Bickel Blog

Running Shoes for Charity!

noreply@blogger.com (Bob Bickel) — Wed, 19 Aug 2009 14:35:00 +0000

We just created a website that will sell running shoes online and benefit Back on My Feet.

We got involved with Back on My Feet thru the efforts of Ed Scioli. He ran the crazy 20 in 24 relay last year. This year we had two teams from the Moorestown Distance Running Project run the relay and raise nearly $10,000! While at the relay Ed started talking about how else we could help out.

BackonMyFeetShoes.com is the result of that brainstorm. You can buy your shoes online and 20% of your order will be donated to Back on My Feet. It is a great way to help your running and help those less fortunate get back on their feet by running!

So go get that new pair of Brooks Adrenaline, Saucony Triumph, Asics Kayano or any of the other dozens of great shoes we have available.

RunSignup.com - Alpha Ready!

noreply@blogger.com (Bob Bickel) — Tue, 14 Jul 2009 23:00:00 +0000

We went live with the Alpha of RunSignup.com today.

Right now we are focusing on just the user registration side (although we have most of the race creation and editing done as well). We just want to make sure we get this part right and are able to focus on it. So far today we’ve had about 100 people test it out and things seem to be going well. We are processing credit cards and Paypal transactions and are giving users a very simple way to cancel the transaction and not register.

Our little effort to make life easier for race directors of running races and their participants is off the ground!

A New Venture

noreply@blogger.com (Bob Bickel) — Mon, 13 Jul 2009 16:52:00 +0000

Well, I am about to launch another new little venture. It combines my interests in running and technology.

The basic idea is a web service that makes it easy for races to allow users to signup online. We will go live with an Alpha version of the service in the next day or two (hopefully) for a local race that has agreed to test the service.

This is an old idea that I have been harboring for several years. I’ve used the big market leader, Active.com, as both a runner and as a race director for a number of years. However, they have become un-focused on the running marketplace. Their website is hard to use and certainly does not take advantage of Web 2.0 technology or approaches.

So our site will have focus on running races, it will be simple to use, and it will be much more cost effective than the alternatives in the marketplace. Hopefully people will like it and it will provide a valuable service to others. I’ll be blogging about this a lot over the next few months…

Wanted: Running Web Wizard

noreply@blogger.com (Bob Bickel) — Tue, 12 May 2009 13:03:00 +0000

We are looking for a new person at the store since Marc Pelerin is going to be moving to California.

Moorestown Running Company is a specialty running store in Moorestown New Jersey.

We are seeking a motivated web designer and enthusiastic store associate.
You will work in our Moorestown store helping to build and design our website, doing customer marketing and helping runners and walkers select the proper equipment.

You will have the opportunity to serve the running community, work with passionate staff and an experienced technology consultant as you develop an expanding running specialty website and growing store. The applicant should have related experience in web design and development, working with tools like Dreamweaver, Photoshop and Illustrator. PHP and Javascript experience is a plus. A strong desire to learn and keep expanding your skills is required. In addition to web development, you must demonstrate a willingness to work with customers and learn about properly fitting customers with running shoes.

The qualified candidate has related education and experience dealing with online marketing and/or web design. Email your cover letter, application and examples of your web work to info@runningco.com.

My History with Middleware and Management - like Peanut butter and jelly

noreply@blogger.com (Bob Bickel) — Wed, 06 May 2009 13:11:00 +0000

In 1996 we started a project called the Bluestone (actually Sapphire at the time) Application Manager. Kevin Minder led the project, Larry McCay and Rich Friedman were also key guys on the project as well. We felt it was very important to have Management tightly tied to our middleware. We saw tremendous synergies where customers could go way beyond simple Systems Management and move toward Application Management. I remember Kevin talking with me about how we could actually build something that was way better than things like Tivoli. Here is a link to a snapshot of the old Bluestone site -

Fast forward to 2002 and when I first started working with Marc Fleury and JBoss. In my first presentation to Marc on my recommendations on where JBoss could go I had a slide that said we needed to create something like the Red Hat Network for middleware. It would give us value that we could bundle in our Subscription and it would allow us to go from the developer side of the house into the operations side of the house where the IBM and Bea guys got paid. It was not until late 2004 when we hired Rich Friedman to figure out how we would build the JBoss Network that we got serious about it.

While Rich was investigating what was out there, Raven Zachery sent an email to Ben Sabrin (Jan. 24, 2005) suggesting we take a look at Hyperic. Rich did and we eventually got into a series of discussions about how we could use their technology to be the foundation of the JBoss Network. We were too cheap at the time to actually acquire the company (although a number of us wanted to), but we did enter into a license deal that gave us rights to the software and the ability to modify and take our own product to market. Friedman and the JBoss Network team (including John Mazzitelli, another Bluestone alum) delivered that product by Q4 of 2005. Customers really ate it up and our sales accelerated quickly, helping to drive the valuation discussions with the various companies looking at acquiring JBoss. During those times, I recall Friedman and myself trying to pitch the idea that if we were going to stay an independent company, then we should acquire Hyperic. JBoss chose to go down the other path and combine forces with Red Hat.

Having learned so much about Hyperic and the great team there, as I left JBoss I started to work with them on their strategy moving forward. Javier asked me to be on the board and let me become an investor. The past couple of years have been great in terms of growth and new opportunities. Today, customers like Comcast, CNet, Intuit, RealNetworks, (and several I am not yet allowed to name, but you likely use some of them every day) now rely on Hyperic for their Web Infrastructure Management.

