I’ll get to some market analysis in just a minute — if you can’t wait for that, skip ahead to the section with the half-naked woman. In the meantime, lemme get something off my chest, something new readers may benefit from knowing. (Don’t worry, the half-naked woman will still be there waiting for you afterwards.)
You’ve probably noticed that this newsletter looks and reads differently from the other investment blogs out there. I made that decision intentionally. Most blogs publish frequent, bite-sized content because they are fully- or partially-supported by ads. When you’re serving ads on your website, more pageviews translate into more revenue. It doesn’t take an MBA to figure out the goal of most websites: maximize traffic!
What happens is that this business model starts to drive content. When the goal is to maximize pageviews, content is delivered and structured in such a way to enhance overall site traffic. Posts get smaller. Posts get more frequent. All sorts of links appear in places that are easy to click on. Headlines get sexier. Even the content gets more dramatic so as to hold the reader’s attention. Ariana Huffington built a nice little business with this model. But so did ESPN.com and Zero Hedge.
There’s nothing wrong with this. In fact, most readers appreciate it because their attention spans are short. Per Google Analytics, the average duration for each post on our website was 1:58. In today’s world, that’s an eternity. And that number is skewed short because there are so few things in this site to actually click on. My little Google Bot has a hard time accurately tracking visitor behavior.
This website got 2,762 unique pageviews last month. It got delivered to 1,029 people by email. To a guy like me who started writing this newsletter for about two dozen friends, family, and clients, those sounds like gigantic numbers. But on the Internet, it’s small potatoes. Embarrassing, really.
But I don’t care. Writing is fun. I spend about 3-4 hours each week composing and cleaning up each issue. It brings me a lot of joy even though the whole endeavor lacks direction or an endgame. In fact, it would almost certainly bring me less joy if my objectives were more focused. Because I’d probably be failing to meet these objectives. Then I’d start worrying about it, worry which would probably interfere with the process of writing itself and sabotage the whole darn venture.
So every week I get up here and write about whatever I feel like. I think it’s a fair deal, because you, the reader, have the freedom to listen or ignore at your leisure. The stakes are very low. This site doesn’t cost anything, but I’m honored beyond belief that every week you guys come back and give me a few minutes of your time, 1:58 to be exact. Time is the most valuable commodity of all.
Seriously, thank you.
What’s with the Ads, anyway?
You’ll notice there are some ads on this site now. I started experimenting with this a month or two ago. I did it because I wanted to know how much money websites make when they serve ads. Simple question, right? Wrong. I searched far and wide but nobody on the internet could give me a straight answer. So like everything else in my life, I figured I’d learn best by jumping in and trying it myself.
Last month I made $13.05.
I’m sure that Ma Concord is very proud of her son.
Here’s a picture:
Out of 2,762 page views, 9 people clicked on an ad. That’s 0.33% which works out to $1.45 per click.
Is that good? I have no idea. Probably not.
Also, what the heck is Page RPM?
I know that Bloggers and Twitter-Stars and other people on the Internet are super-sensitive about these metrics and data like this. But I was endowed with a woefully small e-peen. I’m happy to share. I don’t care. Here, look at my tiny e-peen.
Google has some really cool tutorials on how you can optimize the placement of your ads to maximize revenue. Maybe if this was a real business, I’d do that. Maybe I’d try and learn about RPM and how I can MAXIMIZE AND EMBIGGEN that too. But for $13 a month, I feel pretty good about ignoring that stuff and spending more time on the aspects of this website that bring me pleasure.
I noticed something else change after I started experimenting with ads. I started clicking on them more on other people’s websites. Not so much because I knew that each click would send money to the people who ran the website, but because I stopped seeing the harm in doing so. Heck, it’s just an ad.
See, I used to hate advertising on the web with a visceral, nasty passion.
But in the last few months I’ve come to terms with a few things. The first is that this is just the way that things work on the Internet. It’s life. Good content costs money. Advertisers are willing to pay, consumers aren’t. This is how things go and it’s why the web is full of ads.
