Citigroup is fresh from being released from its thralldom to the US government and is releasing earning January 18th. So what's the Royalty Trades position on this stock?
Citi's got good earnings growth and positive insider trading. Plus once it hits above $5 it starts to get acquired by mutual funds, further boosting the stock. So we're in the bullish column on this one.
Tuesday, January 11, 2011
A Simplified Explanation of the Credit Crisis
The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.
This is a pretty simple explanation of what happened. The creator misses a few points though. First of all, don't believe the Wall Street lie that this was somehow the fault of the Fed, Fannie Mae, or the American homeowner. That's basically a banker going 75 in a 35, running over a bunch of people in his porsche, and then blaming the government for setting the speed limit so high. Yes, all of those played their part, but it was Wall Street greed and fraud that manufactured this crisis. As Steve Eisman, who made $1.5 billion shorting these CDOs said, "What-the entire American population woke up one morning and said, 'Yeah, I'm going to lie on my loan application'? Yeah, people lied. They lied because they were told to lie." Eisman and the others like him who made fantastic sums off this crisis weren't betting against people or the government; they were betting against the greed and mendacity of Wall Street.
Anyway, the author leaves out that Wall Street firms were deliberately gaming the ratings agencies. The agencies didn't actually know what was in these bonds; in a lot of cases they just went off the average FICO score on each. So the firms matched people with high FICO scores but short credit histories with people with low FICO scores to increase the average score, and get the agencies to rate this stuff higher. The high ratings then convince lay investors that the bonds are safe, and that's how the fraudsters manage to get away with selling financial instruments that were really just ticking time bombs.
Be Fearful When Others are Greedy
That's sound advice from Mr. Buffett himself. Here's just a few signs that we may be nearing a correction in the next few months.
Facebook's value jumps to $56 billion: It was only $35 billion a few weeks ago. This one may not be that off. After all, if Facebook were a country it would be the third most populated, behind India and then China. What other company can say that? That being said, remember MySpace? How about AOL?
Twitter's value is supposedly $3.7 billion: This one makes less sense. Twitter has plans to generate revenue. Most people also make plans to lose weight after New Year's. We'll see which one is more successful.
Groupon Rejects Google: Half of startup business models are focused on getting bought out by Google. So when the search giant shows up with $6 billion in cash, who in their right mind says no? Actually, it seems that the main issue was that Groupon was afraid Google would get caught up in anti-trust litigation and so demanded a kill fee that Google wasn't willing to pay. Still, $6 billion for a service that spams its users with deals, just happens to be operating during the one time when Americans are most likely to use coupons, and turns off 40% of the merchants who participate in it?
FourSquare Worth $95 million: Another fad service that happens to be operating in an environment in which both Facebook and Google have the potential to quickly dominate it. Remember back to every bubble when people were saying, "This time it's different"? It never is.
Facebook's value jumps to $56 billion: It was only $35 billion a few weeks ago. This one may not be that off. After all, if Facebook were a country it would be the third most populated, behind India and then China. What other company can say that? That being said, remember MySpace? How about AOL?
Twitter's value is supposedly $3.7 billion: This one makes less sense. Twitter has plans to generate revenue. Most people also make plans to lose weight after New Year's. We'll see which one is more successful.
Groupon Rejects Google: Half of startup business models are focused on getting bought out by Google. So when the search giant shows up with $6 billion in cash, who in their right mind says no? Actually, it seems that the main issue was that Groupon was afraid Google would get caught up in anti-trust litigation and so demanded a kill fee that Google wasn't willing to pay. Still, $6 billion for a service that spams its users with deals, just happens to be operating during the one time when Americans are most likely to use coupons, and turns off 40% of the merchants who participate in it?
FourSquare Worth $95 million: Another fad service that happens to be operating in an environment in which both Facebook and Google have the potential to quickly dominate it. Remember back to every bubble when people were saying, "This time it's different"? It never is.
Has Google Gotten Too Big?
Nexus One. Google Wave. Google TV. Google Buzz. What do these four products have in common? They were all listed in Business Insider's 15 Biggest Flops in Tech for 2010. They've declared that "Don't Be Evil" never was a real motto, engineers are fleeing the company for Facebook, and they've even (gasp!) lost search engine market share to Microsoft. What's going on?
Simple. Just like every empire business or otherwise that's ever preceded them, they got big. And slowly that muscle that once defined them turned to fat. Bureaucracy sets in, and the geniuses leave for greener pastures where they don't have to report to a manager every time they want to use a for loop instead of an if statement.
We're still bullish on this stock, though. They are one of the gatekeepers of this not so far-off world in which the Internet is tamed and mostly ruled by corporations. Their earnings growth has accelerated moderately in the past year, and the fact that they're coming up with new products to flop indicates that they still retain the daring to try new things. Still, they're going to have to trim some of that fat if they want to stay ahead of their competitors. Remember when people made movies about AOL? Remember when only people in graphic design bought products from Apple? Cataclysms can come suddenly in the tech world, and Google will have to continue to innovate if it wants to stay alive, not just profit.
Simple. Just like every empire business or otherwise that's ever preceded them, they got big. And slowly that muscle that once defined them turned to fat. Bureaucracy sets in, and the geniuses leave for greener pastures where they don't have to report to a manager every time they want to use a for loop instead of an if statement.
We're still bullish on this stock, though. They are one of the gatekeepers of this not so far-off world in which the Internet is tamed and mostly ruled by corporations. Their earnings growth has accelerated moderately in the past year, and the fact that they're coming up with new products to flop indicates that they still retain the daring to try new things. Still, they're going to have to trim some of that fat if they want to stay ahead of their competitors. Remember when people made movies about AOL? Remember when only people in graphic design bought products from Apple? Cataclysms can come suddenly in the tech world, and Google will have to continue to innovate if it wants to stay alive, not just profit.
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