Dogs: Who's Making Money

And so it is that the moths are all drawn to the light, even as it burns them. For they are blindly drawn to its grace, hitting their heads about the light, destroying their senses, going without food, and becoming easy prey to those that hunt them. Even those few moths that will get within the embrace of the light will burn unable to escape, ever.

There was no escape for Ireland this weekend as the IMF and EU pinned the country down and forced them to swallow a $130Bn aid package at (get this!) 6.7%. $17.5Bn of this money is to come out of Irish pension funds all just to make sure Bill Gross doesn’t lose any of the money he lent to Ireland! I honestly cannot tell you who is the more vile, despicable villain in this debacle. Is it the banks, who started this mess with their idiotic lending practices? Is it the lobbyists and lawmakers, who turned Ireland into a tax haven for EU Corporations and destroyed the economy by funneling tax breaks to the wealthy? Is it the Irish Government, who stupidly bailed out the failing banks with guarantees that put the nation on the hook for more money than their entire GDP. Is it the bondholders, who drove up the cost of financing Ireland’s new-found debt to levels that threatened to break the National Bank or is it the EU & IMF, who are effectively playing the role of loan sharks, borrowing $100Bn at 2.5% and forcing Ireland to borrow it back from them at $5.8%.

Perhaps that’s the answer, this is all just a gigantic global shakedown where the bigger, more liquid nations who can still borrow cheaply, are making a little spare change by forcing smaller, weaker nations to go into debt at much higher rates. Of course Pimpco et al happily play along – they make a fortune on these games but even the mighty Mohammed El Erian can’t FORCE an entire nation to borrow $100Bn over a weekend like the EU is doing to Ireland. Before the bank bust, Ireland had very little public debt, now the EU is forcing Ireland to accept a debt bomb that amounts to nearly half of the nation’s $227Bn GDP. This would be like forcing the US to borrow $8Tn at 7% – it would wreck our country and we wouldn’t stand for it – why should we expect the Irish people to roll over and play dead for the EU, who they were only cajoled into finally accepting the Lisbon Treaty just one year ago after years of rejection?

Now Ireland is betrayed, stabbed in the back AND thrown under the bus by the EU at the first sign of trouble. The people of Ireland are being forced to go about $25,000 EACH into debt at 7% in order to make sure the EU’s bondholders get paid – roughly $75,000 per wage earner! Plus, as I mentioned, their nation’s pension funds are being forced to kick in an additional $6,666 per citizen ($19,000 per wage earner), likely busting them down the road as well. Things are so great in bond land that unsecured bonds are even making a comeback, with $246Bn already sold this year, more than double last year’s pace. And why not, there is no such thing as default anymore – if you buy a bond then you are on the side of the men who seem to be able to economically enslave entire populations to insure they won’t take any losses. The Irish people must vote to accept their fate on December 7th, may God have mercy on their souls…

So we have bond moths throwing money at high rates as they don’t see the risk. We have commodity moths driving prices ever higher as they don’t see the risk. In fact options on $100 oil contracts for December are up over 20% since last week but, even more disturbing, is that there are now 45,424 open contracts (controlling 45.4Mb) at $100 strikes at $5.55 for contracts that expire in 4 weeks at 20% above the current price. Do they know something or are they simply heading into the burning light as the Fed fuels the fire with $45Bn worth of POMO this week? Oil moths seem downright rational compared to the momentum stock buyers in the US with companies like AMZN, BIDU,CMG, DECK, FCX, GMCR, NFLX, PCLN, POT, SBUX, WYNN, etc. trading at valuations even Icarus may think are out of reach. And that’s just from the US perspective, let’s look at those stocks priced in Euros!

Wow, those US markets are on fire! The combination of the rising dollar and exploding MoMo stocks are making those US markets look like very attractive flames to the global moths, just as their own rallies are faltering. Does that make US equities a place to put your paper or simply a place where a large number of investors are likely to get burned? Maybe today’s headline will read "Stocks rose sharply Thursday after Ireland moved closer to addressing its debt crisis, better-than-expected economic data suggested the recovery is accelerating and General Motors (GM) returned to the New York Stock Exchange (NYX) with a massive initial public offering." Oops – silly me, that was the headline from November 18th, when the Dow popped 1.6% to 11,181 – the last time Ireland was "fixed." Surely American investors aren’t stupid enough to buy into the same premise just 11 days apart, are they? Surely you don’t know American investors very well if you answered that with a "no."

50,000 people marched on Dublin to protest the budget cuts. Ireland only has 4.5M people so that’s like 3M people marching on Washington (it’s always a matter of perspective) so there’s no slam dunk on Pearl Harbor Day as the EU attempts to bomb the Irish into servitude. One of our Members said in chat this morning that, as a bond buyer, he expects to be protected "no matter what method I have to employ to get it back WITH INTEREST, otherwise, what is the point of being a creditor?" Indeed that is the pervasive attitude in the investment community but why should the Irish people, or any nation’s people accept it?