About a year ago when Spring entered into discussions with Hyperic to license the HQ technology I started dreaming again about a real combination. I saw Spring as the next generation of Middleware – designed for the new needs of the market. Faster and slimmer. More adaptable, ready for Cloud computing and a natural fit for Virtualization environments. The same things we had shifted our emphasis to at Hyperic.

As the new wave of applications are built and deployed there is an even greater need for a tight combination between middleware and management. It is entirely different than the old style – focused on operating systems and Application Servers. There is a new emerging Internet Application Infrastructure (IAI) that is made up of distributed services with a need to scale very quickly. Far more flexible and lower cost. Built on an open source paradigm to ensure that this distributed community can all interact and move forward rapidly.

The new Spring has become the default IAI. Spring has achieved this by simple market demand. Spring has huge market share, the ability to help customers integrate their old environment with the new, and the cost advantages of a simple, integrated Develop-Deploy-Manage product set.

I’m glad that after a dozen years of being a part of this to see it come to life in a meaningful way.

Spring – Hyperic - the future of Internet Infrastructure

noreply@blogger.com (Bob Bickel) — Mon, 04 May 2009 21:32:00 +0000

Spring announced today that they acquired Hyperic (I have been on the board at Hyperic since 2006 and known them since JBoss decided to use HQ as the foundation of the JBoss Network in 2005).

This is the future. The past has been about J2EE Application Servers, Operating Systems, Servers, heavy-weight Enterprise Middleware and Systems Management. The past has burdened companies with high costs and inflexible environments that do not allow them to respond to market and customer dynamics.

Over the past couple of years and into the next several years a new architecture has taken hold. Built around the flexibility of the Internet. Cloud Services. Virtualization. These are the things that let companies take advantage of rapid market shifts and to achieve much lower cost levels. Traditional Middleware and Systems Management have not kept up with this new environment.

The combination of Spring and Hyperic provides the Internet Infrastructure for new business applications to be deployed on. The dramatically lower costs of Spring development and deployment are proven in the market with the huge market share and shift from the heavy weight J2EE model. Hyperic now adds the full lifecycle of management to this dynamic infrastructure.

There are two interesting synergies between the companies:
1. They both provide a smooth migration from the past. Over 50% of J2EE App Servers actually use Spring based models. And Hyperic has become the defacto management platform for Internet based applications, not to mention the fact that the JBoss Management products are based on Hyperic HQ.
2. Both companies have been investing directly into the Cloud. This benefits companies hosting their own Cloud services, as well as customers of Cloud services like Amazon and Google. Analysts and partners name both companies to their list of leaders in this space.

Spring is showing the type of leadership and partnership capabilities to make it the leader in Internet Application Infrastructure in this new world.

Inconspicuous Consumption - Running Shoes

noreply@blogger.com (Bob Bickel) — Sun, 05 Apr 2009 00:49:00 +0000

I was talking with my running store partner, Dave Welsh, this evening about the fact that business so far this year is up - and seems to be getting better each month as compared to last year. We were down Jan. 09 to Jan. 08. By March we were up over 20%. So far in April we are up even more!

I am wondering if running shoes might be a way for people to partake in inconspicuous consumption? As I have discussed before, the vast majority of the population that is still earning what they have been earning the past several years. But it is not cool to shop and spend excessively. Hummers are out, Saks Fifth Avenue sales are down 25%+, but buying a nice pair of running shoes is not viewed as excessive. And maybe people want to get more natural - driving less, taking more walks and trying to get in shape by doing some running.

I have no idea if this theory is right, but we sure hope it keeps up!

Mark Little - JBoss CTO

noreply@blogger.com (Bob Bickel) — Tue, 31 Mar 2009 13:34:00 +0000

It looks like Mark Little is moving into the CTO role at the JBoss division in Red Hat as Sacha Labourey departs.

This is a great move. Mark is very smart, has deep experience in enterprise level software, is very collaborative and has a quiet drive for success. Plus Mark comes from Newcastle, England - which I think is a pretty close translation from Neuchatel, Switzerland where Sacha is from.

I first met Mark when Rich Friedman and I went to Newcastle to try to convince Arjuna Labs to join forces with Bluestone about 10 years ago. Mark was the genius CTO who was one of the key guys on an amazing team that had developed a Java Transaction Processing technology. Mark was one of the leading, recognized industry experts in this field. He was the one who drilled us with questions across the board - technology, people, processes, customers, culture. Mark had an understanding far beyond the details of the code and into the whole complex set of people, customers, partners and markets that make projects and companies successful. He and the team eventually agreed and he became one of the key technical thought leaders at Bluestone and then HP.

As fate would have it, Arjuna spun out of HP and in 2005 Mark and I had the opportunity to work together again as Arjuna joined forces with JBoss. Mark went on to lead the ESB and Integration space for JBoss. I know he has enjoyed working with all of the different projects in JBoss and bringing them together to solve problems in the integration space.

Anyway, I think this is a fantastic choice by JBoss/Red Hat. I am sure Mark will come up with some new twists, but stay true to the fundamentals that has made JBoss successful. Congrats Mark!

