Category Archives: finance

Facefraud and Shitter, Part 2

My apologies I am about a week late in posting this but my trusty Lenovo laptop finally bit the dust last week after 3 years of emitting a high pitched squeal after I dropped it from about 1.5 meters around 3 years ago. See below for the email I sent out to the investment club participants. A few things to note:

1 – New all time high of +$137/share was hit after hours, however it was interesting to note FB closed the week down slightly just over $130/share.

2 – Despite my dislike for the “cash-for-eyeballs” advertising model FB utilizes, I recognized the potential that they could continue to post good results in line with market expectations so utilized a call/put options straddle to take advantage of a move up or down. The options expire Feb. 24th so ideally FB makes a move outside the range $127 = $138 before then in order for the trade to profit.

3 – The earnings came with an accounting caveat – they “Beat” 2016 Earnings On A $1 Billion Tax Benefit From Accounting Change.

“a slightly deeper dive into the results reveals that a conveniently timed accounting change created $214 million of extra net income in 4Q and drove about 73% of the earnings “beat” for the quarter.”

4 – Despite 5 hours of denial from Fuckerberg, they were accused of stealing software from Zenimax (which later made it’s way into the Oculus Rift product, which was purchased by FB for $2B).

Please see full email text below – I will post again this month with an update on this trade plus any new ideas that come to mind.  Cheers!  Murphy 🙂

Hello “Gents”,

Well today is the day. Facefuck reports after hours and Shitter a week from now.

Synopsis below – for those of you who did not get my 1st analysis please see the following bLAWg post:

Earnings released after trading is closed today so I will take positions in options. It would not surprise me if they continue to cook the books to keep this sham going so I am thinking a call/put straddle may be the way to play it.

I will leave you with the following article that I found posted today – here is Google’s chart since they posted earnings on Jan. 26th, 2017.

“Facebook and Google Have a Problem With “Crappy” Ads”

When the world’s biggest spender on marketing warns that online advertising is broken and ineffective, people from Madison Avenue to Silicon Valley should listen.In a recent speech, Marc Pritchard, chief brand officer at Procter & Gamble Co., called for sweeping changes in how technology companies such as Facebook Inc. and Google operate, as well as to the opaque billing practices of ad agencies like WPP Plc and Omnicom Group Inc. He laid out a five-point plan on how to fix things and issued an ultimatum: P&G will no longer pay for any digital ads, tech, or agency services that don’t meet its standards. Oh, and Pritchard thinks much of the marketing online is “crappy” and the viewing experience “even crappier”

Best quote:

“We serve ads to consumers through a non-transparent media supply chain with spotty compliance to common standards, unreliable measurements, hidden rebates, and new inventions like bots driving fraud. Which all leads to an even bigger problem: we’re not growing fast enough. Despite spending $200 billion on advertising in the U.S. alone, the growth rates of our collective industries are really pretty anemic.”


Murphy’s bLAWg – Facefraud and Shitter, Part 2

OK so after market close today we will get Facebook’s 2016 Q4 earnings report.

“Facebook, Inc. is expected* to report earnings on 02/01/2017 after market close. The report will be for the fiscal Quarter ending Dec. 2016.”

As per my earlier post, the Facebook google trends graph continues downward.


Note I am in the contrarian minority by calling sell short compared to most analysts (see buy/hold/sell) recommendations below. This is fine. Someone has to have some balls and call them out.

If the all time high of $133.50 is breached to the upside, I am wrong and it’s time so sell (currently sitting @ $132.56).

Also note that these analysts have a conflict of interest in the sense that their access to management, which is required to do their job, can be limited if they are critical of company prospects…so they tend to be ‘optimistic leaning’.

Another look at the analyst recommendations over the past year:

Some links:

That being said with the above heavily skewed opinions, if bad numbers ARE released we could see a sharp move downward should all these optimistic hands decide their analysis is no longer correct and sell. The latest daily chart:

FB is up over 10% in 2017 so far – RSI indicator showing overbought conditions which indicates likely reversion to mean sometime soon.


FB has cracked the most widely held stocks – it’s currenty #14. The shares have been distributed widely amongst the population & institutions which makes it a great time to execute the closing actions of “Operation Pump_and_Dump”.


Fuckerberg is back in court, this time denying his Virtual Reality brotege Palmer Fuckey did NOT steal/use software/methodology from a company called Zenimax and use to develop the Oculus Rift VR headset.

