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Those Millions on Facebook? Some May Not Actually Visit - Fullermoney

February 09 2012, 8:07am
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This is an informative article by Andrew Ross Sorkin, who has actually read the Facebook prospectus. Published by the NYT and IHT, here is the opening:

On the first page of Facebook's prospectus for its sale of stock to the public, it pegs the number of its "monthly active users" at a whopping 845 million people. The social networking site arrives at an even more astounding number when it comes to "daily active users": 483 million people.

Those are some huge numbers. If it is hard to believe that so many people are clicking on every day, that's because well, they aren't, exactly. Those eye-popping numbers should have an asterisk next to them.
If you managed to wade through to Page 44 of Facebook's prospectus, you'd discover that the company provides a definition of an "active user" - and it is unlikely to be what you expected.

Facebook counts as "active" users who go to its Web site or its mobile site. But it also counts an entire other category of people who don't click as "active users." According to the company, a user is considered active if he or she "took an action to share content or activity with his or her Facebook friends or connections via a third-party Web site that is integrated with Facebook."

Come again?

In other words, every time you press the "Like" button on, for example, you're an "active user" of Facebook. Perhaps you share a Twitter message on your Facebook account? That would make you an active Facebook user, too. Have you ever shared music on Spotify with a friend? You're an active Facebook user. If you've logged into Huffington Post using your Facebook account and left a comment on the site - and your comment was automatically shared on Facebook - you, too, are an "active user" even though you've never actually spent any time

My view - US brokers report a high interest in Facebook among their clients. The reason most frequently mentioned it that they hope it will be "the next Google."

This item continues in the Subscriber's Area.

As Growth Slows, India Awakens to Need for Foreign Investment - This topical article from the NYT and IHT is likely to be of interest to many global investors. It is posted in the Subscriber's Area but here is the opening:

NEW DELHI - When India's finance minister, Pranab Mukherjee, flew to Chicago recently to address a group of American executives, it was to deliver an urgent message: India is still open for business.

He listed pro-business policies his government recently approved or soon would: foreign individuals could invest directly in the Indian stock market; overseas specialty retailers like Gap could open wholly owned stores in the country, and bigger retailers like Walmart would soon be admitted. And though Mr. Mukherjee did not cite it, he could just as easily have mentioned a proposal the cabinet is considering to let foreign airlines buy as much as a 49 percent stake in India's airlines.

"I urge you to seize this moment and contribute to our collective prosperity in the times to come," Mr. Mukherjee told his audience, the World Affairs Council of Chicago.

The flurry of activity by the Indian government has helped push Indian stock indexes up by 15 percent this year, and the rupee has climbed 8 percent against the dollar

Skeptics wonder, though, whether Indian politics will really allow Mr. Mukherjee and his boss, Prime Minister Manmohan Singh, to force significant change on the nation's hidebound protectionism. But there is no question that after years of taking rapid economic growth for granted, the government is finally awakening to the need for new policies and greater foreign investment.

The change is occurring as analysts and India's central bank conclude that growth - which was at 8.4 percent or higher for much of the last decade - will fall sharply to 7 percent in the current fiscal year and remain sluggish in the next one, which begins in April.

The signs of new salesmanship from Mr. Mukherjee are a notable departure from his demeanor, and that of other Indian officials, for much of 2011, even as their economy was slowing and inflation was gathering steam. Preoccupied by a big anticorruption protest movement and internal bickering among politicians, officials tended to dismiss the gloomy data as unimportant or as temporary setbacks.

But this year, Indian leaders have begun publicly acknowledging the nation's economic problems.

"The growth slowdown was a nice wake-up call for us," Kaushik Basu, the chief economic adviser to the Finance Ministry, said in an interview.

My view - Wake-up calls, although necessary, are seldom "nice". However, it is welcome news that India's central government appears to have shaken off its complacency and torpor of last year. Recent announcements have been so upbeat that I wondered if it had employed a public relations advisor.

This item continues in the Subscriber's Area where another related article is also posted.

China Lone BRIC Among Top Emerging Markets - This is an interesting article from Bloomberg. Here is the opening:

When Antoine van Agtmael was traveling around Asia in the late 1970s, he became convinced there were companies worth investing in throughout the developing region. In 1981, while working for the World Bank's International Finance Corp., he presented an idea for a "third- world equity fund" to Salomon Brothers Inc.

