
The biggest merger you didn't hear about today - madz
http://finance.fortune.cnn.com/2013/05/20/the-biggest-merger-you-didnt-hear-about-today/?iid=HP_River
======
mindcrime
That was a great post. It's a very valid point that there are things going on
in the world which are just as important as - if not for more important than -
M&A around Internet media hubs. Seeing even one media site take a refreshingly
honest stance like this warms the heart.

This many years after the 'net bubble burst, you'd think we would have gotten
beyond this obsession with net media sites. But sadly, no... this reminds me
of a year or two ago, when there was a similar situation involving, aaaah, I
don't remember, maybe Facebook or something, and around the same time there
was a huge enterprise software deal (IBM bought somebody, or something). Net
result: The Facebook (or whoever it was) deal was reported everywhere, all
over HN, Reddit, etc. The other deal? Crickets...

Whether all of us want to admit it or not, we do participate in something of
an echo chamber here, and anything that comes along now and then and helps
tear down those walls, even to a small degree, is a Good Thing.

IOW, there's a _much_ bigger world out there than the world of YC, Twilio,
Tumblr, Google, Yahoo, Dropbox, AirBnB, Medium, Apple, 37 Signals, Heroku,
Square, Twitter, Facebook, Color, etc.

~~~
w1ntermute
The simple fact of the matter is that the (consumer-facing) tech industry is
much more sexy than pharma, by virtue of people consciously interacting with
tech products on a daily basis. Every Tom, Dick, and Harry these days wants to
make a mobile or web app, and it's getting easier for them to do so with each
passing year.

In comparison, biotech doesn't have this phenomenon, which makes it a good
industry to get into if you know what you're doing.

~~~
goetzliedtke
Actually, the ability to make drugs or biologicals is quickly dropping in
complexity. Right now, one can design drugs and biologicals on one's
workstation. There are production agencies that can make one's design real.
The only reason this is not as accessible and known as 3D printing is that the
design phase requires much more specialized knowledge. It's not unlike
designing one's own circuit board and getting one of the shops to print it for
you.

~~~
w1ntermute
> Actually, the ability to make drugs or biologicals is quickly dropping in
> complexity. Right now, one can design drugs and biologicals on one's
> workstation.

Uh, no you cannot. I have worked on these exact sorts of problems, and we are
_nowhere near_ being able to "design drugs and biologicals on one's
workstation."

~~~
leohutson
Dr. Alexander Shulgin managed to some pretty groundbreaking drug design in his
small home laboratory.

Of course it was hardly rigorous, and his analysis of what he made was mostly
subjective rather than scientific, but it seems kind of analogous to what a
hacker does vs what an engineer does.

~~~
w1ntermute
I'm not sure how this is related to the technical issue of not being to just
"design" drugs on a computer and have them "printed out."

> in his small home laboratory.

You can certainly work out of a home laboratory, if you so desire. The
location is not particularly relevant. But it will definitely cost you a lot
more than a laptop and internet would. And even then, what Shulgin did was
quite limited by his capital resources.

> it seems kind of analogous to what a hacker does vs what an engineer does.

Don't forget that he already had a PhD in biochemistry from UC Berkeley. If he
had just tried to learn like a "hacker," he would have either bankrupted or
killed himself (or killed someone else and ended up in jail).

And even then, he got raided by the DEA and fined $25000 (the regulation
issue).

------
kevinalexbrown
I'm actually on the fence about which merger is more important.

On the one hand, tumblr is a toy[0]. Warner Chilcott, founded in 1968, and
having gone through mergers before, is Serious Business.

On the other hand, should we really be upset that toy makers are getting a lot
of press? I honestly go back and forth on the issue. True, if I had to pick
between the medical products of WC/Actavis vs the blogging platform of tumblr
I would probably pick WC, because I think the net happiness for the world is
probably better served via their drugs than easy blogging access.

But there is something delightful about an age in which cool toys get
recognized, and I think that's important to remember.

Incidentally, does anyone know if mergers like these affect which drugs get
offered by a company? I can see the tumblr acquisition having a larger effect
on society than the WC/Actavis one if drug companies are less likely to stop
producing a drug than tech companies are to shut down a product.

0\. I know a lot of toys turn out to be remarkably useful and transformative.
That's part of my point.

