Where To Put Your Money Right Now

October 15, 2008 by

This is for anyone who has under 250k dollars in stocks and bonds and also has debt.

If you listen to me, I GUARANTEE YOU that you will earn a greater return than 90pct of the richest, supposedly smartest money managers ON THE PLANET. All those Wall Street fat cats, they can’t earn as much on their money for you as I can help you earn.

Sound too good to be true  ? Read this and decide for yourself.

First thing to understand is that Wall Street wants you to believe that if you give them money, every month, forever, to buy stocks, that you will most likely will earn 7 or 8pct per year. When compounded, your money  will double every 9 or 10 years.  Sounds great, right ?  One problem with it. You know what you would call someone on Wall Street who made you 7 or 8 pct a year, every year without ever losing money in a year ?  Non Existent. Those managers don’t exist.

You can however do what they can’t and even better if you do the following:

1.  Write down a list of every penny you owe to anyone and the interest rate that you pay on that amount.  Your mortgage, your car payment, your student loan, the Rent A Center TV and Dell Computer Loan,  your loan shark, your uncle or grandparents and most of all your  credit cards

2. I’m willing to bet that you have absolutely no idea what your interest rate is on any of the above.  Between penalties for using the wrong type of stamp, being 37 seconds late, and moving interest rates that are triggered by every crazy thing, its hard for anyone to know. However, a glance at  Citibank Platinum Select Mastercard details as an example, would tell you that if you are late on your payment, your rate is:

All default APRs equal the greater of (1) the Prime Rate plus up to 23.99% or (2) up to 28.99%. PLUS LATE FEES of 10pct OR MORE ON BALANCES UNDER $250 !!!! (There may be something in the fine print that asks you to bend over too, but my eyes couldnt focus on  print that was that small….)

All of Wall Street would give you the choice of either testicle to be making returns that high.  A quick glance at IndexCreditCards.com tell us that not only are the average rates for any card, higher than the biggest promises from the best Wall Streeters, but they have been trending higher.

So in a nutshell, while the interest rate on your credit cards is going up, the return on your investments has been going down.  You know what they call someone who keeps on giving money to their stockbroker, mutual fund or 401k, but doesn’t pay off their credit card balance in full every month, BROKE AND STUPID !

The first thing you do with your money  is if you have money market funds, you take the money out and pay down your credit card debt. If that doesn’t pay it off. This is what you do next:

You make a list of every stock, bond, fund, whatever you own, and mark what your cost is, the current market price, the current dividend yield on your cost basis, if any and whether it is in a 401k, fund or brokerage account.  For any stock or bond at a brokerage account that is yielding less than what you are paying in interest rates on your credit cards, and for which the current price is less than what you paid for it. YOU SELL IT. When you call your broker to get the prices, you do not let them give you a bunch of BS about why you shouldn’t. YOU SELL IT.

You dont hold it to see if you can make money with it. If you love it, you immediately fall out of love with it. ITS A FRICKING STOCK, not a family member, and you sell it. You take that money and you pay down your credit card debt.

Then you start with the stocks/bonds you have made money on. Beginning with the stock/bonds you have made the least amount of money on, if it isn’t yielding you more than the interest rate plus late fees that you pay, you start selling, and selling and selling. Sell as much as you need to until you can pay off your credit card balance.

Once you have sold enough to pay off your credit card balance, you RIP UP YOUR CREDIT CARDS and replace it with a debit card.  The only way Credit Cards cost you less than  9pct, or possibly as much as 40pct or more is if you pay it off monthly. Debit cards make that happen automatically.  You cant afford to pay 9pct, 40pct or more.  Both are far more than you can expect to make in the stock market, or any market. If you have gotten here to this point, and you just tore up your credit cards, YOU HAVE JUST EARNED A GREATER RETURN ON YOUR MONEY IN THAT PERIOD OF TIME THAN ANYONE ON WALL STREET COULD EVER EARN YEAR IN AND YEAR OUT.

If you still arent to the point of paying off your credit card, its time to borrow against your 401k.  Switch all your money from whatever funds to insured, guaranteed funds like money markets.  Then find out the rate of interest you pay, how long you have to pay it off (usually 5 years), and then borrow the money to pay off your credit cards.  I have never seen a 401k that charges more than credit cards in interest. Credit cards accrue interest and penalites a lot faster than you can earn and accrue interest and returns in your 401k.   So borrow the money, pay off the credit card, and start paying back your 401k with what your credit card payments were. You will have your 401k loan paid off a lot faster than you could ever pay off your credit cards.