"They told me we would never sell this fund," van Agtmael says, Bloomberg Markets magazine reports in its March issue. "They wanted a more-uplifting name. That's how we came up with the term emerging."

Today, van Agtmael remains bullish on what everyone now calls emerging markets.

"As a group, they're now as attractive as I have seen them, on both a historic and comparative basis, at any time in the last 25 years," says van Agtmael, who oversees $7.4 billion in emerging-markets equities at Ashmore EMM LLC in Arlington, Virginia. He's looking in particular at shares of companies in China and the Middle East.

That's in line with the results of Bloomberg Markets' first ranking of the most-promising emerging and frontier markets for investors. China topped the list, which is based on more than a dozen measures of the investing climate, from forecast gross domestic product growth to the ease of doing business. China was followed by Thailand, Peru and Chile. (IPSA)

My view - This view bodes well for many of Fullermoney's favourite long-term investment themes.

(See also my detailed comments on China on Tuesday 31st January.)

This item continues in the Subscriber's Area where a further report is also posted.

Email of the day - On volume:

"Hi David, much has been said on news channels about concern about the lack of volume on this recent up move in Equities. From basic analysis it seems like volume has particular relevance in exhaustive large sell offs when accompanied by volume spikes to indicate capitulation. However it seems that in many cases upside moves are more persuasive if volume is running at or below recent average volume. In deed a capitulation by shorts, new entrants by retail investors and profit taking by professional money fortunate enough to have been long could result in the higher volumes so many want but would in fact be quite concerning? Would be really interested to hear your views on this."

My comment - Thanks for your summary and question certain to be of interest to many other subscribers.

I agree with your first part and we look for heavier volume as evidence of capitulation selling in a steep downtrend, and therefore an ending signal. Understandably, this was highest in September and October 2008, as you can see from this chart of the S&P 500 Index, and it spiked again in August 2011.

This item continues in the Subscriber's Area.

Additional commentary by Eoin Treacy

Armageddon USA? America at the crossroads Thanks to a subscriber for this educative, well-argued report by Dr Tim Morgan for Tullett Prebon. It is posted in the Subscriber's Area but here is a section:

Since the process of adjustment began in the early 1980s, the officially reported CPI-U number has diverged ever further from the underlying figure calculated on the traditional methodology. Some of those who have researched the issues of hedonic adjustment, geometric weighting and substitution reckon that these methodologies now strip out at least six percentage points from inflation calculated on the traditional basis. On this basis, true inflation might be at least 9%, rather than the 3.4%reported in December.

If critics are right and we are convinced that they are then the implications are enormous, because inflation calculations reach into every aspect of economic life. The significance of distorted inflation reporting has impacts on:

Americans' cost of living, and the purchasing power of the dollar over time.
Wage rates and settlements.
Benefit levels, and the cost of social payments to government.
Economic growth.
Real interest rates.

According to official figures, aggregate inflation between 2001 and 2011 was 27%, meaning that the dollar lost 21% of its purchasing power over that period. But, if we accept that real inflation may have exceeded the official number by 6% in each of those years, the loss of dollar purchasing power was about 55% between 2001 and 2011. Between the third quarters of 2001 and 2011, average weekly wages increased by 31%, fine if the dollar lost 21% of its purchasing power over that period but evidence of very severe impoverishment if the dollar in 2011 was worth only 45% of its 2001value. In short, if millions of Americans feel poorer now than they did ten years ago, the probable explanation for this is that they are.

My view The fudging of government unemployment, inflation and growth statistics has been a sore point among those seeking to preserve their standard of living in real terms for quite some time. Academic arguments centring on the value of a free service, or how much rent someone with no mortgage would theoretically pay themselves, help to conveniently smooth stubbornly volatile price measures but do little to reflect the reality of everyday life.