~~~
busyant
> Incidentally, does anyone know if mergers like these affect which drugs get
> offered by a company?

I think the FTC can (and does) block pharma mergers which severely reduce
competition -- they will either block a merger or force spin-offs of certain
divisions in an effort to prevent the acquiring company to corner a market on
certain drug therapies (e.g., <http://ftc.gov/opa/2009/10/pfizer.shtm>)

Finally, I don't know which acquisition is more "important", but I think the
primary reason that the Tumblr acquisition makes news is because it has the
feeling of a "lottery win".

Everybody likes this story: 26-year old CEO, a handful of employees. Maybe
they worked hard, but they also caught the wave at the right time. Bunch of
young people get rich over the course of a few years. *edit: Many people like
to believe that they could get lucky and have a similar payday.

That's much more appealing than: company works hard, grows slowly, makes
drugs, has setbacks, expands, has more setbacks, gets bought. Middle-aged
people then get laid-off so that the acquiring company can squeeze more $$ out
of WC's drugs.

------
ChrisNorstrom
I feel like we're celebrating whoever can make the most money in the most
ridiculous way rather than those who make the most useful thing for society. A
lot of kids are growing up with this pathetic and twisted idea of success
being... come up with "some stupid internet thing that everyone uses", get
money from some rich guys, get advice from other successful guys, grow your
stupid internet thing into a business using their money and the hard work of
hundreds of employees, be worshiped and become famous. On top of that media
and society concentrate worship, idolization, and ass-kissing towards 1
person. It doesn't matter if you came up with the iPad while working at Apple,
Steve Jobs will be the one who will be known for it by nearly everyone. Did
you redesign Facebook and make hundreds of millions of people rejoice at the
new easier layout? No one will know your name, Mark Zuckerberg will be
praised. Did you create FarmVille, FishVille, Mafia Wars, Cafe World? Their
names will be connected to Mark Pincus, not yours. Not to say that these
leaders were lazy, many people have been given hundreds of millions and have
wasted it away without having anything to show for it, these founders took the
money and trippled it. That takes work & intelligence but it's never done by
one person. Yet the success all goes to one person.

It's so shallow and superficial & yet there's no one to blame. It's no one's
fault. We can't help we celebrate such primitive things. Especially looking at
The Kardashians and Paris Hilton. Usefulness need not apply to this contest.
Worth seems to be measured in how many people you can get to follow you. 50
years from now all of will be old and we'll read about how some 9 year old
made $75 billion dollars by creating a website were kids under 18 can gossip
and rate how lame their parents are. You will sigh. You will laugh. And you'll
remember it all started in our generation.

~~~
marknutter
I believe it's the novelty of the fact that "some stupid internet thing that
everyone uses" was purchased for 1.1 billion that makes it newsworthy. An
extremely profitable medical company that very few people come into contact
and that makes life saving medicines is purchased for a large amount of money
and goes unnoticed and this is somehow surprising? It's the height of
pretentiousness to expect that everyone be as interested in the things that
you are interested in and to look down on them if they aren't.

~~~
ChrisNorstrom
Valid point. So does it make me an asshole to look down on people who worship
Kim Kardashian and Paris Hilton?

------
maqr
> So we give readers what they want, even if we don't necessarily think it's
> what they should want. It may mean we're no longer elitist. Or, more likely,
> it means we're no longer living up to our responsibilities... Sorry.