Sacha Retiring from Red Hat - JBoss

noreply@blogger.com (Bob Bickel) — Sun, 29 Mar 2009 21:36:00 +0000

Sacha Labourey announced today that he is moving on from Red Hat - JBoss.

There were a ton of great people who helped make JBoss successful. Of course Marc Fleury, the smart and dynamic founder. Scott Stark who made JBoss a real product with excellent stability. Fantastic technical project leads like Bill Burke, Adrian Brock, Gavin King, Bela Ban, Ivelin Ivanov, Rich Friedman and so many more. And great business people like Tom Leonard, Rob Bearden, Joe McGonnell, Brad Murdoch, Shaun Connolly and of course the original JBoss Sales-Guy Ben Sabrin.

But I would say Sacha Labourey had as much impact as anyone over the years at JBoss.

Sacha started like all early people with JBoss – as a contributor. He wrote the first implementation of clustering with JBoss. That capability is what moved JBoss from a simple developer tool and low end app server to something that could seriously compete with WebLogic and WebSphere.

That early work established his technical smarts, but it also was the kick-off to demonstrating his ability to attract some of the best and brightest to JBoss. Sacha lives in Neuchatel, Switzerland – not exactly the hub of middleware technology. Yet his personality and technical leadership made it the hub of JBoss Europe with top flight talent moving from places like the US, England, and Russia to live in Neuchatel, as well as coordinate all the developers in Europe (which is where most of them lived).

Sacha also made the transition to running JBoss Europe from a business perspective. He established key customers and partnerships thru his unique technical and personal abilities. Large companies put a tremendous amount of trust in JBoss because Sacha was the person saying he would stand behind it. And these customers and partners knew that he would.

As JBoss grew, Sacha became Marc’s real trusted counselor. Perhaps it was that they both spoke French. But Sacha had the Swiss gift of diplomacy. Sacha could communicate with Marc in a unique way – and was always someone Marc could trust to give honest, non-biased feedback. Sacha provided a steady hand in the background as JBoss grew from 6 to 200 people in less than 3 years.

Sacha was always incredibly loyal to JBoss the open source project and JBoss the business. He brought balance and a long term perspective. While many people (like me) left after the Red Hat acquisition, Sacha saw the transition all the way to its’ successful completion. There were certainly many problems with the integration – but again Sacha had the patience and skills to guide JBoss forward. Much credit goes to Sacha for continuing on with great projects and getting resources for new projects. He was incredibly valuable in providing stability to the technology and had the skills to make sure the business worked well over time.

The true measure of how good Sacha was for JBoss is the good shape he has left it in. He has grown the business to the point where he is no longer needed.

I was in Europe two weeks ago and spent a day with Sacha exploring Switzerland. He was looking forward to having some more time in his life for Sophie and Eva. He was also looking forward to spending some time getting in shape (hint, hint Sacha). And I could tell he was already starting to think of new endeavors that would take him in new, fun directions. As always, Sacha had a very good plan of what would happen and how the transition would work. I don't know what is public, but I can say that the plan is great. It gives some very good people a well deserved chance to advance and contribute in new ways.

Certainly he will be missed, but I think Sacha leaves feeling he has done his job and JBoss will continue to be successful in the long term.

I certainly thank Sacha for his friendship, his guidance and all he has given to JBoss.

Onward, my friend!

Marrakech

noreply@blogger.com (Bob Bickel) — Wed, 25 Mar 2009 14:52:00 +0000

I just returned from a great trip to see Allison since she is doing a semester in Toulouse, France her Junior year. It is really cool to see your daughter grow up so well.

We did a long weekend adventure to Marrakech. Allison has done a lot of studies about the French colonization of Northern Africa and some of the modern implications of that with immigrants to France. She was also supposed to be taking a course in Arabic, but alas the French are on strike so that class has met rarely.

We stayed in a Marrakech Riad - Riad Dar Najat. This is a picture of Allison relaxing on their open lounge area on the top floor.

Getting a good Riad is pretty important. Riad's are the equivalent of American Bed & Breakfasts. The streets in Marrakech are lined with walls typically without many windows. It is kind of hot and dirty. You open the door to the Riad and it is like an oasis! Open courtyard to the sky and typically three floors with a couple of bedrooms on each floor and an open area on top. Marrakech is a very different place for us Westerners. The streets are narrow and twisty and unmarked - so to have Amin or Said from the Riad Dar Najat lead us to our destinations was very nice.

The owner of the Riad, Olivier, is a very enthusiastic and friendly Frenchman who now lives in Morocco. He was the perfect host - welcoming us when we got there and providing us with the best salad we've ever tasted.

It takes a couple of days to get used to Marrakech. The markets are crowded, with many aggressive street vendors. Some of them try to put monkeys or snakes on you - we avoided them. But they did get Allison for a Henna tattoo that first day. By the time it was time to leave, we wished we had more time to explore and relax. I've put up some pictures.

Some good news

noreply@blogger.com (Bob Bickel) — Tue, 24 Feb 2009 13:28:00 +0000

I walked into a friends office yesterday and he called me "Mr. Gloom" as he was watching the Dow fall 250 points and hit levels last seen in 1997.

So I thought I would pass along some good news... The running store's sales for this February vs. last February are up over 20%. I'm not sure if this is a leading indicator or just a freak of weather or what. The same is true at our two sister stores in South Jersey.