The second is that I realized my hatred and vitriol wasn’t directed at the advertisements themselves. It was directed at the act of disturbing me from whatever else it was I was doing(¹). Pop-ups that I have to manually kill or Flash boxes that paint over the article I’m reading piss me off beyond belief. I’m sure those are effective tactics, but sites that do that can suck it. So that’s why I tried to put the ads in the least intrusive places possible. But the bad thing about non-intrusive ads is that they get fewer clicks! The Google AdSense tutorial taught me that. Oh well.
The aesthetic of this site matters a lot to me. I want it to look nice because most investment blogs and newsletters look like garbage. For $13/month, I don’t have to compromise my standards. If I got the kind of traffic that Zero Hedge did, my site would probably have to look as ugly as theirs does. I’d have to take it very seriously.
As I made my peace with online ads, I also began to appreciate targeted advertising. If I don’t have a choice in the matter and am going to get ads regardless, I may as well see ads that are relevant to my interests. This is an under-appreciated alignment of incentives: when ads are more relevant Google makes more money, the advertisers sell more product, and I have a happier web experience.
That’s called win/win/win!
Anyway, Google is really sensitive when it comes to talking about ads. Their ToS has all sorts of scary language about how I’m not supposed to tell you to click on the ads on this website or confuse you into thinking that the ads are sponsors for the site and that you should support them. So whatever you do, don’t click on the ads because of something I said. Honestly, I’m not even sure I’m really allowed to talk about the ads at all. The first rule of Google AdSense is do not talk about Google AdSense.
Who knows. Maybe I’ll get an angry email from the good folks at Google. Maybe they’ll revoke my AdSense account. But for $13/month, this isn’t something I expect to lose any sleep over.
OK, sorry for the diversion. Hopefully a couple of you found this of interest. Before I started playing around with this stuff, I know that I certainly would have.
Just FYI, I do plan to keep playing around with ads. I’m not done learning and I’m not done experimenting. If I can get revenue up to $50 per month, then they’ll probably stay for good. It’d pay for server costs and after a year I’d have little left over to take Mrs. Concord on a date to a fancy restaurant.
So long as they rest of you guys aren’t too badly inconvenienced, that’s probably a fair deal.
It’s been a fairly quiet week in the market.
What’s amazing to me is that crazy things are happening in Europe right now.
Greece is as messy as ever. There are riots!
Spain is disintegrating. The banks are falling apart. Unemployment is at 25% and rising. They’re on the verge of asking for a formal bailout. Which is weird, because just a few months ago Spain was too big to bail out.
Even the German economy has been slowing down, flirting with its own recession.
But the market continues to drive higher. In case you still thought that headlines drive the markets, allow me to submit this summer as Exhibit A. If you’re trying to trade the market off the headlines… well, at least you’re making progress learning an important, if not expensive, lesson.
For the most part, the technicals still look good. I still think we’re ultimately heading towards a new all-time high, or will get sufficiently close to it. And I still think at some point after that a new secular bear market begins, one that won’t resemble the last one and one that will be wrought by different reasons than the last, reasons that don’t seem obvious just yet. And I’m still planning to load the boat with equities sometime between 2016-2018, provided that’s where that next secular bear market really starts to look scary.
I’m also prepared to be totally wrong about all of that. As always, data will be my guide. The economic data of today isn’t anywhere close to suggestive of an economy I want to bet on for the long run. The trajectory of tomorrow’s economic data may differ.
The European Union, United States, China, and Japan account for about 65% of the entire planet’s GDP. Three out of four of those names have some serious economic problems to still work out while the fourth of those is anybody’s guess. I know that the question isn’t whether the Chinese government manipulates the data it publishes, it’s the degree to which these all of their data points deviate from reality and how long until the jig is up. And how confident are you in the growth prospects of the remaining 35%?
While my rational brain wants to interject and say, “Hey dummy, you’ve got it wrong. The market is proving you wrong.” I’m hesitant to believe the market is going up because the economy is turning the corner and we’re taking steps towards fixing the systemic and structural problems. There simply isn’t any data to support this.
So why the bull market then?
The Grand Guignol
Anyone who’s read this newsletter for any length of time knows that I’m of the belief that the market is going up because the market is going up. What else are investors going to do? Investors don’t have a choice. Money has to flow somewhere, and when real interest rates are negative, the stage is set for all sorts of bizarre, or even perverse, things to happen.
