The New Normal in Venture Capital

The "New Normal" is a characterization popularized by PIMCO, the big bond fund, to describe a low-rate, low-return environment that they expect to persist for a considerable period. This environment is affecting all aspects of financial investing, and it should be no surprise that it is transforming the venture capital industry. 

What has emerged is a new venture ecosystem, characterized by "capital efficient" funds which raise a modest amount of capital and can deliver good returns to their investors with $50M "quick flip" exits. When there are few IPOs and the number of Billion Dollar Babies can be counted on a couple of fingers, this is the only approach that makes sense for the limited partners (LPs) who invest in venture funds. The big funds are refocusing on long-term capital-intensive cleantech projects, which are more in character private equity deals. The statistics are vivid: as reported by Silicon Valley Bank and summarized in the attached chart, small funds have returned dramatically better than big funds. The funds below median are 24x more likely to return over 2x cash-on-cash to LPs than the funds above median (48% vs 2%): 

 

To make this work, the capital efficient funds are investing in lean startups: ventures that follow a set of principles to enable a small amount of capital to go a long way:

• Open source - which is low cost and has been stress-tested
• Cloud services - low capital to the startup and easy to scale
• Browser/App-phone clients - free to the startup and wide-spread 
• Rapid product iteration - letting the market give feedback quickly
• Socially-connected - very low cost customer acquisition
• Pervasive mobile - enabling a whole new set of applications

Venture capital produces great returns during waves of innovation. John Doerr, the inimitable leader of one of the premier funds, Kleiner Perkins, calls this the Third Wave after the PC revolution (1978-1983) and the Internet (1994-2000). This wave has not yet been succinctly characterized, but the leading candidate name is Cloud Computing. 

An immediate criticism of capital efficiency is who builds the big infrastructure, if not venture capital? The answer is already clear: the big Internet winners are scaling out cloud computing platforms (Google, Amazon, Microsoft), and the PC leaders are clearing the forest with new client devices, such as the iPhone and the iPad from Apple. 

The technology model of every era of innovation defined the predominate venture capital model - the funds designed themselves to leverage the trends. The last era drove megafunds to lay the railroad tracks of the Internet. This era in contrast is about working at higher levels of the technology stack than operating systems, computers, cellphones or networks. Now that the tracks have been laid, what are the new apps that people will love?

The always-connected Internet cloud provides the answer: the eternal beta application, launched quickly, changed constantly, always seeking to find the combination of fun and function that captures the hearts and minds of users. 

The disruption of the New Normal venture model is likely to affect a whole passel of current funds. It has been much noted how the amount of money going into to venture capital has decreased, and this is putting the squeeze on mid-sized funds. What has been less noted is that the New Normal model may cause LP capital to rapidly switch from traditional VC funds to the new breed of capital efficient funds. 

The New Normal model comes with Logan's Run: if you are over thirty, you won't be funded. The mantle of what is cool has been passed from the Boomers, who still rule the funds, to the Millennials, the new generation of 20-somethings who grew up tech-savvy. The Millennials first flocked to Facebook, Twitter and Zynga, the darlings of the new era, and are feverishly checking-in with Foursquare, Gowalla and other iPhone apps. 

The New Normal entrepreneurs care little of the old brand names of traditional VC. Indeed, the capital efficient funds believe the traditional VC model is broken. Maybe so - we shall see how the adapt. As this Third Wave crests, it is likely the capital required to make serious companies will increase, as it has in the past, bringing the traditional funds back into the game - or leading to a new breed of larger capital efficient funds. 

Right now it appears the venture capital jungle is soon to be ruled by little furry mammals running rings around big funds. 

Comments

[nspolar]

W/r to BP blowout Irish bookie says BP CEO Tony Shot His Wad is the first to go.

http://www.marketwatch.com/story/bp-ceo-seen-first-to-leave-by-irish-bookie-2010-05-31?siteid=yhoof2

Obama is more likely to stay. Until 2012?

I continue to follow the news and details and may put together a post, in the next week or so.

What a freak show this has turned into.

