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Do you ever get so angry that you think about what you could have said better in the last argument?
For the past two years I’ve been on an e-mail list for investors and traders. The problem is that I’ve kept quiet and everyone else has been shorting the market. Every other day, there is a new blitz of e-mails shooting around saying something like “this is like 1999!”, “this is a bubble!” or “why isn’t the market going down? Google just missed by 3 cents. Shouldn’t this be a crash?”
This has been going on for two years. When the markets fell in February, the general response was: “Finally! Now all those bulls are going to get what’s coming to them.” Then the market went on to hit all-time highs.
Same thing the other day when the markets fell due to Google’s “miss”. You know what, maybe they’re all right. I have deep respect for all these traders and investors and I’ve known them for years. But I can’t handle the non-stop pessimism, particularly in the face of a market that has mostly risen, give or take a few blips.
So finally I wrote to the list: “How come you guys are so bearish all the time? Isn’t it time for a little self-reflection to understand what’s been wrong about the bearish premise over the past two years?” Then the fun started.
It’s important to note that the bearish case has almost never made money. Short-selling is not an investment strategy. It’s not an asset class. It’s not even a successful hedging method. Short-selling is hard and even the pros have a hard time making money at it (Jim Chanos: you’re the exception.)
But it’s hard to disagree with people on an e-mail list. I was instantly blitzed: “What stocks do you own? Let us see your whole portfolio!” My credibility was in question.
But maybe I should ask myself, are we in a 1999? There have been a lot of articles about what year we are in. Some people say 1999 or 1998, that the bubble is about to froth up again. I’ve seen everything from “2007 is the new 1937” to “2007 is the new 1896”. The good news is that I think 2007 is probably the new 2008. In other words, the best is yet to come.
I’m excited about new products and technologies in ways that go beyond the feeble internet that was around in 1999. I love the iPhone, the fact that I have full web access while standing on a street corner. I like my video iPod. The internet is the same as it ever was but I’m lovin’ Facebook.
Facebook is almost like a mini internet. For a while I was jealous of Mark Zuckerberg, the chief executive of Facebook. Apparently he spurned an offer or two in the $600m range, then the $1bn mark, and maybe recently near $2bn. I thought to myself at the time: “Man, that’s the last time that kid is going to see those numbers.”
I was right, but in the wrong direction. Now the rumour is that Microsoft could buy Facebook for $6bn. He shouldn’t take it.
After all my jealousy I finally signed up for Facebook two weeks ago. It was incredible. I am on there about 30 times a day. It was like I was missing the party. Instantly all my venture capital buddies, writer friends, chief executives, entrepreneurs, etc, were messaging me: “What took you so long?”
It’s like a mini internet that is neat and organised and not only are all of your friends there but so are your heroes. A Facebook page neatly organises interests, activities and the Facebook applications that people collect. If a Facebook page is like a mini-personal website, the Facebook applications universe has become a microcosm of all the best web applications.
My prediction is that every business, business owner and advertiser is going to migrate to Facebook. Facebook applications are going to eventually provide real PayPal-style commerce and allow for transactions. Advertisers are going to be able to do real broadcast micro-targeting in a way they were never able to before.
Advertisers are dying to talk to their demographic. The teens are there, and the organisation of content and information makes it a thousand times easier to target compared with MySpace. Additionally, with the help of private companies such as Lotame that focus on social media marketing, Facebook is going to change rapidly over the next year. So rapidly that it will call into question the advertising models of just about every other website and media property.
Facebook shouldn’t sell for $6bn or even $20bn but should wait until it has about $300m-$500m in earnings before interest, taxes, depreciation and amortisation, go public, and then make its way to the $100bn-plus market cap I am confident it will eventually deserve.
Oh, and it’s because of the innovation that is creating companies such as Facebook that I think this bull market, which started in 2002 (or 1871, depending on how you look at it), has a very long way to go.
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