Friday, 16 January 2009 23:00

Quick note on my thoughts of the weekend

I think the better known blogs mentioned in the recent post (A humble thank you to my readers and supporters) in particular happen to have a higher valuation and staying power than the average. This is particularly true for those that can successfully charge a significant fee. I bring this up again becaue my MSM posts have garnered an awful lot of attention from the media via email, though not many seemt to be willing to post on the site publicly. Basically, everybody seems to believe that the ability to charge respectable fees for online content is still far out of reach. I disagree. Free content, by definition, can only be but so good because it takes resources to create and distribute it. Those that truly give it away for free will either go out of business, or cease giving the truly quality stuff away for free. Now hybrid models (like mine) provide a middle ground, but that is not the same as free.

There is also something to be said for the quality of the traffic in question. See Super Brokers form to push Super Broken products to make those with High Net Worth Super Broke for a socio-economic view of who visits this site, and why it may have more staying power than a blog about ferrets (no disrespect to about ferrets, there are two in my house).

I'll be on my way to DC in a couple of hours, and will do some HD video blogging with my new equipment. I have some interesting observations from my studies to share. JPM (the biggest bank) is insolvent and I can probably prove it, and as I type this I am working on financial/macro blog valuation models - interesting results.

I will be talking to a few power brokers in DC to get a feel of where they stand vis-a-vis my opinions, and will post accordingly, time permitting.

Published in BoomBustBlog

I apologize to my readers and subscribers for the inconvenience, but it appears that things are back to normal. Feel free to subscribe to the premium research, login or register for the free stuff at will.

We feel we have defeated the hacker problem, adding several additional layers of security to the site. To the guys in Romania, the subscriber in the UK and the local guy here in the states we will be coming after you legally (through both the government criminally and through civil courts). It doesn't matter whether you actually got in or not , I'm coming after you because you tried!

I don't take this very lightly.

On that note, let it be known that everyone should be running update to date antivirus software on the local machines and it is a security best practice to change all of your passwords regularly. Our database remains intact and unhacked, but it is always better safe than sorry. While any site can be hacked with enough resources dedicated to the process, you can be confident that our security is quite tight here, particularly now. We respect your information and privacy just as much as we respect ours.

Published in BoomBustBlog


Sell side brokers and fund of funds pushed tens of billions of assets
to Bernie Madoff, for a fee and maybe a commission or two. You know the
rest of that story. Funds of Funds charge 1% and 10% on top of hedge
funds 2% and 20% - to lose about 21%. Hmmm! The big name brand Wall
Street banks charge full commissions (about $10,000 to $50,000 per year
for accounts the size of the top quintile of my blog's reader's
accounts) and give you the privilege such a charge the opportunity to
lose between 29% and 41% of your capital! Hey, thanks fellas. With
friends like those, who needs enemies. Now, they are bulking up due to
their own investment missteps, and merging into super brokers. B of A
bought Merrill Lynch, and now Citibank is spinning off Smith Barney
into a JV with Morgan Stanley's brokers. Both of these merged entities
will have a sales force of over 22,000 sellers each. Wowza! That's a
lot of salespeople. Can any of them invest worth a damn, though? Now,
what exactly are they going to be selling? After all, to cut costs,
brokerages and sell side banks are reducing the size of their
analytical staff, which was already reduced significantly in the last
Wall Street cyclical downturn after Spitzer got in their ass about
conflicts of interest. Even without these head count and talent
reductions, investment performance stemming from this
salesperson/analyst model was horrendous, and that's about the nicest
way I can put it. We'll get to that point later, though.

The Rich have it rougher than many would be led to believe!