If I had called this wrong from the beginning I would not be writing this. But I did not, in fact I was about dead nuts on. Why? Cuz I know from a lot of experience how many these cos function internally, and I do know a bit about this business, including the downhole side. I am not an expert in the latter, but I can do many of the computations and understand 'all' that I read.

BP is basically incompetent, internally. More or less totally. I stand by that, and the history of what has happened to date is on my side. If you look into all the details it shows, not just a little but at every turn. The reason they are incompetent is because their management made real decisions to make it all happen, over the course of several years. Building up and maintaining internal competence is not something that just happens. It takes hard work and it means one has to do the work, as opposed to just going out and hiring it or more amptly put contract it all, on demand no less. Competence can not be bought and sold on the market, like The Whiz Kids think. Contracting the way these companies have done just dumbs them down, internally. And BP is internally dumb, it shows in their well design, their actions during the last few days on the rig, their actions prior, and most of all their actions post the blow. To me and to others who know a bit about this biz (my opinion), they just look stupid and make the whole industry look much the same.

It is a shame.

But the other day I have to say I was completely amazed, not by BP but by Obama. Both the CEO of BP and then Obama no less came out and made it look like the decisions as to what the next move was going to be was their's. What the f is up with that? It would seem to me even a simple person can figure out that these two clowns know shit all about the details of what is going on 5000 feet below the surface. So they make the decisions? Yah right. To understand what is going on requires one have a very good engineering education, a good aptitude to be an engineer, and applicable experience. Neither of these two clowns have that. Not even close.

And that way of doing things is in a nut shell why this accident happened in the first place.

I have had to ask myself over and over again during the last 10 years or so why management and leaders have gyrated in the direction they have. It is more than micromanagement, it has something to do with the need to exhibit power, authority, be all knowing, feel and show yourself superior ... is it elitism? Maybe.

I think these same behavioral patterns are also causes of the financial meltdown we have had to date.

I can only tell you it was not like this in the oil industry 30 years ago. Not even close. But it has changed, and it is like this today. It changed slowly, and I can not figure out why. To a logical person it makes no sense to run a company this way.

The other side of this that is a total farce is the government regulation side. Should we have such? Yes I think so. But the situation today is that many of these dudes on that side are oil company has beens and cast offs. They are all but worthless, as this tragedy has exposed. What should be done about it? I admit I have not a clue.

I previously mentioned and recommended a book to read, 'About Face', which was primarily about the Vietnam debacle. It occurred as a result of much the same mentality as inferred above. Yet following that the military did some introspective work and study, and the same processes were not used in Desert Storm I. Not even close.

That gives me hope that this too shall pass, but it may be a while. I too am a LT goldbug. And part of the reason I am is that our society has yet to lose faith in our leadership, to the extent I think they will. Maybe this BP blow out is but another nail in that coffin. Poor little Tony Shot His Wad and Obama, both trying to act like the big man. But it is more like a little joke from a little man. Basically they are powerless here. Utterly powerless.

Not only must the show go on, it will go on. And at some point it will end.

ns

[Account Deleted]

USD VS SWISS FRANC BULLISH CONTINUATION PATTERN

http://niftychartsandpatterns.blogspot.com/2010/05/us-dollar-vs-swiss-franc-bullish.html

Thank you

[nspolar]

Yelnick, w/r to the under the surface 'plumes' in the gulf, I failed to save a good link and can not find it again.

One source/cause of those plumes may be the use of the dispersants they are using. This is a first for the volume of such used, in any incident. I am not expert in this area certainly, but the article stated they may be a factor in the large underwater plumes. If they were not used the oil would likely readily rise to the surface, entirely.

I made a previous comment that mother earth is fortunately pretty good in cleaning itself up. I also made a comment that many of the actions taken post the Exxon Valdez were in hindsight wrong.

I wonder if the same will hold true in this spill?

Time will show but I certainly question the widespread use of the dispersants? I would suspect, giving all that has happened, it may make BP look better (if that is possible) because it helps to hide the oil. And looking better is probably related to real dollars of liability. But in the longer term it may be more of a negative than a positive.

It is just too early to say.

