Special Alert: Removing Facebook shares from the Select List

Special Alert: Removing Facebook shares from the Select List


Special Trade Alert for Tematica Investing Subscribers:

  • We are issuing a sell on Facebook (FB) shares and removing them from the Tematica Investing Select List. As we do this, we will note the 30% gain in the shares to be had since they were added to the Select List in November 2016
  • We are placing Facebook shares on the Tematica Investing Contender List


As the privacy and user data issues continue to mushroom at Facebook, we see the risk-reward trade-off to be had in the shares as limited to the upside as the company looks to address the issues and win back users. Given Facebook’s reliance on advertising revenue — which is obviously predicated on users and the amount of time spent on the service — in the current environment, much like the one we are seeing with the stock market in general, I suspect advertisers will “shoot first, ask questions later” as the could likely curtail their ad spending with Facebook.

In the recent past, we have witnessed advertisers balk at digital platforms following breaches and privacy concerns, and I expect that is likely to happen with Facebook. In the short-term, the beneficiary of this pain point is likely the Google AdWords platform, a nice additional tailwind for Tematica Select List company Alphabet (GOOGL), whose shares are up over 40% since we added them. While we remain bearish on shares of Snap (SNAP), we recognize that in the near-term both SNAP and Twitter (TWTR) could see some lift in advertising revenues.

Odds are Facebook will look to forestall such advertising spend shifts by salvaging its reputation as it trots management out, owns up to the issues and says it will address the problems. Any fixes, however, will take time and as we are seeing in the headlines we are hearing about other breaches that in my view will only stoke the current privacy concerns.

Here’s the thing, as these thoughts and actions begin to permeate investor minds, we will probably see Wall Street begin to cut revenue and EPS forecasts for Facebook for 2018 from the current $55.1 billion and $7.35 per share, respectively.

What this all means is for Facebook shares is that the best case scenario sees the shares stay range bound in the near future. However, there is also the likely case that they will trade off becoming a “show me” story in the near-term. The former is the likely the case even though Facebook is looking to expand the stickiness of its namesake service with video and original content on its Watch tab, while at the same time pushing its other services — Whatsapp and Instagram — to offer more advertising opportunities.

One of the key tenants for investing is to not fall in love with your investments, and that has us cutting Facebook shares from the Select List, and placing them onto the Contender List. The why behind that move is while there is a short-term disruption underway in where and how companies will advertise, in the medium to longer-term advertisers will still want to reach consumer where they are. In keeping with our Connected Society investing theme, this means connected devices and other digital platforms they are using to consume content, no matter the form or substance.

  • We are issuing a sell on Facebook (FB) shares and removing them from the Tematica Investing Select List.
  • We are placing Facebook shares on the Tematica Investing Contender List





NSA Surveillance Impact Overseas

On February 10th I spoke with Neil Cavuto on how NSA surveillance affects international communications.

I work internationally, dividing my time between San Diego, California and Italy. I sometimes advise on deals that have involving high-profile, publicly traded companies and the actions my clients take are significant enough to affect the market.  Now whenever you are talking about large amounts of money, someone will always find information valuable.

So… aside from the obvious obscene Constitutional violations by the NSA, their spying has a material effect on how we now communicate, specifically on how non-American entities conduct their business with Americans and with each other. The world has been put on notice that communications, which in anyway interest the US, are subject to interception by an agency that has shown it doesn’t have its house in order and its use of that information is uncomfortably vague.
Some companies in Europe have even taken steps to ensure that their communications do not get routed through any servers that they believe the NSA may observe.  Of course we really have no idea just how pervasive the NSA’s program truly is, so an overabundance of caution is required.
So now, when I am outside the US and I send an email to the US, I have to first think of which account to send it from based on what I’m saying and whom I’m sending it to.  When placing calls from outside the US to firms with whom we work in the US, I am conscious that someone may be listening and cannot trust what they may do with what they hear.  What if I place a call from somewhere like Dubai or have a conference call on with someone from there to a financial institution in the US?  Does that raise any red flags for the NSA?  Would someone then listen to that call?  I have to think about how to protect information that cannot be released before we are ready, which adds more friction to the system. That is not exactly helpful in an economy that is struggling.  Why make it harder for us to work done?

Forget Snowden and Focus on the NSA

Forget Snowden and Focus on the NSA

The NSA works for us.  The power to govern lies with We the People and flows from us to the government, not the other way around.  The NSA does not dictate to us what the appropriate constraints on its activities ought to be.  It may suggest, but We the People decide what controls we want on our government.  When the governing violate the constraints imposed by We the People, without our knowledge, someone like Snowden needs to take the risk to let us know.

“I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.” ~ Thomas Jefferson

2013-07-04 WhistleblowerListening to the pundits finger-wag and vilify whistle-blower Edward Snowden for the past few weeks has me in a serious lather.  I’ll admit that the recent heatwave in Genova, Italy (my part-time home along with San Diego, CA) and my upcoming trip from here to Las Vegas for FreedomFest probably has me even more fired up than normal.  You haven’t lived until you’ve had to drive in Italy in the heat.  I swear it makes an already anarchic driving society even more lunatic, but I digress.  I’m usually one to pshaw conspiracy theorists, but the vehemence of the vile attacks on Snowden’s character by those who have scant information to go on has even my eyebrows raised.  He may be an angel.  He may be a demon.  But why the hell is that even the focus?  That’s like finding the lost city of Atlantis in a tropical sea and obsessing over the clarity of your goggle lenses!

Snowden has been referred to as a “cross-dressing Little Red Riding Hood” in the Washington Post, a grandiose narcissist in the New Yorker, and Fox New analyst Ralph Peters and Donald Trump want to bring back the death penalty for Snowden.  Seriously people?  Talk about going off half-cocked and gunning for bear.

Where is the focus on the Constitutionality of the NSA’s spying?  Oh but not to fear, Jed Babbin of the American Spectator assures us that the NSA is “a whole lot more trustworthy than most of the rest of our government,” and isn’t like the IRS.  Oh that’s comforting, given the NSA’s track record.  For the love of Pete, in 1978 the Foreign Intelligence Surveillance Act was created specifically to limit the powers of the NSA after project SHAMROCK came to light, a project that Senator Frank Church claimed was, “probably the largest government interception program affecting Americans ever undertaken.”  That is until now of course.

Let’s not forget that the NSA is responsible for  the Gulf of Tonkin incident, reporting falsely that an attack had occurred on the USS Maddox, which ultimately led to the Vietnam war.  Ooops on that one too?

Now we’ve got National Intelligence Director James Clapper admitting in a letter to the Senate Intelligence Committee that his statement before Congress that the NSA did not have a policy of gathering data on millions of Americas had been “clearly erroneous”.  Right, you lied to the people you serve, but we’ll trust your judgment anyways.

A month after the Guardian broke this story, Snowden’s worst fears may be coming to pass, namely that nothing changes.  We have no Frank Church to lead the charge as he did in the 1970s, instead we have the likes of Cheney defending the NSA and calling Snowden a traitor.

The power of government must at all times be vigorously constrained because power will always end up being abused.  Perhaps we get lucky and have angels running the show for a while and we grant them all kinds of powers under the theory that they are there to protect us.  History has shown that angelic bureaucrats are a quickly fleeting dream.  Hell, if the NSA is so good at making sure this data doesn’t get into the wrong hands, how did Snowden get it?  Doesn’t look like he is exactly their poster child!

Liberty comes at a price.  Living in a society in which individuals are free to live their lives as they see fit, rather than living in a one-size-fits-all world comes at a price.  The more protection we ask for, the less freedom we have.  Keep this in mind.

All men having power ought to be distrusted to a certain degree.” ~ James Madison