Bonfire of the SPACs (S.P.A.C.-D.O.A.-R.I.P.)

 

We here in the blogosphere are constantly on the hunt for niche subjects to monopolize the edification of the masses about. It’s what we do. It makes us feel important and gains us a patina of uniqueness over and above the lamestream media.(1) Of late this blog’s search has lit upon the subject of SPACs, or Special Purpose Acquisition Companies. Although a brief reiteration of what said SPACs are might be in order at this point, it is more to my point to wax poetic about how much fun it would have been to be the informational hub of everything about them. What joy I would have taken in defining and refining the different classes and styles of SPACs and venturing guesses about the viability of each. My writing days would be mapped out for months in advance as I bloviate endlessly, a guru of the financial cutting edge like all of the crypto currency gurus.

Sadly, that’s exactly what it would be like. Just as crypto currencies are money issued by no one, SPACs are collections of money given in blind trust to someone who promises to make you rich by finding a going business to marry it into. The SPAC is then drained of all funds and you and the others in this collective now own a business, arguably still under the control of the person who promised to make you rich. This person then magically lists the business on the stock exchange and cashes you all out for oodles more money, as investors seek shares of your fine viable enterprise.

To date, at least part of the process has worked exactly once:

Grab Holdings, the largest ride-hailing and food delivery firm in Southeast Asia, clinched a merger on Tuesday with special-purpose acquisition company Altimeter Growth Corp securing a valuation of nearly $40 billion and paving the way for a coveted U.S. listing. The merger, the biggest blank-check company deal ever, underscores the frenzy on Wall Street as shell firms have raised $99 billion in the United States so far this year after a record $83 billion in 2020.

Cue stirring theme music and condor swooping animation. Opportunity has been sought and found! Just what the world needs… a combination of Grub Hub and Uber… in Southeast Asia, no less. Not exactly cold fusion, is it? Especially when one considers that the non-knock-off versions of both concepts have done nothing but bleed tranches and tranches of red ink here in the first world. I’m sure it will do just zingo business in a part of the world where they eat cats and drive bicycles. (2) Can’t wait for the NASDAQ listing. Oh, the vast promise of SPAC Land has the dreamers dreaming…

Frith expects more early-stage battery startups to go public through special-purpose acquisition companies, a trend currently sweeping through Wall Street, in part because management teams get the latitude to make future projections, unlike with conventional initial public offerings. If the secrecy in the battery industry remains as tight as it is now, you can expect more Scorpion Capital-style short seller attacks.

The above named Mr. Frith was deemed a bunko artist by a bunch of short sellers and is now envisioning MIGHTY SPAC as the savior for his venture. This is in opposition to the much dreaded path of actual financial transparency. Perish the freaking thought. Better to hide in a coop with birds of a feather.

And just as the story wends further, adding with complexity like a fine White Zinfandel, the spiked punch bowl is suddenly pulled. The Golden Age of SPACs is over…

SPAC mania has come to a screeching halt. Just last month, special purpose acquisition companies celebrated a head-turning milestone by breaking their 2020 issuance record in just three-month’s time. After more than 100 new deals in March alone, issuance is nearly at a standstill with just 10 SPACs in April, according to data from SPAC Research.

Kinda leaves the poor SPAC Research specialty prognosticator without a gun to holster or a bug to net. When, one wonders, did the whiz-bang consultancy have a chance to whip up a SPAC Research ™ wing in the first place? How much specialty experience can they have? From whence doth they cull their empirical data and seasoned insight? Lucky for those folks unemployment has been extended. Or you can accept being folded back into the Etherium Crypto Research pool at a junior level. Your call.

There’s trouble in SPAC land. (3) The SEC is mulling a new definition on the warrants given to SPAC insiders, a move that could weigh on the bottom line of these blank-check IPO mills.            

While SEC mullings have never stopped those truly inspired to blow money like drunken sailors, it ain’t good news. Bad mojo lurks in the fine print of the offers to those whose money is better than that of others. These halo-suckers (4) are often offered sneak peeks, tranche return protection, first pennies of every dollar collected or some sort of bonus dice blow--very little of which is kosher and none of which has ever prevented a dime’s worth of the catastrophic losses destined to inflict all. In short, warrants are come ons to start with, so exactly how shady they are is a matter of degree.

You will note that during the fly-like lifespan of the SPAC, the second cashing out phase never culminated. No one saw their pennies turned into IPO dollars nor bloated listings of equities on the NASDAQ. Which means that the 99 Billion dollars subdivided into 100 SPACs are now worth… wait for it… zilch. This clearly cannot be, since the SPACs themselves are simple balloons full of cash and should still have cash in them. Which can easily be returned. And I have a bridge in Brooklyn that you may buy with your returned SPAC funds.

During my first bout of opining and prognosticating on the wonderful SPAC Future I estimated that the originating parties numbered in the handful and that most of them were refugees from OTC pump and dump scams. I was close.

SPAC king. Former Facebooker and so-called king of the SPACs, Chamath Palihapitiya, has become the face of the great unraveling of these blank-check new issues. He raised billions for a series of SPACs which he regularly promotes on his social media channel. How are they doing? Per Bloomberg "Palihapitiya’s SPACs... have been among the worst bets."

By “Facebooker” our pals at Bloomberg are not referring to sub literates posting kitty photos and relationship updates in some sort of advertising supported internet garden. Nor are they actually referencing anyone who operationally works at Facebook. Instead, they are referring to a caste of people who became instant narco republic Richie Riches at the time Facebook became listed on the stock market. As I recall the investor pool’s story—which was made into a movie—most of these people were potential litigants against Facebook’s operator who took a piece of the action instead of suing the place into oblivion. Had they acted, there would be no Facebook, no Zuckerberg and they would have netted nothing other than goodwill assets (cups with the Facebook logo on it) and legal bills. In short, their qualification amounts to being ripped off by an internet start-up guy who stole their ideas and stole the money he was given to work on their projects and instead used all of it to start his own thing. Their improbable gain has been humanity’s loss. While I might want to rub one of these bozos for luck, their path to riches most resembles the one employed by Rodney King. Not the type of folks one should take advice from. (5)

In any case, I am going to have to find another niche to squander your attention with.

