Facebook is Hemoraging Cash

The scatological vertigo shown here represents facebook's current business plan according to this piece from PE Week Wire.

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That $15 billion valuation implied by Microsoft's purchase of a 1% stake in Facebook--at a time (2007) when revenues were ~$150 million--looks a little frothy today.

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Never mind that it looked a little frothy back then, as--even if you assumed 100% profit margins , a perfect and instant cash conversion cycle, and a 25% VC/PE-type cost of capital--then you're basically also assuming a 24% compound annual growth rate forever. Look, I'll show you, using the perpetuity equation:

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if 'terminal' value at (t=0) = CF0 / (r-g)

and D/E = 0

then, $15 MMMM = 150 MM / (.25 - .24).

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Point is, that's nearly impossible or at least highly improbable. That implies you double in size every 3 years--and I want to emphasize this again--pretty much forever.

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Let's say you buy a dog (let's call her "Izzy") and invested the 10,000 dollars grandma gave you under the Federal tax exempt gift allowance under these circumstances. Well, by the time Izzy's dead of whatever killed Marley, you're a millionaire. You get a second dog (a puggle named "Deuce"), and by the time it get's hit by a bus in year 13, you're worth 8 figures.

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Pretty good deal, eh? Too good? Yip. Well, that's facebook at $15 B.

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And you know what? All this analysis is crap, because tomorrow I'm going to argue to you how this valuation is justified despite all fallacious evidence to the contrary.

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OK-I'll spoil it here: Facebook is going to start charging subscription fees.

"First They Came

for the gas traders, but I said nothing, for I was not a gas trader.

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Then they came for the originators, but I said nothing, for I was not an originator.

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They then came for the power marketers, but I said nothing, for I was not a power marketer...

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and then they came for me...and there was no one left to say anything"

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Okay, okay--we're not quite at the last line yet, because while 1 in 5 employees in our front office/trade floor were liquidated yesterday, your friend Mike Pemulis remains among the living. Apparently my biggest strength is that I'm not paid that much. You know, short blade of grass.

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My friend the III*, a Wharton alum who does BD for a midstream operating and trading company (a very large private family corporation owned in large part by, believe it or not, Elaine Bennes) told me the story of how one Thursday afternoon three weeks ago, his company sent out an email to a bunch of select employees calling for a staff meeting in one of the main conference rooms. What they found when they all entered and sat down was a firing squad waiting for them...the Malmedy Massacre writ small.

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I guess these developments really shouldn't suprise us "what with the economy and all"**

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On a positive note, gas prices are down!

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(Oh wait, that's bad for me...fuck!)

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*need a better nickname for my blue-blooded friend from San Antonio

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**This seemingly ubiquitious panacea of an excuse was joked about recently by the same 'the III' referenced above. For now, I encourage all of you reader(s) to use this phrase as often as possible and as frivolously as possible, as in

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"Doesn't surprise me they overcooked my steak, what with the economy and all"

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"Look at all this traffic--what with the economy and all, I guess it moves slower"

[editor's update: you'll notice also that politcal cartoonists are basking in their own wit by utilizing the "plane crashed into the Hudson River" metaphor for the economy. If one damn person had died, they'd be unable to do this.]

I've started dating this wonderful new girl

and have had very little time to update this space lately. However, we've built up quite the inventory of ideas over these past few, very eventful months. And here's the blurb on some of them:

I) Predictions for the Obama Administration:

He will be a pretty mediocre president, a fusion of JFK and Jimmy Carter. The Obama topic has been covered ad nauseum in both the MSM and here, so I have nothing more to add. Except this: stay away from those hostile rabbits, Mr. President.

II) How I felt about the real Chinese Democracy, not the fake one my esteemed colleague Benton wrote about last April:

Tracks 4, 12, and 11 are fantastic and the rest, like the future Obama Administration, are pretty mediocre. Track 4, "Street of Dreams", is bipolar and transcendent--one of the greatest love ballads ever written. In fact, the best love songs of all time:

1) "Street of Dreams" GNR

[editor's update: 1a) "Rocket Queen" GNR. The commentariat has bested me again on an even field of play]

2) "Back in the USSR" The Beatles

(I like this one a lot better than the melancholy "Yesterday", which is actually a breakup song--and I prefer 1981's "The Breakup Song*" in this category. Don't Argue with me here; BITUSSR is indeed a love song, hence the line "come and keep your comrade warm")