Once your credit card is paid off, then you go to your debt list and pick out the next highest interest rate and start the process all over again until all your debt except your mortgage is paid off.

If after paying off all your non mortgage debt, you still have money left, then you need to sit down with someone who knows your tax situation. Since mortgage loans are usually deductible,  ask them to help you figure out what your effective interest rate is on your mortgage and what your outsanding balance is. If you are fortunate and  your net effective rate is less than 7 or even 8pct, and you can make the monthly payments, then you probably don’t need to do anything with your mortgage.

If you have a mortgage that is variable in any way , shape or form, you are probably paying more after tax in effective interest rate than you can earn on your money anywhere that is legal. With this information in hand, you and your accountant or whoever you turn to for help (and please make it someone who really knows what their doing, not someone who got a refund using some tax software) can set up a meeting  with your banker, or whoever happens to own your mortgage if you can find that person, and start discussions on how to buy down, pay down , buy out, or pay off your mortgage. They may say no, but if you can get them to renegotiate, and these days thats a very real possibility, you should be able to get a greater return from this process than you can get from the money being in stocks, bonds, or any thing else for that matter. This is particularly applicable if you have a subprime , ARM, or any type of variable rate mortgage.

If you have read this far you have hopefully picked up on the basic principle of debt vs investments. The people who lend you money can guarantee you that they are going to charge you a ridiculous percentage, and throw on top of it, any and every fee they can, thereby increasing the effective interest rate you pay.  They can do it every year forever.

On the other side, no one in the universe  can guarantee you that they can earn you more than what Consumer lenders like credit card companies charge you in interest. No one. If they could, the lenders wouldnt lend the money to you, they would give the money to those people to invest, right ?

If it takes selling every stock, bond and whatever you have to pay off your debts, do it. If it means borrowing against your 401k and paying back yourself instead of the credit card or finance company, do it. It is a far better return than you will ever make putting that money elsewhere.

If none of this applied to you. You kept your debt at levels that you could afford and at rates that were fixed and low, congrats. Hopefully this just reinforced what you already knew.

If  on the other hand, this set you on the right path, and you still have money in stocks and bonds, you are fortunate. You probably need to make sure that what you own is very, very safe and not at risk. My recommendation is 6 month CDs, you can probably go to your bank and convince them to pay you 4 or more percent. If you havent heard, there is a bank liquidity crisis. Banks want your money. They have been ripping you off with credit cards all these years, go take some of their money…

One last point. It would not be out of the realm of possibilities to see a collapse of credit card debt like we saw in mortgage debt. Default rates are going to go up. That means credit card company income is going to go down. You know what banks do when their income goes down  ? They try to figure out more ways to charge you more money to make it up. Which of course pushs up default rates. Its a viscious circle and you pay the price.

Get out now while you can.

Why McCain Was Right to Suspend His Campaign

September 25, 2008 by

One candidate thinks he can add value to solving the greatest financial crisis since the Great Depression. The other candidate thinks he can’t add value and that its a better idea to campaign.

Here is the question I would ask the Senator: “How is it Senator Obama, that with Wall Street burning, you thought it was a better use of your time to campaign ?. You make it clear that one of your greatest skillsets is promoting consensus. Has there ever been a time when promoting consensus was more important to the financial health of the American people than today ?”

Even if all either Senator did  did was go to the meetings and shut up and listen, that would put both  in a position to offer help if needed.

Remember this. 90pct of being successful is showing up. The other 10pct is being prepared to  know what to do when the opportunity presents itself.

Understanding the Bailout… I think

September 23, 2008 by

Consumer mortgages sat on a wall. Consumer  mortgages had a great fall. All the kings accountants and all the kings friends, couldn’t put Consumer mortgages back together again… or can they ?

After watching all the testimony on CNBC and Fox Business (and a little Bloomberg too), there was one comment from Hank Paulson that really clarified things for me. Or at least I think it did.