Failure to honestly measure economic output, growth and participation represent one set of problems. Failure to address glaring holes in the financial regulatory framework is quite another. MF Global's recent failure and its loss of, supposedly segregated, client moneys is the latest in a long line of examples of corporate malfeasance where nothing substantive has been done to address the underlying problems. Simply put, banks need to be able to fail without jeopardising the entire global economy. Clients need to be reassured that their money is safe. This is as true of Europe as it is of the USA. The failure to regulate and supervise securitization, CDS, high frequency traders, bank leverage and lending practices represents a failure of governance which has still to be corrected.

This section continues in the Subscriber's Area.


Email of the day (1) on the source of demand for gold:

I found a fascinating "White Paper" published by GMO. (Bhartia and Seto)

With all of the talk of gold ETFs, they only comprise 7.5% of gold purchases, while Central Banks in total have actually been net sellers (despite China and India being large buyers). Meanwhile, emerging market retail purchases amount to 77% of purchases.

I do not believe it is a stretch to draw the following implications from these numbers.

1) Gold and Gold stocks may be a better way of playing the rise of the middle class (and wealth in general) in emerging markets than consumer discretionary stocks, where there are always the dangers associated with stocks (legal, political, mismanagement, inflation etc.).

2) By the same token, a hard landing in China or India could do serious damage to the aforementioned."

My comment Thank you for this interesting report and your additional insights. Let us differentiate between the primary reasons for buying gold:

It is as a hedge against a loss of purchasing power. In the West, this is what we are most familiar with because we are contending with lower standards of living, weak currencies, high debt and a loss of confidence in the ability of government to do anything constructive.

People also purchase gold because it is one of the classic trappings of wealth and success. As a progressively more wealthy middle class evolves, the nouveau riche, often vie for a limited supply of expensive trinkets. Property, cars, boats, shoes, bags, jewellery and gold all fall into this category.

This section continues in the Subscriber's Area.

Email of the day (2) on behavioural finance:

"I have been a regular reader of your free comment of the day for some time, and will probably turn myself into a subscriber soon. I am quite impressed with your service and your approach. I have noted that some of your readers are interested in Behavioral Finance and, more generally, in theoretic explanations of market behavior. Today's item on the Neil Theory of Contrary Opinion fits into this.

"I have attached a recently published working paper (which incidentally has a reference to David) on how communication structures market perceptions. If you find this relevant, please feel free to post it."

My comment Thank you for your kind words and for sharing your paper which I'm sure will be of interest to the Collective.

Email of the day (3) on additions to the Chart Library:

Would it be possible to add the following ASX stocks to the chart library:


Many thanks

My comment Thank you for this suggestion which has been added to the Chart Library.

Speaking engagements in the USA - I have accepted invitations to speak to a number of associations and groups while in the USA for The Chart Seminar. My schedule is still filling but here are the details so far:

San Diego MTA chapter in the first week of April. Time and venue yet to be arranged.

Los Angeles MTA chapter on April 11th venue to be arranged but will be in the Long Beach area.

To Hoard or to Horde: risks and opportunities from participating with the crowd. Will be the topic of my talk to both these associations.

CFA Institute San Francisco April 12th 3pm. Venue and the topic have yet to be finalised.

The TSAA-San Francisco April 13 th . Venue and time have yet to be confirmed by the topic will be Investment implication of competing inflationary and deflationary forces.

If you would like me to speak to your local chapter or organisation in California or New York please contact your respective chairperson and ask them to contact me.

The Chart Seminar 2012 -
Following a sell-out tour to Singapore and Australia last year, The Chart Seminar will be held in San Francisco, New York and London this year. Please be aware that the early booking rate for non- subscribers at the US seminars expires on January 31st.

We are currently taking bookings for our San Francisco and New York dates in April as well as London seminars in May and November. Anyone interested in securing a place at any of our events should contact Sarah Barnes at

The date and venues for my seminars so far in 2012 are:

San Francisco - April 16th &17th 2012 Nikko Hotel

New York - April 23rd & 24th 2012 at The Manhattan Club (above Rosie O'Grady's) at 800 7th Avenue

London - May 25th & 25th 2012 at the Radisson Edwardian Hampshire

London - November 22nd & 23rd 2012 at the Radisson Edwardian Hampshire

The full rate is £950 + VAT. (Please note US delegates, as non EU residents are not liable for VAT). The early booking rate of £875 for non-subscribers expires on January 30th for the US seminars. Paid-up Fullermoney subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates. 



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