I was also talking with another friend this weekend, and he made an interesting observation. He said that while there were people losing their jobs, most people had not been affected in their income level. Meaning that for over 90% of the population, nothing has changed except their 401K statements. The fact that their house is worth less does not really impact their day-to-day "Income Statement". We speculated that people were saving a bit more than they did and building up a cushion, but in the long run this was kind of healthy.

Anyway, some positive thoughts for the day. Although I still say the Dow will go down to 6,000...

10% Reduction...

noreply@blogger.com (Bob Bickel) — Tue, 03 Feb 2009 13:44:00 +0000

I have had this thought in my mind that the economy seems to be contracting about 10%. I was reminded of this as I awoke to my radio (KYW) news that the Pennsylvania State Revenue was 11% below expectations. They reported Sales Tax was off 7%, Personal Income Tax was off 13%, corporate tax was off 18%, inheritance tax was off 10% and real estate transfer tax was off 35%.

This matches the performance at the running store in January - we were down 10% excluding our recently opened website - RunningCompanyShoes.com.

It kind of makes me think that maybe we got 10% ahead of ourselves the past decade. People took out too much credit, and basically extended the economy more than it should have naturally grown. Now that we take the 10% step back, it is very painful. It is painful for the 10% of the workforce that is getting laid off. It is very painful for the states and other government organizations to be coming up 10% short of their revenue projections. And of course businesses get an unusually high % of their profits from that last 10% of business. For example at our little running store, that 10% in revenue makes the difference between a small profit and a loss.

As an investor, I am not quite sure it is time to jump back into the market. The problem is that 10% is still rippling thru the market and economy. And earnings are still in the process of being impacted negatively. And probably will be thru the end of this year, even with the stimulus packages being enacted.

Galbraith Revisited

noreply@blogger.com (Bob Bickel) — Thu, 29 Jan 2009 14:30:00 +0000

To follow up on my post from a while ago, Galbraith sited 5 key reasons for the 1929 crash and following depression:
1. The bad distribution of income.
2. The bad corporate structure.
3. The bad banking structure.
4. The dubious state of the foreign balance.
5. The poor state of economic intelligence.

To compare this to today:
1. Bad income distribution.
1929 - Top 5% received about 33% of all personal income.
1929 - Top 1% held 44% of all wealth.
2000 - Top 1% received about 20% of all personal income.
2004 - Top 1% held 34% of all wealth.

Here is a picture of the real income gains between 1979 and 2005 by percentage. It is clear that the top income groups are gaining ground faster than lower income groups - creating an income distribution that approaches 1929.

2. Bad corporate structure. In the 1929 era there had been a large rise in a "vast structure of holding companies and investment trusts... In particular the dividends from the operating companies paid the interest on the bonds of the upstream holding companies... the temptation to curtail investment was obviously strong." In addition this structure was practically non-regulated.

In today's market, the hedge funds have obviously created a system that rivals the structure of the holding companies and investment trusts of the 1920's. Hedge Funds manage roughly $2.5 Trillion of assets and according to a 2007 WSJ article accounted for about 60% of bond trades. And obviously there is very limited regulation and visibility - witness Madoff...

3. Bad Banking Structure. Galbraith writes "Loans that would have looked perfectly good were made foolish by the collapse of the borrower's prices or markets for their goods or the value of the collateral he had posted. The most responsible bankers were often made to look the worst. A depression such as that of 1929-32, were it to begin as this is written, would be damaging to many currently impeccable banking reputations."

Of course the similarities to today are striking. Looking at the November housing data, prices fell over 18% from the previous year. And of course housing makes up the largest percentage of wealth in the US.

The CDO's have a way of amplifying this. In my mind the CDO's are the increased leverage similar to the high margin leverage in the stock market of the 1920's. Meaning that if the margin or CDO leverage had not been there, the crisis would have been far less severe.

The good news is that the Fed, FDIC and SEC make a very big difference between today and the 1920's. They provide a level of coordination, control and confidence that was non-existent 80 years ago.

4. The Foreign Balance. Of course this is several orders of magnitude different (and from Galbraith's perspective) worse than the 1920's. The global economy and the meaning of imports and exports and multinational companies just brings a whole new perspective. I am not sure this is a real driving impact to this crisis - meaning it is not making it worse IMHO.

5. The poor state of economic intelligence. Galbraith feels the economists and politicians of the era did not understand what was happening and did not respond appropriately. He discusses how Hoover enacted large tax cuts for business, however there was no corresponding increase in capital spending, investment or hiring. There was also a central focus on balancing the budget. In fact Roosevelt's Democratic Party in 1932 ran on the platform of an "immediate and drastic reduction in government expenditures to accomplish at least a 25% decrease in the cost of government." He adds that the fear of inflation reinforced the demand for a balanced budget.

This is a major difference between then and now. We have very active Fed monetary actions, Treasury bank stabilization actions and coming tax cuts and new spending programs. These actions aren't quite the level of government intervention that WWII brought, but they are much more aggressive than the combined actions of the 1930's.

In summary, the similarities are at the very minimum concerning. It is understandable why Ben Bernanke, a careful student of the Depression Era, has been very aggressive in his moves. It is also the driving factor why there is general consensus in the government that major fiscal stimulus is needed. Let's hope it works...