He said the process of the bailout was going to take place, asset class by asset class. Combine this with other testimony that talked about the important of getting participation from all banks, rather than dealing on a bank by bank basis, here is what I think I can conclude:

Every which kind of debt, from mortgages, to parts of mortgages, to corporate bonds to IOUs from your Uncle Fester have been packaged together in every possible permutation to create sell able assets that could then be used to package CDOs , CDSs to who knows what. Every investment bank then took these complex instruments and made a boat load of money selling them to anyone who would take them, including each other. Every one did it because everyone did it and they were making a ton of money from it.

Problem was, these products were  complex, and, and its a VERY BIG AND, there was no real accounting of what products were sold, how many were sold, and what was in the products, individually and in aggregate.  Bialystock & Bloom could have done a better job accounting for this than what exists today. Which is basically no accounting for all of this at all. None.

Because there is no transparency or centralized documentation of what the financial institutions have sold, what they own, or what the pieces involved are, the Fed really has no idea whatsoever what it is buying.

So what to do ? Exactly what Paulson is doing. You tell everyone to throw their junk into a big hole and then you send in the accountants and “experts” to untangle everything and put them in their “asset class bucket”

Figuratively, imagine a huge trash pile of contracts reaching to the sky. Some government accountant is going to start with the one at the top and start reading it to figure out what the hell is in each contract. Then they are going to extract the pieces and put them in asset class buckets. It will go something like this…:

This contract has 10k pieces of mortgages, so we are going to document which mortgages and put them in the mortgage bucket. This one is a CDS against XYZ corporation , put it in the corporate debt asset bucket for XYZ corporation.  There is a bucket for each asset or debt class, mortgages, corporate and whatever else is possible.

Once they have deconstructed each contract into the lowest common denominator asset class bucket, they will start to reconstruct, if not each individual mortgage, packages of mortgages and how they are encumbered. They will construct each individual debt obligation and all the instruments that have been sold against that debt. They will do this over and over again, documenting all of it until they can come up with an accounting of what assets, debts and derivative instruments they actually have bought

Once they have done this, they can start the process of selling what they hope will be far simpler and easier to understand and document financial instruments. Which, by nature of the fact that they are simpler, will be easier to sell at a higher price.

One of the challenges they have is in having all the contracts required to identify all the pieces of the base asset class. To simplify, if a mortgage was split up into 100 pieces and they only were able to identify 90 of them, it will be harder to sell the underlying mortgage because its missing pieces. this is exactly why Paulson said that they are not going to punish each individual corporation and CEO.  They dont want to disincent any holder from contributing every bit of these obligations. They need to find everything in order to put the pieces back together. They need full participation.

Once they identify all the pieces, then they can start selling all the pieces, asset class by asset class.

Once they get to this point, then I stand by my last post. They need 100pct transparency. They need to identify all the final products they were able to reassemble and all the pieces that the final products were assembled from, along with the companies they came from.  Then they need to publicly list all these and create some form of auction market exchange from their sale.

if they can sell it, it means they have it documented. if its documented for the buyer, it can be documented for shareholders of USA Inc, you and I, to see and for private equity to possibly bid more and buy

And finally, they need to work with Congress to pass a law that revokes the Golden Parachutes of any officer of a company that contributed assets to the Bailout.

This is how I understand this whole thing. Tell me what I missed or where I am wrong

Thanks for the advice on Josh

September 19, 2008 by

I wanted to thank all of you who took the time to email me with your comments on how best to deal with Josh. They were so good, I thought I would share a few of them with everyone. Including the email addresses of those who were bold enough to use real email addresses.

Author : Barack Obama (IP: , cache-mtc-ah04.proxy.aol.com)
E-mail : Nigga4life@coon.com
URL    : http://Watermellon
Whois  : http://ws.arin.net/cgi-bin/whois.pl?queryinput=

“Jeff Kellen” <jkellen@idealssi.com> Add Address to Contacts
To: <mark.cuban@dallasmavs.com>
Date: 09/18/2008 04:22 PM
Subject: Ask Mark Cuban
Hi Mark,

Did you know Josh Howard was an America hater when you signed him or was
it a surprise?

“I don’t spend my money on this NBA shit, I am white.”


