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Commentary on The Capital Markets- Category [Company Specific]
2017-10-17 10:42 by Karl Denninger
in Company Specific , 215 references
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You have to love the insanity that's being touted all over the street this morning.

Here's the bottom line folks: Netflix is not "buying" content, they're (for the most part) leasing it at ever-increasing cost.  That cost in terms of negative cash flow is rising rapidly as they acquire customers.

This is a ponzi scheme that is "hidden" by GAAP abuse; in other words, they can report "earnings" under GAAP that do not reflect the fact that on a cash flow basis they're bleeding from the ass.

If you buy plant with said money like this then you have a permanent (ex depreciation) asset.  But Netflix isn't doing that, and further, once someone has watched a given show they've watched it, which means that said customer probably won't pay to see it again.

That is for the current customer base the "value" of the content produced that they've already been exposed to is very close to zero.  Said content is only valuable to new customers who haven't yet seen it.  As new content is produced it has value to a customer once.

Here's the problem: The amount of money they're spending to develop and license this content is accelerating rapidly, and the negative cash flow is also accelerating rapidly.  They are doing this because for existing customers they have to or there's nothing "new" for said customer to watch.  Yet they don't have an asset in most cases, they leased said content instead of developing and owning it themselves.

There is a point at which this goes severely negative on the firm but they'll never get there; it's like going into a black hole.  You never actually get to the singularity before you die; you're ripped into sub-atomic particles first.  Likewise the street will eventually realize that this is an exponential cost curve with a linear, and terminal point on customer acquisition and eyeball time.  That is, you can only watch Netflix so many hours in a day and there are only so many humans, so if you produce more than those hours of watchable shows some is wasted on said customer because he can't watch it.  That content doesn't result in a ratable amount of revenue; it's "contribution" to revenue is zero for that particular customer.

Today Netflix is circling the black hole at an ever-increasing velocity and decreasing distance and their "performance" (speed around the black hole) is causing people to say "wow, these guys are great."  Just like you though they won't hit said singularity.  Either they'll get ripped to atoms first or the street will call bull**** on their business model and when that happens the company will detonate in a day as it will be locked out of the financing market for its ever-more-voracious appetite for fuel in its cash bonfire and collapse.

I find the stock price of this "company" tremendously amusing; like so many companies in the "social" and "media" space today they are serial abusers of the exponential function which they know cannot continue indefinitely.

This model was tried in the 1990s, and it blew up in spectacular fashion in 2000.  The reason Hastings and the rest of these clowns are running that same scam today is that nobody went to jail for doing it in the 1990s.

It will blow up again, just as in 2000, because it mathematically must.

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2017-10-12 07:00 by Karl Denninger
in Company Specific , 559 references
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Walmart has said they expect a 40% e-commerce increase (in dollar terms) over the next 12 months.

Here's my view on them vis-a-vis Out-Amazoning Amazon: Amazon is in trouble.  Serious trouble.

WalMart has done a lot with their online presence of late.  Further, and far more importantly, they do not charge a "subscription fee" for some "premium" tier such as Amazon does with Prime.

Why is this important?  Several reasons:

1. Walmart now handily beats Amazon for a lot of products when it comes to price.  In fact if you don't check Walmart's online listing before ordering from Amazon you are a fool and almost-certain to overpay.  It's that blatant now, and has been getting more-so over the last few months.

2. You need buy no special plan to get free delivery.  You can, as with Amazon, get free delivery to your house if you have a modest amount spent in one transaction.  However, you can also get free delivery to any of WalMart's stores irrespective of the amount of the transaction and typically the product is there in 2-3 days -- in other words, just as fast as PRIME.  WalMart will hold it at their customer service desk for about a week and you can come get it at your leisure.

Since nearly everyone in the US is within 10-15 minutes of WalMart by car and most people do stop in once a week or so this means that not only is Walmart's online presence simpler to deal with (no worries about someone picking off your package off the porch while you are at work, etc) there is no membership fee either to obtain reasonably-fast delivery.  If you do not buy PRIME Amazon will sit on an order for as much as a week (probably to both aggregate their shipments internally and try to coerce you out of $100) where WalMart instantly dispatches the product to the store you choose.

This feature also works really well if you're traveling; you can order something and have it sent to any of their stores, anywhere, and pick it up on your trip.  If something goes wrong and you don't pick it up they'll automatically return it and credit your card after a week or so of it sitting at the store unclaimed.  Try that with Spamazon, Prime or no.