"Downturn to conclude in June" - Not my words...

noreply@blogger.com (Bob Bickel) — Fri, 12 Dec 2008 14:34:00 +0000

Late yesterday the Wall Street Journal reported:
“On average, economists expect the downturn to conclude in June 2009, marking an 18-month duration, the longest postwar period of decline. The economists on average said the unemployment rate will peak at 8.4% in response to this recession.”

In a separate set of headlines:
“Bernard L. Madoff, a former chairman of the Nasdaq Stock Market and a force in Wall Street trading for nearly 50 years, was arrested by federal agents Thursday… Mr. Madoff told his sons he believed losses from his fraud exceeded $50 billion.”

I was not going to cover this chapter of Galbraith’s “The Great Crash of 1929” until later, but these two headlines just make me jump back to page 14- “Aftermath II”…

During the book, Galbraith points to a group called the Harvard Economic Society – a group of economists from Harvard. He also points to some other high profile economists from well regarded Universities like Joseph Stagg Lawrence of Princeton and Irving Fisher of Yale who strongly supported the whole run-up of the market. His recounting of the Harvard Economic Society’s predictions are remarkably similar to the quote from the WSJ above:

11/2/29: “The present recession, both in stocks and business is not a precursor of business depression.”
11/10/29: “A serious depression like that of 1920-21 is outside the range of possibility.”
12/21/29: “A depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall.”
1/18/30: “There are indications that the severest phase of the recession is over.”
3/1/30: “Manufacturing activity is now definitely on the road to recovery.”
4/19/30: “By May or June the spring recovery forecast in earlier newsletters should be clearly apparent.”
5/17/30: ”Business will turn better this month or next, recover vigorously in the 3rd quarter and end the year at levels substantially above normal.”
8/30/30: “The present depression has about spent its force.”
11/15/30: “We are now near the end of the declining phase of the depression.”
10/31/31: “Stabilization at present depression levels is clearly possible.”

Galraith concludes in his understated tone “even these last forecasts were widely optimistic. Somewhat later, its reputation for infallibility rather dimmed, the Society dissolved.”

The Chapter goes on to recount how “among people of prominence worse havoc was worked on reputations. In such circles credit for wisdom, foresight and common honesty underwent a convulsive shrinkage.” In addition to the soiled reputations of the economists, he talks about a couple of bank presidents, but saves the worst story for the end of the chapter – Richard Whitney who was the head of the New York Stock Exchange.

Like the current day story of Mr. Madoff, who is the former Chair of the NASDAQ Stock Market and owner of his own Wall Street firm, Richard Whitney also ran a stock exchange and headed his own Wall Street firm. Whitney and Madoff shared the common practice of keeping their books to themselves, and thus employed very large leverage to make their investments. With major drops in the market, they were eventually unable to cover their leveraged and illegal positions.

The current press is talking about Madoff essentially running a Ponzi scheme. In one other strange twist of similarity between eras, Galbraith covers the fact that the term Ponzi is based on the case of a Charles Ponzi, who in the mid-1920’s made a business of brokering land in Florida. Apparently there was speculation on real estate before the collapse of the stock market in 1929. Ponzi was incredibly misleading about what people were buying - selling lots of 1/23rd of an acre 25 miles away from the Ocean. However, there was the similar practice of enabling buyers with insufficient means to purchase property beyond their ability to payback. The scheme to drive prices up and up collapsed and ended with land owners stuck with their properties and no way of either selling the property or covering the payments. Sounds familiar.

Mollie is in!!!!

noreply@blogger.com (Bob Bickel) — Thu, 11 Dec 2008 22:05:00 +0000

Mollie just found out she got accepted to Cornell! Proud Dad!

John Kenneth Galbraith's "The Great Crash of 1929"

noreply@blogger.com (Bob Bickel) — Thu, 11 Dec 2008 21:23:00 +0000

I just finished reading John Kenneth Galbraith’s “The Great Crash of 1929”. He wrote the book in 1955 and recounted what happened and looked at the reasons why. Very interesting, and while there are many things that are different, there are a number of similarities that I will try to highlight in my next couple of blogs.

From Sept. 3, 1929 until Nov. 13, the Times Industrial Index fell from 452 to 224 – almost 50% exactly. Prices stabilized for a while, but continued a long term trend down until they reached their eventual bottom at 58 on July 8, 1932. Meaning $1,000 invested on Sept. 3, 1929 became worth $130. Ouch.

So we all know that the Dow Industrials fell from a high of 14,164 on Oct. 9, 2007 to a low of 7,557 on Nov. 21, 2008 – a little less than 50%. Of course the Dow has rallied back to about 8,600 as I write this on Dec. 11, 2008 – an improvement of about 14% above the bottom. Looking back to 1929-30, the Dow Industrials rallied about 29% from a low in 1929 of 228 to close at 294 on April 14, 1930.

Of course the numbers do not really look at the reasons behind the crash. Galbraith summarizes the reasons:
1. The bad distribution of income.
2. The bad corporate structure. “The most important weakness was the vast new structure of holding companies and investment trusts.”
3. The bad banking structure.
4. The dubious state of the foreign balance.
5. The poor state of economic intelligence.

He morphs the 5th point into the government reaction to the economic events in the 1930’s. For example, I was surprised to learn that FDR’s Democratic Party ran their successful 1932 election bid with this as part of their platform called for an “immediate and drastic reduction of governmental expenditures” to accomplish at least a 25 % decrease in the cost of government.