If the oil was on the surface I would think a couple of good hurricanes would do wonders, w/r to cleaning it up.

ns

[Dsquare]

DG, I was talking about the diametric count you just posted on the SPX for the upwave from February-May. On a 60 minute chart, it looks to me that it could end early May if you count wave D as a triangle with b of the D triangle rising above the C wave of your count. The last 4 peaks ending in early May would be a,c,e,g of G counted as a diamond diametric (F would be a small zigzag similar to wave B of the diametric in your count and the first peak of the 5 peaks above 1200 would be the end of E).

No, I don't use the HUI as a template for the SPX, and I don't normally do counts on the SPX (but follow Neely's counts on Traders Talk when he posts publicly there). My count on the HUI is a contracting triangle from the October 2008 low, currently in wave d or in wave e (waiting for that to resolve). I post my counts here: http://www.mexicomike.ca/php/phpBB2/index.php

[Monster]

I am a beginner in Ewave. I want to ask if EWI view the 2000-2007 wave pattern as "expanded flat"? In EW Principles (p.137-138), in an expanded flat correction, wave C is often 1.618 times the length of wave A. Sometimes wave C will terminate beyond the end of wave A by 0.618 times the length of wave A. In rare cases, wave C is 2.618 times of wave A. But in May 2010 EWT, Bob expects wave C in DJIA will decline to 400-500 pts. The extent of the drop seems significantly beyond the common ratio between waves A and C. Yelnick, can you explain this?

[Guido]

Monster;

The simple explanation is that Prechter is nuts. For real!

[Account Deleted]

EURO VS USD MIGHT GET A BOUNCE FROM 1215000 AREA

http://niftychartsandpatterns.blogspot.com/2010/06/euro-vs-usd-may-get-bounce-from-1215000.html

[seattle waver]

Simple Elliott calculation:

2007 Top = Dow 14000
2008 Bottom = Dow 6500

= 7500 total point wave 1 of C decline.

Next Wave 3 down will be either 1.618/2.618 of wave 1

Therefore there will 12,000 or 19,000 point decline.

If the 12,000 point decline hits...the Dow will be in NEGATIVE numbers for the first time in history.

[Guido]

"Therefore there will 12,000 or 19,000 point decline."

THIS DECLINE WILL TAKE PLACE IN THE LAND OF MILK AND HONEY —PRECHTER FORGETS TO MENTION THIS

"If the 12,000 point decline hits...the Dow will be in NEGATIVE numbers for the first time in history."

—AND EVERYBODY WILL LIVE UNHAPPILY EVER AFTER.

Good luck with that!

[Monster]

Regarding Anoop San calculation, if the destination of wave C is 400/500 pts in DJIA, obviously the magnitude of this wave c is out of proportion with wave a (i.e. 2000-2002 decline. From chart in EWT, wave a declined from the DJIA top of roughly 12000)to 2002/03 bottom of 7,200 and that was 4,800 pts. 1.618 times of 4,800 pts is 7,728 pts. If we subtract 7,728 pts from the top of wave b (i.e. OCt/Nov 2007 when DJIA was roughly 14,000), we get 6,272. It seems that wave c already reached its destination in Mar 2009.

[Steven_737]

Simple Fibonacci calculation on Elliott wave structure:

Dow 2007 Top = 14198
Dow 2008 Bottom = 6470

Length (wave 1 of C) = 7728

Length (wave 3 of C) = 0.782 * Length( wave 1 of C )= 0.782 * 7728 = 6043

Bottom of wave 3 of C = 11258 - 6043 = 5215

Extreme case (as in extreme sports):

Length (wave 3 of C) = Length( wave 1 of C )= 7728

Bottom of wave 3 of C = 11258 - 7728 = 3530

"Death of Wall Street" calculation:

Length (wave 3 of C) = 1.272 * Length( wave 1 of C )= 1.272 * 7728 = 9830

Bottom of wave 3 of C = 11258 - 9830 = 1428

[Monster]

Thanks. Steven. I understand your calculation. But should wave c starting from Nov 2007 have common ratio relationship (1.618x) with wave a (from 2000-2002)?

[Guido]

"It seems that wave c already reached its destination in Mar 2009."

Catchin' on Monster.

