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?

Photo by VSmithUK

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.

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.

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).

Instead, we should let GM et al. declare bankruptcy and restructure their debts in court.  This probably means reducing their commitments to their unionized employees, both in terms of pensions already promised and benefits to be earned in the future.  And that sucks.

But if the government provides GM with taxpayer money in the form of guaranteed loans or a capital infusion, what is really happening?  Taxpayers are subsidizing (a) GM shareholders/debtholders; (b) salaries and benefits for GM executives; and (c) salaries, benefits, pensions for GM rank-and-file employees.

I think everyone can agree that taxpayer subsidies of (a) and (b) are an inappropriate use of money.  How about (c)?

I like unions, and I think they're good for the country and need some degree of government-provided protection.  But the average hourly cost for a current GM employee, including all benefits, is $78.21.  That's $166,400/yr .  For a normal job, without a defined-benefit pension plan, benefits are about 25% of the base salary, so that would translate into a $133,120 annual salary.

They're getting paid really well.  So why should my tax dollars go towards propping up their exceptional employment arrangements?  I'm all for helping the needy, but wouldn't government dollars do much more good being given to people living below the poverty line (where a few hundred dollars can make a huge difference) than to people making $133k/yr?

Additionally, a government bailout is a really inefficient way of helping out rank-and-file GM workers who would lose their jobs without a bailout.  If there's no bailout, a bunch of compensation for existing employees gets cut, debt costs are substantially reduced in court, and a bunch of employees are laid off.  If there is a bailout, taxpayer dollars go to (a) keeping everyone's compensation at the same level; (b) paying the original (higher) debt costs; and finally what's left goes to (c) keeping those employees employed.  

How about we do no bailout and instead channel a big chunk of the money that would have been used in the bailout to benefits (healthcare, tax rebates, unemployment) for the people who lose their jobs?  Then taxpayers don't have to pay for (a) and (b)!  We could spend less money and achieve the same benefit.