Anyway, over the next week or two I will do some research on today’s metrics and contrast them to what Galbraith covers in his book about 1929. I think I will find quite a few similarities – especially on the first 4 points. However, it is really quite remarkable the difference in the government’s reaction this time. As Galbraith points out “The avoidance of depression and the prevention of unemployment have become for the politician the most critical of all questions of public policy.

Goldman Downgrades Forecasts

noreply@blogger.com (Bob Bickel) — Mon, 24 Nov 2008 01:43:00 +0000

Some pretty sobbering forecasts from Goldman Sachs means more bad news is on the way. Highlights to me are the fact we could go over 9% unemployment (meaning 50% more people will be without a job than today), and that inflation will be negative (but they say this is not really the "D" word). The bolding is mine...

BOTTOM LINE: We have marked down our forecasts for US real GDP in response to continuing signs of falling domestic and foreign demand, labor market deterioration, renewed tightening in financial conditions, and an apparent impasse in fiscal policy pending the transfer of power to the Obama administration in late January. As a result, we expect the unemployment rate to reach 9% by the fourth quarter of 2009, profits to fall 25% for 2009 as a whole following an estimated 10% drop this year, and the Federal Open Market Committee (FOMC) to use nontraditional policy tools more aggressively, as detailed below.

MAIN POINTS:
1. A weaker growth profile...We now estimate that real GDP is falling at a 5% annual rate in the current quarter, and we expect this to be followed by declines of 3% and 1% in the next two quarters. This deepens and extends the expected recession, bringing the drop in GDP close to the decline seen in 1982 (2.3% in our forecast versus 2.7% then). Previously we had estimated changes of -3.5%, -2%, and zero, respectively. In the second half of 2009, we expect growth to average 1%, only slightly less than before.

2. …due mainly to fiscal policy stagnation...Although persistent downside surprises are a major driver of the current-quarter adjustment, the main reason for the downgrade to our forecast is the policy impasse that has developed in Washington and the tightening in financial conditions it has provoked. It is now reasonably clear that a second fiscal package will not be enacted until after the Obama administration takes office in late January. Other potential measures of support -- deployment of TARP funds and more aggressive expansion by the GSEs, for example -- likewise await the transfer of power. Although the probability is rising that the next round of fiscal stimulus will ultimately exceed the $200bn we have been assuming, we have not incorporated this into our forecast because the timing and magnitude remain unclear. At the moment, any significant impact seems unlikely until 2009 Q2 at the earliest.

3. …results in a postwar record increase in unemployment...Given the lower expected profile of real GDP, we now forecast that the unemployment rate will reach 9% by year-end 2009, half a point higher than our previous forecast. With very little reason to think that the US economy will return to trend growth in 2010, we expect further increases in unemployment during that year. This forecast, if correct, makes the current recession unequivocally the worst single downturn on record since World War II insofar as increases in joblessness are concerned, and it raises the prospect that this recession could eventually exceed the 5-point cumulative increase posted during the double-dip recessions of 1980 and 1981-1982 combined.

4….a sharper slowing in inflation…As the economy contracts, inflation pressure has started to ease. This was evident in the latest CPI, which produced the first drop in the core (ex food and energy) index since 1982, when a different computation of housing costs made the index more sensitive to interest-rate movements. With real GDP now expected to drop more sharply we have marked down our forecasts for year-to-year core inflation by the end of 2009 by about 1/4 percentage point, to 1.2% for the CPI and 1.0% for the PCE (personal consumption expenditure) index. With energy prices dropping sharply and some evidence of softening in food prices as well, we now show a more meaningful year-to-year drop in the (headline) CPI for all items to about -1.4% in the third quarter of 2009. However, we do not expect a broad-based, sustained pattern of significant price decline that would normally be associated with the term "deflation" over the forecast horizon.

5. …a record decline in aftertax profits…The combination of weaker real activity and slower inflation means that profits of US companies will fall even more sharply than we had previously expected. Specifically, we now forecast that aftertax economic profits will fall 25% in 2009 (annual average basis), which would mark the biggest drop since 1938. Previously, we had expected a 20% drop for 2009.

6. …a resort to unconventional policy tools as the FOMC struggles to remain ahead of the curve…We continue to expect the FOMC to cut the federal funds rate target by 50 basis points (bp), to 50bp, at its next meeting on December 16, if not before. Although a subsequent rate cut to zero is not out of the question, we think that the committee will turn to unconventional policy tools more openly to remain aggressive in attempting to support the economy and financial markets. Specifically, we expect the committee to precommit to maintaining short-term interest rates at a low level for a "considerable period of time" (or language to that effect) and to attempt to push longer-term interest rates down by purchasing longer-dated Treasury obligations more aggressively. In executing these policies, we expect the Fed's balance sheet to increase further, from the $2.2 trillion to which it has risen over the past two months.

7…and a flattening yield curve. Although we do not forecast deflation, the fear of this outcome has clearly risen in the financial markets. This, coupled with the Fed's efforts to flatten the yield curve, implies a much lower profile for the yield on 10-year Treasury notes. We now expect that this yield will fall to 2-3/4% by the end of the first quarter of 2009, as compared to 3-1/2% previously. Thereafter, signs that the US economy is stabilizing will likely cause these rates to rise to 3.6% by year-end (versus 4% previously).