(1)  Lamestream Media: Also known as the press. To be distinguished from hate mongers and conduits for Russian disinformation or other social media rubes. An institution which has defended democracy world-wide, is professionally researched and deserving of trust.

(2) Massively unfair of me and racist. Still, if you could buy anything, why buy this? Why not buy a bunch of shoe stores. People actually need shoes.

(3) SPAC land. Also known by me as SPAC Land. Even though I did not coin the term, I insist that the Land itself be given its own prominence. At 99 Billion dollars it’s worth more than a lot of Lands out there.

(4) Halo-Suckers. Derived from the term Halo-Car, meaning a type of vehicle designed to bring people into the showroom, but which is seldom if ever purchased. A Halo-Sucker is an investor whose participation is attractive to other investors.

(5)  If Chamath Palihapitiya is so damn wise and prosperous, why is he peddling investments on a social media channel? Ditto Motley Fool and all of the other high profile investment touts. The answer to this question is both obvious and amazing.

Impeach Trump While the Impeaching is Good!

 I thought I was through with this. The guy only has two weeks left in office. How do you screw up two weeks?

By calling for an armed assault on Congress, that's how. 

No April Fool

Hi Interweb!

How’s it going! I’ve been doing a bit of writing, although obviously not here. That does not mean that I’ve forgotten this blog nor its attendant website HIL-GLE dot com. No sirree, not at all. Quite the opposite.

As promised many moons ago, HIL-GLE is about to go through a major replate and expansion. We have about 300 pages completed and are now inching our way to launch. The majority of these pages are dedicated to the new Streamlined Edition of Weird Detective Mystery Adventures. We have expanded our listings well beyond those found in the previous edition and the text has been extensively rewritten and reformatted for greater clarity and ease of play. All of this is part of a long-term plan to relaunch the game in print.

At this point I am thinking that we will be live by August, but it could be sooner. We also are planning on a pair of web novels for posting on these pages. And I have a whole bin of subjects to blog about that I have compiled over the months. Life incidents not intruding otherwise, I am hoping to make a dent in the stack. We may also revisit some of our other continuing topics, such as the Flying Car (two more have been “invented”) and the Electric Car.

Certainly current events have provided more than enough fodder for the dedicated blogger to feel prompted by. As recounted earlier, HIL-GLE is now a registered, card-carrying member of the Resistance. The experience has been an eyelash or so less than satisfying, although control of the House is nothing to sneeze at. I’m not sure toting a protest sign and rubbing shoulders with anti-fascists pushing for the legalization of prostitution contributed much to the cause. I am ready to resume my protesting, weather and proximity of protests permitting.

It’s been easy to relax one’s focus during these past few months.  Many hopes have been pinned on the legal process doing what the political process seems incapable of—removing the Orange Thing from office. Barring a reversal of fortune predicated on an attorney named Barr’s lack of reading comprehension, it looks as if the big probe struck out. That’s not good news, no matter how you slice it. The groundhog sees two more years of Trump, unless he massively overplays his hand.

If I were the Republicans, I would just settle for giving each other hickeys and blowing wet kisses at the opposition and call it a day.  Gloating is well within the norms for this sort of victory, as is the loud postulation of superlative hypotheticals. Break out the Emerging Republican Majority and all the other blow up dolls and party favors. All good fun and possibly deserved. Unfortunately, it appears as if the euphoria has turned sinister, if this recent missive from Trumpland to my secret identity can be believed:

Dear HIL-GLE’s Secret Identity,

President Trump has been vindicated, but now justice must be served.

It’s time to go after the witch hunters who allowed this illegal attempt to overturn the 2016 election to happen.

Kellyanne Conway, Steve Scalise, and Jim Jordan are all calling for Adam Schiff -- the congressional Democrat who led this witch hunt -- to RESIGN.

The rule of law in America is at stake.

If unelected government agents can get away with colluding with the losing political party and the mainstream media to wage a two-year-long witch hunt against an innocent man based on no evidence, what will become of America?

This time it was President Trump -- the most powerful man in the world.

But next time, the Deep State could choose to go after you.

Justice must be served. Adam Schiff, the Pelosi lapdog who replaced Devin Nunes as Chair of the House Intelligence Committee, cannot serve one more day in Congress.

He must RESIGN -- and if he refuses, then he must be expelled from the people’s House.

This is either silly or a classic example of overreach. By “unelected government agents” the Trumpsters mean the FBI, Justice Department, IRS and other cop types. They could also mean the mailman, but the mailman has not been tossing Trump’s pals in the pokey.

If we can’t trust these FBI, Justice Department, IRS cop types, I’m not sure who Trumpland proposes we do trust.  Their demand to refashion the whole shooting match in their own image seems a tad self-serving, to say the least. If this DEEP STATE was so powerful, one wonders how MAGIC TRUMP was ever elected in the first place. I am sure that all of these things will be explained to me, in exhaustive detail, once the DEEP STATE finally gets around to COMING FOR ME. In the mean time I will continue to dress in non earth tones and eat sensibly.

As odd as Trumpland’s missives have been, they pale when compared to a 24 page letter I recently received in the mail.  Fraud In My Mailbox has been a theme in this blog, mostly consisting of run of the mill trolling for geezers using various color of law pretexts. My latest treasure uses the rare Secret Society of Supervillains tactic, posing to initiate me into the hidden wisdom of the ancients through membership in their clandestine cult. No human sacrifices, but it was pretty flamboyant otherwise. And at 24 pages it was fatty as far as long form lies are concerned, outside of the format of the investment prospectus. A quick check of the interweb showed that it was well debunked—which is what you get for being so long-winded. I may still post parts of it, since it did contain some interesting flourishes.

Speaking of cults, not one, but two of the mega cults here in the Northwest Suburbs of Chicago have recently imploded. Cults are more common than one might believe, and they all have a discernable life cycle. Since this life cycle has not been covered to any degree, I may make it a subject of a new post. The two cults in question, Harvest Bible Chapel and  Willow Creek Church shared a lot of demographics in common and both essentially failed at the same place in the life cycle.