Next up Walmart has announced that they intend to make returns of their internet purchases zero hassle (requiring just seconds) at any of their stores.  That's a huge win over returning something via Amazon where you typically have to go to a UPS retail outlet or similar to drop it off and deal with printing their return label.  In this case just take it with you the next time you go to Walmart, check it back in at the store and it's done.

Will this destroy Amazon's e-commerce game?  No, but it's sure as hell going to dent it.  In short Walmart has upped their game when it comes to internet commerce massively over the last year or so while Amazon has done nothing other than raise the price of Prime over the last few years.

Spamazon's acquisition of Whole Paycheck does nothing to help, since the density of Whole Paycheck outlets is both insufficient and too-concentrated in yuppie areas to make a material contribution to their distribution pipeline.

Walmart, on the other hand, is leveraging what they already have which makes their improvement in the customer experience near-zero in additional cost to them.

Walmart one, Amazon gooseegg.

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2017-10-09 13:10 by Karl Denninger
in Company Specific , 424 references
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Maybe.

The BlackBerry Motion is a new handset announced over the weekend.  Many will point to it's decidedly-midrange CPU, the Qualcomm 625, as a reason to dismiss it.

Don't be so fast.

Just like your desktop PC RAM is more important than raw CPU speed, and this phone has 4Gb of RAM in it.  It will likely perform better than the KeyONE, which has 3Gb.  When I reviewed the KeyONE I was unable to get it to misbehave in any way that indicated it was CPU-limited at all.  Sure, in the "synthetic" benchmarks it didn't win any awards, but in terms of actual use it was perfectly fine -- and quick.  The only indication of its limitations was an occasional second or so pause in opening a new app, which is a function of available RAM (and needing to evict an idle app to make room for the new one); not CPU exhaustion.  The 4Gb spec-bump on the Motion will take care of that.

Unlike the $800, $900, even $1,000 "flagship" bragfest phones that so many makers are announcing and shipping (a device that, in my opinion, is almost as bad as a tattoo on your face in being a "job stopper" should I see one in your pocket or hand during an interview) the Motion appears to be tagged to have a price right around US $450 unlocked and carrier-agnostic.

It also has a monster 4,000mah battery and is IP67 (1 meter for 30 minutes) dust and water sealed, which means the end of killing your phone by doing common things like attempting to use it when it's raining or, shockingly common, dropping it in the toilet by accident.

The camera is the same as the KeyONE's, which I reviewed and found extremely competent and superior to both that on the Priv and the DTEK60, with its primary advantage being much-larger pixels and thus far better low-light shooting.  It was able to shoot usable pictures in light that was too low to see well with the naked eye -- pretty darn good.

The physical design has a context-sensitive convenience key (nice; different actions can be programmed for home .vs. work, etc.) and a front-side "hard" home key (which some will scoff at -- right up until they realize that not only is that the fingerprint sensor, it also is at least a limited scrollbar.  That ought to reduce finger smudges on the screen, one of the major complaints of all modern slab phones.

The combination of the monster battery and the power-sipping CPU ought to return 2-day battery lives for virtually everyone, and be for all intents and purposes impossible to kill in a day.  This along with QC3.0 (which puts power IN at a ferocious rate; in excess of 3,000 mah) in turn makes reasonable "ad-hoc" charging, where you simply plug in for 30 minutes or so whenever convenient on a given day.  That in turn makes the "night charge" unnecessary and results in extremely low cycle expenditure per-day for the battery, with the expected result being a four year service life before the battery requires replacement -- in other words, no more planned obsolescence.

Speaking of battery replacements I just had mine replaced in my DTEK60 under warranty as it was clearly out of spec and the one year period was coming up.  BlackBerry's service department issued me an RMA and turned it around in two days, which is pretty darned impressive.  They didn't ship me a refurb; I got my actual phone back (same IMEI and WiFi MAC addresses, etc) making that performance even more impressive.  Oh, and they paid for the shipping both ways too (issuing me a pre-paid label for FedEx on the inbound side), so my out-of-pocket was zero.

Finally, the software.  You can poo-poo that all you want but for anyone who gives a damn about security you ought not to.  First and foremost is the hardening of the kernel and other operating system components which materially reduces the risk of your phone being hacked.

