Monday, May 16, 2016

Crash Go Boom Boom

The reality is that the Unicorns are flying high and that which flies higher towards the sun means some will get burned.

It is ironic that the same assholes who brought us the dot com bomb of the start of the millineum are now circling back as the crash of 2008 took the spotlight off of the tech sector.  Funny it is have never been brighter as the Professional Class has determined that all of America's economy is dependent upon it for future growth and success. Well everything old is again well new and get ready for crash 2.0 or 3.0 or whatever the cool new term is the valley's mantra for failure is a good thing.  I love that one.

This weekend was awash with not just the idea of opening up equity trading to the great unwashed, to a new type of crowd funding that permits individuals to actually  invest in what hedgers have been doing for decades.  Hedge funds are the shadow dancers to the Venture Capitalists who actually do the dirty by selling this crap to larger investors as they did with mortgage back funds a decade ago.  The same way they peddled that crap they do with tech it is just wrapped in a icon.

 This idea of peer to peer lending is the new bullshit that is the mashup between the Tech Sector and the Banking one.  It mirrors slightly another bullshit concept - Microlending. Anyone who actually believes that works needs to do some research as there are dozens of tales of the failure of that concept thanks to the hype from the professional class.  And this hilarious op ed piece only confirms my belief about that group.    Here is the deal when I gamble I do it independently with no middle man and what happens in Vegas really does stay there. 

The crux behind this new regulation that opens that door:

But what got people excited was the crowdfunding provision allowing companies to raise up to $1 million with few regulatory obstacles.
 
Sounds simple, right? Not to the Securities and Exchange Commission. Concerned about protecting investors from charlatans, bad ideas and their own poor judgment, the agency spent years drafting its proposed rules. The final version, released in October, runs to 685 pages (I am sure that will go down as an easy read with a nice glass of Chardonnay)

The new rule, known as Regulation Crowdfunding, allows most private companies to advertise shares for sale to anyone, regardless of income. Individual investors can invest $2,000 to $100,000 a year in crowdfunding offerings, depending on their earnings and net worth.

So it must be irony that the news that Lending Club is tanking follows on the heels of Theranos both   highly touted with the right names and faces pimping those butterflies.  And like butterflies they apparently have a short life.

The idea that Joe and Jane Blow in Missouri can buy investment shares without any guidance or knowledge is distressing and I wonder what fallout can result from this.  Losing homes and foreclosure is one thing but this is entirely another.  It is why these same people are also pimping the elimination of pensions as the 401K money and the idea of IRA's provides a greater source of income in many ways. 

Gretchen Robertson gave this salient advice when commenting on Lending Club:

Full and detailed data about a public company’s operations is crucial if investors are to remain confident about its prospects. While it’s not unusual for companies to want to limit their disclosures, Lending Club no longer has that luxury. If it wants to regain its shareholders’ trust, being more forthcoming is a good way to start.
The investor lesson here is also clear: Don’t let enthusiasm for a purportedly innovative business model replace hard-nosed analysis of a company’s operations. And if the data to do that analysis isn’t there, move on.

And who and how would provide that to the ordinary investor?  The Hedgers.  I can see this working out well.


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