Sub 8000

noreply@blogger.com (Bob Bickel) — Thu, 20 Nov 2008 02:40:00 +0000

The DJIA went below 8000 today. A financial person told me that if you listen to the sage advice of Buffet, Lynch, etal, then you will invest now because it is tough to time market bottoms.

But I just saw a headline that makes me thing we have not hit bottom yet. The title was "Dow falls below 8,000, S&P at 5-year low". If this is the worst financial crisis since the Depression, and it is much broader than the 2000-2003 meltdown, then why would the stock market not reflect that? IMHO the world economy is far worse with no real tangible turnaround on the horizon in spite of the Goverment's efforts to free up the money supply and increase the velocity of money. So the stock market is in for more downward trends...

Pride

noreply@blogger.com (Bob Bickel) — Wed, 05 Nov 2008 05:18:00 +0000

I have never been more proud of our country.

How low will the Dow go?

noreply@blogger.com (Bob Bickel) — Mon, 27 Oct 2008 22:41:00 +0000

A frequent topic of conversation these days is the declining market. It is particularly interesting because so many people are affected by it, and certainly my own portfolio has taken a real bruising over the past year.

I told my broker my original thesis last March that the credit "issues" back then would have repercusions in the real earnings power of companies and bring down stock prices to the Dow 10,000 level. We made a lunch bet on it - I won that one. Now the question is how much further it will fall - or have we reached the bottom.

There are many pundits in the market today. They talk about the pressure of Hedge Funds, and the deleveraging of the credit market. I think about the habit of history repeating itself. Maybe not in the terms of the Great Depression - but possibly in the terms of the 1970's and early 80's. So I thought I would do a bit of research and share it...

First, I decided to look at the DJIA price 20 years ago and what the Inflation rate has been since then to get a feel for where things were at the end of the vaunted Reagan era when things had gotten back on track (the DJIA went from under 1,000 to over 2,500 during Reagan's 8 years in office). The DJIA on Oct. 3, 1988 was 2,168. Since then inflation has increased 75% as measured by the CPI, as it has gone from 118 to 207.

Let's assume stocks should return twice as much as inflation, then the stock market would be at 2168 * (1 + (.75 * 2)) = 5,420. Hmmm - that does not look so good, and could be an indicator that there is still significant downside in this market.

In another view, Price Earnings Ratios have been one of the standard ways to value stocks. Of course earnings calculations have been changed significantly over the years with issues like measuring the value of assets on and taking big write-offs (like Wachovia's recent -$24B write-off). But it is still useful.

The WSJ states that the past 12 month PE Ratio is now 13, which is "well below the 10-year average of about 21 times earnings". But the article goes on to say "But if the economy slides into a deep recession, as some predict, and earnings continue to slide, current stock prices won't look cheap."

Three observations. First, it is obvious that the next 12 months of earnings will fall significantly from the past 12 months. Second, in the recent earnings calls few executives are giving much guidance on future earnings and that will scare investors so they will not pay as much for a given earnings level. Third, the chart above shows many times when PE ratios were below 13. If history does indeed repeat itself, then we could see pressure on current prices. To take one set of non-far-fetched numbers earnings could fall by 20%, and PE ratios could continue to fall to the 10 range. This could drop prices by roughly 40%, implying a Dow of about 5,000 from the current 8,200.

I am a child of the 70's (graduated high school in 1975 as a semi Alex P. Keaton) and remember the Dow inching above 1,000 barely in 1972, 1976 and 1981 before it permantently stuck in 1982. Could we get into a similar situation of a stagnated Dow? While we are likely in for a recession for a year, there is a possible inflation scenario similar to the 70's that could follow given all of the money supply expansion worldwide and the likely government stimulous packages that will grow National debts across the globe.

OK, so I am pretty depressing. I am going to guess a Dow of 6,000 as the low. The good news is that if you are a long term investor and can free up cash over the next couple of years, this should prove to be a very good time to invest. Who knows where the bottom will be exactly. If you can dollar cost average your buying then it should be pretty effective when the positive side of history repeating itself occurs.

Social Pass

noreply@blogger.com (Bob Bickel) — Sun, 28 Sep 2008 13:05:00 +0000

Shaun decided to put up what we were almost ready to put into Beta. You can watch a very good example video here.

Although Ringside is winding down, this technology may see the light of day - and might help with the socialization of the web (I know, Sarah Palin won't like the sound of that!).

Ringside Winding Down

noreply@blogger.com (Bob Bickel) — Wed, 24 Sep 2008 14:06:00 +0000

A year ago, a group of us met in a pizza parlor to discuss how we could bring the social web to every website and business. In January, we launched Ringside Networks with seed funding from Matrix Partners, one of the best VC firms in the country. By the end of March we released into open source an initial beta of our Social Application Server – a very ambitious project. We got some very positive reviews on our approach, our implementation and the need in the marketplace for every website to become social.

We were ready for our Series A round of funding, and in late May we received a number of term sheet offers from the very best VC firms. As we were about to finalize our funding, one of the biggest non-evil Internet companies asked if we would have interest in being acquired instead. After a lot of thought and debate, we decided that the larger company would enable us to get our technology to market sooner and with more impact.

The story sounds almost too good to be true. And it was. After dragging out the process for most of the summer, the non-evil company decided that they really did not want to acquire the company after all. Recommendation: always beware of wolves dressed as Grandma, they may be more like Microsoft than they admit.