Even if the Irish people do agree to each take on $75,000 worth of debt at 7% in order to pay back loans that they never asked for that were used to bail out banks that they never profited from – even if they agree to this insanity – who is to say they can actually afford to pay it back? THAT is the joke that Flip (our Member) and other bond-holding moths do not see as they head into the light – we are currently in the stage of replacing one stage of broken promises with a new set of promises that simply haven’t been broken – YET.

In a few years (in 2013, in fact, when the EU already terminates the current deal) we’ll be right back where we are now and you’ll be asking the Irish people to promise to pay $150,000 each to fund the next rollover, maybe next time at 11%. Defaults don’t always come by choice but by artificially preventing defaults and continuing the madness that has already engulfed this planet – we only "extend and pretend" the global debt bomb as bond buyers keep transferring money from one unpayable loan to another under the very, VERY false assumption that there is some infinite amount of money that will keep the game going forever. Only vast amounts of money printing can inflate our way out of this mess and, if that’s the case, then what’s the point of tying up money at 7% if it’s devaluing at the the 20% pace the Dollar was setting for the first 10 months of this year?

So consider this fair warning. Things are not "fixed" and our PSW Holiday Shopping Survey is not giving us as rosey an outlook as the breathless announcers on CNBC are indicating. I am hearing very bullish commentary about retail sales but, so far, none of us are really seeing it in the stores we visit. I’ll have more to say on Retail as we get some real data, the stuff they are quoting today is just thin-sampling nonsense for the most part and should not be taken seriously. Today is Cyber Monday and we’ll probably get those numbers along with store counts on Wednesday and I’m still expecting the numbers to disappoint overall and I have no doubt at all that margins are slipping considerably as Extreme Discounting is now considered the norm in retail land.

We’re still in cash and we will be amusing ourselves by trying to double up our $10,000 to $50,000 Portfolio, which was up a virtual 160% at $26,000 when we lost interest in risk in early October. Our goal is still to get to $50,000 by Jan 21st (options expiration day) despite our hiatus, and we’ve had great success with our short-term trading this past month, so we’re going to "go for it" in this still-choppy market.

The Dollar is NOT going down. In fact, it’s hitting 81 this morning, just 1 point off our goal. This can provide a nice boost for the markets (in dollar terms) if we get a bit of a pullback to re-test 80 but, after that, it’s anybody’s game as the dollar could break back down or the Irish people could grow a spine and tell the EU and the Bondholders to shove it. If only US citizens had been that wise when we were "only" $75,000 in debt per family, as opposed to the crushing $671,846 per family hole we’re in now. Of course, you don’t really have to worry about national debt as you can just buy a home in a debt-free country and move there after transferring your assets to off-short accounts and relocating your business to a tax haven – like Ireland!

If for some strange reason, you are not wealthy enough to walk out on this train-wreck of an economy before it all hits the fan – don’t worry – we’ll send you a post card…

- Phil

*****

For this weekend's Stock World Weekly newsletter click here. - Ilene

Pedro Sorrentino is the first international student to attend Boulder Digital Works, a graduate school based in Boulder, Colorado that exists to build the next generation of digital professionals. Prior to moving to the States, he was the head of marketing and PR for Mediamind (Nasdaq: MDMD) in São Paulo, Brazil, his homeland.

Although startups and Madison Avenue agencies are perceived to have little in common, coffee shop-hopping entrepreneurs and modern “Don Drapers” actually share more characteristics than you might think, and they can learn a lot from one another.

The most valuable assets for startups are time and team. When working on a big idea with little money and a short time to make it real, Mark Zuckerberg’s corporate mantra “move fast and break things” is particularly a propos. Getting user feedback and making (and then fixing) mistakes as quickly as possible can help startups avoid bigger problems and bring home the bacon in the long run.

It seems that now, more than ever, it’s time for “Mad Men” everywhere to heed the advice of the entrepreneurs setting up shop in basements and coffee shops around the world.

Here are five lessons Madison Avenue can learn from startups. Add your own thoughts in the comments below.

1. Be T-Shaped

Big multinational advertising behemoths that hit their stride before the rise of the web often struggle to deliver high-quality digital and interactive work. In many cases, a hesitance to move forward or a lack of technical knowledge within a company’s talent base are at the root of this.

“Startups are most likely to have a small team. Consider eight people and a situation where four or five of them are programmers. They are not just going to do technical stuff. There’s a demand to have a broader line of thought, since there’s no one else around to do the work,” says John Keehler, principal at ClickHere, the digital division for The Richards Group.

Marketers should strive to be T-shaped professionals. This concept was born inside the creative agency Ideo and is about professionals with versatility and the ability to think like a designer or a programmer, even if you work with marketing.

T-shaped professionals have a broad view of things. In startups, this is a reality, but when it comes to big agencies, people tend to be divided in silos.

Advice for Madison Avenue: It’s important to have a wide vision and understanding of everyone who’s involved with the campaign that you’re working on. This versatility saves time and brings more ideas to the table.