There's a lot to unpack there, but maybe the most revealing thing is that the
paragraph made it through CNN's editorial process.

~~~
beachstartup
these days, even anti-CNN rhetoric generates pageviews for CNN.

------
dakrisht
It's really unfortunate and sometimes unnerving that we live in a time where
most people are so caught up in the hype and bullshit of meaningless
companies, actions, ideas and people that have no real importance and benefit
to our daily lives.

It's even more unfortunate to see the actions of CEOs based on hype, big cash
reserves and Silicon Valley VCs begging for an exit. I've been seeing it all
day on Twitter: VCs ecstatic about Tumblr's "successful exit", they're done
and can now go home and drink champagne.

But the problem is not with Tumblr being a blog full of porn and cat GIFs,
running out of money, having 175 employees most of which do little, and making
$15M vs. $100M projected revenue. The problem is with the state of the
industry as a whole.

The problem is with a company like Yahoo! rushing to get a deal done for a
company that would be worth $100M in 6-months when it runs out of money. It
just doesn't make sense. But maybe it's not supposed to.

Warner Chilcott is obviously a company that tries to do good and create
products to better humanity (for the most part), and I'm not saying that
Tumblr is worthless - it isn't - but the madness behind the media, the Yahoo!
board meeting on a Sunday to get a deal done before Captain Zuckerberg swoops
in (I'm sure he's laughing and could care less) is maddening.

This isn't a rant, it's more of a "what the hell is going on with companies
and innovation of substance?" I really enjoy Thiels quote of "we wanted flying
cars instead we got 140 characters." It really embodies the state of the
industry in one sentence. Every month a new chat application gets a $3M round,
another photo sharing app gets all the hype, bang with friends is the "it" app
- what happened to people actually trying to solve REAL problems? Problems
that will enable us to continue as a society and not implode.

~~~
beambot
_what happened to people actually trying to solve REAL problems?_

What did _you_ work on today?

(EDIT) Less snarky way of putting it: It's not fair to judge others'
motivations -- or to say that Tumblr's employees do "nothing" -- especially if
(at the very least) you're not tackling big, "real" problems yourself.

~~~
dakrisht
What did I work on? Well, to answer your question I've been working on solving
major problems affecting our society, which include obesity, diabetes,
unhealthy lifestyles, poor nutrition and high blood pressure. With that said,
it wasn't a snarky comment - it was an analysis of the state of innovation and
business in SV in general. I'm tackling big problems. And I wish more people
would do the same. We have a lot of challenges to solve.

~~~
qwertzlcoatl
Could you elaborate in detail how you are tackling significant problems like
obesity, diabetes etc.? I'm genuinely interested in your work.

~~~
dakrisht
Probably not the right place (or thread) to elaborate in detail on a handful
of complex health problems that my team and I are working on. But with regards
to obesity, for example, we're looking at hardware and software applications
to gather, analyze and make sense of quite a bit of physiological, social, and
genomic data. It starts with the basics really, and most people simply have a
hard time executing them: exercise, proper nutrition, healthy sleep, etc. So
the goals are to make sense of a ton of data, using existing and new sensors,
and use software to enable preventive medicine.

Obviously, there's a lot more to it than this, but medicine and technology are
two really exciting areas people should be starting companies in. Pushing the
envelope, asking questions and trying to solve problems. Nothing wrong with
the occasional social app or service having a big exit or becoming a major
player, but that gives people a lot of incentive (and false sense of hope) to
try and make another IG or the 15th chat app. It's amazing what a dozen great
coders, thinkers and innovators from "Photo App A" could do, if they were
focusing on bigger problems. And it doesn't begin or end with healthcare, you
have energy, hunger, disease, and a dozen other real issues. But I digress.

~~~
guard-of-terra
What's in for people who don't have diabetes or obesity? I don't but I read
some tumblr.

Futuremore, if you could just develop a pill that makes you fix your weight
instantaneously and forever, that would be great; but data gathering will only
help people willing to help themself. And most of the world doesn't have such
big problems with obesity anyway, while they still like cat pictures.

------
jmduke
Dan Primack, the author of this article, has a daily (M-F) business newsletter
called the _Term Sheet_ which is highly worth subscribing to. It does a great
job -- as this article does -- of getting outside of the traditional SV VC
bubble, focusing on all sorts of coverage from B2B to industrial to even
fashion.