The lawsuit is for $2 billion, basically what Facebook paid for Oculus. At the center of the lawsuit is Oculus CTO John Carmack, who previously ran a video game company within Zenimax called id Software and is best known as the mastermind behind video games like “Doom” and “Quake.”

John Carmack, CTO of Oculus.Wikimedia Commons

Zenimax has accused Oculus executives of knowingly stealing its software and trade secrets through the hiring of Carmack and five of his employees from id Software.

It will make a great starting plot for “The Social Network Part 2” movie that surely will be released in the not too distant future.

(Note that while I am not a big fan of the display ad revenue model as applied via Facebook given it’s lack of transparency, potential ineffectiveness & overall value proposition, I think if they do have a selloff/hard time growing the next few years, their next leg up will be to ride the VR wave leveraging their connectome of humanity.)


Will Facebook beat the street or eat the meat [sic]? It’s hard to say. A lot likely depends on the overall market as both the broader market and FB have been in an upward trend for years:

Although the last quarterly earnings report on November 1st, 2016 disappointed the market and let to a selloff. Interesting to note the price that day was $129.50/share on that day so we’ve pretty much round-tripped back to that point setting up for the next earnings release.

In shorting Facebook or Twitter I’d definitely say the weaker hand is Twitter, but given nothings goes up forever and the analysis I’ve presented in this post plus the previous one perhaps it’s time for this FANG darling to take some time to consolidate. Twitter has had the shit kicked out of it recently so maybe we can catch this move at the turn and get a larger %-age gain, i.e. further to fall for ol’ FB.

However, It IS interesting to note that Facebook insiders have been net sellers at a 3:1 ratio over the past 3 and 12 month periods:

…and that COO Sheryl Sandberg has sold 25% of her holdings since the last quarterly earnings report in early November, reducing her holdings from around 4 million shares to close to 3 million shares as shown here (880,000 shares was the big dump, sold on Nov. 21st, 2016 via disposition (i.e. direct sale):

Even stranger is that as of July 18th, 2016 “Sheryl Sandberg, with a reported 4.6 million shares as of a July 18, 2016, reporting date.”

So you could argue in the last half a year-ish she reduced her holdings by 1.7 million shares or by 37%.


B/C everyone is so bullish FB (especially after the Apple beat yesterday) I’ve opted to utilize a bearish strip option (put/call same strike with 2:1 ratio), to provide some protection should Facefraud continue it’s ridiculous march upwards. Stay tuned :).

Peak Social Media? (Part 1 of 2)

Check out the following from Google Trends:

If markets are to go down this year, there needs to be something to change the narrative.

I think it’s time for Wall Street to be able to point the finger @ the Silicon Valley and blame THEM this time around for their ‘rampant greed’ just to maintain balance in the universe.

We’ve already seen a high profile Silicon Valley unicorn, Theranos, go down in flames b/c of flat out fraud.

I came across this link on Reddit from a medical lab tech (a great example of the ‘wisdom of the crowd’) calling Elizabeth Holmes out way back in 2014 as a fraud:

I also saw some misogynist trolls on Reddit accusing her of fellating every investor personally. After listening to her voice for a few seconds in this video I’ve concluded they may have a point.

Getting back to the theme of peak social media – “You’re crazy!” you say. You are probably correct but bear with me and let’s examine some arguments supporting this claim – we all know its good practice to consider alternative points of view.



“The eyeballs for ads model doesn’t work. And – it’s being stated by one of their own.”

“Procter & Gamble Co., the biggest advertising spender in the world, will move away from ads on Facebook that target specific consumers, concluding that the practice has limited effectiveness.”



“….when calculating its “Average Duration of Video Viewed” metric…video views of under three seconds were not factored in, thereby inflating the average.”

“They do say ‘trust us’ a lot,” says Ian Schafer, CEO of Deep Focus, a digital agency. “People trust Facebook because they are the only ones that have access to all of that data and they alone can tell people what the correct thing do is on the platform. If the data can’t be trusted, however, Schafer says that “faith in Facebook… is going to erode….I’m an advertiser and I’m questioning what other data is incorrect.”


Extending the chart in the article to include the latest price movements we see we are close to breaking through the wedge:

But note that after the over +10% run up so far in 2017 things are into overbought territory:


“Pompliano, Snapchat’s “growth lead”, says he was hired away from his position at Facebook to provide confidential and proprietary information about Facebook’s systems and was subsequently fired, after only three weeks on the job, for blowing the whistle on the company’s growth misrepresentations with several higher-ups.”