By that time, of course, we had used up all of our seed money. And by backing away from our Series A offers, we kind of burned the VC’s. Even better, our development had stalled because of our desires to build stuff aligned with our new direction in the non-evil company.

Matrix was certainly gracious about our predicament and funded us with bridge loans while we mapped out a way forward. The team pressed on with some really cool on-demand technology called Ringside SocialPass that we were readying for Beta.

However, we were not successful in raising the kind of Series A round required for us to make a real impact on the market.

So, the team has decided it is time to move forward.

We are not quite sure what that is for us yet. There may be companies that share our passion for the future of the Social Web and feel our technology and people can help them out. Some of our team may disperse (some already have) to go make their individual marks on the industry. Some may even pick up the pieces and go on to form another company out of the remains of Ringside.

We can’t simply blame non-evil companies, however.

The building of a company requires so many things to come together.
Good ideas, good target markets, good people, good business models, good timing.
I think we just missed on the final ingredient - good luck…

Ringside Site Connect

noreply@blogger.com (Bob Bickel) — Tue, 12 Aug 2008 22:15:00 +0000

Ringside is bringing the power of the Social Web to any website in two very simple, yet powerful services. Yesterday, we released a demonstration of the idea that any website could easily integrate the idea of Social Activities. Today, we are releasing a demo of our new Ringside Site Connect, which is meant to allow any website with a set of users to allow those users to become social.

Many websites have large and dedicated user bases. Ringside Site Connect provides a simple way for those users to connect with each other within the website, as well as reach out and map users in the large Social Networks like Facebook and MySpace.

In this demonstration, we have shown how the Food Network website could be extended to allow their users to connect thru a social application for people with similar tastes in recipes.

In this application, the Food Network:
- Enables users to login
- Chooses which applications are available (they can use any Open Social or Facebook application, or develop their own)
- Has full access to the user’s social graph

Ringside Site Connect:
- Accepts the identity of the user from the Food Network
- Provides the hosting for the social applications
- Provides the hosting for the Food Network’s social graph

Over the coming weeks, we will be putting up more demonstrations as well as explaining the technology behind it. We will also be looking for early adopter customers who will work with us to test this service out before releasing it broadly. Let us know if you have an interesting need.

Go Ringside for Social Activities

noreply@blogger.com (Bob Bickel) — Tue, 12 Aug 2008 01:41:00 +0000

The goal of Ringside is to bring social capabilities to the entire web. Today, we are introducing an early demonstration of our Go Ringside Service that lets any website very simply add a social aspect to any activity.

As we talked about earlier, people are social in small groups around specific activities – going to dinner, traveling on a business trip together, asking friends for advice on buying something, talking about a video on YouTube, etc. There are millions of websites that offer a set of services to individual users for all of these things. As opposed to the large Social Networks, our Go Ringside Service let’s any of these websites simply add a JavaScript tag to their website and suddenly become social.

What does that mean? Well, you can see an example of adding social capabilities to the TicketMaster website. The demonstration shows a user buying a ticket and wanting to also invite some friends to go to the concert. The Go Ringside Service offers the user a way to not only invite friends to this concert, but enables this group of friends to keep track of who is going and to enable a discussion among themselves. If TicketMaster wanted to do some additional work, they could integrate this with our Social Payment service and allow users to buy tickets together in a variety of ways. To be clear, we have used GreaseMonkey to demonstrate this capability and the service is not running directly with TicketMaster.

From the website owner's perspective, a set of little mini social graphs are getting created around their web pages and activities. Having insight to these interactions can provide website owners with additional benefits beyond just making their website more engaging and enabling built-in word of mouth promotion.

Over the coming weeks, we will be introducing a number of other use cases and examples. We will also be describing the underlying technology in more depth for those interested in the plumbing. We are of course making use of the Ringside Social Server, and will be introducing this Go Ringside Service as a cloud-based service that anyone can use for free in the near future.

Social Payment - Part 2

noreply@blogger.com (Bob Bickel) — Sat, 09 Aug 2008 15:41:00 +0000

As we pursue our goal of moving the Social Web forward, Ringside is focusing on two things. First to enable websites with user communities to become socially enabled. Second, to enable applications to become socially enabled.

As we had previewed a month or so ago, one of the applications we are trying to socially enable is Payment. One of our great developers, Brian Robinson, has done a video showing the current progress of this project - http://wiki.ringsidenetworks.org/display/ringside/Payment+Services. We are now to the point where we are looking for early customers to collaborate with on deploying this technology and integrating it into their existing infrastructure.

There are three interesting elements that I will highlight:

1. The payment service is designed to work across websites and social networks. In this example, premium sports content is available to users on the SportsNet website as well as Facebook and MySpace.

2. The social payment service provides companies a variety of ways to create different offerings to customers that can expand their business and distribution. The basic concept is that it is simple to add friends to a service. This screen shot shows how a user can select friends from their social network to share the premium sports service with. In the example we are showing, the original user was offered a basic offering for himself at $6.95 per month, or a service that would be for himself as well as up to 3 friends for $9.95.

3. We have designed the Social Payment Service to connect with any backend payment gateways (like Authorize.Net, PayPal or Google Check-Out) or billing services (like Aria, Zuora or LeCayla). This means it is flexible and can be integrated with any existing website’s existing e-commerce capabilities.

Let us know if you have ideas for enabling your company for the Social Web.