The Smart Money is CLOSER to this kind of thinking than 400-500. Steven 737's calculation although technically ok is pretty ridiculous as well. You'll lose more than your shirt if you become a believer in that.

Like I said, Prechter is nuts. Check out his track record, there's a link to a site that has his actual effectiveness documented, I saw it floating around on this blog recently.

[?]

ns,

The trouble with BP (and other entities) is once you have all your "Yes" Men in power you have massive Group Think. When problems like these happen well nobody has a clue about anything. Maybe BP should ask for a TARP bailout.....

[Steven_737]

Following the previous Fibonacci projections,
the corresponding SPX values (using a ratio of 10) would be 521, 353, 143

To understand how these link to the US economy and expectations:

Given that SPX 2009 earnings are approximately USD 60 (59.65) the current P/E(trailing) is 1100/60 = 18.3

deep correction scenario
SPX 521 would correspond to a 40% drop in earnings to USD 36 and a P/E of 12.5

extreme correction scenario (as in extreme sports)
SPX 353 would correspond to a 50% drop in earnings to USD 30 and a P/E of 11.75 (or 40% drop in earnings to USD 36 and a P/E of 9.75 - or similar combinations

"Death of Wall Street" scenario
SPX 143 would correspond to a 70% drop in earnings (or expectation for such a decrease) to USD 18 and a P/E of 7.95

"I need to sell subscriptions - Prechter scenario"
Well, I suppose that if
a) the US economy tanks extremely hard, SPX earnings can drop 85% (or an expectation for such a decrease may take place) to USD 9 and if
b) nobody wants to hold stocks unless they have to, resulting to a P/E 4.5,
then Prechter can get his SPX 40.5 and DOW 405

[Steven_737]

correcting a typo / line omission

deep correction scenario
SPX 521 would correspond to a 40% drop in earnings to USD 36 and a P/E of 14.5
OR
to a 30% drop in earnings to USD 42 and a P/E of 12.4

[Steven_737]

Compare the deep correction scenario to a
"stock market exuberance scenario"

This investment / trading expectation is based on the assumption that
under the current economic conditions
SPX earnings remain at 60
and that smart money is bullish,
willing to pay a P/E ratio of 18 i.e. SPX 1080
to reach the exuberant
P/E ratio of 20 i.e. SPX 1200

OK. NO PROBLEM. :)

[Steven_737]

For complete analysis
let us include the

"optimistic scenario"

Economy is on the rebound, prospects for growth are excellent over the short term and the medium term i.e. over the next 7 year "foreseeable future".

SPX earnings will increase by 5% on average (63 in 2010, 66.15 in 2011 and so forth)

low P/E ratio to enter such a nice rally is 17

SPX 17 * 63 = 1071 is an excellent investment opportunity
because in 2 years the market will be at P/E 21.5 resulting to SPX 21.5 * 66.15 = 1422

OK. I wish that were true. BUT I don't believe it.

[DG]

DG, I was talking about the diametric count you just posted on the SPX for the upwave from February-May. On a 60 minute chart, it looks to me that it could end early May if you count wave D as a triangle with b of the D triangle rising above the C wave of your count. The last 4 peaks ending in early May would be a,c,e,g of G counted as a diamond diametric (F would be a small zigzag similar to wave B of the diametric in your count and the first peak of the 5 peaks above 1200 would be the end of E).

dsquare,

You could very well be right, since these Corrective formations are quite tricky. One of the primary reasons I ended the initial February to April Neutral Diametric where I did was due to the fact that the decline on April 15th was "larger and faster" than any other decline on the way up. That is in keeping with the NeoWave logic of post-pattern behavior.

No, I don't use the HUI as a template for the SPX

Sure. I just meant that if you had found a strong correlation between the HUI and the SPX, sometimes using the correlated index to "back in" to a count on the main index is helpful and maybe this was one of those instances. I use the IWM and SPY in that way. Sometimes the IWM is just a bit clearer than the SPY or can help me eliminate an SPY count that doesn't also fit the IWM.

[Steven_737]

Hey, wait

SPX 21.5 * 66.15 = 1422 is not correct!
in 2012 66.15 are previous years (2011) earnings i.e. 1422 is using trailing P/E

How about using forecast 2012 earnings USD 69.45
SPX 21.5 * 69.45 = 1493

This deal is a steal! OR is it NOT?

