Bloomberg ran a story earlier this week illustrating the human capital flight out of the Wall Street machine and into tech:
At elite universities, fewer MBA and finance candidates are willing to even consider a life of missed weddings, busted romances and deep-into-the-night deal negotiations. The percentage of Harvard Business School graduates entering investment banking, sales or trading dropped to 5 percent last year from 12 percent in 2006, while those entering technology almost tripled to 18 percent during that period.
At the University of Pennsylvania’s Wharton School, the percentage of MBAs entering investment banking dropped to 13.3 percent last year from 26 percent in 2006, while those entering tech more than doubled to 11.1 percent.
Those of you who have been following finance from the Wall Street/Bay Street/Canary Wharf perspective realize that this is a cyclical occurence. Basically, Wall Street falls out of favor with MBA whiz kids every ten years of so. But!!!! This time is different. This time around, Wall Street, et. al. is about to succumb to the destructive forces of technology that transformed, revolutionized, disintermediated, gutted and absolutely reinvigorated the media, news and retail industries.
That's right! The Internet Paradigm Shift has finally hit Global Finance... and it's going to hurt, and hurt a lot!
As many know, the I've poured my time and resources into a start-up by the name of UltraCoin. Many have been clamoring for white papers and details, and I have been purposely secretive about such. The reason? I needed to entrency protection from my competition - the money center banks. How did I do this? Well...
I patented the future of Global Finance!
This video illustrates my presentation to both the mainstream and alternative media as I start my capital raising rounds from venture capitalists and strategic investos alike. Check it out!
Must be willing to sign an NDA. You should be knowledgeable and competent, but we prefer grit to genius. Prima donnas need not apply.
It started in 2012 wiith the article "Deadbeat Carrier Creative Destruction In The Ongoing Mobile Computing Wars". That's when I warned that margins in the carrier space will collapse - just as they did in the cellular handset space, as new business models and the effect if Android start to ripple and reverbrate. My latest article in the series, "The Smallest & Liveliest Of The DeadBeat Carriers Successfully Launched Wireless WMDs" detailed how T-Mobile will throw the gauntlet down and turn the wireless industry on its head - at great risk not just to margins but entire business models. To wit:
There are 4 major national carriers in the US, basically two big ones two smaller ones. The smallest of the 4, T-Mobile, consistently get beat up - losing out on the right to subsidize the iPhone at a loss (like AT&T used to and Sprint still does) and basically losing subscribers. Then they decided to do something about it. They said, "Hey, let's stop being deadbeats!". By changing their pricing plans and eliminating subsidies and instead selling pure access to their virtual pipes (like a carrier is supposed to) combined with actual "real" financing of the hardware (at competitive rates, nonetheless) they essentially committed DeadBeat Carrier Blashphemy. The only issue was, it worked, to the chagrin of the competition - reference:
As a matter of fact, in Deadbeat Carriers Compete, aka #MarginCompression!!! (exactly ONE year ago), I prognosticated that T-Mobile will kick off a pricing war that will bring about the greatest savings to the wireless consumer it has seen since the birth of the industry. I even went so far as to include and online interactive spreadsheet for readers to analyze their own savings - or potential therefore.
Well, fast forward to today and we get to see if Reggie's thesis is still holding water. From the Street.com in How the Consumer Wins In the Wireless Wars:
Carriers are engaging in a price war in order to win market share, with T-Mobile's "uncarrier" plans really shaking things up. T-Mobile has been aggressively trying to grab market shares by eliminating consumer "pain points," specifically the issue of locking customers into two-year contracts. T-Mobile has been rolling out programs to entice customers to switch their carrier, with the latest three offerings announced in April, where the company under the "Simple Starter," "Tablet Freedom" and "Overage Freedom" - eliminated all domestic overage charges for consumers, even those on legacy plans. T-Mobile had announced in March 2013 its "Simple Choice" plan that offered no annual service contract and low out-of-pocket costs on smartphones.
The company must be doing something right, given its impressive first-quarter subscriber growth of 2.4 million total net customer additions for the three months, making it the "fastest growing wireless company in America," it said in its earnings release last week.
Both Verizon and AT&T are combating T-Mobile by touting payment agreements for customersthat require little to no down payment, more data, and fewer service charges when it comes to multiple phones or being able to pay for the device itself in installments as appealing features to switch over. (Check with your carrier to see the latest offers available.)