<http://money.cnn.com/investing/> (Right sidebar, under 'Newsletters.')

~~~
jonathanjaeger
Yes it is great. It has a voice, isn't too dry, and gets me slightly out of
the usual tech bubble-like posts I read elsewhere. Plus he often posts reader
comments, which are critical and dissenting views of his own posts.

------
sgpl
I was expecting this post to be about Glencore merging with Xtrata [1].
Although in news for over a year, the merger was completed earlier this month.

It is important for the fact that this merger creates the largest commodities
trading entity and the fourth largest mining company on the planet.

[1] wsj: <http://goo.gl/UOaN2>

[2] wiki: <http://goo.gl/faWrJ>

~~~
jacques_chester
Glencore and Xstrata are so incredibly far from the consumer mind that it's
hard to explain.

Yet the impact of that merger? Ultimately, very large.

But it's difficult to make a story out of it. No photogenic women are making
instant billionaires out of photogenic high school dropouts. The narrative is
dull. Two companies, one which digs and one which deals, have decided zzzzZZzz

------
rodly
Tumblr's 2012 Revenue was only $13 million? How can they afford 175 employees,
a building, infrastructure, etc on $13 million and ~$125 million in seed? I
may just have an issue with frugality I suppose.

~~~
CaveTech
In case you haven't heard, having revenue is no longer cool. Having a huge
user base on a service that isn't self sustaining is - and people will pay big
bucks for those companies!

~~~
rodly
I suppose this is because there are two outcomes for these huge user bases
like instagram and twitter.

1) Get bought by a larger company that can use add your user base to their
total user base

2) Start advertising intrusively and hope that you can make enough before your
service is no longer favorable

Instagram comes to mind for #1. I'm thinking Twitter will go with #2 when
investors get sick of no returns year after year.

------
aeturnum
The reasons listed are pretty silly and jaded. The reason the Tumblr
acquisition is bigger news is simple: it's a big player in a fast growing
economic sector. As big as both Warner Chilcott and Actavis are, their
industry is mature. The Warner Chilcott acquisition is unlikely to shake
things up. Tumblr is one of the "not facebook" players in social that's gotten
a lot of mind share. If and how they can turn that mind share into revenue is
important to the sector (and the market).

~~~
jmduke
You didn't refute anything in the article. You're saying you think the Tumblr
acquisition gets more attention because it has a lot of mindshare (which is
circular logic) and because internet content is a faster growing market than
pharmaceuticals (which I have no way of knowing whether or not that's true,
but its not as if Primack is arguing the opposite.)

~~~
beat
Bah. How much coverage do we get for, say, some random has-been celebrity's
drunken arrest versus wars that cost a lot more than $11B?

What the media chooses to cover (and what consumers choose to read, since we
no longer have the limited-sources excuse) has pretty much nothing to do with
the actual big-picture importance of the events.

~~~
w1ntermute
That's _exactly_ the point the article is making and trying to correct.

~~~
dakrisht
People have lost touch with reality a LONG time ago.

They do not care about health (America is the fattest, unhealthiest country on
the planet), they don't care about science & technology (Tumblr, IG, FB,
reality TV, TMZ, etc. dominate the news/app/entertainment spectrum and bring
little to no value), they care about GIFs, cats, Kim Kardashian and other
brain dead agenda.

It's very unfortunate but that's the way it is. People could care less about
Warner Chilcott. They care about stupidity.

Companies like IG, Tumblr, and others are smart because they seem to employ
the "if you can't beat em, join 'em" logic.

~~~
gashad
> People could care less about Warner Chilcott

Couldn't. "People couldn't care less ..."

~~~
stan_rogers
Actually, "I could care less" is a transplanted idiom (from Yiddish), and is
correct. It implies "... but that would be too much work." It is an
Americanism, though, and is not generally understood outside of the lingering
cultural influences of the "borscht belt".