– Jeff

From: “Tyree, Pam” <ptyree@nwcouncil.org> Add Address to Contacts
To: <mark.cuban@dallasmavs.com>
Date: 09/18/2008 11:18 AM
Subject: Howard
This ahole is just as anti American as you are Cuban! What a disgusting bunch.
rom: “Billy Leto” <billy.leto@gmail.com> Add Address to Contacts
To: mark.cuban@dallasmavs.com
Date: 09/18/2008 09:20 AM
Subject: are you kidding me?
Tell Howard that him and Hussein Obama can go to another country and live if they don’t want to support our symbol of freedom.


From: Donald Joy <donaldgjoy@yahoo.com> Add Address to Contacts
To: mark.cuban@dallasmavs.com
Date: 09/18/2008 09:20 AM
Subject: Howard’s(and the rest of them) anti-American, thuggish remarks/attitude
These black criminals that you people coddle and cultivate are the reason why I no longer watch/follow professional sports.  Sickening.
From: “Riley Johnson” <Riley.Johnson@directs.com> Add Address to Contacts
To: <mark.cuban@dallasmavs.com>
Date: 09/18/2008 09:14 AM
Subject: Ask Mark Cuban
Hey Mark, I’ve always loved the way you ran your team and respected a large amount of your opinions.  Regardless, I have to stop supporting the Mavs.  Why?  Because I don’t support POS, America-bashing people like Josh Howard.  Tell that spoiled pansy that his lifestyle is only made possible by the marvelous experiment that is America, and to take his bs to Russia if he’s going to talk down our national anthem.  Until he’s off the team, you guys are off the TV.
From: christopher.wolff@comcast.net Add Address to Contacts
To: mark.cuban@dallasmavs.com,<mark.cuban@dallasmavs.com>
Date: 09/17/2008 11:28 PM
Subject: josh howard
This the first time I have e mailed any one of this stature you have to be kidding me I have always admired you and I am a warriors fan Don Nelson or not. Fire that ass hole this is America send him to Iraq No wonder kids act the way they do this is there role model they have no clue what we have been through in our history and how we became this country we all have faults but this is not the 60`s if it was he would of been hanged. I suppose that he thinks all the fireman, police and innocent citizens in 911 should of died also only in America could this happen and thats the point he does not get.
From: Larry Smith <sdnco99@hotmail.com> Add Address to Contacts
To: <mark.cuban@dallasmavs.com>
Date: 09/17/2008 08:51 PM
Subject: Your boy
You need to get rid of your nigger howard before you go down with him!
From: “Manuel Rodriguez” <manuel_rodriguez_7126@yahoo.com> Add Address to Contacts
Cc: <Mark.Cuban@dallasmavs.com>
Date: 09/17/2008 10:09 PM
Subject: Maverick Josh Howard

You better get that piece of work out of your team for talking and disrespecting the national anthem or you are going to pay the price for it…..  What kind of org. allows a looser and an idiot play for them?  You are so low you make me vomit!!!!  If you allow a hate of America play for your team, you also Hate AMERICA.  GET OUT OF HERE!!!!

Have a Blessed Day:

Manuel A. Rodriguez

Name: Roger
Email: rconnally@hotmail.com

Dude: Worry less about why the financial world and more about that unpatriotic coon you have on your team.

Time: Wednesday September 17, 2008 at 10:07 pm
IP Address:

From: vxsmith@aol.com Add Address to Contacts
To: Mark.cuban@dallasmavs.com
Date: 09/18/2008 08:58 PM
Subject: Josh Howard
You need to fire that SOB immediately. However, given your political leaning and anti-US film producer credits, I doubt you have the nuts for it. Wouldn’t be surprised if you encouraged him. Do the right thing…dump that dumb asshole.
From: George Bannon <georgebannon@sbcglobal.net> Add Address to Contacts
To: markcuban@dallasmavs.com
Date: 09/18/2008 08:25 PM


How dare you defend this Josh Howard piece of shit. After his disrespect, at the very least, you should have transferred his ass to the Euro league. He doesnt like America? Well screw him. Ive been around the world, defending America. Hell, I havent even had the opportunity to live in my own country since 1995. I can assure you many people, with IQs higher than a shoe lace, would gladly trade places with this ingrate punk. As long as you protect him and make excuses for him you carry equal guilt. I would immediately have any person in my employ fired and have his security clearance yanked for expressing such an opinion. I could retire on 1/20th of this assholes salary, and all he does is play ball and trash the country which provides him the opportunity to make such a living. Send him to REALITY, where he should be; bagging groceries and/or in prison.