[Wags]

nspolar,

Drilling down 3-miles below the ocean floor is incredibly risky... that we all know.

But do yourself a favor and go back over and re-read your post regarding BP. I'm certainly no BP "apologist" but your post is nothing more than a bunch of rhetoric, without one single example of the "pattern of incompetent" behavior (over the years) that you automatically assume is in evidence.

You also say that BP CEO Tony Hayward does not have an engineering background, yet the FACT of the matter is that he has a Phd in Geology and began his career in the North Sea as a geologist. You also paint Obama with the same broad "brushstroke", naively thinking that he is not being advised by a panel of scientists and engineers inside the Administration in regards to what is going on in the Gulf.

Please do us all a favor and spare us your rhetoric and bias. It has nothing to do with any factual basis whatsoever. If it did, you would actually present FACTS to support what is nothing more than your opinion.

Good luck with that.

[Trader123]

Is anyone here short RIG from last week?

[Molecool]

I met David Hornik a few years ago - great guy but don't bother showing up with an early startup ;-) August and most VCs I know are now mainly focused on companies which can show customers or at least a large group of early adopters. Fortunately I found an angel last year and David may be on my call list later this month - he's probably one of the smartest guys in his industry. Very few VCs even truly 'get' the stuff they decide to invest in - David is the exception.

[New Trader]

Hi
Has anyone followed or successfully used Cycleman's newsletter/ trading information? I am new to EW and this looks like they could work well together? I would appreciate any helpful feedback.

Cheers

[yelnick]

Mole - David Hornik gets it. I updated my post (it went out a day early!) to fill in the rest of the story. I think August is one of the traditional VC funds which can rapidly evolve to the New Normal model. David will be a great help to them.

[yelnick]

ns, your posts have been very helpful. keep them coming! What do you think of the Dutch model (drop a tanker upside-down over the hole, let it fill with oil, bury it so it stays tight, and attach a hose/pipe to the tanker)? In other words, create a new pipehead above the mess.

[yelnick]

ns, it would be interesting if you could come up with why the industry has changed in the last 30 years.

[yelnick]

Steven_737, what happens with PE ratios and earnings is the PE falls faster than earnings rise. Regresses to the historical mean. In any event, if we have a double-dip, earnins will fall, compounding the drop.

[yelnick]

Monster, it is a good question that has two parts:
was 2000-2009 a large flat?if not, how can we go much farther down after that huge C wave down?

I have commented on this several times. Let me summarize:
It could be a flat. It fits the wave structure and the psychology .. but the correction may still have more to golarge drops should be measured as percent not number .. if it dropped 54% it can drop another 54% or 1.6x 54%

The main pushback on the flat is that it is over too fast. My comment, compared to what? A 9-yr correction is pretty lengthy. Prechter's orthodox count has 1966-1974 as a whole corrective wave (wave 4). The main time scale that I use to compare it with is the constant-dollar waves since 1949 (when the 1929 correction ended in constant-dollars). Each of those waves went about 16-17 years (49-66-82-00). This suggests this wave will go to 2016-17. One possibility is that we are in a double correction and the Hope Rally is an X wave. First correction is your flat; second stretches out to 2016. 

Second pushback on the flat is to use the gold-adjusted Dow, which says we are still falling. The Dow in real money. Real money Dow tracks the constant dollar Dow: it bottomed in 1980 (1982 in constant dollar) not 1974. 

Third pushback is that 2000-02 was a small wave 4, and 2003-2007 was a final wave 5. Hence the 2007-2009 drop is but the first wave (A or 1) of a larger structure. Tony Caldaro counts the drop as a "3" but more commentators count it as a "5" down, meaning at least a zigzag is to come. Often C=A in a zigzag, so this implies a drop from the 1220 peak (if it holds) of similar magnitude. Stays above 0 in both numeric and percent terms. 

