Allan Young’s Incoherence

Macro

• Between a rock and a hard place – that’s the scenario Ben Bernanke finds himself in as the economy decelerates drastically while inflation rises more than anticipated.

• For the masochists, Nouriel Roubini proposes a perfect storm to demolish the financial markets. Of course, the probability of financial armageddon is extremely low, but you never know. Even if a handful of his scenarios come to fruition, the pain will be significant.

• Do KKR Financial’s (KFN) woes signal further trouble for the private equity industry? During the height of the private equity boom, analysts predicted that 2007 and 2008 would be great years for the equity markets as leveraged buyout funds were anticipated to take scores of companies private. In addition to the premiums spent to pay off public shareholders, the resultant shortage of publicly traded shares was supposed to increase the value of the remaining pool of public companies. This credit crunch is going to hamper funds’ ability to lever up and buy out public firms; we’re already seeing a slowdown in private equity. Never mind KKR’s efforts to lobby against aggressive efforts by Congress to raise taxes on the industry?

• Oil sets another record today and breaks $101. This is half of the two-pronged vice that will be giving Bernanke & Co. at the Federal Reserve fits as they try to navigate between this economic downturn with rate cuts while the threat of inflation remains. The other half is rising food prices spurred by demand from a growing world population.

Micro

• Sharper Image (SHRP) files for bankruptcy. As a little boy, I used to love borrowing my father’s Sharper Image catalogs and fantasizing about trading my toy soldiers for the overpriced remote controlled cars and suits of armor. The Ionic Breeze, arguably their most successful and popular product, is also the nail in the coffin after Consumer Reports raised doubts about the product’s efficacy.

• One prong of the inflation vice is the rising price of food. Cal-Maine Foods (CALM) has been a big beneficiary of that price strength. MagicDiligence has a nice short piece about why Cal-Maine may be riskier than the rosy superficial metrics suggest. Can’t stop making omelettes.

• Continuing on with this theme on food inflation, NutriSystem (NTRI), the company that delivers ready-to-eat meals that help consumers lose weight guided earnings lower and saw its stock plunge. Interesting that it has not been able to pass on higher costs to consumers without seeing a corresponding loss in “subscribers.”

Technology

• Social networking and, to a lesser degree, cloud computing are the hot topics in web business models right now. Blist, a startup that just raised $6.5 million is attempting to combine both by providing a cloud database web application with a social networking twist for sharing that data. The dominant social networks revolve around sharing pictures, music, and videos. It’ll be interesting to see what kind of data schemes will arise out of the social interactions that take place. It’ll be interesting just to see if people will gravitate towards such a tool. My intuition tells me this will be relegated to the geeks amongst us.

• Online video advertising network VideoEgg unveiled the new AdFrames program. Advertisers are going to gravitate towards this model where they only pay if consumers interact with the video ads and perform a predefined action. Unlike the traditional CPM model which is harder to measure from an ROI perspective, the CPA (cost per action) model lends itself to detailed analytics and ROI measures.

• Open platforms have been all the rage in the social networking space since Facebook exposed its APIs to the developer community. Now we see video game platforms following suit as Nintendo (NTDOY) announced WiiWare, essentially opening the Wii gaming console to allow independent game developers to create and distribute games to the Wii community. Many of the most successful Facebook apps are simple, fun games. This is an outstanding move by Nintendo to get all that gaming creativity into their camp.
  • [update]: VentureBeat is reporting that Microsoft (MSFT) just announced that it too will create a platform for independent game developers to make and distribute games for the Xbox. The Xbox Live system is currently the best online gaming system amongst the top three gaming platforms. It looks like we will indeed have a future in which we will never have to go to GameStop (GME), Best Buy (BBY), or Wal-mart (WMT) to buy games, they’ll be sent over the Internet into our gaming consoles or computers.

Science

• Recently, I’ve had the opportunity to meet with the executive team at GeneTree, a social network based on DNA. The concept is very exciting to me for the possibility of being able to add a deeper level of understanding to a family tree, finding out about ancestors’ migratory patterns, and even the potential to be warned of diseases I am particularly susceptible to. While preparing for our meetings, I had to bone up on my college biology and chemistry. I stumbled upon a Sanger Institute web page today that puts a mind-numbing spin on DNA.

• Exciting developments in energy science emerging as two scientists propose turning greenhouse gases emitted by cars into jet fuel. Please bring it on! We couldn’t have more options for energy at a better time.

• Have you wondered how the U.S. Navy is going to shoot down the spy satellite due to reenter our planet soon? Obviously a lot of math is involved, the greatest science of all sciences. LiveScience does a good job explaining the process.

Categories: Investing, Linkfest, Randomness, Technology
Tags: AdFrames, BBY, Ben Bernanke, Best Buy, Blist, Cal-Maine Foods, CALM, cloud computing, Congress, CPA, CPM, DNA, economy, Facebook, Federal Reserve, GameStop, GeneTree, GME, inflation, KFN, KKR Financial, Linkfest, LiveScience, Microsoft, MSFT, Nintendo, Nouriel Roubini, NTDOY, NTRI, NutriSystem, oil, Private Equity, ROI, Sanger Institute, Sharper Image, SHRP, social networking, U.S. Navy, Venture Capital, VentureBeat, VideoEgg, Wal-Mart, WiiWare, WMT