Twitter: WTF? $TWTR

Twitter shares should be much higher. They aren’t and we need to figure out why.

To get up to speed, last night CEO Jack Dorsey confirmed the departure of 4 executives via midnight emo-Tweet. Dorsey’s note came hours after re/Code first reported the seed of the story, launching rampant speculation in the Twitter-spere itself.

The lag is important. There’s skepticism in some circles regarding Dorsey’s sense of urgency and focus when it comes to Twitter. 4-days ago Jack was Tweeting about an “unconscious bias training” session he’d just completed at Square. “Twitter’s next Thursday!” he added.

To be gentle, it’s awkward to follow that with this news.

Maybe the prospect of taking unconscious bias training with Jack was just too much for the 4 execs (two senior VPs and two VPs). It’s still not clear if they quit or were forced out of Twitter for any number of obvious performance-based reasons (disastrous communications, the perplexing failure of Moments, the disappearance of Vine while SnapChat takes over the world etc ad nausea). At least one of the Departing had been “trying to quit” for while, per a Twitter exchange I had with Kara Swisher (@KaraSwisher) and @CraigScott31:

 

The exchange is everything great and maddening about Twitter. Kara Swisher has 1 million followers. Her company broke the story and she followed-up on it in real time, chatting with her massive audience about what may or may not be happening at Twitter.

Twitter gives anyone who wants one the ability to talk to the world. If you Tweet me (@JeffMacke), I’ll see it. I have 27,000 unread emails. I rarely answer my phone. I roam the earth like Caine by choice but I’ll see your Tweet. That’s kind of messed up. Twitter is insanely useful for investors. Kara Swisher is tied in to the Valley at the highest levels. She’s smart and she knows where all the bodies are buried. 5 years ago there’s almost no way I could have chatted with Kara Swisher about breaking Twitter rumors on a Sunday afternoon. Certainly not in pubic.

Kara is a smart source. She also generally defends Jack Dorsey against critics. That second part matters to me because, if we’re going totally honest here, I’m not sure Jack is up to the task of running two public companies.

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Why Can’t Jack Tweet Good?

Executive turnover should be insanely positive for Twitter.

The company is bleeding share all over the place. It’s past time to get some fresh ideas at Twitter.

I’m willing to bet that had Jack Tweeted out a message remotely resembling the below shares would be pushing $20:

“I have a very specific vision of what [pick a failing product] needs to look like. Others have different views. A company can’t go in multiple directions at once. As CEO I have made the decision getting Twitter to the next level will require a more united view of our strategy. I thank these wonderful people for their contributions. My only regret is they didn’t have time to participate in our Unconscious Bias training. Using terms like ‘you guys’ can make others feel excluded.”

That last part was optional.

What mattered were speed and clarity. Twitter’s mass Exodus was either part of Jack consolidating the company behind his vision or rats leaving a sinking ship. The perception matters. It’s very hard to convince good executives to work for failing operations. Twitter is at a very fragile juncture. It doesn’t want to be seen as Yahoo.

As the hours passed before Twitter released any official response, Finance Twitter chattered away while watching football.

 

Finally @Jack released a sort of screenshot of an email linked to a Tweet:

 

 

Jack starts by blaming media inaccuracy for his having to address the flight of four top executives from his company. It’s a topic he was hoping to save for Twitter employees “later this week”. That’s a bad start. When you point fingers three point back at you, buddy. The media ran with what they had because Twitter didn’t give them anything else.

Jack never says if the execs quit, got fired or are leaving to spend more time with their collective families. “They have chosen to leave the company” implies they quit. But in the second paragraph Jack is gently stuffing all 4 in a pillowcase and throwing them under an oncoming bus. “All four will be taking some well-deserved time off” clearly implies they couldn’t keep up and were fired.

Per Swisher, Stanton has been trying to quit for months. Why couldn’t she just leave? Was Twitter thinking including the respected Stanton in a group Exodus would be more efficient?