That said, it's easy for consumers to get confused by the growing array of options, but it's clear that for once, the consumer is winning since costs associated with smartphones are becoming more transparent and understandable. "This trend, combined with a wider selection of fully functional mid-range and low-end devices, should help win over the undecided consumers but also will shift the growth away from the high end," Kantar stated.
Between the first quarter of 2013 and the first quarter of this year, spending on smartphones on contracts dropped to $93 from $119, while pre-pay spending dropped to $148 from $187, Kantar said.
Now, the mainstream media and sell side analytical community is just a year (or two) late in realizing this, but better late then never, eh? Also from the Street.com we have Why T-Mobile Is Beating AT&T and Verizon:
T-Mobile US shares were surging 8.1% to $31.67 following news that larger rival Sprint was prepping plans to propose a buyout of the carrier as its impressive subscriber growth for the first-quarter shows that consumers are digging its offerings.
T-Mobile, known for its "Un-carrier" initiatives, has been aggressively trying to grab market share by eliminating consumer "pain points," specifically the issue of locking customers into two-year contracts like Verizon , Sprint and AT&T . T-Mobile has been rolling out programs to entice customers to switch their carrier, with the latest three offerings announced in April, where the company under the "Simple Starter," "Tablet Freedom" and "Overage Freedom" - eliminated all domestic overage charges for consumers, even those on legacy plans. T-Mobile had announced in March 2013 its "Simple Choice" plan that offered no annual service contract and low out-of-pocket costs on smartphones.
The company must be doing something right, given its impressive first-quarter subscriber growth.
T-Mobile reported first-quarter earnings results earlier this morning in which it boasted 2.4 million total net customer additions for the three months, which included more than 1.8 million branded net customer additions, making it the "fastest growing wireless company in America," it said in its earnings release. T-Mobile ended the quarter with 49.1 million customers, it said. On the other hand, the company experienced "record low" churn of 1.5%, down 20 basis points from the fourth quarter and down 40 basis points from the year-earlier period.
... T-Mobile actually posted a net loss of $151 million, or 19 cents a share, for the three months ending March 31, compared to a profit of $106 million, or 20 cents a share in the year-earlier quarter, according to its quarterly filing. However, revenue at the Bellevue, Wash.-based company rose 47% to $6.87 billion year over year.
... Adjusted EBITDA came in at $1.1 billion, down 12.2% sequentially, which it attributed to increased equipment sales due to the "significant acceleration in customer growth and the success of its Un-carrier 4.0 - Contract Freedom offer." Adjusted EBITDA margin was 20% compared to 24% in the fourth quarter of 2013.<story_page_break>
... T-Mobile expects branded postpaid net additions between 2.8 million and 3.3 million for the full year and adjusted EBITDA to be in the range of $5.6 to $5.8 billion, it said.
Althouth T-Mobile may be hard pressed to replicate that pop in revenues and subscribers, I expect the trend to continue until and unless the other carriers match it in both pricing model and marketing efforts. I doubt they will do this until it is too late. They should, but they won't. That is unfortunate for thier investors for, as T-Mobile is the smallest of the top 4 national carriers, this is Verizon/ATT/Sprint's (in that order) fight to lose!
In addition, as revenue and subscriber rate increases subside, EBITDA may level off as the switching incentive costs amortize. This is not even considering what may happen if an entrepenurial and disruptive force (ex. Google Loon offshoots) appears on the scene.
I called the Apple short before it became vogue! I called the Blackberry short beforethey became the industry whipping boy! I warned about Nokia and made clear that Samsung Will Be Ready To Do That Fruit Thing! How'd I know all of this? It's quite simple, I explained it all in 2012 - Smartphone Hardware Manufacturers Are Dead. Well, now the chickens continue to come home to roost, as per CNBC:
In order to deal with such pressures, Samsung appears to be pricing the Galaxy S5 lower than its predecessor S4, according to Kang, who has collected pre-order prices for the device from around the world.
"It reflects the trend of smart phone commoditization – Samsung will have to learn to create profits at a lower price point," Kang said.
Earlier this week, Samsung said it's on track to post its second straight quarter of profit decline, as slowing smartphone sales growth continued to weigh on earnings.
The South Korean tech giant estimated that its January-March operating profit fell by 4.3 percent to 8.4 trillion won, slightly below an average forecast of 8.5 trillion won, according to Reuters.