Our In Box remains jammed, in any case.  A new posting on trends we are likely to outlive will be live here shortly.

My Mailbox Full of Fraud Returns!

I used to dream about all sorts of things when I was younger. Many of these dreams were of the typical sort, involving nipples and wheels and such. Of late I have been dreaming about food. Literally. I have dreams about freaking food. No wonder I am fat.

My longer form dreams are about finding a bag of money along the roadside.

At some stage your dreams suddenly lower their expectations and it all comes down to comfort… food or cash. I suppose that is why I write, why I focus on writing fiction, to express my own dreams, to help people guide their dreams. At times I have written fiction for money, which is sort of a dream convergence.  There are other people also engaged in this craft, although some of them do not label their works expressly as fiction.

THE STUFF DREAMS ARE MADE OF

I have been neglecting the whole MAIL FRAUD beat for a while now. Mostly this is because I have been submerged for months in the re-write of Weird Detective Mystery Adventures, the re-write of two novels, the marketing of another novel, a change of day jobs and other life events. I intend to make amends for this lack of blogger activity over the next few months. When it comes specifically to the Mail Fraud beat, not much new or new-fangled had crossed my path in a long time. The Sweepstakes Audit Bureau seems to still be in business, despite my various reports here, as is the goof ball with his bad magazine marketing program and the guy running a contest “of skill” using a twenty-five year old abridged dictionary as the final and sole authority of which answers are correct. Even this wonderful scam is nothing all that new.

The Pitch: A shipping container has arrived with your name on it. It contains a new BMW. Seemingly the Beemer is paid for and insured and now all you have to do is file a claim and it will be released.

For fun and snicks, my oh-so-official Valuable Insurance Notice came in this bread wrapper-like sleeve.

No, Fedex has not expanded its services to a ground group called Pedex. And ‘Pedex’ as word or concept has not been copyrighted—because it can’t be, © or no ©. It could be trademarked, if the Fedex people or their lawyers were suddenly rendered deaf, dumb, blind and bankrupt. In any case, it’s not even a proper shipping label because it cannot be printed on.

The bread wrapper envelope is the most credible part of the presentation. Generic or not, a run of plastic sleeves takes some forethought to set up.  My guess is that was remaindered from some other junk mail run. The rest of this is the product of a good color laser printer and a professional folding machine—high end office automation, but nothing out of the ordinary. The fascination with long pieces of paper escapes me except that they are perhaps kin to other legal documents.

The skinny: He wants twenty bucks for processing. In return for this, he will release your claim on this shipping container. Inside the container are a BMW, a laptop computer, a Sony Theater system and “one Professional Maid Service.” That’s right! They’ve shipped at least one human in the container, which would be an admission of some sort of crime, if this pitch made any sense whatsoever. So for $20.00 you get one of these items—or—“over one million pieces of jewelry.” Which is to say that you will get “a” keyring. Very amusing.

(I held off on posting this for two years, partly because my examples were so underwhelming. Although the cost of producing semi convincing scam material has now fallen into the reach of everyone with a temp job as office help, the increase in postage rates has curtailed much of this activity. The scamsters can only afford to target the elderly at this point. My love for big band music not withstanding, I am not quite the geezer demographic sought, so a lot of my mail of this type has slacked off. Another thing holding me off is Microsoft’s new operating system eliminated my photo altering program. I used to doctor these things with the Ajax Telegraph logo to disguise my name and address. Now I have to use the silly paint program to run blue lines through things. I hate it when my blog looks like crap.)

This is another laser printer produced long form asking for twenty bucks. As with Emerson Publishing (DBA Sweepstakes Audit Bureau), our pals at Consent Advisory Services (of either Las Vegas, NV or Gilbert, AZ) are offering a report on where you can win money. They do not have $250,000.00 in ‘Monies & Durable Goods’ nor are they running a contest for such. It would not surprise me if it was the same report Emerson is so fond of offering. But it could just be a packet of coupons.

At least Emerson and Consent Advisory are offering something proprietary. This group of scammers is offering me a government grant, perhaps reselling me a government document. Although it says GRANT all over this silly phony replicant of a computer form, the plagiarized fine print on the back says it’s a report about sweepstakes. It’s a near word for word copy of Emerson and Consent Advisory’s rules, so maybe these guys are former cell-mates.

The upswing of our GRANT broker’s pitch is that he would like you to send him a check or money order made out to ‘AM’. Like all true scammers, he’s left a box to check, should you feel the need to just send him ‘Cash’.

It has been my experience that there is a bit more to these letters than meets the eye. Many of them are trolling for marks, attempting to locate the unaware or the elderly and unattended to. If you respond to them in any way you can count on some sinister follow up. My own last interaction with Emerson netted me a phone call from some scammer claiming to be a police officer. You don’t want to put yourself in proximity to these people.

My interaction with Emerson was a while ago and it seemed to me that the whole mail order contest scam was going the way of the Betamax. Given what I had collected, this is a beat I felt I could retire.

Until I got this.

This is flat out fraud, the product of a “professional” fraud ring. To be clear, this is not from Publisher’s Clearing House. There are some tell-tale clues to this, the weird and erroneous “International Lotto Commission” stamp just being the most obvious.  I invite you to read this thing carefully. True to their word, they did send me this wonderful check.

I have won six hundred thousand dollars, but they are sending me a check for another amount to cover incidentals. (Seven grand worth of incidentals?) The check is from an entirely different company. But in order to cash this check, I have to call Alex Gomez to make some sort of arrangements.

It’s an elaborate set-up for a pigeon drop. The check is no good. The company listed is out of business and the account closed long ago. (I have stripped the routing number.) Had Alex Gomez been in a position to make his pitch, he would have advised me to provide him with a credit card number or my own bank routing number or—if he and his pals are as direct as I think they are—simply hit me up for a “good faith” payment, probably for six grand. In the end, the only real money involved would have been the cash I sent to Alex and his pals.