We have had around 2 years or so of rapid asset
depreciation, and after re-examining my notes and thoughts for the
umpteenth time, I am now more convinced than ever that the chances of
the US and much of the developed world and emerging markets going into
a depression is as least as great (and probably slightly greater) than
going into a protracted recession. Things are definitely not looking
up. This will hurt everybody, from the maid to the CEO to the hedge
fund manager to the gardener to the plumber. Believe it or not, I
believe it will hurt the upper classes even more, on both a relative
and absolute basis. Here's why:

  1. The upper classes tend to invest
    much more, if not all of their wealth, as compared to the lower and
    middle classes, in financial and real assets. Their primary investment
    classes are exactly those that got hit the hardest over the last 2
    years, and are going to be those that will be getting hit further in
    the near future. These investment classes are:

    1. Residential Real
      Estate in the form of less liquid primary residences, vacation and 2nd
      homes - down 18 to 30% for the year depending on where its located;
    2. Commercial real estate direct owner ship, partnerships and in trust - all taking a big bath right now;
    3. Stock - down 36 to 40% for the year
    4. Fixed
      income securities of varying investment grades and maturities - taking
      a beating with grand canyon style spreads, particularly the more
      speculative stuff and the tax exempts which the wealthy rely upon for
      tax favored income
    5. Alternative asset funds, ex. hedge funds, private equity, buyout funds - down 21% + for the year;
    6. Art and collectibles - extremely illiquid now, with values plunging faster than VB+ can calculate in Excel;
  2. The
    wealthy have ove extended themselves significantly with debt, many
    counting on historical investment returns to provide relief of debt
    service that probably isn't coming this year. Many have probably gotten
    too lax in relying on easier credit as well.
  3. The
    primary compensation source of the higher end of the wealthy and upper
    classes is investment returns, and as investments nosedive and stock
    grants and options become worth less (or worthless), they will be
    forced to live off of their principal, which is akin to flirting with
    the unemployment line for the middle and working classes.
  4. The
    lack of liquidity in so many markets means that even when they do
    attempt to access principal or sell of assets, they will probably
    receive greater haircuts than they thought they would, meaning the
    downward spiral accelerates.


Believe you me, there will be a significant amount of social mobility
occurring over the next few years, and most of that mobility will be
downward. I would say roughly a third of my blog's readers are high net
worth, and/or belonging to the upper classes (their is a distinct
difference, which we will get into in a moment). Here is a quick
rundown of the blog's demographics:

  • 75% of the BoomBustBloggers are executives and professionals
  • Over 35% of Reggie;s readers make over $100,000 per year, and over 1/4 make over $200,000 per year.
  • 32% of Reggie's readers are millionaires.
  • 18% are multimillionaires
  • 5% have net worths over $10 million.
  • 17% have investable assets over a million dollars
  • 9% have currently investable assets over $2 million

Instead of using some academic study or 3rd party data, I've decided to use the demographics of BoomBustBlog.com
to outline the combined effects of the economic turmoil and the trash
that is being peddled as financial and investment advice - a
combination that is proving lethal to your net worth as you read this.
Now, let's make sure we are all on the same page when we discuss the
social classes and the wealthy. For those who feel you must get
offended when social class is discussed, I strongly suggest you stop
here and watch TV or otherwise get a solid dose of MSM, mind numbing
programming. For the rest of you who choose to continue reading, you
have just chosen the Blue Pill - prepare to be unplugged from the
Matrix!

Social Mobility: Unlike the Jefferson's, We're moving on down!

Social class is defined (on this blog) as the
amount of control one has over one's socio-economic environment. It is
much more than money, although money is a large component. For
instance, Barack Obama is in a higher class than Robert DeNiro or
Michael Jackson, although Robert DeNiro and Michael Jackson are most
likely wealthier (although that is quite debatable after taking into
consideration the value of Obama's campaign contribution list and
membership database from his social networking site!). Obama's higher
class stems from his ability to exert more control over his
socio-economic environment. The factors that this author uses to
determine class combine (with the associated weights) to create a
"socioeconomic index":

Socioeconomic Index=

(Occupation X 12) + (Income source X12) + (Income X 7) + (Wealth X 14) +

(Education X 7) + (Dwelling area X 15) + (Class Consciousness X 7) +

(Housing X 12)

There is a handy dandy BoomBustBlog class
model (based loosely upon the Index of Status Charcteristics) available
for download for anyone interested in delving into this further. See
xls boombustblog.com_social_class_model v.7.3 156.00 Kb.