[yelnick]

Monster, one more comment. Prechter has two longer term scenarios (multi-decade):
a triangle ahead, with the next wave down the deepest drop (just as we saw from 1929-1949)a series of lower lows with the ultimate bottom several decades out

In the first case, Dow 400 comes fast. This is hard to fathom without some global debacle (WWIII)

In the second case, we might have hit the low already at Dow6400 for the next 10 years, or perhaps we have a slightly lower-low in 2016, such as around 3600-4000, the 1994 levels that preceded the extended wave 5 thrust up. 

[Dsquare]

DG, certainly for gold stocks, gold and the general market are important, so I agree it helps to be aware of other markets when counting waves and rating the probability one or another alternate is in play. The HUI can run counter to the general market for periods of time. But some times they are in sync. After a bullish count became invalidated I was looking for one more wave up for the HUI in August 2007, the count was a zigzag-x-large neutral triangle (from 2000) with wave e to finish. This allowed me to predict a "deflationary moment" which finally came in July 2008 (the e wave itself was a contracting triangle with reverse alternation). So knowing this and Neely having called the SPX top made sense. The HUI went from 450 (end of e) to 150! And of course other commodities also crashed. Now the question is where is the HUI and gold. For the HUI I have assumed that it had finished wave D of 4 (large 3 ended in 1980)and we are now in b of E of 4. But now gold seems to be in a terminal 5th wave. So I don't even have gold (rely mostly on Neely for that) and the gold stocks in the same count. My alternate for the HUI is its in a diametric (as the third wave of a terminal 5th) but that doesn't jive with Neely's current count for gold. Anyway, if the contracting triangle for b of E of 4 plays out, we should have another big down move coming fairly soon when the HUI enters c of E.

[Guido]

A flavor for every palette. Whose will win out? We don't know unless we pay very very close attention. Yup that's the market, the biggest tease in the universe.

[Steven_737]

Hi Duncan;

"what happens with PE ratios and earnings is the PE falls faster than earnings rise."

do you mean "the PE falls faster (in percentage terms) than earnings drop (again in percentage terms)" ???

i.e.
are you saying that an earnings drop by 30% will have a P/E drop of 35% or even 40%;

and the corollary:

if the earnings drop is x%, then the P/E drop cannot be (or usually is not) less than x% ??

please clarify.
Thanks

:) :)

[yelnick]

Steven_737, I am saying that PEs can drop even as earnings are expected to rise. 

The PE ratio right now is a bit high at 18 TTM or 21 (PE10). Doug Short has a good post on this: 

http://www.dshort.com/articles/SP-Composite-pe-ratios.html

I think Doug's post is spot on. Here is his key paragraph of why PEs went to absurd levels last year:

"The average P/E ratio since the 1870's has been about 15. But the
disconnect between price and TTM earnings during much of 2009 was so
extreme that the P/E ratio was in triple digits — as high as 122 — in
the Spring of 2009. At the top of the Tech Bubble in 2000, the
conventional P/E ratio was a mere 30. It peaked north of 47 two years
after the market topped out. 
"As these examples illustrate, in
times of critical importance, the conventional P/E ratio often lags the
index to the point of being useless as a value indicator. "Why the
lag?" you may wonder. "How can the P/E be at a record high after the
price has fallen so far?" The explanation is simple. Earnings fell
faster than price. In fact, the negative earnings of 2008 Q4 (-$23.25)
is something that has never happened before in the history of the
S&P 500."

My point is this: 
if PE can go really high as investors expect to wait out a momentary drop in earnings (last year)then PE can also drop as earnings rise when investors believe projected earnings growth is a temporary pop up

Right now you can look at the 10 year smoothed E (PE10) as well as the Nominal PE10 in DOug's post. It shows the PE ratio still at very high levels. The argument for high PE is based on low interest rates. In 1932 when interest rates were also very low the PE10 went to under 5. 

[nspolar]

Yelnick, imo the actions BP are onto now are the first ones taken with any real chance of success. Up to now they pretty much have been wasting their time, and throwing their money down the rathole. I suspect these prior measures were led by good ole boys who have little in the way of engineering skills. But they all sounded good so the The Group Think (refer to ?'s post) won out.

During the course of all this, they wasted lots and lots of time.