I've created an infrastructure that significantly expands these investment markets by allowing anyone, anywhere with an Internet connection (of almost any speed) to participate in almost any of the world's public financial markets. Taking the subject matter of this article into consideration, we can short Samsung on its own home exchange of Korea for nearly any amount, from $10 million US down to $8 ...
These same young investors can even hedge thier currency translation risk with a Korean Won US dollar forex pair, for 55 basis points!
Armed with the information from simply reading my blog posts, your brothers from Haiti or Botstwana can now take short positions in these (margin)doomed hardware manufacturers - taking the other side of the trade from these big name financial institutions that don't seem to read my writings.
These are kids that I taught UltraCoin to during my trip to Haiti a couple of weeks ago. Before you assume, the kids are actually quite bright and adept at math, and yes - kdis can easily trade with UltraCoin. My kids have been doing it for months!
My UltraCoin project will nearly double the available potential investors able to profit from these markets. By making the ability to participate in multi-asset class prices moves bi-directionally (that's right, long and short) I will be increase the liquidity of said markets by almost 2 billion people, as per McKinsey:
- 2.5 billion adults, just over half of the world’s adult population, do not use formal financial services to save or borrow.
- 2.2 billion of the unserved adults live in Africa, Asia, Latin America, and the Middle East.
- Of the 1.2 billion adults who use formal financial services in Africa, Asia, and the Middle East, at least two-thirds, a little more than 800 million, live on less than $5 per day (purchasing power parity adjusted).
- Regulatory and policy environments, as well as the actions of individual financial services providers, affect usage levels in a way that is, to a large extent, independent of countries’ socioeconomic and demographic characteristics.
I just had the pleasure of meeting this young lady from Botswana who's trying to spearhead Bitcoin adoption in her country. I've made friends and I'm going to supply her with the means to have the whole country trading a whole variety (UltraCoin can trade more than 10,000 tickers - stocks, bonds, options, futures, indices) of financial assets very soon.
I'll leave it up to you to determine who'll win those trades. These are interesting times indeed. For those who are not aware of how far I've come in transforming the way value is traded across geo-political and socio-economic lines, I urge you to view the following video and/or peruse the embedded presentation below it.
Sep 6, 2013 - Smartphone Hardware Manufacturers Are DeadNov 29, 2012 - Two and a ... BoomBustBlog Mar 7, 2013 - applecutsabreandriod3d Two and a ...
Sep 27, 2013 - Here I go again – Hardware is Dead & Samsung Agrees Featured ... raw fundamentals and margins, let's look at the newest crop of hardware.
Nov 29, 2012 - Two and a half years ago I declared in my mobile computing wars series that Google would commoditized the mobile computing space, thereby ...
Dec 10, 2012 - Last week I told the world that hardwarevendors are DEAD! At least the fat margin business modelhardware vendors (like those whose name rhymes with Snapple). ... Related BoomBustBlog Subscription-only Research:.
Let's quote some of the last lines of my last article on Bitcoin: "Witness the drivel that comes out of the the analyst's reports (and yes, I thoroughly ridiculed each one):
- Theres' Something Fishy In The House Of Morgan, Pt. 2: Bitcoin Fear, Envy & Loathing
- Does the Mainstream Media Assist Wall Street In Hypocritical Hypothesis For Fear Of The Next Paradigm Shift?"
You see, first JP Morgan threw baseless fear tactics, then Citibank jumped into the fray. Well, guess whose next? Goldman Sachs, of course. Everybody's favorite fair game player. As excerpted from Business Insider today:
"Dominic Wilson and Jose Ursua of the firm's markets research division are first up. They argue that Bitcoin fails to meet both basic criteria of a viable currency: while there remains an outside chance for widespread acceptance as a medium of exchange, as a stable source of value, it has so far failed. That undermines the premise that Bitcoin could serve as a way of short-circuiting exchange rates in inflation-prone countries."
And Reggie, Chief of Bullshit Patrol & Related Crimes Division chimes in with a Google search on promintent "failed" currency processors:
But wait a minute! Goldman's business business is growing at a fraction of this pace, and actually negative in some areas. So, if Bitcoin as a currency and payment system is a failure, what the hell is Goldmam? Of course, Business Insider goes on to report...