As you can see, wealth is the largest
contributor to the class standing, and coincidentally it is the factor
that is the most at risk in this current economic climate. I believe
that there will be a significant entry into the upper middle class by
those who were once firmly entrenched into the upper classes! While
that may not seem like a big deal to many, it is damn big deal to those
who are moving down the ladder. This also means, that there will be
some space for others to move (relatively speaking) up the ladder. One
man's (or woman's) misfortune is another's opportunity. I believe this
blog can not only be used to insure and proof against downward mobility
for those in the upper strata, but can also be used by those in the
lower, middle and lower upper strata to rise upward a notch or even
two. Social Mobility is the name of the game in times of severe dislocation - times like we are experiencing now.

Lower Strata

Underclass/Poor

Working Poor

Middle Strata

Lower Middle Class

Upper Middle Class

Upper Strata

Lower Upper Class

<-- 20% to 30% of BoomBustBloggers are here, roughly 1,000 of you!

Higher Upper Class


Now, in term of wealth (not social class and influence, just wealth) we
can split the upper strata into three different categories (there are
only two above because of the other factors that come into play when
social class or socioeconomic standing is taken into consideration).
There is the poor wealthy, those guys and girls that are just a hair's
breath from being pulled into the upper middle class strata due to
marginal wealth. This would be the $1m to $10m net worth crowd, who
rely on business profits, salary and investment returns for income. The
next would be the middle strata of the wealthy, hailing between $10 t0
$100 million in Net Worth, and then there is the upper strata wealthy
at above $100 million. Each of these three strata of wealth represent,
in my opinion, distinct behavior tranches in terms of discretionary
expenditures, investment, and politics and (what passes as, this is a
story for another post) philanthropic activities.

Demographic

Source of wealth

Net Worth

Lower strata wealthy (High net worth)

Service professionals, corporate executives, entrepreneurs,
inheritors

Salaries, stock options, restricted stock, small business
profits, investment returns

$1 m to $10 m

Middle strata wealthy (Very High Net Worth)

Corporate executives, entrepreneurs, inheritors

Business ownership, investment returns, salaries, restricted
stock, stock options

$10 m to $100 m

Upper strata (the truly
Rich!)

Entrepreneurs, inheritors, very few CEOs

Business ownership, investment returns

$100 m to several $billion

A trip to practically any decent sized yacht club or
recreational vehicle port reveals the relatively stark differences in
discretionary spending behavior. The first strata can be found in the
36 ft. to 68 ft. yacht docks (where a captain is optional, but not
mandatory and you really don't need a crew). The second strata can be
found 50 ft to 120 ft docks, where captains, crews and semi-custom
fiberglass boats abound. The third strata are almost exclusively in the
super yacht category, where the carrying cost alone for these
(basically waste of money) fully custom built hulls and vehicles are
about million a year to start with. You can also see the other social
economic strata as well, upper middle class in the 20 to 35 ft boats,
the middle and working class in the considerably smaller fishing boats
- as opposed to the ultra fast Viking and Hatteras deep sea fishers,
etc. It is an interesting and instructional study in social studies and
anthropolgy just walking along your local docks!Once you are aware of how these things break down, you will see many settings in a different light.

For
the purposes of this discussion, we will focus on the 30% or so of my
blog readers in the multi-million dollar range of net worth.

Click any graph to enlarge to printer quality and size!

reader_networth.png

The dark purples, deep greens and reds
are most likely the general demographic to get hit hardest.
Fortunately, those who follow this BoomBustBlog closely, either
personally or through their advisor, should have seen a net increase in
networth rather than a net decrease. This has hurt non-BoomBustBloggers
in this demographic tranche significantly, and will hurt them even
farther. At the same time, let's hope that the opinion and research
that I bring to the blog helps, because many will need it. Let's see
why.