English -- any natural language that's progressed beyond early creole, for
that matter -- is not, and should not be treated like, a completely self-
consistent system of formal logic. "Me" (or other "object" pronouns) in a
compound subject is correct, as are double negatives, split infinitives
(English doesn't actually _have_ an infinitive, it has a form of phrase that
occupies the function of one), and so forth. The prescriptivist dictates of
Lowth, Murray and Cobbett are an artificial imposition on language that
rejects them at every turn. It's time to use the _real_ grammar of the
language, rather than trying to structure English on some formal (and, it
would seem, rarely spoken) version of Latin or Greek.

~~~
dakrisht
Thanks for that, I always felt the same way even though "couldn't care less"
seems to be the more grammatically correct version.

------
notjustanymike
I don't think they're totally in the wrong reporting on on tumblr. The
purchase of Tumblr by Yahoo is far more relevant to the majority of readers
than Warner Chilcott. We use and interact with Tumblr, know about it's
features, and understand the history of the new owner. This isn't just a story
about a big number.

~~~
mindcrime
_The purchase of Tumblr by Yahoo is far more relevant to the majority of
readers than Warner Chilcott._

I agree that the Tumblr news at least _seems_ more important to a lot of
people, and I'll add that perception is not always reality. Just because we've
all _heard of_ Tumblr and maybe even _use_ Tumblr, doesn't actually mean that
Tumblr is particularly _important_.

~~~
guard-of-terra
But isn't medical topics even less relevant for me today?

I'm 28, so if everything goes right I have 20 to 30 years before I'll need any
kind of life saving from medicine. And in 20-30 years the landscape might be
very different, so for me medical topics are not of any importance at all.

Unless they let me to grow hair or teeth; or customise my body and mind.

~~~
dakrisht
WRONG. Medical topics are more relevant for you today than have ever been
before. The best medicine is preventative medicine and if you start a
proactive approach now, you'll live longer. Not by waiting until you get a
disease and then trying to figure out how to cure it using the latest
technology. You could have a genetic mutation in the next five minutes, the
more you know, the better prepared and proactive you'll be.

Healthcare has never been more important than it is today for all walks of
life.

I'm sorry, but that was one of the most mind-blowing comments I've read on HN.

~~~
guard-of-terra
But I really don't want to spend any time today on using medical devices
(that's the acquired company does, right?)

The probability of me having a genetic mutation is low given no family
history.

I don't see the point of being old for so long it takes half of your life. I
want to live my life and then be done with it at the age of 70, perhaps?
Unless they find a way to make youth longer. Not even middle age - youth.

------
jacques_chester
Yahoo and Tumblr get more press because they are mass market companies and
journalists are in the mass market.

Basically, it's availability bias.

I whined and moaned about it here: <http://chester.id.au/2013/01/05/on-
selling-to-consumers/>

------
xroja
>It's easier for most of _us_ to understand what Tumblr makes than what Warner
Chilcott makes.

I would argue that statement since he says Tumblr is a "blogging platform" and
"the latest/greatest means for teens to express themselves". Tumblr is more
nuanced than that. It's also a social network and to relegate it to teens
seems very out of touch.

To me, it's much easier understand what a pharmaceutical company makes (drugs,
a physical product) than what Tumblr makes (blog/social network/place for
online advertising/???).

------
gpcz
One important detail to remember is that Facebook, Tumblr, Yahoo, Google, etc
are not in the search/blogging/social media industry. That's all a
smokescreen. People who follow the money and value chain see past the porn and
cat GIFs and consider these companies to be in the advertising industry. The
average EV/EBITDA ratio for the conventional advertising industry is 7.77
(src:
[http://people.stern.nyu.edu/adamodar/New_Home_Page/datafile/...](http://people.stern.nyu.edu/adamodar/New_Home_Page/datafile/vebitda.html)
), while Warner Chilcott's is 2.94 (src:
[http://www.wikinvest.com/stock/Warner_Chilcott_(WCRX)/Data/E...](http://www.wikinvest.com/stock/Warner_Chilcott_\(WCRX\)/Data/EV:EBITDA)
). This implies that the market (in general) gives a higher valuation
multiplier for advertising companies than this healthcare company. Then again,
Facebook's EV/EBITDA ratio is 49.8 (src:
<http://www.wikinvest.com/stock/Facebook/Data> ), which makes one wonder: what
makes these high-tech mobile advertising companies more valuable than TV/print
ads?