I did call Alex Gomez at 4:00 AM in the morning. I got his none too convincing voice mail.  He left a message for his drug dealer on the system. I didn’t leave a message. The next day someone called me from his number and left a voice mail on my cell phone claiming to be a police officer. He was demanding a call back and threatening my arrest. Without using my name.

I did contact Publishers Clearing House and confirmed that I am not a winner. Truth be told, I have had dealings with them once before. When it comes to dispensing cash, they do not use any third parties. If there is even a chance that you are in the running for one of their contests, you will receive a form in the mail which you have to sign and send back to them.

Publishers Clearing House is used as a pretext for many scams of this type. It’s a daily occurrence. I also reported this to the postal inspector and Alex Gomez’s cell provider.

And now I’ve told you.

(Full disclosure: It would have been nice to win 600K. I could certainly use it. My detective work on Mr. Gomez and his idiot pals was fast-forwarded by my pal Terri, who figured out the letter as I read it to her over the phone. By the time I called Gomez, I knew the whole thing was fake. I called Publishers Clearing House not so much to report a crime, but rather because a man’s dreams die hard. By the way, I’ve lost two cars in one year, so the BMW would have been nice, too.)

Moneycode25.com (Cult Marketing)

God’s Financial Horizontal Passing Game

The Christian Right is repellent. This is something the Republican Party knows in its core. For every Bible thumping wing nut you attract, you repel two  members of the general public. The only advantage catering to this moralist minority is that they are twice as likely to participate in the political process than the average citizen.

It’s a statistical chimera, with the true results buried within category definitions and population overlays. But the conclusion is obvious and close enough to the truth on the ground to be actionable.

Beyond the political calculus, the Christian Right is a distinct culture. It has literature in all genres. There is a look and an agreed standard of comportment. It has its own music. The group is less clinging to regions or defined by education level or even by race than most would suspect. Economically they shade no better or worse than the average Joe in average times.

They do constitute a market unto themselves, with specific channels of promotion. And it’s a somewhat mature defined market. There are any number of proven postures tailored to reaching them, a whole cascade of ‘the phrase that pays.’

Moneycode25.com is a financial advice vehicle which is being specifically pitched at the Christian Right. Its appeal is chock full of custom ordered tag lines. Advertisements have recently aired for Moneycode25 on news stations and talk radio.

Moneycode25.com’s pitch is that its operator has discovered a magic system for creating wealth plucked from the pages of the King James Bible.  Through following a simple system, supposedly secretly adhered to by many millionaire investors, you too can ethically build a substantial fortune.  The radio advertisement directs avid listeners to a website. This website itself is—SURPRISE! SURPRISE!—more marketing. The actual product isn’t what one might expect and it isn’t actually called Moneycode25. In fact, there is no moneycode, no magic system plucked from the Bible and any pretense towards ethics is add-on eyewash.

That’s what we in Ajax Telegraph Land call a TwoFer: both a potential scam and a potential cult.  The good news is that Moneycode25 is nowhere near as bad as I suspected it might be. It is neither a scam by any classical definition nor is it overtly the conduit to participation in a proprietary religion. End of endorsement.

Unfortunately, it’s not very good, either. It’s nice to see that the field of Christian Right Financial Planning has advanced beyond the selling of gold coins. The appearance of this appeal is a step in the right direction.  And it isn't so much that Moneycode25 is in any way unsound, but rather that there is no there there.

Moneycode25 is itself an advertising vehicle, a product pitch in website form. The “25” portion of the name is meaningless and was added on—probably to secure the domain rights at an affordable level.  What Moneycode25 promotes is Ultimate Wealth Report, itself a product of long time wing nut marketer Newsmax.

Newsmax itself is a shabby operator, often pretending to be the fair and balanced version of Time Warner. It’s the K-Mart knock off of Fox News. This time they are pretending to be financial gurus—or they’ve hired someone to play the role. That said, Ultimate Wealth Report is a step up from their usual shoddy offerings.

The front man for Ultimate Wealth Report is, at best, an enthusiastic hobbyist.  That’s actually his own claim, delivered aw shucks style. He’s just a good old boy, with none of them fancy Ivory tower credentials. He don’t hang out on no Wall Street. Prior to being called by the Lord to promote financial increase to the masses, he was called to preach in more conventional venues.

On top of not having any credentials, he also has no real track record. After months and months of publishing and numerous weekly podcasts, this guy can claim to have been right exactly twice. And that’s stretching it. His other claims are equally nebulous. He helped guide his father’s 401K out of a lull over an undisclosed period. He went from making $15,000 a year to giving away up to $50,000 a year. Product claims don’t get any more meaningless than this.

This is the best Newsmax can do. He does clean up nice. He hits his mark. He knows his lines. He seems sober—at least on television. I highly suspect that his appearances on financial television have been bought and paid for.  This would not be unusual in and of itself. Most financial touts are paying for the privilege of talking at the talking heads above the stock scroll.

What does make him somewhat unusual is his thorough lack of qualifications as an expert.  This man wouldn’t even be considered an expert witness on the subject of investing in civil court.

He’s also no genius. His mysterious Triple Pronged Approach is disclosed as being nothing more than an amalgamation of three very well known and widespread forms of analysis. None of these systems is perfect and none of them have been proven predictive. (Hint: no system works.) At best, they are predictive for forecasting what other  people using those systems may think.  How he triangulates between the three isn't explained. It doesn’t matter. It’s all unreliable bafflegab and poop to begin with.

On top of that, he’s not going to teach you how to work this system. None for you. Too complicated for your feeble mind to comprehend. Instead he’s offering you a subscription to his wonderful tip sheet. But wait! There’s more! You also get his video podcasts. Plus some books. All for the price of a full tank of gas.

Some of the groundwork information he provides is quite sound. On the other hand, if the maxims wonderboy is spewing are news to you, you do not belong in the market. He doesn't quite go with “buy low, sell high”, but it’s pretty basic stuff. Overall, he’s preaching what they call in football a horizontal passing game.  He keeps you from making mistakes and chasing phantoms. You will be invested in Blue Chips, period. None of this will keep you from being wiped out by the defense—in this case, negative economic forces. The down side is that he has mitigated your upside. You don’t throw bombs, you throw for first downs. The strategy is stupid, unless you’re already rich. If you are this risk averse, the stock market is not for you.*

I fear that the stock market is simply not for most of the people he is out to reach. He is also giving some exceptionally bad advice, including seemingly advocating buying stocks on margin. This is a bozo no no, except for the well to do.  Ditto options trading. Even sophisticates screw that up on a regular basis. Moreover, the stock market is simply out of reach for people with fixed incomes, credit card debt or those who have less than a quarter of their earnings left after food and shelter are accounted for. No one should be pulling a Jim Cramer and living in their car while shuttling off monies to brokers.

Bottom Line: Ultimate Wealth Report is a valueless product, a well packaged and well targeted ball of nothing. For the price of a full tank of gas you can subscribe to all of the mainstream financial magazines. You’ll then have as much of the advice as you care to read, provided by real experts.

*Owning individual stocks is probably not for you. Invest in an EFT. These are available through most brokers.

(Full disclosure: Ajax’s own self-traded IRA is doing swimmingly. I’m not at guru level… yet. For the mean time I’ll remain a hack.  Thank you.)

AquaRug Sucks

I hope everyone out there is set to have a Merry Christmas. Winter showed up here in Chicago right about Halloween this year, so any festival rooted in the idea of making the darkness go away is good with me. This year finds me grateful for more items than I was last year and I hope the same is true with you. As I write this I have just finished my gift shopping, which was done man-style—a four hour search and destroy mission, with little wavering of purpose.

Normally I am long done with Christmas shopping by now. Time and finances sort of pushed my deadline back and I wound up venturing out with the great unwashed on the last weekend before the big event. Having done my marketing in the morning, I was able to dodge running through the teeth of the last minute idiot drove. As it should happen we are about to be blasted with more freezing rain which is bound to turn into something more substantial, so it’s best I went when I did. I intend to spend the rest of this weekend on more noble matters—plunking away on my new novel while experiencing via television the magic that is professional football.

I may not be a thoughtful gift giver, but I am a deliberate one. I knew exactly what I was going to get for whom before I started by venturing. There was a little wiggle room here and there, but I basically stuck to the program. With the exception of one item purchased at ALDI (an appliance, of all things), I did not buy things for myself and I did not impulse shop.

Impulse shopping is the thing of the rube, the nabob,  the allergic to money nitwit. It is the glut of our landfills, the reason for all 401K shortages. It is why Johnny must finance his used car. Should a fad against such purchases sweep this great land of ours, family fiscal solvency would become commonplace. Money is a real store of social value and should be husbanded with patriotic fervor, used to improve one’s material lot, provide for demonstrable needs and cushion the fall of unkind fate. Having just emerged from a spate of unkind fate myself, may I state that the companionship of close intimates and the love of my creator were the wind in my sails. That said, it also helped to have a giant bucket of money handy. And I had that money due to a long standing habit of not spending it on stupid crap.

Wait. I’ve previously confessed to buying an InstaHang. And a Wax Vac. Two more obviously useless items it would be hard to imagine. As previously covered, the InstaHang is a somewhat medium tech replacement for the hammer and nail; and the Wax Vac is non functional ear crud remover. Since I’m up here on my paragon of frugal virtue white horse, I might as well confess to Aqua Rug.

Mind you, it was not my intention to rat Aqua Rug out. I gave Aqua Rug a fighting chance. In fact, I have now owned FOUR Aqua Rugs. I bought two before learning the DISMAL TRUTH about Aqua Rug and then spent an additional $13.00 plus time replacing my original two Aqua Rugs after they had become utterly contaminated due to entirely normal use. And I sort of knew better, but I was just hoping the becoming a filthy discolored mat of mildew and mold was an isolated product defect and not a design flaw.

Let me take you back to step one. I wanted a nice shower rug. The problem here is that there aren’t any. Shower mats are by nature disgusting. They all become stained, warped and nasty over time and with conventional use. To think that there is some other phylum of object that will withstand the shedding of your dead skin, hair and other HUMAN FILTH day after day without becoming reflective of the environment to which it has been subjected is to believe in fairy stories—or Aqua Rug’s utterly fraudulent product pitch.

Aqua Rug goes its bath mat brethren one worse by becoming irretrievably human waste horrific in a far shorter time than normal. Of course, your normal bath mat is nothing more than a partially embossed swath of rubber with one side covered in sucker things. Over time, slime build up, spills, and normal use abrasion will render this fairly simple object unsuitable for being in your abode. The actual life span of your average shower mat is more dependent upon the consumer’s level of environmental perception and toleration for cohabitation with not nice things than any other factors. Your new significant other will replace your shower mat. A new shower mat will be on the list of things that you need when you move. The moment any shower mat’s condition is noticed, its days as a functioning object in your home become numbered. It was forever thus.  

Aqua Rug is something new, something different, but weirdly in no way improved. It’s actual product claims are a little hard to parse. If there is an advantage promoted, it is in the Aqua Rug’s ability to keep hair from clogging your drain. Provided that the Aqua Rug is fully positioned over the drain, it acts as a filter for such leavings. Oddly, it is this sole advantage, this selling distinction, which leads to Aqua Rug’s downfall.

The Aqua Rug is sold as being some sort of space age breakthrough. And it might be, if you count the now defunct Astrodome and its subsidiary innovation Astroturf as being particularly cutting edge. The actual product promotion touts whatever grade of plastic like substance used in Aqua Rug as previously deployed as carpeting on the decks of yachts. (Has anyone ever seen a carpeted yacht deck?) By presentation, Aqua Rug should be a swatch of plastic carpeting (Astroturf) affixed to a rubber backing. It is shown as entirely covering a shower stall and being cleaned effortlessly with a common hose. On TV it looks like white Astroturf.

As odd-ball of a product allusion as that might be, Aqua Rug is not actually Astroturf nor anything like it. Nor is it carpeting at all. Intead it is several layers of intermeshed rubber wire set in a rubber frame. Supposedly it looks like a flat natural sponge. To my eyes it appears to be a drunk hyperactive spider’s concoction. There are layers and layers of squiggly plastic strings.

Basically, it’s a shower mat—and not a very big one. Unlike your average shower mat, it does not have an array of suckers on its surface facing side. Instead, each of your Aqua Rugs has one typical plastic sucker riveted to its edges. The action of these suckers is all that keeps Aqua Rug in place. Cheapo touches though they may be, the suckers work. End of faint praise.

It should also be mentioned that Aqua Rug stunk. The out of the box stink eventually faded (it smelled as if it had been in a fire), but I can think of few things other than my new rat pelt leather jacket which have radiated quite as much stench out of the box.

Aqua Rug is originally a sort of beige. The two I had were at first the same color. Their replacements have also started out this color. None of my four Aqua Rugs stayed this color for long. All of them soon sported spotty coats of body hair brown, bath gel blue, shampoo green and red.

You see, Aqua Rug performs its miraculous defending your drain function by eating everything that passes through it. This diet of skin, body hair, filth and soap coloring becomes entwined in its little meshes, where it helps form colonies of sticky gunk wads. Soon black splotches will be showing from between its bristles, set against a patchwork of whatever goop and body hair hues prevail in your home. It’s like having your own swamp.

None of this hoses off. It does not wash off if placed in a washing machine. Frankly, it would be impossible to clean without cutting the damn thing open.

After my first two Aqua Rugs became discolored, I attempted cleaning them in every way the manufacturer recommended. They never came clean. They never even remotely looked clean. Nor did my originally identical shower mats—which were in the same tub—ever come to resemble each other in hue again. So I contacted customer service.

Aqua Rug comes with a 50 year guarantee. (As they should, since they cost 25 bucks a copy.) I was intstructed to send the mats back, at my own expense, after which a new set would be promptly sent to me. The lady on the phone seemed to be well aware of the mildew issue. True to their word, they sent me two new Aqua Rugs, which did arrive promptly.

These mats did not smell. Moreover, a note that came with them stated that they had been treated to thwart any occurrence of mildew and mold. Reassured thus, I placed the replacements into their new home.

Three weeks later, they look like the old ones. Or should I say they have the same affliction as the old ones. If nothing else, they are rather unique in the ways they stain up. As opposed to spending yet another $13.00s for them to meet their makers as their brothers did, I will be introducing them to the landfill cycle.

All in all, $63.00 up in smoke.

**

And a Happy New Year to you all if we don’t speak again before then. 

Cult Stocks (Explained)

It’s a chance at being in on the next hot thing! They’re less expensive than sports teams, but just as overpriced.  Like anything else, sometimes investing is more about showing off than it is about making prudent choices. With Cult Stocks the odds are such that  your only hope of making money comes in the form of a bigger idiot being somewhere down the line willing to pay more for it than you did.

Last week Time Magazine  decided to pay ham-handed tribute to stock market hot streaker Carl Icahn. Time (which also owns Mad Magazine) obviously  isn’t beyond distorting a cover subject’s image a bit. (Anyone remember what they did to OJ?) All of this said, it’s a closer likeness than the one of Carl shown on CNBC whenever he just happens to call in.

For the record, Carl is not the steely eyed seer of the future portrayed so dynamically via head shot on CNBC. And his hands are nowhere near as big as what Time is depicting.  Instead, he’s a stereotypical bent over old Jewish man—the type New York is chock full of. And he’s not the master of the universe, either.

Quick, name an investor.

Ok, other than Carl. I gave you Carl. Name an investor of historical importance. Name an investor whose name has been passed down to us from ancient times--or even the Gilded  Age.

Unless you are really clued in, you’re going to come up with J.P. Morgan. He’s pretty much the only one you have to know. The rest of the titans of finance fell from memory moments after their fortunes were disseminated, their names mentioned only on occasion by their heirs. Most of the rich dead people that come to mind weren’t investors, but rather inventors or actual business operators. The guy who lent the guy with a dream money usually just gets his interest while others get the fame.

No one is going to remember Carl when he kicks, either. But let’s let a sad, old man have a moment in the sun. Carl is a big deal. He is a very big deal, indeed: in a class with Warren Buffett and T. Boone Pickens and Mark Cuban. (And Michael Bloomberg and Sumner Redstone, but that’s stretching it. Although damn fine finance twits, Redstone and Bloomberg made their cash in operating going businesses, not lending money.) And by some extraction Carl is alone as an investor--a pure investor-- with Pickens, since Buffett and Cuban operate the entities they own. But why quibble? All of these guys could quit tomorrow and cash out for more than many states are worth. And none of them invented squat to get where they are.

Carl strayed onto our Scams In The News territory a little while ago. Since he’s topical now, we’ll start our commentary on Cult Stocks with him. Carl just made a killing riding a Cult Stock called Netflix. Netflix itself is a fairly unremarkable operation which largely mails people movies on video discs. If this hardly seems like the thing futuristic dreams are made of, it’s only because it isn’t. Nor is actually becoming a movie studio or pumping content to high end home theaters activities one would think of as ground breaking. If anything, the firm is an unfocused operator in mediums on the waning end of their utility. It’s plying waters of technological half steps and heading in all directions at once. And if you invested in it when Carl invested in it, you would be wiping your ass with C notes.

As tempted as one might be to cry ‘tulip bubble’ at the whole thing, that really isn’t the essence of a Cult Stock. Although any equity can rise or fall based on internal or external events, Cult Stocks attain a patina—a halo—which causes their real market value to rise rapidly and then keeps their price above rational parameters. At least for a while. (See the raft of 3 D Printing stocks.) They attain this halo in two different ways.

Way One: If the Cult Stock  were a peanut farm, how valuable would it be? Everything has a limited market. Everything has inputs and outputs. Strip away what it is the business actually does and look at it as if it were a generic business, or peanut farm. Many Cult Stocks would make fantastic peanut farms. Some are larger than the world’s peanut industry by any number of measures. Cult Stocks of this type have special efficiencies,  in scale or profitability. They are making a lot of money in a way the other folks can’t.  

Way Two: The business is transcendent.  It is not a peanut farm at all. No one can make what it makes. It produces as a monopolist a commodity the world must soon consume profitable quantities of. It renders others in its segment obsolete. It creates wealth from thin air. It turns the world, makes the stars shine a new color.  (Or it cures cancer. This is where most bio stocks try to be.)

Netfilx is a Way One stock. Carl made it that way, forced the transformation. Prior to Carl taking his massive stake in the firm, Netflix was merely a very profitable mail order firm. It had been husbanding its nice haul in hopes of innovating its way to a more future-facing business model. Netflix was fairly convinced that mailing people movies is a delivery mechanism with a short shelf life and had been steadily investing in the next big thing. Then Carl showed up. Carl and his thugs said “Stick em up” and made Netflix pay out its R&D cash in the form of dividends now.

That’s a rather negative view of it. Carl has done this before. It’s his trademark move. Carl refers to his initiatives as enforcing investor rights. Other people take the view I have expressed.

Carl does have a point, however. Counting on Netflix to innovate its way out of the mail order business is like counting on AOL to innovate its way out of the pay for email business. Most R&D projects are odd ball wish fulfillment exercises and thorough wastes of money. No right thinking banker would touch a start up direct to Playstation movie studio with a twenty foot pole. In the view of people like Carl, the fundamental best social utility for firms such as Netflix is to make hay while the sun is still shining. By throwing off it profits to investors, Netflix frees up capital to find innovation on its own—or hookers or speed boats. One could argue that the launching of another movie production house or the enveloping for cash of Time Warner by AOL serves no grand moral nor economic purpose.

That said, history indicates Carl is wrong. Nearly every innovation we have today is the fruit of a long term R&D program. Crackpot notions with connected sponsors are the mother’s milk of our standard of living. Factually, bankers don’t speculate. (Or they shouldn’t.) Innovations such as photo offset printing, the automobile and the light bulb would have never come about without companies making continual and speculative investments in them.

(Or they come about through a process I will call Cascade.)

I mention Carl and his ilk here not merely to pick on them, but also because they are instrumental to both Way One and Way Two.  First, only  a guy like Carl can make Netflix do anything. Netflix could have been spending its R&D cash on innovations in sea foam pillow stuffing or astrology readings and, chances are, the lapdog board of directors and equally disinclined to look a gift horse in the mouth investment banks would have let them. (Quick: what is the next innovation in movie delivery systems? Telepathy?) There is a role for the guy who says “WTF”, especially if he owns a large chunk of the dump. Second, people follow guys like Carl—either to mimic them, guess their next move or triangulate around them. They are the catalysts of both Way One and Way Two.

That, in a nutshell, is the entire Cult Stock dynamic. The only significant nuance is the operational theory of the guy like Carl. Carl’s theory is that businesses exist to make him money and that they should pay him money as they make their money.

There are other theories. Once upon a time there was a company called IT&T. Arguably IT&T was International Telephone and Telegraph, but it also owned hotels and land and a movie studio and a bunch of other things. The theory behind IT&T was that it was economically indestructible, that it could make massive profits in any cycle of the economy. (That the economy goes into cycles with equal numbers of winners and losers depending on condition is the supporting theory.) This theory and the guys like the guy behind it were once very influential and many stocks like IT&T became Cults. And then theory went out of vogue. And IT&T (or ITT) was chopped for parts.

In IT&T’s case, the theory was simply wrong. (There are not an equal number of winners and losers in any business cycle. In general, everything is in the same water. When things are good, it’s good for everybody. When things suck, they suck everywhere.) But the important thing to remember about investor theories is that they are fairly much disposable. In true Cult terms, they are the cosmology. Unlike cosmology in actual religious Cults, in the stock world what is touted as a principle as fundamental as the law of gravity today is often dismissed as utterly irrelevant the next. All of it is dependent upon the perceived current track record of the theory’s promoters.

Dogged followers of Carl would have been led to the promised land of Netflix and scored big. But they also would have followed him into the black hole that is Herbalife. This is where Carl drifted into our radar, so it’s a good illustration.

We cover scams here. Herbalife is a Double Threat Scam Artist, both a phony baloney patent medicine purveyor and a pyramid scheme. The originators of the Herbalife/Nutrisytem scam bailed out once it became a stock. Those unfortunates running Herbalife now are merely stuck with an investment vehicle based on criminality. At one point a guy like Carl named Bill presented a paint by numbers assessment of the firm, detailing its the emperor has no real customers fleecing of the hopeless dupes nature.

This was no act of altruism on Bill’s part. Bill was hoping to convince his own followers to organize an attempt to ride Herbalife's stock price down to zero. (Short sell into oblivion.) It would have worked, too, but Carl stepped in to save Herbalife—solely it seems because Carl doesn't much like Bill.

The history of Cult Stocks are rife with such incidents.

Just as all religions are not Cults, the vast majority of stocks are not Cult Stocks. (Herbalife is not a Cult Stock. As a stock, it is fairly ordinary.) The analogy between religions and stocks ends here. There is less to stocks than there is to religion. And becoming a Cult Stock is not necessarily a bad thing. Most stocks aspire to have a Cult phase—or an award in overall valuation for the occasional home run. Public Trust companies always seek to be more than just the sum of their assets, and the good ones arguably are.

At the dawn of the modern stock era, slightly before the American Civil War, most public trust companies were aspiring Way Two Cult Stocks. This caused the reputation of the market as a whole to flounder. Such luminaries as Ulysses Grant and George Armstrong Custer fronted so many failed Way Two stocks that it negatively impacted their reputations. In response to spates of skullduggery the market has emplaced certain valuation barriers. The effectiveness of these measures is historically uneven, but in general you need more than just a sales pitch to get your firm listed and traded. That said, stocks themselves are financial commodities and the market will print up as many shares as there is demand to buy them.