Tommy Lee Frederick
Systems Technician – Warrior Training Center, U.S. Forces Korea
Unit 15596 Camp Casey, Korea APO AP 96224-5596
DSN 315.

COM +82.31.869.1645

EMAIL: frederickt@korea.army.mil

From: “stephen rogers” <stevadore@cableone.net> Add Address to Contacts
To: <mark.cuban@dallasmavs.com>
Date: 09/17/2008 09:34 PM
Subject: Ask Mark Cuban
Mr. Cuban,
Just saw your nigger Josh Howard  disresepct the national anthem because he is black. According to the news you say he is a really great guy. Of course he is because he makes you lots of money you greedy bastard.
You would rather sell out your own country that my dead father fought for in WW II than than lose a buck by firing this black bastard.
You are nothing more than a nigger slave owner milking him for all his black ass can get you.
There’s lots of black dick on that team, get busy. White power is coming back because of race traitors like you.
Know what you get when you cross a nigger and a white nigger lover ? a  WHIGGER. THAT IS YOU !!!!
Mark WHIGGER Cuban. A White storm is brewing Mr. Cuban, you and those niggers like you better evacuate.
From: Jeffrey Miller <imjeff49@yahoo.com> Add Address to Contacts
To: mark.cuban@dallasmavs.com
Date: 09/17/2008 08:14 PM
Subject: Ask Mark Cuban
You need to get rid of NIGGARS like Josh Howard.
Email: joejujo@yahoo.com

why on earth would you keep the piece of embarrassing ghetto trash named Josh Howard?
I will no longer cheer for the mavs.
Go Spurs!

The Wealth Effect of Companies, Power and how its Hurting the Economy

November 8, 2010 by

The Wealth Effect on Individuals suggests that the more wealth people know or feel they have, the more likely they are to spend their money. Which in turn is good for the economy.

I’m no economist. Thankfully. I try to pay attention to what is happening with the economy and create observations based on experience and common sense.  Based on that, I think the Fed is making a big mistake in how they are implementing their Quantitative Easing 2 policy.

Here is why: Companies are not spending money.  Corporate cash balances at public companies are at an all time high.

When People feel like they are getting richer, that wealth doesn’t convey power to the vast majority of the population.  They reward themselves for all their hard work and success with increasing their standard of living.

In today’s world, when companies accumulate cash they feel the exact opposite. A growing cash balance conveys a feeling of power to CEOs.  The more cash in the bank, the more power with in their industry that CEOs feel that they have.  It is not an accident that CEOs refer to their cash balances as a “war chest”.  The more cash a company has , the bigger the industry sledgehammer they have with which to make acquisitions, buy back stock and most importantly increase their own personal wealth through a rising stock price.

Not only does a big cash balance convey power to the CEO, but it also acts as a foundation for a stock price.  Analysts are quick to justify Apple’s stock price by pointing to the fact that 17pct of Apple’s market cap is in cash.  Steve Jobs has been quick to point out that there is no reason to spend their “war chest” because of the opportunity value the cash presents for acquisitions in a  very competitive industry.

Jobs doesn’t chase stock price increases. Most CEOs do. The same personal wealth greed that pushed companies to over leverage (only to be deleveraged) is now pushing companies to aggregate as much cash as possible. With cash you can buy back stock at any time, increasing the company’s stock price and your personal wealth.

With cash in the bank, you don’t have to pay to repatriate cash from overseas . You already have the cash you need.

With cash you can lay off people to increase earnings per share, knowing that if you make a mistake, you have the cash to fix it.

With cash you can borrow all the money you need at barely breathing interest rates.

Companies are not holding on to cash because of fear of political and tax uncertainty. Companies are holding on to cash because of the power it offers and the opportunity to increase personal wealth.

All that cash is sitting in the bank earning NOTHING.  Economists would tell you that if you can earn more from deploying cash than by hoarding it, you should deploy it. Not true. In this age of CEOs, power trumps return on cash every time.

If the Fed thinks that creating money to make it easier for companies to borrow money is going to stimulate the economy, they are wrong.

They are simply making it easier for companies to hoard cash.