For most users what matters is not the comparison with other currencies, but a comparison with the volatility of the currency that they hold (dollars in the US for instance) in terms of the things that they need to buy. The volatility of consumer prices (in dollars) has been even lower than FX rates, even if measured over a period including the 1970s. Put simply, if you hold cash today in most developed countries, you know within a few percentage points what you will be able to buy with it a day, a week or a year from now.
This is Bullshit! Say it to the more mathematically challenged, my bonus hungry friends. Let's run the math using theusinflationcalculator.com:
As you can see, if you measure things from the '70s as the esteemed, erstwhile Wall Street aficiaondo from Goldman recommended, then you would have less than 17% of your buying power left. Yes, bitcoin is volatile, but its volatility stems from the price going up and down, while the USD has primarily just went down. You know that saying about the frog in the slowly heated boiling pot of water, right?
In addition, both of the largest Bitcoin payment processors absorb the exchange rate volatility for their customers, or did the best of breed Goldman analysts somehow overlook this pertinent fact?
Eliminate the bitcoin volatility risk with BitPay's guaranteed exchange rates. ... Import your BitPay sales into QuickBooks, to report and reconcile your bitcoin ...
In addition, there are cutting edge products being introduced by tall, handsome, charsimatic and highly intelligent entrepeneurs who have a long track record of out gunning Goldman et. al. that allow anyone to hedge Bitcoin volatlity against any prominent fiat currency.
Back to those Goldman guys...
Wilson and Ursua include this graph showing volatility of Bitcoin versus the Argentine peso, the yen, the euro, the pound, and U.S. inflation. It's not even close.
But wait a minute! If the largest payment processors absorb the volatility and market risk of their customers, then Goldman must assuredly be referring to the currencies above from an investment perspective, no?
Yes! Bitcoin is truly volatile, indeed, but the guy at Goldman are cheating, hoping that the rest of us don't know our finance and/or basic common sense. You see, they are looking at just one side of the equation - the side that favors fiat currencies and disfavors bitcoin. You see, risk is the price of reward. For every reward you seek, you pay a price in risk. The goal, as a smart investor, is to pay little risk for much reward. Goldman is trying to make it appear as if you are paying nothing but risk for bitcoin and getting little reward in return. Let's see how that pans out when someone who knows what they're doing chimes in. From the BoomBustBlogresearch report Digital Currencies' Risks, Rewards & Returns - An Into Into Bitcoin Investing For Longer Term Horizons:
You see, with high volatility (aka, risk), it's hard to earn your cost of capital, not to menton surpass it. Isn't that right, employess of Goldman Sachs? Let me jog your collective memories, as excerpted from the BoomBustBlog post on When the Patina Fades… The Rise and Fall of Goldman Sachs???
GS return on equity has declined substantially due to deleverage and is only marginally higher than its current cost of capital. With ROE down to c12% from c20% during pre-crisis levels, there is no way a stock with high beta as GS could justify adequate returns to cover the inherent risk. For GS to trade back at 200 it has to increase its leverage back to pre-crisis levels to assume ROE of 20%. And for that GS has to either increase its leverage back to 25x. With curbs on banks leverage this seems highly unlikely. Without any increase in leverage and ROE, the stock would only marginally cover returns to shareholders given that ROE is c12%. Even based on consensus estimates the stock should trade at about where it is trading right now, leaving no upside potential. Using BoomBustBlog estimates, the valuation drops considerably since we take into consideration a decrease in trading revenue or an increase in the cost of funding in combination with a limitation of leverage due to the impending global regulation coming down the pike.
Now that we see how hard it is to truly produce Alpha, I query thee... What do you think would happen if a financial maverick, an out of the box thinker who's different from all of those other guys, got a seed round of funding for the most disruptive product to hit the finance world since the printing press? What if that seed round was for $8 million dollars, with a preferred A series coming right behind it? What would such a cash flush company do, being one of the most cash flush Bitcoin companies in the world? Hmmmnnn!!!
Speakin' of Goldman Sachs...
I anticipate being in the market very soon for (I'm not thier yet, but hopefully very soon):
CTO - Chief Technology Officer
COO - Chief Opertating Officer
CMO - Chief Marketing Officer
CFO - Chief Financial Officer
As well as skilled Java and Blockchain developers.
Hit me via reggie at ultra-coin.com if you have an interest in coming on board.
No, Facebook is not stupid for paying $19B for Whatsapp! If they didn’t do it, Google would have!