If I understand correctly they are going to more or less slip a pipe over a pipe, initially with a less than tight seal. The hat on the pipe acts more or less as a guide and has provisions to leak off pressure, so that pressure will not build up in/under the hat, and lift it off. This was the whole problem with their previous top hat, it was not hydrates as advertized, that was another ruse/excuse.

This fellow in this interview is the first one I have seen that gives me some confidence. It would appear to me that it is now possible the good ole boys on the inside have been pushed to the sidelines, and the engineers are doing some real work, homework, and being allowed to do so. They should have been leading this from day one, but were obviously not.

http://www.nola.com/news/gulf-oil-spill/index.ssf/2010/06/oil_spill_video_bps_bob_dudley.html

You have to take into account here that the pressure on the downhole side of the BOP can likely build to the near 10000 Psi in the non flowing condition. And as I have stated, pumps of the type they can use here don't suck. Nor does oil 'siphon' to the surface in this arrangement. Forces are generated to force it to the surface. So when they installed their first top hat, pressure just build up on the inside of the dome, and enough that the resultant force balance just lifted it off (before it was even in place). No big surprise.

It would appear the biggest issue with the latest device might be having enough visual clearness to get it in place. There is likely going to be oil mixing about, which will cloud up the whole area. But they can probably overcome this with additional engineering.

I give BP's latest a good chance of working. All the prevous ones imo were at zero or near zero.

ns

[nspolar]

Yelnick, maybe we can gauge BP's chances of success with their latest by looking at the wave action of BP common stock.

It is not too far from the Jan 09 low.

Looks to me like it is nearing a 1st IT low, from the initial turn around April 20th. Got a bit to go yet, more than likely.

For traders ... if the latest succeeds the pop is likely to be pretty darn good.

ns

[nspolar]

Hock, read your latest comments. I agree.

I have made it no secret, I work in the oil patch. Recently passed 30 years. Been a good career and I hope I am in the twilight of that.

Won't say exactly what I do, but it is on the technical side, and I have done loads and loads of high tech failure, problem analysis and solution work. Have also done such work on a few drilling rigs, but some time ago.

I have been involved in the post analysis of a few major incidents as well, incidents that took several lives. And I read fully the causes of the incident at BP's Texas City refinery.

I have read a lot about this incident. I did not copy but one of the most interesting commentaries I read was about the complexity of deep sea drilling. I had a thought that maybe this was part explanation for the issues here, and that segments of this industry are just getting too complex. But then a commenter replied and informed that the average age of personnel on the USS Nimitz was a mere 19 years.

I have found in my work there are very few pure accidents. On the severe ones like this blow out, there are almost always a host of human factors. There was here.

To me most are maybe all of these incidents include a lack of 'Leadership, Leadership, Leadership' as a contributing factor. Maybe often the main one. What is odd to me however from my observations is the oil industry seems slow to learn from these. Very slow.

This incident is going to have major repurcussions for the offshore drilling industry, at least in US waters. Can say I do not feel sorry for the industry, in this regard.

ns

[Mamma Boom Boom]

Today's market action was incredibly _________________(you fill in the blank)

[swingwaves]

Today's market action was incredibly _____good for short term swing traders adding to longs and looking for bounce higher into July____(you fill in the blank)

[usdollar]

It looks like a head and shoulder is forming possibly, maybe a top june 25-28. the big part of the fall should come b/w july 12 and 18. 850th on spx or lower, followed by Consolidation and then a crash /collapse Nov 8-11. topping pattern probably in the end of Oct. 1.3 Billion dead and clif high on webbot calls it the big Israeli misstake will set it off. WWIII

Dollar will hit 98 on index and then plummet to the 65 range, from there the big Kondratiev winter will set off with extreme deflation and collapse of the 100 trillion derivatives market and an extreme amount of foreclosures. End of 2011, beginning of 2012. That is where you want to buy silver and gold.

[Mamma Boom Boom]

swingwaves
excellent

[tony]

today's market action was incredibly inconsequential because I was at Roland Garros all day!

[Steven_737]

Thank you Duncan;

I have studied the link;
my P/E values for the extreme and catastrophic corrections are in line with historic values.