What should the Fed do ? I’m not sure the fed can provide the solution. I don’t think they have the authority to encourage or penalize companies into using their cash. The way to get companies to spend their cash is to make it hard for them to spend their “warchests” in manners that only serve to increase their personal wealth.  As i wrote several years ago:

How to Tax Wealth = Earned vs Found Money

Aug 26th 2008 4:41PM

When you go to work, whether you get paid by the hour, or on commission, tips or by salary, you earn every penny of it. The operative word being earned.

When you invest your own sweat equity and/or money to create a company, the operative word being create, you earn every penny of it.

I think Obama is about to make a HUGE misake, if elected, by increasing taxes on EARNED income of 250k or more. 250k does not make you rich, particularly if you live in a city, say New York City, with a huge cost of living. 250k does not make you rich if you are 60 years old, hoping not to get laid off and holding on to your salary long enough to have enough in the bank to retire. 250k does not make you rich if you have 3 kids near or at college age.

The disparity in wealth in this country does not come on the backs of people making 250k, or even 500k or 1mm per year FROM THEIR JOBS. The ever increasing delta between the rich and everyone else does not come from EARNED INCOME at all. It comes from found money.

Found money is when an internet bubble hits and the options you got for 1 dollar are sold for 250. It comes from buying a stock for $1 and seeing it turn into a “10 bagger”. It comes from hitting the lottery. It doesn’t matter whether you were smart or lucky, it is money you FOUND based on good fortune.

When I sold broadcast.com does anyone seriously think I would have cared if the tax on my FOUND money was 10pct or 20pct more ? Hell no. Would I have made any decisions differently, HELL NO.

I dont have access to financial data, or maybe Im just too lazy to find it, to know how much income in this country is found money. Capital gains earned from limited risk capital. Things like stock options awards sold. I dont know what the number is, but its found money and could be taxed higher. If Steve Jobs gives himeself 1mm Apple options at a buck or two apiece, and he sells them for $175 dollars each, would anything about his actions change if that FOUND income were taxed at 20pct higher rate ? Sure Steve Jobs busts his ass to increase the output of Apple Computer. But his ass busting does really change the multiple or base price assigned to the stock. Thats a function of the market and market trends.

Im not the economist, fortunately, but if we can arbitrarily assign taxation to given income levels, we can arbitrarily define what constitutes FOUND MONEY.

I would do the following:

if an individual, in any given year, has short term capital gains of more than 1mm dollars, AND that gain is 200pct or more (remember, for your taxes, you list cost and sales price, so gain percentage would not be difficult to calculate) you pay the existing cap gains tax, plus you get hit with a “You got lucky tax of 30pct”

For long term capital gains, it would be more difficult, but I would tax it at a gain greater than $1mm or a basis equal to the compounded CPI for every year held, against a 300pct increase and reduce the GOT LUCKY percentage to 20pct.. So in the Steve Jobs example, if he had held his stock for 5 years, then sold it at 175mm a share, he would pay tax on 175mm in gains at the current rate, then a GOT LUCKY tax at 20pct of $175mm or $35mm dollars.

Will it piss off rich people like me.. Yep. But it wont affect our behavior at all. At some point you know the difference between FOUND MONEY and EARNED INCOME. That stock that went crazy, the options or warrants you got that vested just at the right time, thats where people get in to the Fuck You money territory, and most if not all recognize that paying taxes at that level is a great problem to have.

The transactions this GET LUCKY tax is most likely to impact



So what does the blogosphere think about all of this ?





How Google TV Could Hand Netflix the entire streaming universe

October 22, 2010 by

I personally can’t think of anything stupider for the big broadcast networks to do than give their shows to Google for free. Why ? Because they are finally getting BILLIONS of dollars in retransmission fees from their distributors.  This is new money. It is found money. It is money they are fighting for.  Just ask Fox and Cablevision what they think of each other this week.

The idea that they would take and fight for money from their distributors, who generally are the same ISPs that Google TV delivers content over, and then offer the exact same shows for free through Google TV, or any aggregator that expects that content for free is probably one of the dumbest concepts ever.

Now if Google were to go to those networks and offer them money per month for every buyer of a Google enabled device or TV, that would be different. Then they would be a tv provider competing with the rest and they should take their money. Think Google will ever do that ? I don’t.

So giving the same content  they not only charge their distributors for, but also charge their local affiliates for to Google for nothing or for a share of revenue  ? STUPID.