3) "Sweet Child of Mine" GNR

4) "You're Crazy Bitch, but You F*** So Good I'm on Top of It" Buckcherry

999,999,999,999,999) "Hey There Delilah" Plain White Tees

I really can't express to my one remaining reader in prose how much I hate this song. When I was in New York last week it even popped in my head, specifically the line "Hey there Delilah, what's it like in New York City?" Well...it's fucking cold and depressing. And PWTs, thanks for ruining the phrase "Hey there"--Freddie "Boom Boom" Washington's suave pickup line from Welcome Back Kotter*. Just a terrible, legacy-ruining song all around, and I'm still mad about it well over a year later.

III) Speaking of New York, it was great to see Greaseball, Megeeia, Little Joey, Moister C Moister, and the Shylock up there. The special guest appearance by Al Gore at the Regency on 61st and Park was a nice touch too. Too bad it's a frigid, concrete hellscape, reminiscent of the mythical Nordic Niflheim, except without any Nordic people in it.

IV) We've added a new concubine to the mix who shall henceforth be know as "The Drakes", joining callsigns Blackout, Zulu, Talbot, Reebok, TexMex, and Weaver** in the female nicknames category. I don't think she knows about this internet diary, so let's keep things mum, eh? Eh Comrade?!

V) In the future, we'll be tackling random, tangential, high brow topics as we did pre-Hurricane Ike. So we'll get to that Austin top ten bar ranking real soon!

* Topical and timely! Welcome to the Plebian's Blog.

**Per her imdb page, she's technically a public figure, so she gets the honor of a real name designation. Be sure to check out her on stage sex play starting this month in Los Angeles!

Quick Update

Like Greaseball with his illegitimate children, I've been negligent in maintaining this "web log" lately. This is because I still have no power flowing through to my residential building. I realize the irony of this, considering my profession. Since I'm on a trade floor and my screen is visible to all, this update shall be minimalist and photoless, in complete betrayal of this newsletter's banner slogan.

/"Peace out"

[subsequent update: I was in Austin this weekend, escaping the blackout and performing some due diligence for my bar ranking list. And yes it was awesome, and everybody got laid. So there will be a top ten list put up this week once power is restored. I'm not promising anything, but the #1 slot may shock you (or it may not; I still haven't decided the top 2, given my new information).

Unlike Gaul, this list will be divided in two parts: block #10-3 and then a longer breakdown of #1 vs #2.]

Just a Bad Few Days in the Land of Pemulis

Lehman Brothers goes under, the Dow drops 500 points, a hurricane ravages my hometown and David Foster Wallace is dead.

The Peemster is..very sad.

POTUS Intrade Update

For those of you Obamatons following the political betting markets, I've got some bad news for you. As the poster for the Joe Piscopo vehicle above would hint, the oddsmakers have the race at a dead heat (as of 5pm September 10; this site updates continuously).

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So if you're a betting man (and if you're reading this newsletter, you're probably both), I'd lay some money down on Obama, at least as a hedge against the higher taxes you will inevitably pay under his reign. Plus I think the nation's enthusiasm over the stripper/teacher from Varsity Blues* will wane considerably after she forgoes the comfort of the teleprompter in a one-on-one debate contra Biden.

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And as always, be on the lookout for that October Surprise, one of my favorite election phenomena.

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* [Editor's update: I'm very disappointed in the internet for not having a better picture than this. (Per commenter complaint, the last hyperlink I posted was a busted link) And I've tried every permutation of stripper, teacher, varsity, blues, tonie, perensky, sarah palin, "Miss Davis, will you go to the prom with me", and vpilf that I could think of in my search toolbar. You'll just have to buy the movie, which is fantastic anyway.]

Commenters of the World Unite!

Arise Commentariat!

A revolution has begun here in Pemula. No longer shall commenting be restricted to elitist bourgeois registered blog users. Now the teeming, mongoloid masses may post anonymously.

Have a quip about intrade-implied Presidential death spreads? Think Blake Lively is hotter than Lily Van der Woodsen?* Say so now under the aegis on anonymity, free from the reprisals of the Pemulan state apparatus.

Commentariat, you have nothing to lose but your chains!

*you are a gey if you think this