Also, Jack didn’t mention the head of Vine who was reportedly overseeing 40 people. The exec, @JasonTorff announced via Twitter that he’s leaving to work for Google’s VR team. That’s a guy finding a better job. Seems worth mention.

Jack needs to hit the right notes. He needs to make it clear Twitter isn’t losing people it wants to keep. There is an underlying message sent when well-paid people leave low-stress jobs in favor of nothing. While execs move on for all sorts of different reasons be very sure of one thing: No one walks away from a huge pay-off. Twitter shares are down 75%. Employees wouldn’t leave unless they think on some level that drop makes sense.

Which brings us to the awkward larger point raised by Jack’s indifferent Twitter feed. Mostly he re-Tweets banal basketball pictures. Occasionally he interacts with Twitter celebs like VC Capo Marc Andreessen. The nature of the conversations don’t inspire confidence. The last Tweet from @Jack prior to the executive emo missive was this exchange:

 

 

Twitter shares are down 50% in the last 6 months. It’s down more than 20% just in 2016. Jack’s tenure his given us the hype release of Moments, some lay-offs and now this debacle. These are all problems that speak to the core user experience. Shouldn’t the CEO of such a company be, if not expert, at least able to exhibit basic understanding of the appeal of his product?

Without the weird emotional disconnect from the top Twitter getting rid of this team would be good news. The stock would be higher. No offense but none of these products has been killing it. Clearing the deck makes some amount of sense.  The stock should be higher. Instead Twitter is getting downgraded at Stifel and down 80-cents early.

I remain long only because flogging myself like an ancient monk draws stares. Later Twitter is going to announce a new celebrity board member and possibly a new product manager. Rumors are eveyone from Iger to Katie Couric. The world breathlessly awaits Jack’s next Tweet.

 

 

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On Wednesday with the world crashing down upon our heads I wrote:

For those of you who question God, the Plunge Protection Team or both I offer once again the full day chart:

 

40 S&P handles in 3 hours Wednesday afternoon. At the highs yesterday near 1890 the S&P500’s market cap had increased a cool $700 billion in 24-hours, give or take (100 S&P500 points is roughly equal to $890b). The consensus explanation (mocked in real time here) was ECB Capo Mario Draghi muttering something about Europe being open to the idea of additional stimulus.

In case I haven’t been clear on this point it’s ok to go ahead and assume every Central Bank on earth is going to do everything they can to keep their personal empires from crumbling. You can call it a conspiracy. I tend to think the explanation is far more simple. No one wants to go down in history as Nero or even Herbert Hoover*. Spending more of other people’s money to avoid such a fate is a small price to pay.

The idea of some Ayn Rand world where the government allows crashes to unfold “naturally” is crap. It’s the expression of a dream where everyone is John Galt and we all make our own roads, deliver our own mail and fight to the death for the natural spoils of earth.

Governments always intervene. If you expect them to stop because it doesn’t work you’re either insane or selling a newsletter.

Stocks already knew Draghi was ready to spend money he doesn’t have. Keep it simple. The market rallied because Bear markets are hard and the bears over-reached. Don’t dwell. Set targets.

 

Special Guest: Leonardo Fibonacci!

Fibonacci was the greatest mathematician of the Dark Ages. Dead for nearly 800 years, his theory of natural patterns is still used on a daily basis in trading pits. That wasn’t Fibonacci’s original intent but he’s been dead far too long to get a vote.

Per Leo as understood by traders, bear market rallies tend to retrace specific percentages of recent losses. Most notable among these levels for our purposes are .62 and .38. In this case I used the peak of 2080 on December 29th and the lows of 1812 for a total drop of 268pts. 38% retracement works out to about 1915-1920 (also the “official correction” level). 62% works to 1980.

You can read about the details elsewhere.

