The Advertising Bubble Continues To Deflate And A Timely Rant On Society's Belief System And The "Suspended" Year 2000 Economic Collapse
Nielson's latest announcement on global advertising expenditures is available here. Re our prior post on the substantial advertising bubble we see today, the fundamentals are starting to deteriorate significantly in the ad industry. They will get worse. Most likely they will get substantially worse. And this is an ad bubble not a downturn. The data behind that statement becomes more evident every day.
As an aside, these Google Adsense and advertising parties I was constantly spammed about are reminiscent of the residential telephone reseller schemes so prevalent during the internet bubble. I don't know how much of this is buzz and what the participation rate is but I distinctly remember the residential telephone scheme. It was a true pyramid scheme promising quick riches. Money was made by working yourself up layers by getting people beneath you to sell residential phone service. Even though this has little impact on ad revenues, it is indicative of a developing social belief system. One not based on sustainable fundamentals. I think it's fair to say we should expect similar macro outcomes as happened with any pyramid scheme.
Chart courtesy of Nielson
As I state so often on here, one of the objectives of this blog is to encourage individual free-thought - one reason I cover certain topics over and over. In a perfect world no one would believe anything stated by the press or by business or by politicians. One would believe facts or plausible reality from one's own due diligence or experience. Or for anything that cannot be completely proven, to believe what one knows to be true in one's mind. To become as Buddha.
So here I go again with a rant. Now that every economist and financial commentator has had years to develop their remarks, place their bets and share their well-developed financial and economic ideology, I am going to start to re-frame the economic environment by tying together many of the remarks made on here over the last four years. By the time I'm done, you are going to realize just how ideologically-driven everyone is. And, how many of those who have been right to date actually contributed to this crisis with their faulty economic beliefs.
It's not a coincidence I am posting this advertising bubble remark a week after Google's CEO stated the worst of the economic crisis is behind us. Remember, Eric Schmidt (Google CEO) rode the internet bubble while at Sun Microsystems. The management of Sun actually believed they were geniuses during that period of insanity. We see that was a complete mischaracterization given Sun's business imploded in 2000 and management didn't see it coming. I recall some hazy details about Scott McNealy, the then Sun CEO, calling the White House economic team to tell them Sun's business literally collapsed in 2000. And the government needed to act or the economy was going to collapse. Or some similar actions in this same context.
McNealy was right. Those viewing the post 2000 recession as mild from a statistical standpoint were and are completely wrong. Another great economic myth formed by a misunderstanding of economics and the ever dreadful notion that correlation equals causation. The perspective that 2001 was just another recession manifests itself in the near universal belief that we would have had a mild recession if Greenspan weren't so aggressive in 2001 and 2002. This perspective is held by nearly every financial blogger, every economist and even every Nobel Prize winning economist. In fact, a few financial bloggers now seemingly hypothesize Greenspan purposefully created the housing bubble. A position of mild insanity or conspiracy or both.
Here is reality. We were headed for an economic collapse in 2000 and I'll prove it to you. Well, not in this post but at some point.
In the end Greenspan's policies did not reflate the American economy. Because the Fed does not control the economy. They simply reflated the credit cycle. Which is the only metric the Fed does control. That is why we had a jobless recovery post 2000. Because the economy was and is broken. A point we have highlighted repeatedly over the last four years. All Greenspan did by priming the pump post 2000 was put off the inevitable. And in the process make the impending misery that much greater. Yet even today the financial industry and business leaders are once again very bullish. Because they still believe the Federal Reserve has saved the economy. First on this list of Federal Reserve altar boys is Jim Cramer with his recent article thanking Ben Bernanke for saving us from another depression - a completely factless charade.
This is a nice place to post a commentary I found some years ago at the Cleveland Federal Reserve site. Does the Fed Cause Christmas? The article's first paragraph says it all. If anyone believes the Federal Reserve is going to save the economy by pushing money around, they should read this. So, applying the same logic of the aforementioned Fed commentary might we be correct in stating that not only does the Fed not cause Christmas but Cramer's success in the biggest stock market bubble in history does not make him the Bodhissatva?
