News

Walmart Buys Jet.com

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walmart buys jet plan

A couple years ago, when Yahoo bought Tumblr for $1 billion, I wasn’t the only one who wondered what value Yahoo saw in the acquisition. It takes a special kind of Silicon Valley mind to think that a money losing internet business plus a money losing internet business somehow adds up to profit. It turns out that even the modest goal of $100 million in annual REVENUE, not profit, set by Yahoo, was too much for the internet property supposedly worth so much that Yahoo shelled out $1.1 billion for it. It seems that the great lesson of the internet bubble years earlier, that eyeballs and name recognition, do not equal money, still isn’t something tech companies are ready to learn. Which brings us to today’s multi-billion dollar buyout of Jet.com, a money-losing online retailer that goes head to head with Amazon. It’s just over a year old now, and it crossed the $1 billion in revenue line earlier this year. Revenue, not profit. The company, by all accounts, hemorrhages cash and funds its operations by taking on more investors. But, somewhere in there, Wal-Mart sees something worth $3 billion, plus an additional $300 million in Wal-Mart stock. I guess tech companies …

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Elections and Investing

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presidential election us stock market

Here it comes (actually, we’ve been seeing it for a while), the pontification about which U.S. Presidential candidate will help or hurt the American Economy, and by extension, the U.S. Stock market. As you might expect, in the world we currently live in, these articles are tinged, if not rife with, political bias. If you are a Republican, then obviously, the Democratic candidate will destroy the economy and ruin your investments, and vice versa. However, some “neutral” economists and financial journalists will write similar articles. So, how do you know the difference? The reality is that it doesn’t matter as much as everyone likes to pretend. Presidential Reality People love to forget that the U.S. President is not a king. No matter who is elected this November, the reality they inhabit involves a grid locked Congress, among other things. While there is a great deal of power invested in the American President, much of that is policy based. While these decisions will eventually influence the course of American business, such changes will not immediately effect either the economy or the U.S. stock market, both of which are enormous in size and scope. Just like spinning the wheel on a super tanker slowly makes …

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June Jobs and Mid-Year Economy Review

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Monitoring the economy is tricky business. The monthly reports that we get from the government require gathering reams of data over hundreds of hours, and all manner of processing to get us a simple sounding number like, “The U.S. economy added 287,000 new jobs.” Even then, those numbers are routinely readjusted up or down later as more data comes in. The May employment numbers were enough to stop a Fed rate hike in its tracks. Are the new June numbers good enough to put an interest rate increase back on track? June Employment and the Fed Employment numbers are very important to the Fed. A tightening labor market often is visible before any actual signs of inflation. The theory is that lower unemployment forces businesses to offer higher wages in order to attract and retain workers, which will eventually lead them to raise prices in order to cover higher costs. So, if employment jumps too fast, too far, it might be time to take a look at a rate hike. The increasing transparency and ability to buy goods online has shaken this up a bit, however. Just because Macy’s raises prices on something doesn’t mean that you have to pay …

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What Does Brexit Mean for America?

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Gah! Brexit! Run for the hills! Wait. Wait. If you live in England, this might be kind of a big deal. I’m not 100% sure. However, if you live in America, it’s time to calm down. How Does Brexit Affect America? I’m on vacation, so I’m going to keep this brief, but I know a lot of people are worried about the vote on the Brexit, and what that might mean for the economy and the stock market, and so on. Let’s start at the beginning. The markets hate instability. They hate not knowing what is going to happen. The POTENTIAL exit of England from the European Union is both unstable, and something that no one really knows what will happen. After all, Britain, if it actually goes through with it, will be the first country to ever leave the European Union, or EU. That is why you got a super plunge in the American stock market on Friday. What happens next with the Brexit? Well, no one is actually sure. That’s what unprecedented means. However, there are some things we do know. England, while politically and strategically, very important to America, is actually very small from an economic point …

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Microsoft’s LinkedIn Mistake

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There is an interesting post over at Mashable about the failure of Tumblr to make any progress in righting the ship at Yahoo. The author makes the argument that Yahoo, and Marissa Meyer, somehow “derailed” Tumblr, when the reality is that Tumblr was a money burning machine about to go bankrupt without yet another infusion of financing when Yahoo rode to the “rescue” with a billion dollar buyout offer. Most analysts expect Yahoo to write off every single dollar related to the acquisition. In other words, it was a billion dollar waste of money. Microsoft’s $26 Billion Blunder This brings us to this week’s stunning blunder by Microsoft. The company announced that it would pay $26 billion to acquire LinkedIn. LinkedIn, like Tumblr, does not make a profit, though it isn’t teetering on the verge of shutdown. LinkedIn, like Tumblr, has a very specific user base that has peaked. The company reported a $66 million loss for last quarter, and a loss of $166 million for 2015. In other words, Microsoft just paid billions of dollars for a company that will cost it hundreds of millions of dollars. The truly bizarre part of this acquisition is that Microsoft’s current CEO, came on …