For our purposes know this:

• Not even Leo sets this stuff in stone. He was just a mathematician with odd taste in hats, not Moses. 1920 makes sense as a target but any idea that’s 800 years old is to be considered at least as much art as science.
• Unless or until the above levels are recovered this rally is to be considered more a bounce than bottom.
• We are still reliant on crude and China but going into the meat of US earnings season will be a useful distraction. Things just aren’t that bad in the US. If you want to add “yet” to that observation go ahead but it’s not a great trade.
• 1850 is a great stop but it won’t save you on a gap lower. Just know a close below that level is still toxic to bulls.
• Finally, and this is absolutely the last time I’ll reference myself this morning, I promise, screaming rallies are perfectly normal in literally every bear market in history. One last time consider the list of biggest intraday moves in history and note the Fall 2008 rallies. Citi was up 24% the day the SEC banned short-selling banks. To this day C is still down 90% from pre-crash peaks.
• Nothing is over until Leo decides it is..

* Both Nero and Hoover got a bum rap. We can discuss another time.

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The world is officially freaking out over the stock market.

Here’s the cartoon from today’s NY Post Page Six:

The important part isn’t the cartoon itself. It’s a sinking ship called USS Dow Jones (“right on the nose!”). A Captain, blessedly not labelled “Wall Street Cheerleader” is telling passengers “Don’t panic! This is just a correction.”

[Pausing for laughter]

To the extent this artwork matters it’s only because it’s on Page Six rather than the business section. Page Six is where New Yorkers go to gossip to about one another. It’s where networks leak “behind the scenes” controversies to trash talent. Brian Williams was murdered on Page Six well before he was cast to Elba.

There’s only one thing to know about mass-media content creation: the goal is to aggressively agree with your target audience. People like to be told they’re smart. That’s how you generate clicks (“newspaper sales”).

Page Six wants to ease itself into the ongoing conversation with a little kick. Right now NY Hipsters are scared to death of stocks. They’ve noticed the crash. Even the cool ones. NYers express fear by punching it in the face then libeling it “off the record”.

Forget other sentiment indicators. The prevailing mood in Bankerlandia is stocks are going lower, no matter what the Space People in Davos tell you.

It’s cool to be bearish. Everyone has their talking points.

That doesn’t mean we’re at a bottom but it does mark the end of the beginning. It’s a Bear Market. Page Six says so (without saying so directly because that would be cowardly).

In fairness, this was published before I created an app for predicting the next market move. Yours free:

Cartoons as Sentiment Tells

There have been cartoons about stocks for as long as there have been stocks. Art makes great propaganda because the audience doesn’t have to be literate or even necessarily paying attention.

The Chinese have been accused of doctoring their GDP numbers. There are few reasons for this, the largest one being that the Chinese are obviously manipulating their GDP data. (Note: Do I have to say “allegedly” or something here?).

China has responded with official denials but as usual the slave labor artists at Xinhua are there to assuage public fears:

The Chinese aren’t exactly Leni Riefenstahl when it comes to visual impact. Here’s their calming message to investors last July:

As it happens, this wasn’t the bottom.

 

“Once Every Bank Stimulates No Banks Have Stimulated” – Subversive Fortune Cookie

For the record the PBOC Injected “the most cash in 3 years” into the market yesterday. It didn’t work. Because Government intervention never works. Especially not with cartoons like the Chinese have. Chinese stocks were lower overnight.

Just to keep things interesting, the US futures were weak all night and are now strongly higher on something the ECB did.

Lather. Rinse. Repeat.

 

US Bubble-Crash Art: 1929

Don’t laugh too much at the Chinese. Here with limited comment are a series of market-related editorial cartoons leading into and in the early stages of the 90% stock slide associated with the Great Depression.

For perspective, the Dow Jones Industrial Average peaked at 388 in September of 1929. It didn’t bottom until 1932. Knowing stocks were going to fall more than 80% over the next 3 years gives a certain poignancy to the 2 “The Fed Will Save Us!” works.

The lesson: Nothing ever changes. Not even the jokes…

Too much spending…

 

Grim warnings…

Wealth concentration… artificial stimulus…

 

We’re Doomed… Probably?

 

 

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It could have been worse.

It also could have been much, much better. Sloppy close.

Real earnings are starting tomorrow. Starbucks reports. Starbucks is a grown-up American company run by a full-on Jedi Knight. They sell billions of dollars of legal, addictive stimulants all over the world. Howard Schultz loves to use his conference calls as bully pulpits. His January 2014 transcript is a first-rate eulogy for mall traffic. Brilliant stuff.

Does it hurt that the only chain with more caffeine per serving is called DeathWish? No. No, it does not. Doesn’t change the genius of Starbucks.

Howard Schultz and Starbucks will give us real things to talk about starting tomorrow. He’s worth listening to and God knows we need something else to discuss. Because China is tiresome and Davos coverage is depressing on every conceivable level.

I know plenty of Global Thought Leaders. I’m going to listen to one on the Starbucks conference call tomorrow afternoon. Real leaders are too busy leading to take European ski vacations.

 

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I’m not here to lie to you.

We’re pretty screwed.

As I type we’re at 1817 on the S&P500. That’s below the neckline of a huge head and shoulders pattern. It doesn’t matter how you personally feel about charts. Incremental selling will be done unless by some hand of God and the Plunge Protection Team we close back above 1850.

 

 

In just a couple weeks the market has been kind enough to offer me grist for a brief course in Macke’s Personal Rules for Sell-Offs:

Here’s the core problem with Crude and Currency going crazy, boiled down as far as I can rend it, and why it might lead to the Worst. Year. Ever.

I think there’s a massive underlying problem with balance sheets. Cash has been thrown away buying back shares instead of making improvements in core operations. Both at Macy’s and IBM. Watch for this to become a bigger issue as margins get tighter and all that “cheap” debt becomes more expensive.

Here’s a Crash Survival Guide and some case studies of past misery.

None of which matters because China Has Us By the Balls.

 

Which reminds me of a story. Two guys are camping. They get hammered and leave some meat sitting out overnight. In the morning a bear is ripping open their tent.

While one guy frantically smacks the bear with a lantern he notices his friend lacing up his shoes.

“You idiot! You can’t outrun a bear!” screams the fighter as fangs sink into his hand.

“I don’t have to outrun the bear” replies the second camper. “I just have to outrun you”.

Point: Don’t try to make money here. Let other people lose money. Then we’ll pick through the scraps.

 

Stocks are collapsing as I type. My thoughts remain these:

• The S&P500 needs to close above 1850
• It doesn’t really matter where we close because the market is broken. No one will buy stocks when they can wake up to this type of selling every day.
• This isn’t the time to learn how to short.
• If you know how to short, I’m not going to tell you your business. But I will point out that the hugest, angriest, face-rippiest rallies happen in Bear markets. Consider the Fall of 2008:

 

• Bear markets kill everyone. 99% of investors should be liquid enough to not have night terrors. I’m serious. If you can’t sleep you’re going to puke up your whole portfolio at the exact bottom.
• Respect the Panic. My show is called Panic out of respect, not advice. Sir Isaac Newton blew up investing in stocks. Really. Sir Isaac Newton was super, duper smart.
• There will be opportunity. It will come. I like a lot of individual stocks at their August lows (Come to me at $72, Facebook).
• No one knows anything. I’ve done this professionally for 2 decades. I know as much as anyone who will talk to you right now, on TV or in print, and I don’t know shit.
• This market is a human flesh thresher turned up to 11. Just back away from it and wait.

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Reminder: The S&P500 was 1934 last Thursday.

Today makes 3 straight trading days of chaos. One of the indicators I like to watch is the Average True Range (ATR). It’s simply a measure of how much a market is moving, from top to bottom, on an intraday level.

Anything over 1% is unusual. Right now it’s at almost exactly 2%. As you can see from a 6 month chart, it doesn’t mean we’ve bottomed but it’s a start. Bull markets trade in smaller ranges.

 

 

 

Video with more thoughts up shortly. Be cool out there…

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