The Toast: Dot-Com Bubble Bust of 2000-2002
The BSU: Only Real Companies Now Need Apply
Here we sit almost 13 years to the day that the dot-com bubble burst (March 10, 2000) and has anything really changed? Our answer: Yes -- a lot. The get-rich-quick, hit-it-and-quit-it IPO days, a big bubble metered by nothing but buzz words like ‘clicks’ and ‘eyeballs’ now serves the markets as a cautionary, humiliating era. Turns out companies with no plans to become profitable are bad investments. Who knew?
Not enough of us, but at least we learned. Now if you want a ticket to the public markets as a tech company you better bring a healthy assortment of customers, revenues, cash flow, earnings, and our favorite metric: ROIC (Return on Invested Capital -- simply put, how well a company invests money back into itself). The moment of paradigm change here is August 19, 2004 – the day Google went public.
(NASDAQ:GOOG) IPO laid the groundwork for the eventual offerings of massively successful and authentically measured social media companies like Facebook
(NASDAQ:FB) and LinkedIn
(NYSE:LNKD), both of which were credible corporations well before being offered to you and me. Without this Butter Side Up landing of the dot-com crisis, these companies would have begun their public lives with a zero added to their end-of-day closing prices, a number that could well have doubled or tripled during these much-anticipated stocks’ first hours of trading. When the overvalued offerings crash-landed back on Earth, “We the people” would pay the price.
But instead of paying the foolishly unforeseen prices of the dark dot-com days, we’re learning to establish the value of new tech and associated offerings by questioning every newcomer’s business model, products, and valuation. Look no further than the current daily conversation about why Apple’s
(NASDAQ:AAPL) stock has dropped so much recently. Loss of a leader, declining revenue growth, slower product innovation, profit margin squeeze? We want an answer. Here’s one that is usefully considered but not yet part of the conversation: cautious investors.
(See also: Uh-Oh. Apple Is Really Mad at Samsung and BlackBerry Now)
We take you back to September 19th, 2012 – the day Apple’s stock price hit an all-time closing high of $702.10 per share. At that moment Apple market capitalization (Market Cap. = Stock Price x Total Number of Shares Outstanding) was $659.3 billion. As of our writing this, Apple was worth $416.6 billion, a drop of 36.8%. During the exact same six months, to the day
, Google’s market capitalization has gone from $194.6 billion to $269.7 billion, an increase of 38.6%. A near mirror-image coincidence? Or perhaps some big traders and bigger investment funds deciding to switch one tech titan for the other while Apple’s valuation and growth prospects are carefully evaluated.
This likely scenario suggests that real world, fundamental company analysis and investigation, the likes of which never got a whiff of consideration during the dot-com heyday, is influencing the value of market mainstays. As it should be. It’s fair to say that if two of the most profitable, successful, and respected companies in the markets are getting this kind of daily scrutiny, any and all wannabe public tech companies better come heavy or not bother coming at all.
Iraq and Afghanistan
The Toast: Post-9/11 Wars
The BSU: 'We Support the Troops' Not Just a Bumper Sticker Anymore
We don’t want to debate the rational for, conduct of, or security and foreign policy outcomes of our two recent wars. (The date shown in our timeline, October 7, 2001, was the day US troops first invaded Afghanistan.) Our consideration of this hugely consequential topic begins with the assumption that all wars costs plenty. The lives lost, resources spent, and morale taxed as a result of having soldiers in active combat for more than a decade constitutes a piece of toast hitting the floor so hard we’re lucky it didn’t crack the tiles. Is there a Butter Side Up?
Absolutely. It should be a source of national pride that Americans have not taken weariness or frustration out on the soldiers who fought in Iraq and Afghanistan. We may love or hate the wars, but we revere the honorable warriors. Veterans groups have cited the nation’s new attitude as a source of solace, particularly for Vietnam vets who did not enjoy a warm welcome. Where to look for this new patriotism? In the parties, but also in the pragmatism.
No doubt, military families appreciated it when Joining Forces, the action initiative spearheaded by Michelle Obama and Jill Biden, invited Usher and Katy Perry to sing for them during inauguration week. But let’s not overlook two positive impacts of our shared concern for the families who have served and sacrificed: serious attention to the consequences of battle trauma and successful campaigns to return soldiers to the civilian workforce.
Official notice of the brutal consequences of Post Traumatic Stress Disorder (PTSD) has been taken since the artillery barrages of World War I gave us the term 'shell shock'. In January of 2012, Joining Forces announced a coordinated effort by the Association of American Medical Colleges (AAMC) and the American Association of Colleges of Osteopathic Medicine (AACOM) to study and treat PTSD, and Traumatic Brain Injury (TBI). AAMC’s outcomes report at the end of 2012 acknowledged forward progress, but also urged its 130 participating institutions to intensify efforts to find treatments for these mental and physical injuries so particular to casualties of war.
Also particular to those who have been in battle is an urgent need to find ways to pay the bills. An array of corporate citizens from AT&T
(NYSE:T) to Verizon
(NYSE:VZ) is committed to making the veteran job search bear fruit. The coalition of companies participating in the 100,000 Jobs Mission (94 members at last count), reported 51,835 veterans hired through January 2013.
Responding to the needs of military families has fostered cooperation between government, academic, and corporate actors not normally disposed to promote each other’s interests. It is a story of communal values, American style. One worth celebrating.
The Toast: Fallen Athletic Heroes
The BSU: Heroes Who Are Athletes
Say it ain’t so…Roger Clemens, Michael Vick, Tiger Woods, Lance Armstrong. Come on guys, and sometimes girls. We wear your names on our backs, our kids hang your posters on their walls, you are our video game avatars. And so, so often you reward our (brand) loyalty with unsportsmanlike or unsavory behavior. What are we to do, stop making heroes of professional athletes, or is there a Butter Side Up to the crumby way they fall like toast?
Maybe you thought Charles Barkley settled this question for us in 1993 with his now-legendary pronouncement, “Just because I can dunk a basketball doesn’t mean I should raise your kids” (reminder: expand nanny search, Barkley not available). But what demands a closer look is the fact that the round and profound mound made those comments not in an interview with Frank Deford or Bob Costas but IN A NIKE AIR AD (are we shouting? Sorry, a Mets victory parade just went by—not!). Just three years after the role model ad, Nike (NYSE:NKE) produced a spot featuring children of both genders and many colors each declaring, “I am Tiger Woods.”
To be fair, Woods’ calm and sturdy demeanor, and his obvious wealth of self-confidence and determination, were worth imitating. But wishing Tiger’s identity on American youth took hero worship at least a step too far. And it isn’t even Tiger’s temporary toasting of his career that becomes the last word in this story of celebrated athletes behaving badly.
We have endured dog fighting, abuse of line judges, fights on the court, and gunshots at the club, but it’s the doping, the out-and-out cheating at the contests that make athletes celebrities, that is too much to take. Lance Armstrong, how could you? (For our timeline above, we choose to represent this category with the date the cyclist confessed to doping in an interview with Oprah.) Now, if possible, we are going to turn ourselves Butter Side Up by finally acting on what we know is true: being good at sports is not the same as being good.
That realization gives us two avenues for appreciating the players who capture our imaginations and our entertainment dollars. When we are thrilled by an athlete’s greens in regulation or offensive rebounds or career grand slams, we will celebrate just those achievements (if they are come by honestly), without making any assumptions about the character of whoever posted the magical numbers. It is a Butter Side Up blessing that sports associations, most recently and notably professional tennis, will take harder lines against performance-altering substances. Cheating scandals teach the titans of pro sports that they can’t win our hearts if contests are tainted. Cleaned up leagues and events assure us that what we witness in the arena is a fair test of skill and strength. That helps us know who to celebrate for in-game heroics, but what about off the field? What about the character issue?
Our highest reverence will be reserved for heroes who happen to be good at sports. A compelling example is New York Knicks Assistant General Manager Allan Houston. Sharpshooting guard Houston was the NBA’s eleventh overall draft pick the year Charles Barkley refused to raise our kids. Houston was good at his sport. He’s turning out to be a great advocate for his cause, which is—wait for it—parenting. Houston was the National Fatherhood Initiative’s Father of the Year in 2007. The award recognized the work the Allan Houston Legacy Foundation does to foster father-son relationships in the African American community. The foundation runs a retreat that uses basketball as a foundation for life lessons in “faith, integrity, sacrifice, and leadership” and encourages the application of these lessons to the cause of financial independence. Its Business Education & Development Program and Small Business Incubator have trained 137 young entrepreneurs in two years. Eighty percent of those particpants report increased income. Ninety-two percent say their lives have improved. For anyone whose opinion of professional sports has fallen low, that’s a Butter Side Up landing.
So there you have it -- real companies, real citizenship, and real heroes, all born from crisis. We invite you back for our next installment of Butter Side Up when it lands on Minyanville in the near future.
Also see: The Market For Good News: Introducing the Butter Side Up Theory & Bullish on US Economy but Worried About Extended Stock Rally? Play the US Dollar
Editor's note: This is the second installment in a three-part series on the Butter Side Up Theory, by Lloyd Khaner and Nick Smart. See the authors' bios below.
Lloyd Khaner is the General Partner of Khaner Capital, L.P, a long-short hedge fund. He selects stocks for the portfolio, sets the Fund’s investment strategy, oversees the Fund’s portfolio and directs its resources. Khaner Capital, L.P. has outperformed the S&P 500 for the last 15 years. He is also the author of "Lloyd's Wall of Worry," a weekly column published by Minyanville.com.
Nick Smart is Professor and Chair of English at the College of New Rochelle. He is co-editor of "Dylan at Play" (2011), a collection of essays investigating unconventional approaches to the life and work of Bob Dylan, and author of numerous articles on literature and teaching, including “On Not Knowing Virginia Woolf” (2009). He earned a B.S. at Lewis and Clark College and a Ph.D. at NYU, and looks on the bright side of life with his family in New York City.