Of course, the P/E 12.4 (and P/E 14.5) used in my "deep correction" scenario can be reduced to P/E ratio of 9.5 to reflect the appropriate "panic low P/E" on the chart.

At SPX earnings USD 54 (a 10% drop) and P/E 9.5 the value of SPX is 513 , the deep correction.

Now, all this numbers' game was meant to show that at this point in the market evolution, a deep correction is not out of the question.

Likewise the reason for presenting the numbers for the "extreme correction" and ""Death of Wall Street" scenarios, is to show that they correspond to huge SPX earnings reductions (40% and 70% respectively); the first scenario to a "normal" low value of P/E, while the second to an extremely low value of P/E.

My guess as to the reasons for these extreme scenarios (if they actually happen), is hardship and bad luck. Under "normal circumstances" these levels cannot be reached.
Another reason would be "new information" -"additional information", shaping a different understanding of "how things are" or "how things work"; in other words a paradigm shift. Then again, the "new information" and "additional information" to have such an effect, would be in the realm of hardship and bad luck.

Under the circumstances leading to the extreme valuations, we can certainly adopt a more bearish scenario than the "deep correction" one, if we feel like trading it.

Since Prechter needs the "ultra bear" scenario to justify his cause (to be proven right as an analyst and to sell more subscriptions), I don't care about that one.

I value your analysis more than his; in this regard, I would appreciate your thoughts and your "preferred" and "alternate" counts.

cheers :)

[Steven_737]

webbot!

although I have read about the concept of the "analysis", I don't know if it is correct.

are webbot "forecasts" credible?

I have not looked into this, so I am asking to find out if one of the posters / readers on this blog has actually spent the time to investigate the credibility of the webbot forecasts.

thanks :)

[Steven_737]

Duncan;

let me re-phrase my statement:

I value your analysis; I would appreciate your thoughts and your "preferred" and "alternate" counts.

cheers :)

[yelnick]

Steven_737, the key to the PE future lies in the banks. They are generating above normal profits as a percent of all S&P earnings. (I wish I could find a chart on this.) The scenarios come down to, what happens if the banks get back into trouble (big bad scenario), or stay in the Japanese-style decades-long limbo (small bad scenario). In both cases the PE expectations will drop.

[Steven_737]

Today's market action was incredibly following a day traders game plan

1) morning traders closed the gap; easy money taken off the table by 10:45 EDT
morning crowd went golfing - fishing - shopping
2) testing for renewed buying interest before lunch at the top of the opening range
3) found some support and tested the morning highs to find buyers for a breakout attempt
4) no interest found there; so time to test the opening range lows
5) verdict was that having closed the gap, price has no business up there.
6) price crosses the open going south and finds sellers
7) selling is easy going into the close, all the way to the overnight low; no buyers there

[twitter.com/DrBubb]

Y: "Dow 400 comes fast. This is hard to fathom without some global debacle (WWIII)."

I can imagine a debacle that does not require WWIII:
Libor rises back to 5%.
And this is more likely than many believe. All it will require is another surge in fears amongst the banks that they are not creditworthy.

Almost the entire global economy is still on the life-support of ultra-low interest rates. People seem to have forgotten that somehow.

[upstart]

I'm with Mamma and swingwaves.

[Guido]

"It looks like a head and shoulder is forming possibly, maybe a top june 25-28. the big part of the fall should come b/w july 12 and 18. 850th on spx or lower, followed by Consolidation and then a crash /collapse Nov 8-11. topping pattern probably in the end of Oct. 1.3 Billion dead and clif high on webbot calls it the big Israeli misstake will set it off. WWIII

Dollar will hit 98 on index and then plummet to the 65 range, from there the big Kondratiev winter will set off with extreme deflation and collapse of the 100 trillion derivatives market and an extreme amount of foreclosures. End of 2011, beginning of 2012. That is where you want to buy silver and gold.

Posted by: usdollar | Tuesday, June 01, 2010 at 02:03 PM"

It looks like Prechter's got some imitators. If they start mis-prognosticating in Vegas we can have them do their thing at the base of the fake Eifel tower and bill them as Elvis Prechtor impersonators. What a crowd