Paying Attention

Futures are up strongly this morning and I'm pleased. I have no idea what pattern has been developing since the 10/30 high, but only know that it would look a lot better with a couple more subdivisions higher. Today is the day.

It's hard to tell what the market is more giddy about: Draghi's rate cut at the ECB or Twitter. Neither are bullish.

Twitter will IPO today . . . at a more expensive multiple than LinkedIn and the Facebook, yet it's never made money and its user growth is slowing.

ECB Cuts Key Rate to Record Low to Fight Deflation Threat. The key word here is deflation. The market is enthused for the wrong reason. It should be pulling in its horns when record stimulus cannot bring about inflation. Instead it's Party On because of perceived stimulus. This is not a secure foundation for markets.

It's not sounding like Party On in the art world, and it often pays to take notice. The FT reports, for the second time in a week, art auction sales have come in well below already low estimates. "One-quarter of the high-profile Impressionist and Modern paintings under the hammer at Christie’s went unsold on Tuesday night, signalling a bleak start for the autumn auction season in New York. The muted results came hot on the heels of disappointing sales on Monday evening for Christie’s."

"Observers at the evening said the combination of sky-high valuations and mixed quality had weighed more heavily on the purchasing decisions of dealers and collectors than in previous stellar years."

Sky-high valuations and mixed quality.

This sounds like the current equity market. Courtesy of the Economic Collapse Blog, here are some examples:

Twitter is not expected to make a profit until 2015 at the earliest.

According to CNBC, Pinterest is currently valued at 3.8 billion dollars even though it has never earned a profit.

Yahoo paid more than a billion dollars for Tumblr even though Tumblr's revenues are so small that Yahoo is not even required to report them on financial statements.

Snapchat, an Internet service that allows people to send out messages that "self-destruct", is supposedly worth 4 billion dollars. But it actually has zero revenue coming in, and many believe that it is essentially worthless as a money making enterprise. For one extensive analysis by a tech blogger, please see this article.

The stock of Rocket Fuel, an online advertising company, is trading at about 60 dollars a share and it has a market valuation of about 2 billion dollars even though it has never made a profit.

The stock of local business review website Yelp is up 241 percent this year even though it has never earned a quarterly profit.

Fab.com just raised 165 million dollars from investors even though it recently laid off 440 employees.
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I use Yahoo every day for email. I never pay a dime and never click on ads or read the content. I use Twitter daily. I never pay a dime and click Dismiss every time I see a promoted tweet (an ad). I love Yelp and use it extensively when searching for cool places to eat when I'm on road trips. I never pay a dime.

But I pay attention.

This morning's pop in futures should take the cash S&P to the multi-year Fib target of 1778. We'll soon see if the market is paying attention.