If Google sticks to their guns of not paying up front for content like Netflix does, they will have handed Netflix the entire streaming universe on a platter.

Did anyone else see the report that Netflix streaming consumes 20pct of download throughput during weekday primetime hours ?

If this is true. Its one more reason to think that Netflix has won the streaming wars and those broadcast networks would be moronic to give their content online away for free. Why ?

First of all, do you know the difference between Netflix and Google when it comes to content ?  Netflix pays up front and offers minimum guarantees.  Google and everyone else for that matter, pays a commission based on ad sales. (which works wonderfully on Youtube for them)

So riddle me this batman. Netflix is on Google TV , correct ? Given that Netflix pays and Google TV doesn’t, why wouldn’t/shouldn’t the broadcast networks offer all of their shows to Netflix as a way to reach Google TV users, knowing that they will get paid for their content. Paid HUNDREDS OF MILLIONS OR MORE for their content.

All you internet pundits want the broadcast networks to give the content away for free. THAT IS STUPID.  Get Netflix to pay you on a per subscriber basis on a par with  what your other TV providers pay you. Netflix becomes a competitive TV provider. BRILLIANT. You get paid. You reach Google TV users and non Google TV users.

Of course you basically cede to Netflix  control of the streaming content world. You give their streaming only subscriptions a unique value beyond old shows and movies. Goodbye Hulu as well.

Of course once they get the broadcast nets, how long until they add the cable nets like ESPN, Disney, etc., etc. ?

Back to the Netflix using 20pct of bandwidth.  Now that they have gotten there, it is going to be easier for Netflix than anyone else to grow their bandwidth usage. They can add streaming subscribers at a controlled level and it could work.  Growing their usage as a percentage of total bandwidth consumption quickly becomes a trojan horse in the streaming wars.  They are consuming so much bandwidth, they literally are blocking out the ability of anyone to compete with them.

If Netflix gets to 25pct do you think Google is going to be able to also get to 25pct during primetime and all of the sudden 50pct of the internet’s bandwidth during primetime  is allocated to streaming tv originated shows, movies and other video ? Of course not. And that’s before consideration for Youtube. How much bandwidth in primetime does and will Youtube use ? After you combine Netflix and their growth to Youtube and its growth, what kind of internet bandwidth  is going to be left for anyone else for streaming TV to millions ?

There will be big problems and lots of quality and delivery issues long before we get close to those percentages. Leaving Netflix in a phenomenal position.  They get to adapt to a declining available bandwidth environment  with an existing product , revenue and subscriber base. There is no such thing as equal access when you are blocking up 25pct of the lanes on the highway 24×7. The others can’t even get on the ramp.

Their competitors have to figure out how not only how to overcome the technical hurdles of reduced available bandwidth, but also a business model since no one will want to give content away for free when Netflix can pay them.

Netflix is smart as shit.

Netflix is also great for traditional TV providers. TV works. TV works for any number of subscribers or viewers. 100pct of the digital bandwidth that TV uses is designed, managed and operated purely for the distribution of TV and complementary features. It will work.

Netflix should end up as the only “TV” provider that truly works on the internet,  Which means that content providers like the broadcast and cable networks can be paid by Netflix on a per sub basis for their subs  who want to subscribe via the net, and from traditional tv providers for those who want buffer free, (relatively) full quality TV the old fashioned way.

Oh, and one more thing. Expect your internet bills to go way way up as ISPs make it clear that all this video over the internet is going to require billions in upgrades. The irony is that while you may not like paying for cable channels you don’t watch. You will end up paying for cable channels on the internet that you don’t watch as well. In this case you will be paying via higher net bills for the extra bandwidth required to stream cable channels that your neighbors like to watch



Business Process Patents Must Die

October 14, 2010 by

I was looking at investing in a technology company the other day. As I normally do I was searching the web looking for potential competitors and also reading up on competitors the company had identified for me. One of the companies I started reading about was very proud of the process patents they had acquired.  The company itself wasn’t a competitive threat to the company I was looking at. In fact, I didn’t think this competitor was going to be able to stay in business for the long run. I wasn’t impressed with them at all.

But the question I had to ask before I invested was “what was their plan for when this competitor used their patents to sue them for patent infringement “.  The company was adamant that they didn’t violate  any of their patents and that they knew some of the people over at the competitor and they weren’t litigious people at all.