industry_group.png

The hardest hit industries in this economic
downturn are represented by the largest pieces of the pie above:
finance, real estate, and insurance - followed by the commodity
volatility whipsawed agricultural industry - which will trickle down to
the professional services industry that serves all of those above:
lawyers, consultants and accountants (the verdict is still out on
doctors and the medical industry, although the industrial pharmas don't
seem to be doing very well). Basically, 75% of you are feeling it
harder then American industry in general.

image054.png

The relative small size of the firms and
companies, combined with the anecdotal knowledge that I have of the
subscribers confirm that many of you are entrepreneurs and/or small
business owner/stakeholders. These are the primary drivers of wealth in
our economy.

employer_size.png

Many of you are balance sheet heavy, in that
although your income is significantly higher than the US average and
median, the balance sheet seems to rule the day here.

readers_income.png

It is safe to assume that the higher wealth
tier of the blog readers generate most of their income from their
investments. This is what Morgan Stanley and Bank of America were
aiming for when they made their large acquisition attempts of Merrill
Lynch and Solomon Smith Barney. Just imagine, armies of 40,000
salespeople trying to access your capital, or sell you their high fee,
high commission, mediocre (to put it nicely) performing investment
products and services. The Fund of Funds industry is aiming at your
capital as well. Do they add Alpha? I know the Bernie Maddoff scandal
is a helluva black eye for the industry. Taking the median of the
investable capital tranche answers from my blog's questionaire, let's
assume the median investable asset level for the 7 to 8 digit crowd is
$8,125,000 - which I feel is about right. Remember, investable capital
is the money and securities that you have to give to someone to manage
or invest, as opposed to assets, equity or net worth.

readers_investable_assets.png

So, if you run the scenario of you putting
those assets with the big brokerages powerhouses forming, the hedge
funds, or the broad market, let's see what happens to the income of
those living off of their investment returns.

readers_potential_losses_from_brokers_and_funds.png

Now, for those of you who factored in a 10%
annual return to guage your spending and budget, I think those
expectations should be ratcheted down some in order to come in contact
with reality. For the sake of expediency though, we will use 10% of
principal as the burn rate through which you support your lifestyle.
This means that you will need to make 10% (pre-tax) per year in order
to avoid eating into your principal. At the median figure quoted above,
that gives the HNW BoomBustBlogger about $67,708 per month of income
and gains (at least it did last year). Look below to see how your
income will be effected after factoring in 2008 investment returns. For
many of you who did not match the performance of this blog, a
significant reduction in lifestyle expenses is in order, or the
expectation of 20% plus returns from this point on. If I am right about
the economy, the markets and the business environment, this year will
be much worse than last - thus those rosy expectations really need to
be dumbed down signficantly! See "BoomBustBlog Research Performance for 2008"
for a full accounting of 2008 comparative investment performance and comparative performance since inception.

Barclay's Hedge Fund Index

S&P 500

Citi

GS

JPM

MS

BoomBustBlog

Reggie's Prop Account

-20.9%

-35.7%

-28.9%

-29.3%

-41.4%

-29.7%

106.2%

335.0%

Principal at year end

$ 6,430,938

$ 5,222,750

$ 5,775,368

$ 5,744,025

$ 4,761,315

$ 5,712,265

$ 16,753,265

$ 35,343,750

monthly cash flow@10%

$ 53,591

$ 43,523

$ 48,128

$ 47,867

$ 39,678

$ 47,602

$ 139,611

$ 294,531


Now, let's take a look at the expenditures.

discretionary_spending.png

It is difficult to segregate the expenditures
of the higher net worth readers from the other tranches from this
dataset, but it is worth displaying nonetheless.

You are being BAMBOOZLED and HOODWINKED by the establishment!

Despite significant under-performance, the Wall
Street Marketing Machine still seems to keep investors, particularly
wealthy investors, plugged into the Matrix! They will pump the
quasi-reality of their wealth (mis)management even harder as they
attempt to dig themselves out of the economic earnings hole that they
have dug themselves into. Expect an unusually aggressive, and fee and
commission heavy, products push by your local broker sometime soon. As
disguised as it may be, you can bet your Aunt Mabel's dentures that it
will arrive in time for Q309 quarterly reporting. Buy into the Banks,
Brokers and Bullsh1t mantra at your own fiscal risk!