No, contrary to popular pro-Facebook belief, Whatsapp is not a synergistic buy. Remember, Facebook already has a near identical application (Facebook Messenger) already used by probably hundreds of millions.
So, why did Facebook spend this money (stock)? It’s quite simple and rather obvious, but my competitors in the sell side are remiss in not discussing it... Facebook is DYING as a GROWTH company! My analysis of Facebook's Q1-2013 results read much differently from all of sell side Wall Street's - The Truth About Facebook That No Media Outlet Or Analyst Has Bothered To Notice:
In my previous warnings of Facebook euphoria, I brought up the topic of growth many times, particularly active user growth. Reference The World's First Phenomenally Forensic Facebook Analysis - This Is What You Need Before You Invest, Pt 1, while remaining cognizant that this was written exactly 1 year ago:
Thus, it is highly unlikely one can legitimately factor in the type of growth needed to justify the current Goldman $50B valuation - particularly when you consider that Facebook's growth is already slowing!
Well, let's see if I had a valid point now that we have clear and convincing historical evidence from which to base our analysis... (click any of these graphics to enlarge to print quality size)c
Uh huh! Facebook is MOVING BACKWARDS! IT'S LOSING USERS! LOOK OUT BELOW!!!
At this point, I can't help myself. I MUST point out the literal rippoff that Goldman Sachs pushed as a once in a life time investment a year and a half ago. As excerpted from Facebook Registers The WHOLE WORLD! Or At Least They Would Have To In Order To Justify Goldman's Pricing: Here's What $2 Billion Or So Worth Of Goldman HNW Clients Probably Wish They Read This Time Last Week! while remaining cognizant that this was written exactly 1 year ago...
Just a day or two later I penned Facebook Is Now Relying on Developing Markets For Growth, Is It Working? Let's Delve Into The Numbers...
Facebook is a farce even with the froth taken off of the IPO price. Why? As gleaned fromInternet World Stats...
These stats are from the 2011-2012 YEAR! Growth has likely slowed more since then! Here's a tidbit for those who don't subscribe that clearly illustrates... When it sounds too good to be true, it's probably not true!
As luck would have it, Whatsapp is the fastest growing company (in terms of active users) in the history of technology. Whatsapp also is the messaging market leader in nearly all major developing nations.
So, what Facebook is doing is buying user growth. It’s doing so because…
- Not only can it not generate said user growth organically anymore, but
- It is actually losing subscribers
How does Facebook remedy its growth problems? Well, it should be evident at this point, it’s buying the growth! Of course, this begs the question, does a growth company really have to purchase growth? This is a rhetoric question, which leads to this rather painful discovery (posed as a question): If Facebook is no longer a growth company, why doesn’t its valuation reflect that of a rollup instead of a growth company?
If Mr. or Mrs. Market Participant broaches this question, look out belowwwwwwwwww……
Dated Facebook analysis is available to download for all paying subscribers (FB Q4-2012 Analysis & Valuation Note - update with per share valuation). I'm available to discuss this with professional and institutional subscribers via phone or Google+. Click here to subscribe or upgrade.
The reason is because “investment funds” as opposed to beta chasing “trading” or “hedge" funds seek a measured return on investment. The raw returns that you see spouted for Bitcoin and the various alt.coins are actually not what the smart institutional money is looking for.
Put another way, you tend to get what you pay for. Risk is the price of reward, with risk being defined as deviation from expected return. You nearly never get a reward without bearing some risk to attain said reward. On the flip side, you should always demand a commensurate reward for the risk that you take. Measuring reward without taking into consideration the risk paid to attain such reward is akin to jumping out of the top floor of a 50 story building to revel in the exhilaration of the drop without taking into consideration what happens when you reach ground level. All in all, it tends to end ugly.
My clients are told that if you assumed $1 of risk to reap $1 of reward, then you effectively made nothing from an economic, risk adjusted reward perspective. This is difficult for the layperson to understand since those who reaped said dollar are left holding one dollar of nominal returns which looks, smells and spends like a dollar. They don't seem to get it until that third or fourth go around when they get 30 cents back for the dollar they invested (versus an amount over a dollar, hence a negative return). You see, probabilistically, you can reap more than you sow over the short term simply out of dumb luck. Realistically, the law of averages will catch up to you and eventually (and most likely close to immediately) you will reap what you sow, or... you get what you pay for!