~~~
Tossrock
Obvious answer, but targeting is much more effective for online companies, and
success is much easier to measure. An online advertising company can give much
better, more quantifiable ROI by targeting specific users more likely to
convert: in Google's case, it's largely due to the desire to click inherent in
search, whereas in Facebook's case it's through deep demographic information.
They can also directly measure the effect an advertisement has, by measuring
click throughs, etc. Compared to the much more nebulous effects of TV/print
ads, this can be highly appealing.

------
will_brown
Only in the spirit of media taking a shot at itself, which I think we can all
respect, I think the paradigm of the article can be applied to any type of
news story. For example, 14,612 people were murdered in the US in 2011, but
how many of those stories were ever heard on national 24 hour news channels,
such as CNN? Perhaps a handful through the course of the year which the media
focuses in on and exploits to their own financial gain, and the majority of
those stories involve attractive white women.

It is hard to beat up one anyone openly critiquing themselves, but this could
have had much greater impact by examining media behavior vis-a-vis a
controversial issue not unequal treatment of two otherwise non-controversial
mergers.

------
pinaceae
Well, but then there is also IMS Health buying 360Vantage. Still software, but
in life sciences.

There is a lot going on outside the HN bubble, but this is ok, some markets
are simply more closed off to outsiders. Life sciences software is not
particularly open, a lot of vertical players in there now and "verticalness"
is increasing.

HNers will likely completely miss that boat, but again, this doesn't mean
anything there are enough other things happening and bigger fish to fry.

------
hyliandanny
This was refreshingly honest.

------
gcheong
It might be better for companies not to have such press about their mergers or
at least I don't see how it is any advantage for the short term blip media
coverage of these kind of events provide. And if you are a value investor,
having less noise around the price of a share due to short term media coverage
of big events might be an advantage as well.

------
tsotha
From an investment standpoint the Tumblr acquisition was far more interesting,
because it represents a much bigger gamble. Sure, the numbers are relatively
small now. But Tumblr is one of those companies that could end up dominating
its market segment withing just a couple years. Or (more likely) it could
become irrelevant and quietly closed.

~~~
wavefunction
A blogging platform seems like a perfect example of a commoditized software
product. Buying these "audiences" never seem to work very well...

------
zobzu
As a reader I'd usually would like to see what I _should_ want. Then I get
some value.

Unfortunately, what I _should_ want according to others is generally "news
that'll make them richers", while I think I just want neutral information ;-)

And that's why today what I see is tumblr/yahoo merger stuff everywhere.

------
hkmurakami
_> So why are we media folk so obsessed with the acquisition of a low-revenue
blogging platform and so dismissive of an $11 billion combined revenue drug-
maker? Four basic reasons:_

Where's the "It'll get us pageviews!!!!" motive?

~~~
wmeredith
The fourth point is specifically about them chasing pageviews: "4. We largely
cater to people who spend part of their day on the web, consuming content. Not
surprisingly, those people tend to have a particular interest in things that
involve the web and web content. It's a huge built-in audience, and we
reporters know that our bread is ultimately buttered by pageviews."

~~~
hkmurakami
imo that's a really masked way of presenting things, since it turns "we're
doing this for our bottom line!" into "we're doing it for you guys!"

------
chasing
Tumblr's a consumer-facing media property. That's why it gets more press. More
people know about it and directly use their product. (Same with Yahoo!.)

------
Raphael
So, where's the article actually about Actavis?

~~~
r00fus
It's a self-referential link, as stated in the article.

"And, to be clear, we here at Fortune are certainly part of the editorial
imbalance. So far this site has already published three posts about Yahoo's
(YHOO) purchase of Tumblr, and none about Actavis buying Warner Chilcott (save
for this one)."

------
chenster
My problem is that I do not know who the hell is Warner Chilcott neither
Actavis. Probably that's the case for a lot of us.

------
sabalaba
If you want to read about M&A. Pick up a copy of The Financial Times or The
Wall Street Journal.

------
herbig
Now that I've heard about it, I feel like I've been lied to.

