-- Posted Thursday, 30 November 2006 | Digg This Article
| Source: GoldSeek.com
Rick's Picks
Thursday, November 30, 2006
"Phenomenally accurate forecasts"
Here's a story that nicely encapsulates these interesting economic times, from the front page of Wednesday's San Francisco Examiner: "Agassi suffers a loss – in sale of Tiburon home." Who could have predicted, just a few short years ago, that someone selling a home for $20 million would have lost money? But Agassi most surely did, since the sale price is about $3 million less than he paid for his Bay Area dacha five years ago. The guy who scooped up this bargain, if a $20 million home can properly be called a bargain, was one Stuart Peterson, a Dotcom 2.0 zillionaire whose hedge fund had acquired a large stake in YouTube before Google bought the company last month for $1.65 billion.
It's too early to speculate on who overpaid more, Peterson or Google. But suffice it to say, in these breathtakingly liquid times, the dollar amounts involved are probably just chump change to either buyer. But whereas Peterson can settle into his fabulous new digs and enjoy such creature comforts as no Roman emperor or pasha would have dreamed of, the big spenders at Google will be tasked with the problem of making a profit on their $1.65 billion investment.
Google's Blunder
At first glance that would seem to be a simple matter, since YouTube is currently the 800-pound gorilla of the Web, delivering one of the biggest captive audiences on earth. But delivering to whom is a question that the entrepreneurial turks at Google seem not to have considered, at least not in any depth. The simple answer is that YouTube users have been delivering the content to each other, notably without the help of advertisers and media placement companies trying to broker the middle. Will millions of cyberworld junkies continue to imbibe snippets from YouTube if every video they disseminate to each other gets tagged with a banner ad, or preceded by a 30-second scroll from a corporate sponsor? My guess is no – that the instant Google bought YouTube with the goal of monetizing those millions of eyeballs, the property became worthless.
The big advertisers seem to have figured this out, even if Google has not. Consider the recent phenomenon of Lonelygirl15, in which two young entrepreneurs hoodwinked millions of web-browsers into following the day-to-day joys and sorrows of a 15-year-old girl with a spycam in her bedroom. Turns out lonelygirl15 was actually a tightly scripted 19-year-old actress, and, as an astute viewer soon noticed, every single item in her bedroom came from Target. But even after the hoax was exposed, lonelygirl5 continued to attract such a huge audience every day that her creators naturally assumed that all those ears and eyes could somehow be monetized. A top Hollywood talent agency agreed and arranged for lonelygirl's creators to meet with some big-time television sponsors. So far, though, the shoestring producers have gotten nary a nibble, presumably because even corporate stiffs seem to understand that lonelygirl's down-home appeal would not bear the weight of, say, a Subaru promotional campaign.
Clueless as Microsoft?
Of course, even if it turns out that Google has made a $1.65 billion error, it's not going to bring down the company. But it just might end the firm's honeymoon with Wall Street, which until now has assumed Google could do no wrong. It wouldn't be the first time that a company with almost unlimited cash in the till received a comeuppance in the form of dramatically lowered earnings multiples. Think of AOL -- and of Microsoft, which for all of its surplus billions is perceived by investors as totally clueless (or worse, considering the egg that Zune appears to be laying). Totally clueless, Google is surely not, but the company may still discover that improving on or meaningfully expanding the search-engine business model that is already working so well for them will not be a piece of cake.
Meanwhile, Andre Agassi's $3 million real estate loss suggests that even if the dot-com craze has returned, however briefly, to captivate us once again, the housing boom is over for good. One might have thought that the mega-rich who buy and sell houses in the $10-milllion-and-up category were immune to haggling and economic downturns. But where real estate deals are concerned, the rich evidently are not so very different from the rest of us as F. Scott Fitzgerald once wrote. Yes, they do have more money. But as the Agassi sale makes clear, they are manifestly unwilling to part with preposterous sums of it if they do not believe the returns will be even greater. If Andre Agassi could not find a greater fool to take him out of a spectacular property at a profit, it is only because the pool of buyers no longer believes that still higher prices are inevitable. This epiphany has already begun to cause the broad real estate market to detumesce. But the fact that even the super-rich are now having second thoughts about how they spend their millions is a clear sign that deflationary psychology has taken root at all levels of the economy.
***
Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in i ssues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers' initials will be used unless expre ss written permission has been granted to the contrary. All Contents © 2006, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Thursday, 30 November 2006 | Digg This Article | Source: GoldSeek.com