Similarly, if bitcoin investors/traders believed they are doing well when bitcoin jumps from $13 to $950, they may be mistaken. The reason? Bitcoin has a modified beta of roughly 673! That means that it is volatile. Very volatile! More volatile than practically any basket of currencies or stocks you can think of. This volatility means that in a short period of time it's just as easy to be on the losing side of the trade of this asset as it is to be on the winning side. So, you're lucky if you bought at $500 and rode it to $950, but you could have just as easily bought at $1,200 and rode it down to $500.
With these concepts in mind, you should always adjust for risk before attempting to measure reward. By doing that you will find that you can compare disparate assets, ventures and opportunities that have different reward propositions and even different horizons by measuring the risk (or the economic cost) of the investments and then adjusting the actual or expected reward desired to compensate for said risk commensurately.
Notice how, if one were to take this approach, one can see the different risk adjusted returns between the top two cryptocurrencies by market value. Bitcoin is the most popular, but Litecoin is the most profitable - even when fully adjusted for risk.
The UltraCoin team has run these calculations, among many other currencies, on every cryptocurrency with a market value over $1 million. In addition, these currencies have been aggregated to form what we have coined as the "UltraCoin Cryptocurrency Composite Index" - a basket of cryptocurrencies upon which our custom UltraCoin derivatives can trade, hedge, invest and speculate.
These indices and calculations (not to mention a bevy of other calculations to assist in trading) are part and parcel of the UltraCoin client.
The graph below depicts the outrageous raw returns had by holders of bitcoin. It also denotes the extreme volatility experienced therein, particularly from late 2013 onward.If one were to place a hurdle rate of required return to compensate for said volatility, the return curve will look somewhat different.
As you can see, all that glitters is not necessarily gold! I will be pushing for the beta release of the UltraCoin client quite soon, quite possibly at the Berlin Bicoin conference. In the meantime, for those of you who have not had a chance to play with the software, here are a few screen shots.
A screen shot of the page before the valuation section of the BoomBustBlog Apple Q3 update...
Apple has peformed EXACTLY as forecast. There's not much more to include here except for a subscription link (subscribe here)...
- Apple 4Q2013 preliminary update (Technology)
- Apple 3Q2013 Valuation Update - Retail (Technology)
- Apple 3Q2013 Valuation Update - Pro & Institutional (Technology)
A few days ago I was waxing poetic over the abilty of David Z. Morris' ability to grasp rather complex, intangible concepts and loquaciously lay them forth in the written word via the pages of Fortune magazine. After all, what creative destruction advocate wouldn't get all mushy after reading "Reggie Middleton, currently building a client called BTC Swap. Middleton, gravelly voiced, dapper, and businesslike, doesn't fit the stereotype of woolly young bitcoin developers. But he slyly describes himself as "not quite an anarchist," and BTC Swap is a shot directly across the bow of the financial industry"...
Or "Middleton sounds a bit like an 18th-century pirate striking back against the Empire when he declares that "what I'm doing right now is a direct threat to fiat merchant banking." For him, excitement over value fluctuations in the bitcoin currency is missing the point: "It's not a threat as people sit there and ponder whether bitcoin is a bubble or not. But if people go through the protocol and use their imagination, the existing system is threatened.""
FORTUNE -- Carl Icahn, the billionaire activist investor, has been interested in technology lately. Wednesday, he made several TV appearances to reiterate his call for tech giant Apple (AAPL) to engage in a massive $150 billion share buyback. As usual, he demonstrated that he was willing to put his money where his mouth was, revealing that he had upped his stake in the company by $500 million to $3 billion, causing Apple's stock to jump 1%.
Well, my subscribers (click here to subscribe) know where I stand on Apple, reference:
- Apple 4Q2013 preliminary update (Technology)
- Apple 3Q2013 Valuation Update - Retail (Technology)
- Apple 3Q2013 Valuation Update - Pro & Institutional)
Then, after the bell, eBay (EBAY) revealed that Icahn had built up a stake in the online auction retailer and was pushing for some radical changes. But in this case, though, Icahn wasn't interested in buybacks -- he was looking for a breakup. Ebay said Icahn wanted the company to spin off its online payment arm, Paypal, and had requested two seats on eBay's board. eBay rejected both of Mr. Icahn's proposals.
... Paypal has grown from its roots as a small payment processor helping buyers and sellers of Beanie Babies feel safe to do business on eBay, to a full-on payment alternative for thousands of merchants with millions of members. Its advantage in many cases is simply speed and convenience -- how many times have you clicked the Paypal button while checking out of an e-commerce store just because you didn't want to get off the couch to grab your credit card?
Does the author mean like this?
...eBay is also lagging when it comes to valuation. The company as a whole trades on a multiple of nine times next year's enterprise value divided by earnings (or ev/ebitida), which measures a company's return on investment. Meanwhile, the payment operators, like Visa and Mastercard (MA), trade roughly at 15 to 17 times next year's ev/ebitda, or around 40% higher than eBay. E-commerce sites also trump eBay's numbers with Amazon trading at around 33 times next year's ev/ebitida and Groupon (GRPN) trading at around 17 times.
But Visa and Mastercard are about to face the same double whammy that PayPal is staying at. Let me show you with video...
or pretty pictures...
You see, the payment processors are very soon to be subject to...
Why? Because P2P solutions such as UltraCoin easily allow for such, and at dramatically lower prices to boot...
If we were to look at this graphically, it would be comical to compare...
On the commercial macro payments side...
So, what happens when your competitors offer a competitive product for between 1/1000th and 1/3rd the price?
Now, back to the Fortune article and the apparent strawman argument...
... As a part of eBay, Paypal is run by people who know tech and know retail, not by people who necessarily know payment networks. As such, Paypal's growth beyond the web may not be as successful as it could be if it was led by people who worked at a credit card company like American Express (AXP) or a global payment provider like First Data Resources.
Again this seems to ignore the coming wave, alas... I digress...
... eBay's aggressive international expansion is helping to grow PayPal's global presence, especially in countries like Brazil and Russia, where eBay is taking off. If the cord is cut too early the fear is that PayPal's international growth may stall.
Stall or stagnate?
As my readers recall, I've developed a cross currency swap system that allows holders of BTC to dance around two dozen or so sovereign fiat currencies with ease. Combine this with dramatically lower costs and ease of transmission and I see either a material change in business model or... Margin Compression!!!
This really makes one think... Is eBay a short play in and of itself? I know Carl Icahn would likely get a large bang for his investment buck backing UltraCoin than he would calling for a PayPal spinoff. Then again, what do I know? Those who wish to discuss the merits of an UltraCoin investment by Icahn can feel free to ping me at reggie at ultra-coin.com.
I'm rapidly unveiling what's been brewing in the BoomBust labs over the last few months - UltraCoin an intelligent derivative layer of smart financial contracts that sit on top of the Bitcoin architecture. In short, the recreation of the banking industry in software - without the trust and counterparty risk issues!
For those of you who are still skeptical re: cryptocurrencies, I please read the most excellent article by David Z. Morris, which also happens to grace the front page of Fortune magazine today.
I'll excerpt some choice snippets:
Some still doubt bitcoin's usefulness and durability, but 2014 may leave skeptics even further behind -- developers and entrepreneurs are already hard at work building features on top of the Bitcoin protocol that will allow for the decentralized execution of financial services, from currency hedging to loans to stock issuance to rental and purchase contracts...
In the long term, peer-to-peer finance threatens to weaken banks and other financial agents just as peer-to-peer file sharing did the music industry -- and some of the architects of this financial Napster seem gleeful about the possibility.
Ya damn skippy!!!
That means loans without banks, contracts without lawyers, and stocks without brokers, executed and recorded across hundreds of servers at all corners of the earth.
Independent entrepreneurs are also working to build this infrastructure. One of these is Reggie Middleton, currently building a client called BTC Swap.
This will be marketed as UltraCoin! Wasn't completely ready for the interview, but will be shown live at the North American Bitcoin Conference in Miami Beach this weekend!
Middleton, gravelly voiced, dapper, and businesslike, doesn't fit the stereotype of woolly young bitcoin developers. But he slyly describes himself as "not quite an anarchist," and BTC Swap is a shot directly across the bow of the financial industry.
Still in early development, BTC Swap is planned to facilitate a variety of what Middleton calls "Zero-Trust Digital Contracts," which recreate financial functions in software code by matching offered and desired transactions between parties without the need for intermediary institutions. Because these contracts are automated, instantaneous, and executed with assets already represented in the Bitcoin blockchain, Middleton says they eliminate counterparty risk while also subtracting conventional banking and brokerage fees.
David was correct in that it was in early development when he saw it, but we've been busting our collective asses (analysts, financial engineers, software engineers, programmers, website designers, the whole crew) and we'll not only be demonstrating live but will be trading risk down in Miami, right in front of your eyes!
The most immediate function Middleton envisions for his system is for hedging bitcoin against existing national currencies. With bitcoin's valuation still showing huge volatility, Middleton claims the availability of distributed hedging will both ensure the value of bitcoin for individuals holding the asset and provide systemic stability. (Given persistent skepticism, there should be plenty of takers to short bitcoin against the dollar.) And the entire system relies on decentralization for its security and integrity: "My contracts are peer-to-peer," says Middleton. "If you hack my servers, there's nothing to get." Somebody call Target (TGT).
Somebody? Anybody? Target, drop me a line at reggie.middleton at ultra-coin.com if you want my assistance in getting in on this distributed, peer-to-peer bitcoin thingy. My next post will show how my UltraCoins can add 15% to Overstock.com's bottom line. That's pretty damn good if you ask me! As a matter of fact, it's pretty damn good even if you didn't ask me :-)
Such hedging functions have particularly unique promise because of the extremely low transaction costs of peer-to-peer currency. Bitcoin makes microtransactions ranging down to fractions of a cent viable, but Middleton says that "right now, if you do micropayments, the volatility of bitcoin can really take you out." Because of the low cost of Middleton's swaps, "I can let [payees] manage risk and decrease volatility at the micro-level."
Please pardon me for the heavy excerpts taken from this article, but it is really... just.. that.. good!!! And it gets even better. Check it out:
The functions that advocates say could be automated through the Bitcoin network seem nearly endless, including peer-to-peer investment funds, Kickstarter-like crowdfunding, binding arbitrations, and even non-financial transactions such as naming rights management and encrypted communication.
I actually have much of this stuff oven already. All I need is the funds to help accelerate development becuase "you know who" is likely to get their bonus pool panties in a bunch and start coming after me :-)
And all could be executed without a cut for intermediaries. Bitcoin partisans, from developers down to rank-and-file users, often seem to revel in the idea that they are threatening the control and profits of Wall Street institutions, who they see as rent-seeking fat cats. If it were limited to the loss of fees on payments and transfers, bitcoin's threat to existing financial institutions would still be substantial. But with a full array of commission-free financial services on the horizon, there is even more reason to take heed.
Oh, and I love this part...
Middleton sounds a bit like an 18th-century pirate striking back against the Empire when he declares that "what I'm doing right now is a direct threat to fiat merchant banking." For him, excitement over value fluctuations in the bitcoin currency is missing the point: "It's not a threat as people sit there and ponder whether bitcoin is a bubble or not. But if people go through the protocol and use their imagination, the existing system is threatened."
And here comes the rain on the parade :-(
However, there is a substantial obstacle to this coming revolution. Despite the emergence in 2013 of entities like Coinbase that have drastically streamlined the process, it is still difficult to exchange bitcoin for national currencies in a quick, reliable manner. It's unclear how Middleton's automated dollar-bitcoin hedging will work without a lightning-quick and reliable dollar-bitcoin exchange platform.
UltraCoin was in early beta stage when David saw it. It'll be ready to strut much of its stuff in Miami, making things much clearer.
So, the true "automation" of bitcoin functions that integrate with the economy as a whole may require a reconciliation with existing trading platforms.
Oh, I wouldn't bet the farm on that one.
As should be obvious to many, I'm quite serious about recreating today's financial system. I'd like to introduce what some in the media have coined (no pun intended) Bitcoin 2.0 (which is actually just the true implementation of bitcoin), otherwise known as UtlraCoin. UltraCoin is the derivative layer that we're writing on top of Bitcoin to enable Bitcoin holders, buyers and sellers to do some pretty amazing things.
Here's the latest Max Keiser in which he and Stacey Herbert to a good job of explaining what I have in mind. Of course, I get to speak my mind in the second half of the show.
I am pushing very hard to have the Zero Trust Currency Contracts, the first implementation of UltraCoin, to go into open public beta by the end of next week. That means you will be able to short, leverage, go long and arbitrage BTC. The strategies I and my analysts and developers have come up with will blow... your... mind! Here's a screen shot of the early beta trading desk: