Enough News!

I've mentioned before that I have a problem with too much information input and not enough time to deal with it or ways to filter it.  I want to have a website where I can go and read the most important news for me everyday that can be read in ten or fifteen minutes, and then get on with my life.

So I put together news.ianspivey.com, which I mean to use for my daily news-reading.  If you use Google Reader, try news.ianspivey.com/r/.

Right now, it lets you read articles on Google News or Google Reader for ten minutes, and then locks you out until the next day.  And that's kinda cool!  But I don't get all of my news through Google News or Reader.  So my next task is to figure out what to do with the content pane.  Aggregation of headlines à la popurls, a URL bar so users can navigate wherever they like, or maybe just the latest lolcat?  I'm wary of making this too complex.

Input would be appreciated.  Would you ever find something like this useful?  What should change?  Is it stupid?

Buy Google

Photo by VSmithUKGoogle's common stock closed today at $259.56, down 64% from its all-time high in December, 2007.  It has underperformed the S&P 500, which is down a mere 50% in the same period.  But a company isn't cheap just because its stock price has dropped.  In order to figure out if this stock is really a good deal, I whipped out my trusty copy of Excel to crunch some numbers.  

Bear with me here, and I'll compare some Google valuation metrics today with the same metrics at the time of its IPO, and shortly thereafter partway into the big price run-up.  EBITDA is a (arguably the best) proxy for operating cashflow.  If you can't see the Google Docs spreadsheet below, you should look at this on my blog.

It's clear that Google is much cheaper than it was after its IPO by a number of metrics, which is good.  If you thought Google was overvalued at any point since it's been public, you have an excuse to re-evaluate.  But that still doesn't tell you if Google is a good buy or not.  To do that, we need to compare these metrics to some historical norms. 

For example:

• A couple years ago, the average EV/EBITDA multiple for an S&P 500 company was in the ~12-15x range (Google is cheaper at 7.3x)
• In the past half-century, the average Return on Equity for an S&P 500 company was in the 10-15% range (Google is generating better returns at 18.7%)
• Since 1935, the average P/E ratio for the S&P 500 is 15.6x (Google is cheaper at 12.5x)

So, why?  You would expect Google to be cheaper than the historical S&P 500 because either (1) the market expects Google's earnings to grow more slowly or (2) the market sees a lot of risk in Google's future earnings growth.  But the historical S&P 500 earnings+dividend growth has been in the range of 4-6%, while Google is expected to grow earnings at 15% and EBITDA at 20% next year!  You have to be really scared of a Google earnings collapse, and strongly disbelieve those estimates, to think Google should be cheaper than the historical S&P 500.

IN CONCLUSION:

If you think Google is a pretty average company that will keep growing its earnings in line with the S&P 500, it looks like an okay deal.  None of its metrics make it look extremely cheap.  Besides, there are other companies cheaper than Google today (the average P/E ratio of the S&P 500 today is about 10x).

If you think Google is a great company with a ton of smart people and a lot of growth still ahead of it, then it looks cheap as dirt.

The stock price might continue to drop in the short term, because stock prices often bear no relationship to the intrinsic value of a company.  But if I can scrounge some cash from the wreckage of my portfolio, I'm going to buy this growing cashflow machine.

Happy to discuss in the comments.

Magnitude of My Crash

In case anyone was wondering how my stock portfolio is doing:

Magnitude of the Crash

Here's a graphic, courtesy of Calculated Risk, that really puts this stock market downturn in perspective.  The chart compares the % decline of the S&P 500 over time in each of the last four stock market crashes, including this one.  This is the swiftest drop of this magnitude since the Great Depression, and it ain't over yet.

Hedge Funds' Crappy October

Hedge funds had another terrible month (Bloomberg article, h/t Naked Capitalism).  This is a bad time to be raising money for anything, but it's got to be an awful time to be raising a hedge fund (particularly if you need to be selling equity in the manager).

On the other hand, it's a great time to be lucky - if you happened to do well the last 3 months, your fund is probably getting overwhelmed with subscriptions!  I've heard anecdotally about a couple of small funds (< $50m) that have investors knocking their doors down for having 15%+ YTD returns.  I figure anyone who's up this year is either really, really, really smart (e.g. John Paulson) or plain reckless.

Paulson's busy buying mortgages like it's going out of style.  Maybe the Treasury should invest $50 billion of the TARP money with him and buy up distressed debt that way - I'd be much more confident of taxpayers getting a good price, even if we had to pay Paulson's fees.

The $1.65 trillion hedge fund industry is enduring its worst period in at least eight years as global declines in stocks and commodity prices led to investment losses and customers withdrew a net $62.7 billion from the funds last month, Singapore-based Eurekahedge reported. Assets may fall to about $1 trillion by the middle of next year, analysts at New York-based Citigroup Inc. estimated in a report published earlier this week.

``Hedge funds will probably face more redemptions for a while,'' said Akihiro Nishi, executive director at Tokyo-based Mitsubishi Asset Brains Co.'s investment advisory division.

The average hedge fund followed by Eurekahedge fell 4.5 percent last month, compared with the 19 percent drop in the MSCI World Index and the 22 percent slump in the Reuters Jefferies CRB Index, a benchmark for commodities.

Squarespace

I've moved my blog to Squarespace, a hosted website & blog publishing system.  It has a number of benefits over the self-hosted Wordpress site I was running before, like not having to think about hosting and being able to edit the design easily via drag-and-drop and a simple interface.  There are a bunch of other features that haven't been useful to me yet, but hopefully will be soon.  I'm eagerly waiting for them to activate "microblogging" so I can post quick links and quotes without all the rigamarole (title, date, padding) that comes with a normal post (I hear that's in the pipeline).  I also like supporting a local (Soho-based) company.  I'll let you know if I have any problems, but so far it's been a joy to use.

Update on Sunday, November 16, 2008 at 10:55AM by ispivey

Oh, and they need to add support for the Disqus comment system.

President's Weekly Address on YouTube

President-Elect Obama will begin recording weekly addresses today, in video in addition to the traditional audio.  And they're going to be posted on YouTube - awesome!  Details here from the Washington Post.  I'll update with a link to the video once it's available.

Update on Saturday, November 15, 2008 at 12:19AM by ispivey

My friend Sam blogs about the new fireside chats.

Update on Saturday, November 15, 2008 at 11:27AM by ispivey

The weekly address can be found on Change.gov.

Too Much News: An Unfortunate Intersection of Human Nature, The Long Tail and The Tyranny of Choice

I just checked Google Reader (which I use in fits and spurts) and remembered why I stopped using it - about 4,500 unread items in about 30 feeds.  I'm going to invest some time in trying the different tools available for managing my news and information flow and see if I can do a little better.  However, I'm not sure the right tools are out there yet - they're all aimed at presenting flat lists of information in e-mail paradigm.

Lots of people have been thinking about the problem of "information overload" for a long time, in Internet terms.  Brad Feld in particular has been blogging on the topic for years; he wrote a good post earlier this year titled "I Need A News Feed For My News Feeds."

Josh Kopelman also wrote about the feed dashboard.  Together, Josh and Brad describe not just a feed aggregator, but a smart piece of software that can examine incoming information, determine if it's important, and take actions like filing it in a "read-later" folder, popping up an on-screen notification on the user's desktop, or sending the user an SMS.

I like Suli's solution: a webpage that has ten minutes' worth of news articles.  After you read it for ten minutes, it goes black and you can't read it again until the next day.  It's got a certain poetic simplicity.  "Ten minutes" (or about 2,000 to 4,000 words) is a small enough amount of content that it could even be done manually by a human editor.

That seems like a hatchet-style solution, but perhaps humans just aren't particularly well-suited to dealing with the increasing availability of information.  More choices has always led us to indecision (in my case, exemplified by flitting from news site to news site, reading twelve articles about the same campaign gaffe).  Seeing everything my friends are recommending in Google Reader is nice, but it just gives me more - and typically my friends are good for bringing funny videos and web comics to my attention, not news analysis that matters.

Until I or someone else fixes the problem, I'll try and lead by example: exercising restraint in information consumption, figuring out how to use available tools better, and sharing content other than funny videos with my friends (even though that sounds a little boring).