Yeah right. I made it very clear to them that if the competitor saw them as the least bit threatening, which they would, they would sue the shit out of them.  “How could they ?” was the response.

How naive. Companies and people don’t sue over patents because they should. They sue because they can. They sue because lawyers know that they always have a punchers chance of winning a lawsuit. They sue because they know it can tie up a competitors most valuable resources, time and money.   They sue because its become a growth industry in and around Tyler Texas (sorry Tyler, but you know its true. Tyler has been branded with the mark of the Troll) and  I’m guessing every person in Tyler knows that  is their civic duty to make ridiculous jury awards. What juror wants to kill the number one growth industry in the area and face higher taxes ?  IMHO, they don’t and won’t.

This company was going to get sued.  I know it. They didn’t want to face it because there was absolutely nothing they could do about it.  There is no proactive approach a small company or investors can take to fight patent trolls.  So I didn’t invest.

I have never walked away from an investment because of taxes.  I have never even considered taxes in making an investment.

I walked away from this investment because I knew they would be sued and I knew in one fell swoop the courts in the wonderful city of Tyler Texas could wipe them out.

That is just wrong.

Not only is it just wrong, every single investor is going to walk away from investments or refuse to put more money into technology companies simply because of the threat of Patent litigation.   In this case, I can at least give some credit to the competitor for having a business.  That makes them the lesser of evils compared to  Patent Trolls.

Patent Trolls are people/companies who don’t have operating businesses. They aren’t trying to protect anything. They have a collection of patents and they actively try to legally intimidate companies large and small into paying them.  That is their only mission. Extort as much money as possible using the legal extortion materials our government granted them through the patent office. Patent Trolls  are a far bigger threat to the technology industry than anything the Federal Reserve, The Congress or The President of the United States could ever do via our tax system.

Patent Trolls kill companies. Patent Trolls kill investment. Patent Trolls kill jobs. Patent Trolls will prevent the technology industry from taking its place as a source of jobs in our struggling economy  because NO COMPANY is safe from patent trolls. Any technology company with any net profit WILL BE SUED BY A PATENT TROLL at some point in its future. Its inevitable because there is nothing to protect them from it. NOTHING

Without question patent trolls and patent law will extend the great recession this country is facing.

Products vs Features – The Lesson of XMarks

September 29, 2010 by

Xmarks is a really good service that  I have used since it first came out.  What it does is synchronize your browser bookmarks. Add a bookmark on your laptop and boom, it will be added to your desktop browser. Great feature.

Which is the problem.

Many companies start out with what they think is a great product because it adds a valuable  feature to an existing product.  Or it is a standalone product that differentiates itself from a competitor by a couple unique features.  Xmarks was conceived as both.

The problem for Xmarks and for any product that merely adds a few features to an incumbent product is that the incumbent product, in this case every browser on the market usually isn’t deaf, dumb and blind. They see the value in the features of the competitive product and they realize they have to add the feature to their own product. And they do.

In this case, all of the browsers have added bookmark synchronization to their newest versions.

Today, XMarks announced they were closing their doors after 4 years in business.

Before you ever release any product or service and try to build a business around it, you always have to ask yourself :

“Is this a real, stand alone product, or can the competition add my differentiated features to their own product and put me out  business ?”

Product vs Feature: The Lesson of Xmarks

September 28, 2010 by

Xmarks is a really good service that  I have used since it first came out.  What it does is synchronize your browser bookmarks. Add a bookmark on your laptop and boom, it will be added to your desktop browser. Great feature.

Which is the problem.

Many companies start out with what they think is a great product because it adds a valuable  feature to an existing product.  Or it is a standalone product that differentiates itself from a competitor by a couple unique features.  Xmarks was conceived as both.

The problem for Xmarks and for any product that merely adds a few features to an incumbent product is that the incumbent product, in this case every browser on the market usually isn’t deaf, dumb and blind. They see the value in the features of the competitive product and they realize they have to add the feature to their own product. And they do.

In this case, all of the browsers have added bookmark synchronization to their newest versions.

Today, XMarks announced they were closing their doors after 4 years in business.

Before you ever release any product or service and try to build a business around it, you always have to ask yourself :

“Is this a real, stand alone product, or can the competition add my differentiated features to their own product and put me out  business ?”

Hello world!

September 8, 2008 by

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