It’s like Le Théâtre du Grand-Guignol. For those of you who aren’t media/culture geeks like me, this was a macabre theater company in late-19th century Paris that put on all sorts of crazy, wacked-out plays. It was gory, horrifying, and sexual stuff. But the niche audience loved it because it invoked all sorts of deep, dark emotions. Primitive fears and desires. The goal was to make the audience feel intense fear as well as intense arousal.
Anyway, the spirit of The Grand Guignol lives on in places like the community theater of off-off-off-Broadway, and these days the term is more broadly used to describe types of storytelling that are especially dark, bloody, and perverse. The “Grand Guignol” — literally the “Big Puppet” — refers to the hooded figure at the end that would usually just come on stage and chop everybody’s heads off.
When I watch the market today, that’s kinda how I feel. I feel like I’m watching some crazy-ass freakshow. I feel like I’m waiting for this sinister force to show up in Act 3 and slice everyone up into pieces.
Today, investors are literally forced to buy stocks, especially if they aren’t comfortable with alternative strategies like real estate or commodities trading. Investors need yield and they have to go somewhere. The places they used to be able to go to get yield without a ton of risk — munis, CDs, near-term corporates, Treasuries — have dried up. Many are even giving you a negative return when adjusted for inflation.
This is the only way I can resolve the disharmony in my brain. The market is going up while the vector of the fundamentals clearly suggest that the market should not be going up. I’m not going to bang my head against the desk in frustration because the market should be going down, dammit! (That’s how macro traders all die, btw.) As you can see, the market has very good reason for going up! I wouldn’t think twice about betting against that until one of three things happen:
- Real interest rates turn positive.
- Investors get scared.
- The market suddenly seems way expensive (because of a collapse in earnings & margins).
Those are the three main risks facing the market right now.
All good money managers know where the exits are before the theater catches fire. So get your exit strategy in place right now; don’t try and do it while the house is burning down and everybody is freaking out. The Grand Guignol will get you.
Personally, those three factors are what I’m watching for as part of my long-term exit strategy. I’m waiting for them to change. In addition, it might also be a good idea to pre-load one’s portfolio with assets that are relatively more desirable in scary environments, assets that, on an individual basis, are clearly not expensive, even if their earnings were to contract. I guess that’s another way of saying I want to be rotating into boring, stable, asset-rich companies. Bonus points if they pay a dividend because yield is what investors crave when real rates are negative.
Risks #2 and #3 seem like obvious bets to happen first. That can happen any day in the market and can happen without warning. But don’t sleep on #1. If the Fed ever gets to a point where they come out and say that the economy is looking better and they’re ready to start thinking about raising interest rates, I am running for the freakin’ hills. Call me a scaredy-pants or whatever. I don’t care. I have no idea what will happen to the stock market when interest rates are ready to start rising again. Probably something bad. Either way, I’ll be watching from the sidelines.
Until then, Le Théâtre du Grand-Guignol carries on. Let the debauchery continue!
Tactical traders have to buy the dips and have to really know what they’re doing on the short side. On that subject, heed these words of wisdom from Doug Kass: never short a concept or a valuation; instead, short business models that are broken or about to become irrelevant.
Long-term investors have an equally tricky task. You can still buy, you just have to buy the right stuff. Also, make use of asset allocation. Asset allocation is awesome. Get truly diversified. These are old strategies and they work.
That will conclude today’s analysis. I’ll have more next week including some thoughts on this week’s ISM-PMI data, the first presidential debate, and tomorrow’s jobs number. Also some other tidbts of 3rd quarter data and, of course, what’s happening with oil prices.
But until then, let’s have a good time. Let’s enjoy this market freakshow together. Let’s talk about some ideas and maybe let’s make a little bit of money.
¹Incidentally, this is why I started paying money for Pandora One and am sooo glad I did. I didn’t realize how much I appreciated uninterrupted, ad-free music until the ads went away. Say what you will about their stock performer — I’m not a shareholder and wouldn’t be in a million years — but Pandora is a service I enjoy and am happy to support.
Oh, hey, since you’re here: