I will begin with pointing out the obvious; The new iPad is not a new version but merely an S. S in this case  as we all know stands for suckers.  Over the past 48 hours I have read countless articles pointing out all the new-found benefits of the New iPad.  Most of the advocates are just hardcore Apple bulls supporting their position.  The tech analysis and demand story they have presented is nothing short of laughable.

Let’s break down the new iPad:

• Oh boy a 8 mp’s camera allows me to become a professional photographer.
  • By far the biggest “scamming” point of the new product. If quality of photography mattered to anyone who was looking at the product, they would go buy a $60 camera from best buy.  Why? Because it has twice the mp’s (16 mp’s).
• It is completely not redesigned and has no new curb appeal.
  • The new iPad is not thinner or sleeker; It has all the same characteristics and is actually larger and heavier.
• 4G LTE will allow me to not access data through walls.
  • Not only is the 4G LTE world a fractured and confusing one. Those who are somewhat intelligent are telling me that it won’t work in Europe. I know things are bad over there, but so bad no one can afford Apple products? (F.Y.I. LTE stands for Long Term Evolution)
• The new features will be an incentive to buy the new product.
  • That was just in here for laughs and giggles. The point which I will make below and you should already be familiar with being a half intelligent human being, is that this product does not capture new consumers. This instead pushes consumers to the lower tiered iPad 2.

“Sometimes when you innovate, you make mistakes. It is best to admit them quickly, and get on with improving them” – Steve Jobs

Ahh Facebook, the much anticipated IPO of 2012,  the social networking product of Mark Zuckerberg that we all know and love.  When Facebook filed their S1 recently, the financial news world went into hysteria over what was to come.  What should have more relevance to investors is what is not to come.

Last weekend, I came across an article about Shutting Down Facebook Stores. First off, I did not even know that these stores existed; which makes me wonder did the rest of the Facebook world know about this one of a kind retail opportunity?  If you didn’t catch the sarcasm, my point is this: Facebook failed to offer a different retail experience then was already on the web.  If someone wanted to go to Gamestop and buy a product, they would do just that, go to the Gamestop website or in the store.  Facebook attempted to monetize their website and their system of Likes (a fundamental element of the Facebook experience that allows a user to expressly like a post of another user or a product), and failed to do so completely.  This failure should strike fear into the hearts of social media investors.  Once again, Facebook, the giant of social media has shown that people may like their product, but monetizing it successfully is a different ball game.

We do know that Facebook has made money and a decent sum of money through their ad sources.  I will break Facebook’s numbers down in a second; but first off, let’s look at the problem intuitively.  Facebook claims to give advertisers a different and new advertisement experience.  It allows businesses to connect right to customers that find their products interesting.  What all those touting Facebook have failed to realize about the social giant is just that; Facebook serves a social service.  Facebook allows users to share photos, comments, likes, and so on.  Investors fail to realize that consumers are so caught up in the social interactions they do not have time for advertisers.  When someone is on Facebook they are either chatting or surfing the web of social information.  {Yes they may come across an advertisement or two, but they are more interested in seeing what Sally is saying to Bobby and what George is Facebook chatting them about.}

The most interesting part of the Facebook story is the pricing of the company.  Facebook made about $4 billion in revenue last year.  The company is set to be valued at $100 billion.  Those reading this blog likely know Apple well.  Apple made about $108 billion last year and their market capitalization was around $500 billion on Friday.  For the rough mathematics let’s say the market cap of Apple is 5 times its revenue last year.  Applying these same metrics to Facebook we get Facebook, we get Facebook valued at $20 billion.  Well, you may argue Facebook is a growth company. Okay, then let’s double the metrics, you get $40 billion.  Doubling isn’t sufficient for you? Let’s triple to represent the growth potential of Facebook and their one product, and we get $60 billion.  Even with a $60 billion market cap, the growth is handily priced in, and with $100 billion is just ridiculous.

Many compare Facebook to Google or Apple.  When making this comparison, those individuals fail to realize the almost perfect game that Google and Apple have played.  As stated earlier, Facebook has failed to monetize itself as a retail and is already off to a bad start.  What should raise more concern is the Facebook supporters suggesting Facebook will becomes its own platform.  Has anyone witnessed the trouble the android platform has had catching on?  If a company like Google, with their multiple successful products, has trouble becoming a platform and breaking into the computer and cellular space, think about the potential problems a company like Facebook, who has one successful product, will have.  To compare Facebook to giants like Google and Apple, at this point in time borders on ridiculous,  Google and Apple have proven themselves time and time again.  Facebook has proven itself kinda once.

Dont get me wrong. There may be money to be made on a trade in Facebook.  Above are merely the reasons why long term investing isn’t just questionable, but truly ignorant.  As I mentioned last week in my article And They Say Tech Isn’t A Bubble, tech is going to come crashing down, and Facebook looks like it may be the catalyst.

“Success is a lousy teacher. It seduces smart people into thinking they can’t lose.” – Bill Gates

Photo by Sean MacEntee

When evaluating the macro economy there are a few key indicators to look at. Lately I discussed the Baltic Dry Index and it’s lagging growth, now I want to touch on a even more telling indicator, Copper. Copper tells us about global growth and should be used as a telltale sign of where the financial markets should be and where they are headed. Below is a graph that tracks the price of copper through a ETN. Look and be amazed.

The above image tells us a few things. First off, the rally of late may not have solid footing at all. We have seen some growth in copper, but not what is to be expected with the markets acting like they are. For the financial markets to be on track for new highs, as many experts are claiming; Wouldn’t you expect a a little more out of copper? Secondly, it is time to take a close look at the BRIC countries. The BRIC’s have given us substantial growth over the past ten years, and their current global growth may not be what we expect. As copper is telling us, the global growth picture is obviously slowing, which in turn will have an impact on global U.S. companies. This is something to keep an eye on as we go into the next round of earning, as we know there are also sustained economic problems in Europe.

After CNBC’s morning with Warren Buffett last week one could feel very bullish on the economic recovery. My issues do not reside with Warren directly, but rather the public interpretation of his investment calls. To begin with one must understand that Warren deals on a long term basis. He looks at something over a ten year period while most investors are merely searching for returns over a much shorter term.  That being said his brilliant investment tactics may not apply to you.

Let’s take a look at Buffett’s Bank of America call last year. After a nice long year Warren’s call has finally come back. Those who followed Warren into the trade may now have broken even after this long, hard, and uncomfortable year. We have no idea where Bank of America will go in the coming months, that’s a concern for another article. But for those investors at home though followed Warren into the BAC trade, your capital could have had a great return elsewhere. Had you bought Apple, Gold, or many other entities, you could have made an easy profit. Instead you looked at an investment that was down almost 50%. From a normal investor standpoint one would rather get returns now and not in the future. Warren is usually right, but often he is right far ahead of the trend, which could cost the normal investor not only his shirt, but his sanity.

Looking at another one of Warren’s big calls, one that many investors have had big questions about, is his lack of investment in gold. Warren, a brilliant man, takes investments back to basics. He is a firm believer in buying a company (or a part of it) and having his initial capital give him a return in growth or a dividend.  Those who trade commodities know that this is obviously not how commodities work. Warren fails to realize that commodities prices are based on the limited availability of something, like gold or silver, and the desire of that commodity by the public (or investors).  Gold is a simple supply and demand game. Supply is fairly limited and the demand has increased over the past few years. Warren’s failure to look at gold through different lenses; Of gold being in limited quantity and desire increasing for it, have cost him a huge potential return.

Now that you understand how Warren’s ideologies differ from the mast majority of investors, we can evaluate his most recent call. First off, as we learned through his Bank of America purchase, he sometimes is early, very early. This can cost the small or even large investors lots of money (lost potential returns elsewhere). We have all heard the saying “don’t try to catch a falling knife.” Second Warren fails to realize differing trends, being that he is so set in his ways (he refused to buy gold and missed a great return). With that being said we can now evaluate his most recent call to buy single family homes. There are two fallacies in his argument. First off he may be very wrong in his timing. Warren has been calling a bottom for over a year now. At the beginning of last year many investors thought the bottom was in and played the stock market accordingly. This cost them. In the past Warren has also called things far ahead of time, though he has been right, my money can’t afford to wait, and I am sure yours cant either. The second point of contention may be a little new to many but is worth hearing out. With the recent housing market and financial crash many average Americans may be changing their habits. I see more and more families and young people renting or living in apartments. Americas may be moving into a time where home buying is not what it once was. The desire may be there, but the fear instilled by the last few years as many people saw those around them lose their homes, or lose equity in their homes has change the masses behavior. As I pointed out earlier, Warren often misses profitable trends and he may have missed this new trend away from single family homes. Evaluate these concerns as you run in blind after Warren’s trades.

“Rule No. 1: Never lose money. Rule No. 2: Never Forget rule No. 1.” – Warren Buffett

At this point the markets are just comical.  All the experts are suggesting that tech is not a bubble, that this time things are different.  I hate to point out that the only difference is the names that are leading the bubble.  As of this morning Yelp IPOed at $15 and does not make any money.  Let me repeat, this company makes $0.  That didn’t stop investors, they bought it right up.