Mish's Global Economic Trend Analysis |
- Chris Christie on Sick Pay Payouts: "Only in Government"; What You Can Do To Help
- Reflections on the LinkedIn IPO and the Usability of LinkedIn Itself
- Mania is Back: LinkedIn IPO Soars as Much as 173% in One Day
- Will China Have a Labor Shortage, Sending Inflation Out of Control?
- Trichet Goes Ballistic, Walks Out of Meeting Over the Term "Soft Restructuring"; Infighting Over Who Replaces IMF Chief; Some Suggest Trichet
Chris Christie on Sick Pay Payouts: "Only in Government"; What You Can Do To Help Posted: 19 May 2011 08:10 PM PDT Most of you know I am a huge fan of Chis Christie. I never tire of listening to what he has to say. Once again he is taking on "big government" with a well reasoned video as to what reform is or isn't. Please watch Chris Christie on Sick Pay Payouts: "Only in Government" Partial Transcript Right now, the total accumulated sick leave liability for governments across New Jersey is $825 million. That is how much we will have to pay out in sick-leave payouts, currently.If you live in New Jersey, please contact your legislative representative and let them know you are tired of having your taxes raised so that a select few can have benefits that most Americans will never see. Click here to Contact Your New Jersey Representative. Alternatively, here is an Interactive Map of New Jersey Legislative Districts. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Reflections on the LinkedIn IPO and the Usability of LinkedIn Itself Posted: 19 May 2011 02:09 PM PDT In Mania is Back: LinkedIn IPO Soars as Much as 173% in One Day I discussed the mania over the LinkedIn IPO. I have a few more comments that I also added as an addendum to the above post. .... Addendum: People chased the IPO as high as 122.70. After hours the price is down to $92.40. Those who just "had to have it" at any price are now down 24.7% I suspect insiders will be bailing like mad as soon as the restricted lock-up period is over. Reflections on LinkedIn LinkedIn has 100 million accounts. How many are active? How often? For what purpose other than everyone being "linked in" to everyone else? The key questions are:
It's fair to point out just because I have little use for LinkedIn at the present time, does not mean others feel the same. Indeed, I may even change my mind and find a use later on. Merging Profiles I setup a LinkedIn account primarily because hundreds have asked me to be "Linked In", not because I had a particular need. In fact, I have two LinkedIn accounts, both in my name, one under an email account I no longer have. I do not know my password for that account. I would like to merge the profiles because people find the wrong (inactive) "Mike Shedlock" profile all the time. Unfortunately LinkedIn offers no convenient way to merge profiles. Worse yet, I get invites all the time with no real way to reply to them. It is a mess. People have been bitching about this for something like forever as a search for merging linked in profiles shows. LinkedIn has a cumbersome solution that involves inviting everyone from one group to another. Log into your old account and click on My Contacts.Got that? How difficult can it possibly be for LinkedIn to automate that? I did not bother. I do not want to pester people with LinkedIn requests even though I do not mind others asking to be LinkedIn. By the way, If I do not reply to your request to be LinkedIn, it is because you found my profile that I no longer have access to. One Final Point on Income In order to justify the absurd valuation and growth metrics of LinkedIn, expect to see some high-profile announcements of earnings improvements in the first few quarters to come. These deals will have been arranged in advance, but that will not make the growth sustainable. However, the paced announcement of stacked-up deals will provide time for insiders to unload shares to greater fools expecting the perpetual growth that is priced in. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Mania is Back: LinkedIn IPO Soars as Much as 173% in One Day Posted: 19 May 2011 12:59 PM PDT Proving that extreme sentiment can always get more extreme, inquiring minds are focused on the LinkedIn IPO that soared from $45 to as high as $122.70 in a single day. Please consider LinkedIn stock soars in IPO LinkedIn's stock (LNKD +126.40%) soared more than 140% to $108.25, valuing the company at roughly $10 billion, as the professional-networking site began trading on the New York Stock Exchange.100 Million Members - OK - What about Income? LinkedIn boasts 100 million members. I am one of them. But what is a member worth? More importantly what kind of income does LinkedIn have, and what will the growth in income be? Reality Lenses takes up that question in IPO Mania — LinkedIn up 100% in 2 hours So now, the market cap is in the $9-10 billion while company generated $9 million last year, and is hoping to generate $15 million this year. This means we have a price earnings ratio of about 950 and a forward PER of 650? Is my calculation completely wrong? Or are we back in the twilight zone?Based on revenues Henry Blodget says Sorry, LinkedIn's IPO Is NOT Proof Of A New Tech Bubble LinkedIn is an established company. It generated nearly $250 million of revenue last year, and it should do more than $400 million this year. It has three strong revenue streams: consumer premium subscriptions, corporate recruiting subscriptions, and advertising. It earns money. And it has a huge growth opportunity. These reasons and others are why many institutional investors are lining up to buy the stock.Is This a Bubble? In a