2. Test, Fail and Learn

Brent Daily is the COO and co-founder of RoundPegg, a Boulder-based TechStars startup that provides online HR solutions for discovering professional personalities. He thinks that a good startup culture is one that believes “it’s OK to make mistakes and be a spectacular failure.” On the other hand, he agrees that agencies can’t easily bring this acceptance of failure into their ecosystems — after all, if they fail, their clients also fail and that can represent a huge loss of money.

Agencies should consider testing marketing campaigns and products on the web as “beta tests.” Getting feedback from users via the web is a low cost way to get a feel for how the community will take to ideas. After optimizing based on user feedback, campaigns would then be better prepared to launch on other mediums, such as TV or print. When it comes to digital, users tend to enjoy sharing their opinions and giving solid feedback. “There are so many places to go and test advertising rather than doing expensive focus groups, that the result is usually a pretty low-cost test bid for them,” says Daily.

One good example of open innovation is the startup UserVoice. The service positions itself as “customer feedback 2.0″ and allows companies to ask for feedback on an organized web platform. Perhaps some day more companies will substitute the traditional focus groups for this lower cost web alternative.

Advice for Madison Avenue: Before starting a huge ad campaign and spending millions of dollars on media, use the web as your test arena and get quick feedback from your customers.

3. Leverage PR 2.0

PR 2.0 is the art of using social tools to reach and communicate with key stakeholders. There used to be a time when public relations was all about relationships with journalists and sending out press releases. Taking clients to lunch, picking up the check and smiling was the way to go. This method still exists, but is on its way out.

Public relations is now about the art of dealing with, well, the public. Journalists are still very important, but nothing beats the credibility of your customers, and they are probably already talking about your product. The question is: Are you listening?

Fortunately, there’s less and less space for companies with bad products to succeed by deploying exceptional marketing. We as consumers just don’t accept that anymore. Product quality is the true advantage — attaching that strength to a sound PR strategy enables companies to listen to what consumers are saying, engage them and build brand awareness.

Startups take advantage out of this. When a startup offers a great solution with its product, normally there’s an engaged early adopter community ready to give free feedback. Agencies should take advantage of it, too. What better way to improve your business and its product than getting direct feedback from your core users? Initiatives like Starbucks’s customer feedback and idea generation site mystarbucksidea.com are the right way to go.

Advice for Madison Avenue: Remember that having a great product is key. But listen and allow your early adopters to influence the next meeting with your client’s R&D department.

4. Bootstrap It

If a startup can run for months (or years) without without getting funded, Mad Men can dabble in testing and running campaigns without buying media. Agencies could learn a lot by testing out the old startup method of bootstrapping; that is, getting by without external help and being cautious with expenses.

Startups, for example, use free social tools like Twitterclass="blippr-nobr">Twitter, Facebookclass="blippr-nobr">Facebook and YouTubeclass="blippr-nobr">YouTube all the time to save money and still reach large, influential, highly-targeted audiences. Increasingly, agencies and large advertisers are beginning to catch on and test them out; the Old Spice guy campaign is a very good example of this.

As that campaign proved, a Twitter account and some YouTube videos can go a long way. What’s better is that using these tools is cost effective, even if you count time invested. We know that the Old Spice guy videos were not a simple production, but this campaign was comparatively inexpensive because starting with social media is much cheaper (and oftentimes more powerful) than a TV commercial.

Advice for Madison Avenue: Remember that you can do more with less when you have a good idea and a strong plan for execution.

5. Open Up to Feedback

Good startups spend a lot of time crowdsourcing opinions and getting feedback from their communities and mentors in order to improve their products. Agencies, on the other hand, usually won’t share copy or ideas with one another or their communities until a campaign is ready to launch.

Some agencies though, are finding that it doesn’t hurt to ask others for creative or production input — that’s what Victor & Spoils is all about. Based in Boulder, Colorado, the ad agency calls itself “the world’s first creative (ad) agency built on crowdsourcing principles.”

John Windsor, Victor & Spoils CEO and former VP of strategy and innovation at CP+B, understands how disruptive new technologies can be, especially when they relate to the ad world. “We’re moving from a world of scarcity to a world of abundance. The rise of the curator class has a new generator of social creative/digital directors,” says Windsor.

This is a company that has tapped into the startup principles and made its business faster, global (it has people from all around the world giving input) and without the legacy issues that you see on Madison Avenue. As time passes, we can draw a line between businesses that embrace change and the ones that fear new ways of doing things.

Advice for Madison Avenue: Embrace change and don’t fear the unknown. Others can help your cause if you give them the right opportunity.

More Business Resources from Mashable:

- What’s the Value in a Brand Name?/> - HOW TO: Run Location-Based Google Ads/> - HOW TO: Get the Most From a Small Business Social Media Presence/> - Top 5 Qualities to Look for in Startup Job Candidates/> - Why the Best Online Marketing May Be Headed Offline

Images courtesy of MadMenYourself & class='blippr-nobr'>Flickrclass="blippr-nobr">Flickr, jolien_vallins

For more Startups coverage:

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eric seiger do

Wednesday, December 1, 2010

Who's Making Money