Back to Sun Microsystems and the 2000 collapse. Sun's perceived brilliance was near universal around year 2000. Their stock had exploded higher. Doubling time and time and time again. This is the management team Jim Cramer pumped in September of 2000 as his best investment idea. Obviously right before the company's business and its stock collapsed. Eventually this was the same management team that led Sun right into the path of marginalization and into the ditch until Oracle bought them some months ago. They still might still be headed for the grave yard as I suspect Oracle really bought Sun for MySQL and other software assets and likely has no strategic plans for Sun's core business. We shall see.
As we have discussed extensively, including our lengthy PwC CEO Survey post, corporate success is influenced substantially by fundamentals outside of most CEO's control. To assign brilliance because of exogenous fundamentals is completely without merit. The CEOs of all of the homebuilders were rock stars on CNBC before the crisis hit, as was the CEO of Countrywide, private equity partners, hedge fund partners, the CEO of Dow, sovereign wealth fund managers and on and on and on. Turns out all of these people didn't have any idea what was about to happen to their own businesses. They were each living in their respective bubbles driven by exogenous fundamentals. And we wrote exactly that about each of these businesses before they imploded. Most of these people are good people. Smart people. Constructive assets to society. But they put their pants on one leg at a time just like everyone else and most don't know the first thing about economics. They did know a lot about hubris. In other words, the assignment of generally superior knowledge to positions of authority or success is most often a false truth. And let's be frank, in the cases cited above, we can actually draw the conclusion that these people were not just uninformed but they completely lost their marbles. This is part of the human condition and an ingrained flaw we all suffer from. In other words, we all have our blind spots. Want to ask a CEO how he deals with work force motivation. They may have a good answer. Economics? Likely just an opinion without any more merit than Joe down at the local coffee shop.
We should encourage and applaud people for achievement. We should applaud Google for all of the wealth, innovation and jobs it has created in society. But the CEO of Google wouldn't likely know any more about an economic recovery than Joseph Stalin knew about burritos. That Schmidt sits on the President's economic advisory council simply means he has more public opportunity to stick his foot in his mouth. Just as homebuilder CEOs, private equity, hedge funds, bank CEOs and others were afforded that opportunity with their short-lived publicity that has instead turned into long-term notoriety.
The sooner society releases its unsubstantiated beliefs and releases these values that aren't warranted, the sooner we will get back to fixing the economy and listening to the people who really know what the problems are. That would be We the people.
As an aside, these Google Adsense and advertising parties I was constantly spammed about are reminiscent of the residential telephone reseller schemes so prevalent during the internet bubble. I don't know how much of this is buzz and what the participation rate is but I distinctly remember the residential telephone scheme. It was a true pyramid scheme promising quick riches. Money was made by working yourself up layers by getting people beneath you to sell residential phone service. Even though this has little impact on ad revenues, it is indicative of a developing social belief system. One not based on sustainable fundamentals. I think it's fair to say we should expect similar macro outcomes as happened with any pyramid scheme.
Chart courtesy of NielsonAs I state so often on here, one of the objectives of this blog is to encourage individual free-thought - one reason I cover certain topics over and over. In a perfect world no one would believe anything stated by the press or by business or by politicians. One would believe facts or plausible reality from one's own due diligence or experience. Or for anything that cannot be completely proven, to believe what one knows to be true in one's mind. To become as Buddha.
So here I go again with a rant. Now that every economist and financial commentator has had years to develop their remarks, place their bets and share their well-developed financial and economic ideology, I am going to start to re-frame the economic environment by tying together many of the remarks made on here over the last four years. By the time I'm done, you are going to realize just how ideologically-driven everyone is. And, how many of those who have been right to date actually contributed to this crisis with their faulty economic beliefs.
It's not a coincidence I am posting this advertising bubble remark a week after Google's CEO stated the worst of the economic crisis is behind us. Remember, Eric Schmidt (Google CEO) rode the internet bubble while at Sun Microsystems. The management of Sun actually believed they were geniuses during that period of insanity. We see that was a complete mischaracterization given Sun's business imploded in 2000 and management didn't see it coming. I recall some hazy details about Scott McNealy, the then Sun CEO, calling the White House economic team to tell them Sun's business literally collapsed in 2000. And the government needed to act or the economy was going to collapse. Or some similar actions in this same context.