video in the above link, Blodget went on to say "LinkedIn is a profession product. You do not go there because your friends and family are there?" OK, it's a profession product. What are the earnings? What are the expected earnings? Will the expected earnings pan out? Betting on Social Networking A Seeking Alpha Post by Albert Babayev in January 2011 called Betting on Social Networking discusses revenue and earnings. Facebook, at the latest valuation of $50 billion, is valued at 25x its 2010 revenue and almost 105x earnings (Apple (AAPL) is 22x earnings). To get to the same earnings multiple as Apple, Facebook would have to quadruple its revenues and increase profits by 500%.LinkedIn Table of Earnings, Subscribers, Revenue click on table to expand The above table with thanks to Albert Babayev. Assuming the earning's estimate is accurate we can calculate a PE ratio by dividing $10 billion by $48.139 million. I calculate not 950 but 208. Regardless looking at expected growth that may not happen, I would call this a bubble. That does not constitute a tech bubble but it sure looks like a bubble in the price of LinkedIn. Buying linked in at $122 is a bet on the Greater Fool Theory, nothing more, nothing less. Addendum: People chased the IPO as high as 122.70. After hours the price is down to $92.40. Those who just "had to have it" at any price are now down 24.7% I suspect insiders will be bailing like mad as soon as the restricted lock-up period is over. Reflections on LinkedIn LinkedIn has 100 million accounts. How many are active? How often? For what purpose other than everyone being "linked in" to everyone else? The key questions are:
It's fair to point out just because I have little use for LinkedIn at the present time, does not mean others feel the same. Indeed, I may even change my mind and find a use later on. Merging Profiles I setup a LinkedIn account primarily because hundreds have asked me to be "Linked In", not because I had a particular need. In fact, I have two LinkedIn accounts, both in my name, one under an email account I no longer have. I do not know my password for that account. I would like to merge the profiles because people find the wrong (inactive) "Mike Shedlock" profile all the time. Unfortunately LinkedIn offers no convenient way to merge profiles. Worse yet, I get invites all the time with no real way to reply to them. It is a mess. People have been bitching about this for something like forever as a search for merging linked in profiles shows. LinkedIn has a cumbersome solution that involves inviting everyone from one group to another. Log into your old account and click on My Contacts.Got that? How difficult can it possibly be for LinkedIn to automate that? I did not bother. I do not want to pester people with LinkedIn requests even though I do not mind others asking to be LinkedIn. By the way, If I do not reply to your request to be LinkedIn, it is because you found my profile that I no longer have access to. One Final Point on Income In order to justify the absurd valuation and growth metrics of LinkedIn, expect to see some high-profile announcements of earnings improvements in the first few quarters to come. These deals will have been arranged in advance, but that will not make the growth sustainable. However, the paced announcement of stacked-up deals will provide time for insiders to unload shares to greater fools expecting the perpetual growth that is priced in. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Will China Have a Labor Shortage, Sending Inflation Out of Control? Posted: 19 May 2011 09:40 AM PDT An interesting post by Edward Harrison on the Credit Writedowns website suggests a Labour shortage could spell inflation and trade deficits for China Informed researchers are asking what happens to China based on the recent demographic shift from rural labour surplus to rural labour deficit. The answer may be slower growth and higher inflation, according to a paper released last month by China's Center for Economic Research at Peking University. But other impacts may also be increased consumption and a deteriorating external balance.Shortage of Labor? Now? The situation Harrison describes is based on the document What Does the Lewis Turning Point Mean for China? The thesis is interesting, but how probable is a labor shortage in China, and in what timeframe? I certainly see no reason to be concerned over a "Lewis Turning Point " now or for that matter any time soon. However, inflation can certainly happen for other reasons such as rampant credit growth and malinvestment in infrastructure. That said, the Chinese property bubble is likely to pop at any time, and with it China's credit bubble. Certainly China is overheating now, struggling to find useful work for its citizens. Malinvestment abounds because of it. Michael Pettis Chimes In Wanting another opinion, I pinged Michael Pettis at China Financial Markets about the Labor Shortage theory and Pettis responded ... I think there are many reasons to be concerned about the rapid decline in the Chinese working population over the next decade or two, but I wonder if the Lewisian turning point is one of them.Thanks for responding Michael! Rebalancing Through Wage Increases Also consider a recent post of Michael Pettis Rebalancing through wage increases I worry about the reasons for rising wages – I suspect that demand for workers is driven primarily by unsustainable and unhealthy increases in the past two years in real estate and infrastructure development, and so is itself unsustainable.Interesting Questions and Replies to the Article "RS" had three questions for Pettis.