But equally important, if not more-so, is the BlackBerry Hub Suite.  It is the only Android software package that properly handles Exchange-linked accounts in their entirety, including Contacts, Calendars, Notes and Email along with S/MIME secure email.  This also inherently involves device administrator remote access by the company so they can force a wipe of a lost or stolen device and if the user attempts to turn it off the phone wipes all the accounts linked to it so corporate email, contacts and calendars remain under the ultimate control of the company.

Note that this requires no subscription to any sort of "mobile device management" product at all; it's inherent in the Exchange Active Sync protocol.

While encrypted email is important for some people signed emails are important for far more; virtually anyone who conducts business wants some means of indicating acceptance to some agreement or otherwise that is tamper-resistant and can be traced to being unaltered.  Having the corporate IT department able to wipe lost devices and having the device software itself wipe the corporate accounts if a user tries to remove the "remote administration" capability is something all businesses must insist on for even rudimentary data security.

Never mind that any business that "trusts" it's contacts, calendars and emails to Google (or Apple for that matter) has rocks in their head and ought to have its IT department committed as they all mentally ill, and if you're in a regulated industry you're probably breaking the law too.

It's true that you can buy the Hub+ suite as a subscription on any Android device today.  But that's something you then have to buy and manage on a monthly basis, while with the BlackBerry Android devices it's built in and costs nothing extra.

In short unless you're a phone-gamer if your flavor of handset is Android this looks awfully compelling in terms of both features and price-point for what you get, and the security features are a big deal.  For myself my only question is whether I'm willing to buy a new handset with a (now-as-new) DTEK-60, when the real advantage, if any, is the 2-day battery life.

I've yet to decide and BlackBerry Mobile has yet to announce a US release date, but I'll be watching.  Hopefully BlackBerry Mobile/TCL won't sit on this device for the US market; that would be a real shame.

In terms of corporate handsets, however, or at least "approved" ones for BYOD this looks like a screaming winner that sacrifices basically nothing and comes with massive advantages at a very reasonable price.

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2017-07-20 15:38 by Karl Denninger
in Company Specific , 248 references
[Comments enabled]  

How do you stop Zuckerpig's privacy invasions?

Boycott anyone who advertises on those sites -- do not buy and do not do business with in any other way.  How do you know they're advertising?  You see "Sponsored" or any sort of video ad from a given entity.

This post is exempt and will never go away.  I will add to it as I see new companies, and if you do and can confirm it to me I'll add them.  Here's my pledge: If I see an ad from your firm on any of Zuckerpig's properties or sufficient confirmation (e.g. seeing such an ad on someone else's device in the app) I will never buy anything from you.

You choose -- you advertise and pay that company to do so, you lose my business.  To get it back you must permanently pledge to never again advertise on any Facebook-owned property, in public, via a formal press release or other similarly-verifiable and public method.

Oh and you get one second chance, never more.

Advertising is legal.  So is refusing to do business with you because you are the primary and in fact nearly the sole source of funds for a company that does things I consider detestable.

So here is the start of it folks, and yes, it will grow.... check back often!

  • Best Buy (Oh well; I've bought plenty there)
  • REI (this one hurts; I like them.... but no more!)
  • Big Green Egg (Sorry *******s, I was interested but NOT NOW!)
  • Southwest Airlines (all airlines SUCK, but now these ****ers are on my blackball list)
  • Consumer Reports
  • Inked Magazine
  • Runner's World (oh well!)
  • 30A clothing company (oops -- that one's local)
  • The Heritage Foundation (oops again!)
  • Huffington Post (no loss there)
  • A&E TV
  • We Are The Mighty (Military-oriented news org)
  • Orbitz
  • LinkedIN (be a paying customer and you're blackballed - as employer or employee!)
  • iHeartDogs.Com
  • Pensacola Runners Association (ouch; they sponsor races I'd run in...)
  • National Geographic (oh well)
  • CNet (Bleh)
  • 22 Words (Clickbait garbage, but heh)
  • Theclymb.com
  • Active.com (oops again; and I have bought quite a lot from gearup...)
  • 12 Tomatoes
  • The Penny Hoarder (yeah, another clickbait garbage site, but..)
  • SoWal (oops -- bye-bye Walton County beach businesses..)
  • Innermost House (San Fran Non-profit... good for some west coasters)
  • NTD Television
  • The New York Times (shock - NOT!)
  • Conservative Tribune (news)
  • Netgear (Router/ipCam/etc manufacturer)
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