Dana Blankenhorn

Google News Briar Patch

The newspaper industry is as excited as can be over news that Australia has passed a law “requiring” Google to pay for news links. Europe is on deck. They want in on the action.

I’ve written about this scam before.  It’s coming from Rupert Murdoch, who controls the Australian media. Most of the money that Google (and Facebook) will pay for news links in Australia will go to Murdoch and his global propaganda machine, not to keeping reporters fed.

So why was Google willing to be tossed into this briar patch? Because it lets them finally monetize Google News, and more thoroughly monetize a related service, Google Now. If Murdoch is going to charge Google for links to his stuff, Google is going to get its money back.

News has been ad-free for over a decade now. It’s great. Tells you, in broad strokes, what’s going on. It lets you try to go deeper. Increasingly, not much deeper. Paywalls have become commonplace on every beat. You click a link and what you want is covered up with a demand to subscribe.

You Won’t Read This

You won’t read this because I’m in Twitmo.

My account was suspended a week ago. Repeated e-mails to Twitter support have gotten no real response.

Twitter has a legal right to do this. They are under no legal obligation to explain it.

But there is a moral responsibility.

Twitter has become a vital publicity stream for millions of people around the world. I didn’t realize until last week just how vital it was. The free web continues to shrink in size, and Twitter is an increasing part of it. In some ways it has taken the place of Google. We go to Twitter to learn what’s happening in the world. The only force that can compete with it is Reddit.

I blame Trump for that. Trump and his Trumpkins stole all our attention for years, and Twitter is where that attention was both focused and blasted into the world. Twitter’s banning of Trump was a turning point. The stock is up since it happened.

Rupert Murdoch Blackmails the Web

Rupert Murdoch has always hated the Web. It has always threatened his control of public opinion and his political dominance, a dominance I consider this century’s greatest evil.

But he’s mostly had to suck eggs. His efforts to buy into the Web have come to nothing. This is the guy who destroyed MySpace. His Realtor.com is worth less than he paid for it.

That’s changed thanks to a classic Rupert Murdoch strategy. Political blackmail.

Australia has gotten Google to hand “news sources” (half of them owned by Murdoch) cash for hyperlinks to stories. Expect this to come to the U.S. as well, although for now The New York Times is soft pedaling it, but you can hear the cheering inside its story. It’s what incumbent news organizations want – money for nothing.

The result may seem small. The payments give Google a route to putting ads on its Google News and Google Now services. This may even improve them, as readers now see headlines leading to a lot of paywalls.

But a precedent has been set. You can get money for letting people link to your stuff. The free web can be blackmailed. Instead of fighting for the free web, the press is attacking Facebook, which is resisting the blackmail. 

It’s all part of a process by which the Internet is being forced to dance to incumbents’ tune, whatever that tune happens to be. In a democratic society like Australia this may not seem bad. In China, it’s evil. Even in a democracy like India it can turn evil when the elected government chooses to black out news on its opponents.

The Web, in short, is being balkanized. The free web is being destroyed. And no one, not even journalists who should be its advocates, is objecting.

Not All Children are Above Average

Cathie Wood had a great idea.

Instead of having a robot buy the market and sell an exchange-traded fund based on it, why not hand pick technology’s winners, and go all-in? The result is ARK Invest https://ark-invest.com/, a family of ETFs focused on disruptive technology.

I have been doing something like that in my personal portfolio for most of the last decade. If I can get my money out, I’m looking at a $1 million retirement.

ARK has been a triumph. Wood’s funds now have over $57 billion under management. Most of the funds are up 40-70% over the last three months. The biggest fund, called ARK Innovation, is filled with the last year’s winners – Tesla, Roku, Square, Crispr, Spotify and Shopify.

But there’s an obvious problem. When everyone is in on anything, it stops working. If no one’s a seller the price can stop like a stone. This is how every bubble has ended since before the 17^th century’s tulip mania.

If you can wait for 10 years, I think most ARK funds will come to present value. But you’re not going to get huge returns from right here. Not every child is above average.

What you’re really betting on is the Wood team’s ability to get into disruptive companies early and get out before the crowd. But there is now a huge crowd doing the same thing. Again, it eventually crashes.

In the end, Wood is acting like a venture capitalist. She’s expecting some failures. Those who are trading on her do not.

That’s what happened with Gamestop. Those Reddit “insiders” who got in early, and got out early, made bank. Those who got in late, or got greedy, got spanked. When this happens to a hedge fund, we don’t bail it out. (We’re not supposed to, anyway.) That’s all the Redditors were, a bunch of people acting as a single hedge fund, only with millions of fingers on the trading button. It’s when all the hedge funds get toasted that we worry (although we really shouldn’t).

Like Stanley Weiser wrote for the movie “Wall Street,” “A fool and his money are lucky to get together in the first place.” 

There are a lot of fools following Wood right now, and it’s a sign of a frothy market. She will do fine, but a lot of small investors are going to get skunked in the next year. Use her success as a sign for you to go to higher ground and buy her back after the fall.

The Overnight Game

Redditors who started by fighting short sellers over Gamestop have a new game to play.