Cult Stocks are very prone to fast movements in price. They are more the prisoners of current market emotional truth than other stocks are. They sell for more, they fluctuate widely and then they crash. If there’s still something there there when the smoke clears, the stock goes onto be something which trades within general market ranges. It’s the new kid in school and then it’s just Stinky the Fat Kid. Most Cult Stocks are new or in new industries.   

To take us back to our example of Netflix, it’s only slightly new. Nothing I’ve said should disparage the firm’s enviable track record. They are the cause of woe in the cable television business. They’ve put Blockbuster out of business. As stupid as renting movies by mail sounds, it’s a killer move and it’s all theirs. It was already trendy and profitable before Carl set up the slot machine to pay out. That it is paying out so well—perhaps at the cost of its future—is what makes Netflix so Cultic. Lots of old dogs have been Culted up by the likes of folks like Carl.

(Carl’s smash and grab approach isn’t particularly new. Carl is just particularly good at it.)

Most Cult companies do not become so as a result of investor activity. The majority of existing firms which are transformed into Cult stocks can attribute their rise to the influence of an actual operator or a breakthrough product. But an old stock suddenly becoming a Cult stock is more an exception than the rule. The vast majority of them are start ups, their rise powered by an overabundance of expectation.

You can’t bottle it. They’ve tried.

The original Cult Stock was the Bicycle Trust. Its core idea was to standardize the parts and construction methods of the bicycle industry. Enthusiastic backers felt that the bicycle would  change the world, that entire cities would be reconfigured to accommodate this new form of transportation. The Trust became flush with investors and merrily sold stock, first to build itself up and then to fund its operation. And for a time, the Trust’s shares were the hottest thing out there. Once it became clear that the bicycle was more a fitness craze than an innovation in personal transportation, the Trust went bust. And its shares collapsed.

But it wasn't quite done. It emerged from bankruptcy as the first large scale auto manufacturer. Large scale may be a bit of a misnomer, but they were bigger than all of the other firms. (This was at a time when Henry Ford was still working as a machinist.) It eventually issued stock again and then got hot when it attempted to create the first mass production electric car. (Sounds like a familiar concept, doesn’t it?)  Again its valuation did the happy dance. And then it died for the final time.

This fairly much traces what happens to the vast majority of Way Two Cult stocks. I am calling this process Cascade. You think something is such a good idea that you are willing to pay any price to bring it in. Predictably, you go broke. Then another group of guys buys all your crud on the cheap and tries to make a go of it. Then one of two things happen: (1) the thing’s a zeppelin—it’s a bad idea and no amount of money will make it work; or (2) the infrastructure has been acquired at an affordable price thus enabling the product or service to become profitable to produce. Event 1 is more common than event 2, but event 2 is how many industries become established.

A lot of Cult Stocks are on their way to the cascade process. Others become amalgamated—picked up and absorbed by firms in tangential businesses. Amalgamation itself, although not currently trendy (don’t tell Warren Buffett) is often the cause of a stock attaining Cult status. It should also be said that amalgamation is the fate of most stocks, Cultic or not.

It’s hard to predict the fate of the current crop of Cult Stocks. The best one can do is attemot to draw historical allusions.

Former Cult Stock Blackberry seems unlikely to continue as a going concern. It has essentially fallen prey to the cascade process, as has nearly every original leader in the handset business. The best analogy one can find is in the old stereotype industry. The stereotype was an early method of setting printing type by the page. Various systems for doing this were the rage of the stock market in the 1800s. And it was a fight no one won. In the end, stereotype forges of various makes became the industry of small businesses. Every dollar spent by the investors was lost and the innovation essentially became public domain property. It was only after electrification that one public trust company (Linotype) was able to exploit the field. As with stereotypes, it seems that the money invested in Blackberry went to advance the field as a whole, but not create much return to the investor in that firm. (Broadly speaking.)

Current Cult Stock Apple is essentially in the fashion business. How long it can continue to be cool and charge a premium for commodity type products is unclear. Like Google, it rides high on a mound of cash in reserve. Both firms are potential targets of Carl-like activity. Oddly, rigging the cash machines so that they pay out in cash may be one of the few ways either firm can maintain their Cult status.

Amazon is the Bicycle Trust of the 21^st Century. The idea of being a mail order house for everything is as old as Sears. Its efficiencies are all government subsidies. (The internet, the post office and increasingly spotty exemption from sales taxation.) It needs to start making real money fairly soon or it is destined for the fate of the stereotype.

Tesla may be one of the few Cult Stocks with an actual future as an independent entity. Not at its current valuation, of course. But it is otherwise acting like every start up car company in history. Historically all major car companies are founded with a technological focus (an efficient electric engine) and an orientation to the top of the market. Once it has its name and methods established, the firm then telescopes down market, making masses of cars for the masses. I think what takes people aback with this firm is that no one has started a car company in a very long time. If you hold up the mirror of history, this is what many of them looked like when they started up.

Henry Ford didn’t start off by making the Model T. Ford’s first company made Cadillacs. Cult Stocks like Tesla have always been a part of the auto industry.

Several firms started to jump into the auto market with the collapse of the Bicycle Trust. Ransom Olds and then Henry Ford proved that the market for cars was larger than first anticipated. (Again, this is prior to the Model T’s introduction.) In keeping with the perception that cars were the coming thing, two identical trusts were formed to amalgamate the auto industry.

United Motors was the first of these Cult Stocks. It’s literal model was to sell stock and use the funds to buy businesses in the emerging automotive industry. And it would keep printing stock until it owned all of the industry. Or a lot of it. Absolutely no effort was made to rationalize or coordinate the affairs of its holdings. (Shades of Warren Buffett.) In a lot of ways it was its own sector spider or ETF. It was run much in the same way the later IT&T, a method called “portfolio control”. (Again, shades of Warren Buffett.) Most of what United Motors wound up owning were the former assets of the Bicycle Trust, making it another example of cascade. Through various twists and turns, including a bankruptcy or two, the firm became known as Maxwell Manufacturing. The firm eventually renamed itself after its savior CEO and is today known as Chrysler.

The other completely identical trust was called General Motors. Both United Motors and General Motors were Cult Stocks in their day.