Consider yourself forewarned.

Published in BoomBustBlog
Thursday, 08 January 2009 23:00

BoomBustBlog Research Performance for 2008

We have made a downloadable sample of our research available without registration. Simply click this zip file: zipResearch_Samples 11/17/2008,
to download to your local machine and open to reveal the research reports in PDF
format. Click here for Adobe Acrobat Reader version 9.0 or higher, which may be needed to
view the files. Click here to subscribe to my research.
To learn more about my proprietary investment style, see "The Great Global Macro Experiment, Revisited".

If you are a member of the media, see our Press Room

A week and change into the new year and I
finally get around to tabulating the performance results for 2008. They
were quite impressive, until December, when the market rally forced
me to disgorge a significant amount of my unhedged profits. I made a
conscious decision not to take full profits in late November when I
knew the market was going to go into its oversold/overbought momentum
game. Alas, I did not take profits and my proprietary numbers took a
hit. The bright side to this is that both my blog's static research
model (+106.3%) and my proprietary results (+335%) are the best that I
know of.


Barry Ritholz's Fusion Analytics posted positive results for the year
(between 8% and 20%, depending on your perspective), which is damn good
compared to most other services. It's not nearly as good as the
BoomBust, but hey, I am the one of the cutest investors around - it's
hard to competeTongue out. For those interested in his work or the difference between his service and mine, see his research site and blog.
I don't know him personally, but he is often on CNBC, and is one of the most grounded pundits that they
have. I have received permission to release his results and have made
them available for download here:
pdf fusion_analytics_recommendations_2008 09/01/2009,11:49 67.60 Kb.


Now, let's walk through my results for the year in detail. I'll start by
comparing my results to that of the big name brands, just to illustrate
where the real performance is to be found. For those in the press and
the mainstream media (MSM),
take note of this - you guys are interviewing the wrong people! As you
peruse this year end report, be sure to conceptualize what would happen
if all of the talking heads on TV were to have their performance
results streamed across the bottom of the screen as they spoke! Below is what I believe to be the most comprehensive year end performance report of any blog or publicly available investment site, not to mention one of the most impressive.

BoomBustBlog vs Wall Street Brokers


I had my team choose the most prominent brokers, bankers and sell side
research houses to compare with my results, and the final verdict for
all of 2008 is...

Published in BoomBustBlog

Apparently, people with technical skill and too much time on their hands have taken advantage of a hole in the server to exploit a redirect hack to send a few visitors to a porn site. I believe I have closed the hole, and I have my administrator tracking down the culprits. I also have my programmers on the case as well.Thank you to everyone who took the time to point this out to me.

There is no risk to private data or anything else, except for the frustration of having to put up with idiots such as this - even on a temporary basis. Anybody who has experience this problem, or is still experiencing it is urged to use the contact us link to report it with full details (the exact link typed in, and the URL/address of the site redirected to).

Published in BoomBustBlog

I don’t necessarily follow management consulting tomes religiously, since I feel that if they truly believed their advice was all of that, they would be out making money acting on the advice in lieu of selling the advice. After all, which is more valuable, the advice itself or the sale of the advice? The same could be applied to my burgeoning, found by accident, little blogging business. I am not an investment advisor, I am an investor. I decided to sell my research because it simply got too expensive and laborious to give it away for free. It does tend to offset the research expense component and lo and behold, it actually turned out to be a viable venture on its own. The fact still remains though; I would like to consider myself to be an investor more than a media company/website operator. Thus, I feel that the media that I do peddle is justified and the results vindicated by the fact that I eat my own dog food, nigh exclusively. Consumers of investment research and opinion products should keep that in mind when shopping offerings.

With that being said, occasionally those in the management consulting fields do come up with a very good idea; although sometimes these MBA laden, PhD polished ideas can be boiled down to the common sense advice grandma use to give me – sans the PowerPoint proficiency, of course. One such idea is that of Core Competencies. Core competency (sourced from Wikipedia) is something that a firm can do well and that meets the following three conditions:[1]

  1. It provides consumer benefits
  2. It is not easy for competitors to imitate
  3. It can be leveraged widely to many products and markets.

A core competency can take various forms, including technical/subject matter know how, a reliable process, and/or close relationships with customers and suppliers (Mascarenhas et al. 1998). It may also include product development or culture, such as employee dedication.

Let’s keep this concept in mind as we pour over this recent Bloomberg article, then we’ll return to my ideas on a new MSM (main stream media) business model.

Macy’s, Gannett Face Debt Hangover From Buybacks in Good Times

Dec. 30 (Bloomberg) -- Macy’s Inc., Gannett Co. and New York Times Co.’s attempts to prop up their stocks with debt- funded buybacks have left them saddled with higher borrowing costs as they work to pay off loans. My comments will be focused the media companies here. I will offer commentary and opinion on shortable retailers (those with share prices over $15) I expect to risk bankruptcy hopefully sometime late next week to paying subscribers.

Standard & Poor’s 500 companies have spent $1.73 trillion on buybacks through September since the fourth quarter of 2004, according to the ratings company. With the U.S. in a recession, the companies face the threat of additional credit-rating downgrades after being punished for the earlier borrowing. I warned about the fallacy and foolishness of using corporate capital to play equity investor. Unless you are an investment advisory or management firm, you have no business buying stocks. It really is that simple. See my post from September of 2007, Rampant share buybacks bold ill for future growth.

“You had debt-financed share buybacks at a time when the market was good, their businesses were good,” said Edward Henderson, a senior analyst at Moody’s Investors Service in New York. “Then it turned real quickly.”

New York Times, with $1.1 billion in total debt, spent more than $1.8 billion buying shares from 2000 to 2004, enough to have retired all of its borrowings, said Mike Simonton, an analyst at Fitch Ratings in Chicago. Gannett could have paid down most of its long-term debt with the $3.44 billion spent on buybacks since 2004. Macy’s recently renegotiated its bank loans to erase doubts that it could repay loans due next year.

S&P cut the New York Times’ debt rating three levels to a BB- junk grade in October and has a negative outlook on the company, signaling further reductions are possible. Hey, we agree on something. A $400 million credit line is due in May.

To raise cash, the New York-based newspaper publisher slashed its dividend by almost three-fourths and is pursuing a $225 million sale-leaseback of its headquarters. It’s also trying to sell its 17.5 percent stake in the company that owns the Boston Red Sox baseball team, according to a person familiar with the discussions.

Trimming Buybacks

The company paid as much as $44.83 a share on average for its stock in 2003, according to filings. That is more than six times the current price. I don’t want to insult management and say that the use of leverage for a media company to speculate in the stock market during an obvious bubble was stupid, but it sure wasn’t smart! New York Times has reduced buybacks to about $110.5 million in total in the last four years to offset dilution from employee stock options, spokeswoman Catherine Mathis said in an interview.

Gannett, the largest U.S. newspaper publisher, had to draw on unsecured revolving credit in October to repay commercial paper. The McLean, Virginia-based publisher’s debt rating has slid six levels since 2000 to BBB-, one step above junk.

The company, which also operates TV stations, offered to purchase $750 million of notes maturing in May for 95 cents on the dollar. Holders of 13.5 percent of the notes accepted the offer. Spokeswoman Tara Connell didn’t return a phone call seeking comment.

Before lending froze, companies tapped relatively cheap credit to buy back stock and boost sagging share prices and earnings. Investors cheered the moves, at least temporarily… These are most likely the same silly, spreadsheet challenged “investors” that I have been selling (short stock and puts) to in the banking, insurance, and industrial, retail and real estate sectors. All I want to say is thank you for providing me, my family, and my readers with a very Merry Christmas joyous holidays!

Publishers’ shares have dropped as investors focused on the loss of readers, advertisers and revenue to the Internet. Again, I wish you thanks. New York Times has slid 87 percent since a peak of $52.79 in 2002, and Gannett is down 92 percent since its high in 2004.

“Companies failed to switch gears quickly enough, underestimating how much the shift of dollars to the Web would accelerate,” Ken Doctor, a media analyst at the consulting firm Outsell Inc. in Burlingame, California, said in an e-mail. I know this is a matter of hindsight being 20/20, but why in the hell couldn’t they see the Internet picking up steam and transforming media (and telecommunication) companies more than most? I thought it was the best thing since sliced bread since 1994. This is truly an issue of not seeing an entire forest because of that big fat tree sitting in the way.

With credit tight, buybacks slowed last quarter to $89.7 billion, down from the record $172 billion spent a year earlier, S&P data show. The S&P 500 Index has tumbled 44 percent since peaking at 1565.15 on Oct. 9, 2007. It’s a damn shame that tight credit had to usher in fiscal and managerial responsibility. Imagine if they would have had these disciplines during the boom times!

Now, let’s get back to the core competencies argument. The NY Times/Gannet is a media concern. They should be focusing on content production, distribution and advertising sales. That, particularly production and distribution, is their core competencies. They do it better than many competitors, they have mass, scale and experience that give them distinct and viable advantages over both extant competitors and startup organizations. What they are not are good stock investors. Thus, they should not be buying stock, whether their own or anyone else’s – outside of funding their employee compensation plans.

I feel that if they stuck to their guns and butter of content creation and distribution, it would have (should have?) been obvious that it was faster, easier, and cheaper to distribute through the Internet. As a matter of fact, it should have been inevitable that this would happen. I know that it is difficult to cannibalize your own revenues in an effort to chase a new thing or a prospective paradigm shift. The problem is, if you don’t cannibalize your own revenues, someone else will. They key is to make that initial cannibalization a smart investment into a new business, in this case a new media business. Gannet could have taken that $3.5 billion dollars (share price depreciation + interest) and funded a new media distribution service to compete with Google’s news distribution service (which will probably end up dominating MSM distribution over the internet), or creating the central distribution service that Blogger.com (again Google, who will have the MSM calling it Daddy very soon) or Six Apart offer for bloggers. This distribution platform could have been extended to other MSM, and the revenues could be used to further content generation, as well as offset the losses of margin in the transfer of resourced from print media to the Internet. I know the voluntary cannibalization of margin hurts, but look now – the margin is gone anyway AND you don’t have the increased Internet and new media presence.

More on my take on the transformation of the MSM, in reverse chronological order:

The Future of Main Stream Media, pt 3
(Reggie Middleton's Boom Bust Blog/MyBlog)

...iddleton on the Marginalization of Mainstream Media, pt 3 This following is a reply from the MSM official referred to in part 2 of this series. Since it is about a week or two old (I’v...

Saturday, 13 December 2008

Continuing the conversation of the future of main stream media..,
(Reggie Middleton's Boom Bust Blog/MyBlog)

...le of what I mean by the difference in between blog reporting (the higher quality blogs) and the MSM (mainstream media). As regular followers to the blog know, I have been bearish and all over G...

Tuesday, 09 December 2008

A change is gonna' come
(Reggie Middleton's Boom Bust Blog/MyBlog)

...t that is worth more than I am paying for - and one of those sites charges a lot... If I were a MSM (mainstream media exec) I would be pursuing successful blogs to imitate, or outright purchas...

Monday, 08 December 2008

Published in BoomBustBlog
Friday, 12 December 2008 23:00

The Future of Main Stream Media, pt 3

Reggie Middleton on the Marginalization of Mainstream Media, pt 3

This following is a reply from the MSM official referred to in part 2 of this series. Since it is about a week or two old (I’ve been a bit busy), I recommend you refresh your memory so we can pick up from where we left off.

MSM official comment:

I think the structure of your proposed model makes sense. Here's the 'but'. Who is going to pay to evaluate the blogger provided information to make sure it checks out before posting, linking to or printing it? As you know, when I found BBB (that’s BoomBustblog.com) on the Internet I was impressed but didn't blindly accept it. I took my own time and used my own independent contacts to establish a sense of whether RM was providing credible information or whether he was just some random guy. It wasn't easy, as RM (that’s Reggie Middleton) has an extremely low profile. But it had to be done before I would be willing to pass along the info to my employer's customers. The cost of my time was paid for by my employer who acquired it from rack sales, subscriptions and advertising revenue from previous editions. Fortunately, blogger RM checked out and the information was useful in my employer's product which, in theory, means that quality information will have generated eyeballs, ad dollars and sales that will support future information evaluation.

I can see his point here, but this vetting process only has to be done once. Now, that RM has proven to be worthy source of deep information and opinion, his content can be used repetitively without the same vetting process.


Also, as good as the info was, blogger RM can be quite verbose and arcane with terminology. In order to make the material accessible to a general audience, somebody has to be able to evaluate and understand the info and have the ability to synthesize it into words that apply to a non-expert audience, which takes more time and, by definition, money.

Published in BoomBustBlog

To continue the discussion started in “A change is gonna' come“, this is a perfect example of what I mean by the difference in between blog reporting (the higher quality blogs) and the MSM (mainstream media). As regular followers to the blog know, I have been bearish and all over GGP through late last year and this year. For those that haven’t seen any of the GGP work, read “GGP and the type of investigative analysis you will not get from your brokerage house” and contrast and compare it to this article from WSJ.com: Dark Days for Mall Dynasty Built on Debt – The article captions, “General Growth's losses show how the crisis is hitting not just risk-loving Wall Street firms but also family-run companies with histories of conservative growth.”

What???!!! This company was leveraged to the hilt, buying properties at the top of the real estate bubble, tripling their size. They had about 20% of their properties with an LTV of 100% or more. C suite officers used nearly unheard of amounts of leverage to purchase multiples of their net worth in company stock, through shady and clandestine arrangements through family trusts. They attacked me, a nice guy, and my blog calling my work unprofessional. Okay, that last part doesn’t really fit in, but I’m sensitive...

Published in BoomBustBlog
Monday, 08 December 2008 01:00

A change is gonna' come

Tribune filed for bankruptcy today. This, by a very smart
man who sold his $12 billion commercial and residential real estate portfolio
at the very tippy top of the CRE bubble, only to be sucked into another bubble
bursting. The Tribue Cos. And affiliates have sold off a lot of assets, fired a
lot of professionals and cut back on a lot production - in essence, they are
much lesser a producer of actual original content and will shrink further as
time goes on.

Considering "As
investment banks cut back, the serious blogs take the forefront
", there is
a strong current of trenchant, need I say "superior" analysis coming from
blogs, and the ability for bloggers to transform that analytical ability into
most nutritious fodder in the form of being able to quickly analyze news
events not only as they happen but to perform the type of investigative
analysis that is probably too expensive and (in this environment) too intensive
for a reporter who is not a specialist - I think even the most ardent of the old
school must come to face the music, "A
Change is gonna come!
"

This popped into my mind as I had to spend even more money
to upgrade my servers for the fourth time since starting this blog about a year
ago. I also had to hire customer service for subscribers, since I couldn't handle
it on my own. I hate to say it, but this nascent new media business that I
discovered by mistake by just trying to publish my financial and analytical thoughts
to the world is actually growing (knock on wood) while the mainstream media and
the investment bank analyst model are floundering. I now can count several major
central banks as subscribers, much of what's left of the Wall Street
broker/banks, all sorts of small, medium and brand name hedge funds, commercial
banks and even the IMF.

Published in BoomBustBlog

I found this link on one of the econ discussion groups - We’re naming names! Below are our picks for the best economic forecasters for 2008.

After reading it, the first thing that came to mind was, "Where is MY name?"Laughing Not only am I considerably cuter than just about all of those guys, but my track record ain't to bad either. If I were to (re)write the article...

.05 Reggie Middleton
1 Roubinin
2 Gratham
3 Peter Schiff
etc......

In '07, first few months or so of '08.

2007:

Published in BoomBustBlog