Pettis Replied ... 1)Yes, but not yet. It will take a decline in investment growth to reduce labor demand.Lewisian Model Incorrect or Premature Even if the Lewisian model was reasonable, China's structural problems are currently so great, its infrastructure building so excessive, and its property and credit bubbles so massive, that rather than running out of workers, China's next concern will be how to rebalance and keep its population employed in the slowdown on the near-term horizon. Global Economy Cooling The entire global economy is cooling as noted in Huge Cracks in Global Recovery Thesis; Industrial Production Unexpectedly Drops in Germany, France; UK Weaker than Expected China and the US will slow too. I believe a recession is highly likely, yet few see it. Pettis has been calling for a Chinese slowdown as well. For details, please see China's Real-Estate Developers Struggle with Debt; Servicing China's Total Debt Load is Problematic; Dramatic Slowdown in China Coming Scapegoating China However, one reference in Harrison's article caught my eye that I completely agree with. Please consider Roach: GD II awaits if China bashing rhetoric turns into protectionism. Stephen Roach is pulling no punches now. After quipping "I think we should take the baseball bat out on Paul Krugman" regarding pro-protectionist statements Krugman made earlier this month, Roach has launched a blistering attack on the protectionist rhetoric in America.On that score I agree with Roach, Pettis, and Harrison. Tariffs, protectionism, and QE I through QE X will not solve a thing. Nor will all the denials in Europe (Please see Trichet Goes Ballistic, Walks Out of Meeting Over the Term "Soft Restructuring"; Infighting Over Who Replaces IMF Chief; Some Suggest Trichet) However, Roach's suggestion of taking a baseball bat to Krugman certainly has merit. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 19 May 2011 01:01 AM PDT The ECB comedy show continues. Jean-Claude Trichet went ballistic and walked out of a meeting over Jean-Claude Junker's use of the terms re-profiling and "soft restructuring". Adding to the tenseness, huge infighting is in progress over who will replace Dominique Strauss-Kahn who just resigned as IMF chief. Some suggest outgoing ECB president Jean-Claude Trichet. IMF Head Strauss-Kahn Resigns, Succession Fight Begins Bloomberg reports Strauss-Kahn Resignation Kicks Off Succession Fight at IMF Dominique Strauss-Kahn's resignation as the 10th leader of the International Monetary Fund kicks off a contest on his successor, as European officials seek to retain the job amid a lack of unity among emerging-market nations.Trichet Goes Ballistic Over Junker's Reprofiling Suggestion Euro Intelligence reports ECB goes ballistic on reprofiling The confusing debate about "reprofiling" or soft restructuring pays testimony to the sheer incompetence of eurozone's finance ministers, who are now effectively talking Greece into a damaging, and most likely contagious default. The FT reports that Jean-Claude Trichet walked out of a recent meeting chaired by Jean-Claude Juncker in protest at Juncker's proposals to reprofile Greek debt.Trichet the Ostrich Euro Intelligence thinks Junker's idea is silly. I disagree. The terms reprofile and "soft restructuring" are silly, but the idea Greece will default is certainly isn't. Suggesting default is one of the more sensible things Junker has said recently. Greece is going to default and the longer the ECB and IMF attempt to forestall that event, the worse the situation will become. For further discussion, please see ECB Ostrich Maneuver; Euro-Zone Comedy Show: Junker Proposed "Re-Profiling" Greek Debt, Now He Wants "Soft Restructuring"; Targeting Short-Selling Trichet's Poor Sovereign Debt Decision Trichet made a huge mistake buying sovereign bonds of Greece. The idea was to "show support" for the bonds and suppress yields. The strategy worked for about a week. Now the ECB is stuck with a pile of garbage and the yield on 10-year Greek bonds is close to 16%. Former German central bank head Axel Weber warned Trichet about buying sovereign debt but Trichet went ahead anyway. Instead of admitting mistakes, Trichet wants to kick the can down the road one more time. Unfortunately for Trichet, the bond market says "no". The real fireworks begin as soon as market participants shun Spanish government bonds . That can happen at any time. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
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