30 million was suddenly worth $300 million only 18 months later.'"—The New York Times

Has anyone considered the possibility that the company isn't worth $300 million? Nah...