There are 3.5 Billion people currently on the internet…and counting.

Facebook has 1.8 Billion users, giving them 50% market penetration, which is truly amazing I must say well done.

However, they are banned in China.

India rejected Facebook’s ‘free’ version of the Internet.

Thus, their growth is going to slow. This is basically a given considering the shape of the well known technology adoption curve.

Given that Facebook’s growth is the instantaneous derivative of the slope of this graph AND that they’ve just passed the 50% penetration level leads to only one mathematical conclusion – decelerating growth.

Facebook CFO Dave Wehner admitted as much “During the latest earnings report…(he)…noted that there will be a meaningful slowdown. This is fairly vague … will growth be at 40% or so? Or will it be much more subdued, say, 20%? It’s far from clear. But right now, the Wall Street consensus is for about 35%.”



While I kinda like him, Fuckerberg can be a greasy troll. Do any of you remember getting the “So-and-so signed up for Facebook – so should you!” emails way back in 2006? I do. I got 100’s of them. The only way that was possible was to go with the assumption that most people use the same password (they do)…

…so he and his brogrammers wrote scripts to login to your email, scrape out all your contacts and email them invites. Pretty sure even LinkedIn got into this…I’d complain but I just don’t give a shit anymore.

Brilliant really but pretty shady nonetheless.



“Zuck: Yeah so if you ever need info about anyone at Harvard

Zuck: Just ask.

Zuck: I have over 4,000 emails, pictures, addresses, SNS

[Redacted Friend’s Name]: What? How’d you manage that one?

Zuck: People just submitted it.

Zuck: I don’t know why.

Zuck: They “trust me”

Zuck: Dumb fucks.”



Internet lore has it he stole source code from the Winklevoss twins, blah blah blah blah, but at the end of the day “The case was settled before trial, and there is no use attempting to ascertain who was right and who was wrong.” The number floating around was a settlement of $65 million…


Here is the one thing that bothers me – I wonder what he thinks of investors?????

Facebook’s advertising revenues are based on a “trust us” model – they mark their own tests and it appears they like to get A’s. What would any rational capitalist do in their situation? I’ll leave that rhetorical, but it’s likely to be something along the lines of “maximize revenue”.

Should we really trust them based on the past 10 years of activity? We’ve seen that:

  • Snapchat is faking users.
  • The largest advertiser in the world (P&G) sees no value in their targeted offering.
  • Their ad metrics have “errors” (which seems funny for a company with so many highly intelligent people, especially when the errors skew the metrics in favor of Facefraud)
  • “Is it not funny how the “ads for eyeballs” model….suddenly finds itself being shunned…by none other than a company whose CEO once founded Twitter™

  • What else could possible go wrong?


    The main driver behind this ENTIRE line of thought was the recently (Dec. 20th, 2016) discovery of “Methbot” by Kapersky labs which basically was a $200,000/day server network that would generate fake clicks and video “views” to the tune of $3-5,000,000 a day in revenues.

    “Experts say the scam relies on a vast network of cloaked Internet addresses, rented data centers, phony Web sites and fake users made to look like real people watching short ad segments online…”

    Report: $3-5M in Ad Fraud Daily from ‘Methbot’

    “‘Biggest Ad Fraud Ever’: Hackers Make $5M A Day By Faking 300M Video Views”

    Now I’m not saying Facebook benefited from the Methbot network…but let’s say it is safe to assume that if someone in the world was able to build this technology, the super-nerds at Facebook definitely could too (please note that I use the term ‘super-nerd’ as a term of the sincerest respect).

    (How many of you sacks of shit actually click on ads? I do not and barely see them. Sure – argue “subconscious this, subconscious that…blah blah whatever”. In my case as a true minimalist I really don’t buy anything beyond food and the occasional prost…prostate exam.)


    And FINALLY note that Fuckerberg is thinking about selling most of his stocks! I shit you not. He may leave to go in politics.

    (UPDATE: He recently denied this but: 1 – why would we believe him? 2 – if Trump can win…any of us probably could.)

    Won’t that be nice. He can be far away when things go south and some poor bastard in IT will get blamed…which is ok b/c people that work in IT are just barely human anyway so who really cares.

    “Earlier this year, Facebook Inc.’s Mark Zuckerberg came to his shareholders with a big question: would they approve him maintaining voting control of the company, even if he sells most of his stock?”



