There's a reason people talk about "liberal media bias"

While I'm not given to idiotic conspiracy theories about this, it's a well-known fact that most reporters vote Democrat. This clearly results in a kind of group-think, where the "obviousness" of certain "facts" is uncritically accepted.

Today's the headline at the top of the AJC's business page blares out at me, "GDP report fans stagflation talk." Well, if you read the story, you learn that the economy in 2005Q1 grew 3.1% (less than the expected 3.5%). This (pretty good) rate is the weakest growth pace in two years, when growth has ranged from this quarter's 3.1% to a high of 7.4% (in 2003Q3) and averaged a very healthy 4.3%. Yet one not-blistering quarter (but still over the magic 3%) and out comes the "stagflation" talk.

During Clinton's tenure as President, 13 of the 32 quarters had less than 3.1% GDP growth, and I don't recall any "stagflation" "talk" being "fanned." Something to think about...

More Trouble for Krispy Kreme

Krispy Kreme Doughnuts announced that Canadian franchisee KremeKo has filed in the Ontario Superior Court of Justice to restructure under bankruptcy protection. Krispy Kreme owns 40.6% of KremeKo.

Krispy Kreme Doughnuts is trading at $5.93, down 82.7% from their all-time high of $34.33 (on 4/29/2004, exactly one year ago tomorrow).

Response to Comment on Google

Google shares on Friday leapt by 7% on Friday after reporting blow-out quarterly earnings for the third time since becoming a public company last year, powered by the continuing boom in advertising linked to search engine results.

IPO = 95.96, Stock value as of this posting = 216.80. God, I wish I had gotten in on the ground floor for this.

Getting in on the ground floor is great, as long as you are able to recognize when the elevator has gotten to the top and don't ride it all the way back to the basement. There is just no way that Google is worth $216.88 a share, which is 151x 12-month earnings which are widely described as "blow-out." Consider what will happen once earnings are no longer "blow-out." The multiple and stock price is going to come crashing down. As well it should ...

Keep in mind this is a company with rapidly shrinking margins. In 2002 it was 22.7% ($100M/$440M); it 2004 it was 12.5% ($399M/$3.19B). Yes, revenue is growing at an incredibly fast pace, but is this real? (let's remember Enron, WorldCom, Global Crossing and to a lesser extent AOL with their revenue "growth") And is it sustainable? Revenue from 2003 to 2004 may have doubled from $1.5B to $3.2B, but it is not going to double again in 2005.

Can anyone seriously believe that Google with $3.2B of revenue and $400M of earnings is worth $60 BILLION??? Let's compare it to the companies immediately above and below it on the market cap list - Hewlett-Packard and 3M. HP has $82B in revenue and $3.5B in income; 3M has $20B in revenue and $3.1B in income. Not only are both of these companies' INCOME approximately the same size as Google's REVENUE, but 3M has a healthier profit margin (15.5%) than Google. There's just no way that Google is fairly valued at its current price.

More on the Verizon/MCI/Qwest saga

Curioser and curioser...

Verizon Communications said yesterday it is paying $1.1 billion ($25.72 a share) to acquire a 13.7% stake in MCI directly from its largest single stockholder [Mexican investor Carlos Slim Helu]. The transaction removes a major wild card in Verizon's bid to fend off a higher-priced offer to acquire MCI by Qwest Communications.