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There is a catch…

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More coming later today, but a quick note this morning: A MarketWatch article talks about “the most accurate” market timing system but notes that while it is accurate over the long-term, it has “trailed the market for the last decade.” So, long does it take to become inaccurate?

Market Still Crashing… Wait, No It Isn’t

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stock market back even

Still waiting for that market implosion everyone was certain was going to happen a few months ago? Looks like you’ll have to wait a little longer. I usually have to wait a little more to pull out the “I told you so,” on the stock market being a constant swirl of ups and downs that should be ignored by long-term investors. Long-term investors, of course, should be sticking to their long-term plans and only making adjustments to rebalance their portfolios. This is often easier said than done. Usually, in the middle of a down period, people start showing up or calling to tell me that they were, “right,” and that they pulled all of their money out of the stock market and now they weren’t losing anymore money and I am dumb for saying they would be better in the long run if they had just stayed put. They never call me to tell me they put their money back in right before things start going up, but that’s another matter *eyeroll*. This super, mega, down, recession is coming, batten down the hatches, plunge was too short for that to happen this time. Market Back To January 1 Levels Right …

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Fed Stands Pat and Lowers Expectations

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Since before the rate hike in December, Fed Chairman Janet Yellen has repeatedly said that all interest rate hikes were going to be dependent upon the data. In other words, while the Fed was willing, and ready to raise interest rates, they were not going to just keep raising them to meet expectations. The announcement today that the Fed will not be raising interest rates in March surprised no one. However, they also took the step of modifying their anticipated rate hike schedule, which originally anticipated four rate hikes this year, to a total interest rate of 1.25%. The new estimates now anticipate only two rate hikes during 2016. If that holds up, then the maximum Fed Funds Rate by year end would be just 0.75%. While commodities and oil ran higher on the news, that is likely to be short lived. The whole, lower interest rates equals weaker currency thing only works when there is a stronger currency out there to run to, and right now, there just isn’t. The Dollar might not be particularly strong right now, but nothing else is any stronger, so those trends are likely to reverse themselves over the next month or two. The …

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Interest Rate Confusion – Raise or Hold?

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I’ve been writing about interest rates much more than I wanted to lately because I often write about what people talk to me about, or what I hear all over the place, and interest rates seem to be holding people’s attention. I’d like to offer up some ideas about how to think about interest rates. If everyone started keeping these things in mind, maybe there wouldn’t be so much talk. Interest Rates are a Continuum One of the biggest problems people have wrapping their heads around the concept of the Federal Reserve raising interest rates is that it is not some sort of on or off type thing. Sure, each increase is a Yes or No to the question of whether or not the Fed will raise interest rates, but the resulting rates are not simply “high” or “low”. Consider the Fed’s interest rate increase in December. It raised interest rates from 0% to 0.25%. Yes, that is an increase. Yes, it is the first increase in some time. But, is there really much difference in the world because of it? Your credit card interest rate, or your adjustable mortgage interest rate may not have even changed because so many …

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Job Losses Now Due to Market :)

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Not too long ago, I wrote about how context in articles and statistics is critical regarding the huge boom in employment in North Dakota. Now, North Dakota and a handful of other states lead the U.S. in job losses. Of course, not too long ago, the gains in these states were due to the genius of their governors or legislatures. Now, it’s just market forces. Of course, it was the same thing both times around, the oil and gas industry. When oil was booming and drillers were hiring as fast as people would show up, job growth exploded in North Dakota. Now, that oil prices have plunged and the industry is mothballing rigs, while entirely stopping drilling new ones, employment numbers are crashing. Context is everything. Overall, nothing new is happening, good or bad, in the states with the greatest number of job losses, it is just that in one particular industry, the bottom fell out. Interestingly enough, this might be the actual bottom, meaning that there is nowhere but up for these job numbers to go. When they do start climbing, watch for the politicians who claim no blame for this downturn, come scurrying out of the woodwork to …

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