McNealy was right. Those viewing the post 2000 recession as mild from a statistical standpoint were and are completely wrong. Another great economic myth formed by a misunderstanding of economics and the ever dreadful notion that correlation equals causation. The perspective that 2001 was just another recession manifests itself in the near universal belief that we would have had a mild recession if Greenspan weren't so aggressive in 2001 and 2002. This perspective is held by nearly every financial blogger, every economist and even every Nobel Prize winning economist. In fact, a few financial bloggers now seemingly hypothesize Greenspan purposefully created the housing bubble. A position of mild insanity or conspiracy or both.
Here is reality. We were headed for an economic collapse in 2000 and I'll prove it to you. Well, not in this post but at some point.
In the end Greenspan's policies did not reflate the American economy. Because the Fed does not control the economy. They simply reflated the credit cycle. Which is the only metric the Fed does control. That is why we had a jobless recovery post 2000. Because the economy was and is broken. A point we have highlighted repeatedly over the last four years. All Greenspan did by priming the pump post 2000 was put off the inevitable. And in the process make the impending misery that much greater. Yet even today the financial industry and business leaders are once again very bullish. Because they still believe the Federal Reserve has saved the economy. First on this list of Federal Reserve altar boys is Jim Cramer with his recent article thanking Ben Bernanke for saving us from another depression - a completely factless charade.
This is a nice place to post a commentary I found some years ago at the Cleveland Federal Reserve site. Does the Fed Cause Christmas? The article's first paragraph says it all. If anyone believes the Federal Reserve is going to save the economy by pushing money around, they should read this. So, applying the same logic of the aforementioned Fed commentary might we be correct in stating that not only does the Fed not cause Christmas but Cramer's success in the biggest stock market bubble in history does not make him the Bodhissatva?
Back to Sun Microsystems and the 2000 collapse. Sun's perceived brilliance was near universal around year 2000. Their stock had exploded higher. Doubling time and time and time again. This is the management team Jim Cramer pumped in September of 2000 as his best investment idea. Obviously right before the company's business and its stock collapsed. Eventually this was the same management team that led Sun right into the path of marginalization and into the ditch until Oracle bought them some months ago. They still might still be headed for the grave yard as I suspect Oracle really bought Sun for MySQL and other software assets and likely has no strategic plans for Sun's core business. We shall see.
As we have discussed extensively, including our lengthy PwC CEO Survey post, corporate success is influenced substantially by fundamentals outside of most CEO's control. To assign brilliance because of exogenous fundamentals is completely without merit. The CEOs of all of the homebuilders were rock stars on CNBC before the crisis hit, as was the CEO of Countrywide, private equity partners, hedge fund partners, the CEO of Dow, sovereign wealth fund managers and on and on and on. Turns out all of these people didn't have any idea what was about to happen to their own businesses. They were each living in their respective bubbles driven by exogenous fundamentals. And we wrote exactly that about each of these businesses before they imploded. Most of these people are good people. Smart people. Constructive assets to society. But they put their pants on one leg at a time just like everyone else and most don't know the first thing about economics. They did know a lot about hubris. In other words, the assignment of generally superior knowledge to positions of authority or success is most often a false truth. And let's be frank, in the cases cited above, we can actually draw the conclusion that these people were not just uninformed but they completely lost their marbles. This is part of the human condition and an ingrained flaw we all suffer from. In other words, we all have our blind spots. Want to ask a CEO how he deals with work force motivation. They may have a good answer. Economics? Likely just an opinion without any more merit than Joe down at the local coffee shop.
We should encourage and applaud people for achievement. We should applaud Google for all of the wealth, innovation and jobs it has created in society. But the CEO of Google wouldn't likely know any more about an economic recovery than Joseph Stalin knew about burritos. That Schmidt sits on the President's economic advisory council simply means he has more public opportunity to stick his foot in his mouth. Just as homebuilder CEOs, private equity, hedge funds, bank CEOs and others were afforded that opportunity with their short-lived publicity that has instead turned into long-term notoriety.
The sooner society releases its unsubstantiated beliefs and releases these values that aren't warranted, the sooner we will get back to fixing the economy and listening to the people who really know what the problems are. That would be We the people.
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