The overnight game.

I got to see it for myself yesterday. I was tasked to write about Sundial Growers. They’re on the NASDAQ, ticker symbol SNDL. They’re a pot company, a small one.

At the start of January this was a penny stock, worth just 60 cents. Then the games started. Management took advantage, watering down the stock repeatedly to get rid of debt and raise cash. This only made the punters more desperate to get a piece. As of this week there are 1.5 billion shares outstanding.

But with a market cap of $2 billion, it’s not hard to move. If you play the overnight game.

After markets close, they’re still open. After-hours trading continues for hours and officially resumes in the morning. Even during those 10 hours, you can still place an order. So, orders got placed. When I was writing at around 7 AM yesterday, shares that had risen to $3 during the day were trading at $4.50.

I told readers to sell, but the game was already over by the time my article came out. By lunch the stock was trading below $2.50.

Dave Portnoy, founder of Barstool Sports, was in on it. He bragged about his $50,000 profit online, buying, then selling in the overnight hours.

Assholes like Portnoy are going to run this game on their followers again-and-again until the suckers get wise. Those who get in with them will win, the ones who follow will be fleeced.

Reform is needed.

The Next Market Move

Right now, what’s working is overpriced, what might move is ridiculously priced, and what should move is barely priced at all.

Cloud Czars like Apple and Microsoft are trading for more than they should. Their price to earnings ratios hover around the mid-30s, their dividend yields are below 1%.

What might work, speculative EV stocks like Workhorse Group or pot stocks like Tilray, carry prices you can’t evaluate at all, based on the size of the businesses.

What should be moving are companies focused on increased demand from the economy. The COVID relief package is going to pass. It’s going to give Democrats the support needed to do more. Both private and public demand are going up.

This means “value” stocks, grocers like Kroger, landlords like Simon Property, and even oil companies like Exxon Mobil, should be exploding. They’re not. Exxon is up, but that just brings its dividend yield to 6.9%. Simon is yielding 5%, and Kroger’s price to earnings ratio is below 10.

There’s more money running around than there are good places to put it. Investors aren’t chasing returns, but “alpha,” which means returns higher than the market. All the children are not above average.

China

President Biden is right.

China is not our enemy, but it does represent “extreme competition.” 

The difference between the two is simple. If they’re our enemy, then only one side can win. If we’re in competition, both sides can.

This is not a popular view. It’s popular to hate China. We hate China because of the Uigyurs. We hate it because of Hong Kong. We hate it because of the South China Sea, and the way it threatens Taiwan. Some say the country is accreting territory from neighbors like India and Mongolia.

But China’s autocratic ways can be used against it, assuming we maintain America and the West as reasonable, attractive alternatives. That means welcoming Chinese immigrants and their money. Tyranny also hurts creativity.

But there’s one area where China is smarter than we are. That involves its Cloud Emperors.

Why I Think Google is in Trouble

Technology in the 21^st century operates by one rule above all.

Software scales. Salesmen don’t. (Image from YouTube.) 

Google is ignoring the rule and will pay a price for it.

In 2020 Google reports it lost $5.6 billion on Google Cloud. That’s in contrast with Amazon and Microsoft, which both made big profits on their cloud operations. Yet Google’s share of the cloud market barely budged. It’s still under 10%.

What happened is that Google let Tom Kurian build an empire. Kurian was hired a few years ago from Oracle to build Google Cloud. He has done that in Oracle’s image, even though Oracle’s image sucks it’s moving to Texas with its tail between its legs.

The Big Political Story of 2021

Money is walking away from the GOP. (Shown, Washington Post owner Jeff Bezos.)

This has been going on for some time. Silicon Valley, Seattle, Boston and New York, the places where money is made, generally vote for Democrats. They do this because Democrats deliver what technology wants. Tech runs on brains. It’s always in the market for more of them. Brains need training, they need to be empowered, they want to be recruited, they like to be comfortable.

This is the big economic change of our time, a move from resources to brains as the gating factor to growth. Resources need force to secure them. Manufacturing needs hands to run machines. Tech needs brains.

The news hasn’t gotten to everyone. Wall Street sharpies think they know more than the market. There are tech executives who want to corner the market on brains and think other brains are a threat.

These views are wrong for the economy.

Still. It’s hard for money to switch sides. The Republican Party is the natural home of money. That’s been true since the 1860s. For generations, however, money sided with progress. Progress is the root of the word progressive. Both Roosevelts ran as progressives. They wanted progress. So did most businesspeople.

Facebook vs. Apple

It’s not as black and white as you think.

To hear the tech press tell the story, Facebook is promoting evil by admitting to its ad tracking and asking users to opt-in. Apple, meanwhile, is on the side of the angels by loudly promoting privacy.

But here’s the deal. Facebook services are free. Apple services are not.

The tech media is cheering for the global elite against the global poor.

The free web has been the greatest wealth production effort in history. Over the last 20 years over 1 billion people, a substantial portion of the world’s population, has been lifted out of extreme poverty by the free web. The freedom of the web, free as in beer, has been driven by the cloud, which pushed costs low enough that they could be supported by advertising.