    Facebook reports its Q4 2016 earnings on Feb. 1st, 2017…just a few days away.

    I will expand on this further in PART 2 of this post, which I will publish in the next few days BEFORE Feb. 1st – the analysis includes such tidbits as “Facebook Insider Sell-to-Buy ratio over the past year is basically 3:1”.

    Please sign up for bLAWg notifications below.




    Carbon Credits vs Carbon Taxes

    Carbon credits and carbon taxes each have their advantages and disadvantages.


    Credits were chosen by the signatories to the Kyoto Protocol as an alternative to Carbon taxes. A criticism of tax-raising schemes is that they are frequently not hypothecated, and so some or all of the taxation raised by a government would be applied based on what the particular nation’s government deems most fitting.


    However, some would argue that carbon trading is based around creating a lucrative artificial market, and, handled by free market enterprises as it is, carbon trading is not necessarily a focused or easily regulated solution.


    By treating emissions as a market commodity some proponents insist it becomes easier for businesses to understand and manage their activities, while economists and traders can attempt to predict future pricing using market theories.

    Thus the main advantages of a tradeable carbon credit over a carbon tax are argued to be:

    • the price may be more likely to be perceived as fair by those paying it. Investors in credits may have more control over their own costs.
    • the flexible mechanisms of the Kyoto Protocol help to ensure that all investment goes into genuine sustainable carbon reduction schemes through an internationally agreed validation process.
    • some proponents state that if correctly implemented a target level of emission reductions may somehow be achieved with more certainty, while under a tax the actual emissions might vary over time.
    • it may provide a framework for rewarding people or companies who plant trees or otherwise meet standards exclusively recognized as “green.”

    Below:  Overview of existing, emerging, and potential regional, national, and sub-national carbon pricing instruments, both credits (ETS) and tax

    The advantages of a carbon tax are argued to be:

    • possibly less complex, expensive, and time-consuming to implement. This advantage is especially great when applied to markets like gasoline or home heating oil.
    • perhaps some reduced risk of certain types of cheating, though under both credits and taxes, emissions must be verified.
    • reduced incentives for companies to delay efficiency improvements prior to the establishment of the baseline if credits are distributed in proportion to past emissions.
    • when credits are grandfathered, this puts new or growing companies at a disadvantage relative to more established companies.
    • allows for more centralized handling of acquired gains
    • worth of carbon is stabilized by government regulation rather than market fluctuations. Poor market conditions and weak investor interest have a lessened impact on taxation as opposed to carbon trading.


    British Columbia’s Carbon Tax

    British Columbia is Canada’s third largest province (estimated 2015 population of 4.7 million). Its carbon tax is straightforward and transparent in both administration and revenue treatment, and it easily qualifies as the most significant carbon tax in the Western Hemisphere.

    British Columbia inaugurated its carbon tax on July 1, 2008 at a rate of $10 (Canadian) per metric ton (“tonne”) of carbon dioxide. The tax incremented by $5/tonne annually, reaching its current level of $30 per tonne of CO2 in July 2012. At the U.S.-Canadian dollar exchange rate (1.00/0.75) in November 2015, and converting from tonnes to short tons, the provincial tax now equates to approximately $20.40 (U.S.) per short ton of CO2.

    Read more here.


    Why a Global Carbon Market is Coming Sooner Than You Think

    World Carbon Market Database

    Quebec-California partnership blazes trail for carbon trading

    A provincial problem: Putting a price on carbon

    Emissions Trading

    Japanese Population vs Interest Rates vs Government Debt


    A flat to declining number of buyers and consumers opposite ramping elderly sellers plus their unfunded liabilities is a problem with no happy resolutions.


    “Japan’s plan to monetize likely well in excess of 100% and maybe ultimately 1,000% or 10,000% of GDP is a curious solution…”

    Source: Hambone’s stuff: Simultaneous Elderly Overpopulation, Youth Depopulation & The Impact on Economic Growth

    Venezuelans get Fridays off for two months in emergency plan ‘to save energy’ | The Independent


    Venezuelan workers will get Fridays off in the months of April and May, in a bid to save energy in the black-out hit country, the president said.  President Nicolas Maduro said Venezuelans will have “long weekends” in an appearance on state television on Wednesday night, announcing the measure as part of a 60-day plan to fight a power crunch.

    Source: Venezuelans get Fridays off for two months in emergency plan ‘to save energy’ | Business News | News | The Independent