------
pbreit
The drug merger is uninteresting since as two slowish-growing public
companies, the value of each are known and after some straightforward cost-
cutting it will be business as usual. Yawn.

~~~
mindcrime
The Tumblr merger is uninteresting, as two sluggish and unexciting tech
companies merging usually results in one even bigger and more sluggish tech
company. After some straightforward cost cutting it will be business as usual.
Yawn.

~~~
pbreit
Unable to downvote. This post is dumb. Tumblr is far from sluggish. Tumblr
likely will really operate fairly independently. There won't be any cost-
cutting..probably the opposite.

~~~
qu4z-2
There's a reason you don't have downvote :)

~~~
pbreit
Are authors unable to downvote replies? That reply definitely deserved
downvoting more than my comment.

~~~
qu4z-2
Well, be that as it may, you're probably not very impartial in this matter.

------
LekkoscPiwa
That's the old rule in investing that things which bring really handsome
profits down the line are not this much in the public interest.

When I was telling people back in 2007 I'm buying gold and silver they thought
I'm crazy. It was waaay to expensive at $600usd and $10 usd respectively.

Since then I just heard that gold and silver are "a bubble". Literally, like
for past 6 years my family, my coworkers, the media, you name it - treat this
investment type with the highest dose of suspicion. While their "investments"
(a.k.a. house - a place to live not an investment really) - went bad.

It's funny how the markets work.

The genuine growth stocks/assets will be the ones that don't bring too much of
the media attention and the ones that "climb wall of worry".

Gold mining cost is currenly above the price of gold. A bubble?

Tumblr P/E (price to earning ratio) is 1:100. And any investor worth his buck
knows that anything above 1:15 (some say 1:10 in bad market conditions like we
have nowadays) is too expensive.

And still everybody wants to buy it, media reports on it all the time, and
overnight everybody and their uncle knows who Mr. David Karp is. That's how
you spot a bubble. Or at least seriously overvalued asset. And assets are to
be bought on cheap and sold expensive not the other way around.

~~~
kfk
_Gold mining cost is currenly above the price of gold. A bubble?_

Where did you get this info?

~~~
LekkoscPiwa
From:

[http://www.bloomberg.com/news/2013-04-17/gold-miners-
lose-16...](http://www.bloomberg.com/news/2013-04-17/gold-miners-
lose-169-billion-as-price-slump-compounds-etf-pain.html)

Quote: "Gold producers, ignored as global stocks rebounded in the past two
years and investors turned to exchange-traded funds that track bullion, face
closing mines or shutting themselves down after the metal’s worst slump in
three decades this week made 15 percent of miners unprofitable."

I also read that the biggest gold mine in the world in South Africa (70% world
production) is not profitable at these prices.

But you'd need to google for that information yourself.

Also, I'll add another point. The definition of bubble is that nobody knows
that's a bubble. Everybody will think and tell you it's a genuine investment,
actually the best investment going on at the moment. That's why one way of
making sure you're not investing in overvalued assets is to ask your cab
driver if he invests (or would like to invest) in that asset. Now, evey cab
driver who drives me stays away from gold because it's a "bubble". But in the
day they would all just love to buy Facebook.

So media says gold is in bubble. All my friends do. My family does. You check
the stats - the price merely covers or doesn't cover mining cost - that's your
"wall of worry" factor - now you buy.

Don't get me wrong gold will be a bubble. But that's in distant future. That's
when I'll be selling. (if im right)

~~~
kfk
Thanks. Very useful stuff, the site looks good too. I have all my savings in a
bank account because I have no idea what to do with them. One day I would like
to invest part of it, but you know, you need to understand a bit what you are
doing there.

~~~
LekkoscPiwa
Actually, investing can be absolutely fascinating stuff and learning can eat
plenty of your time. There are many schools of economics and different people
will tell you different things, sometimes on opposite sides of an argument,
all can be very interesting.

Try finding some videos of Peter Schiff, Marc Faber, Jim Rogers, Kyle Bass on
youtube. Or read them. They are all in favor of gold, hard assets. Now, there
are plenty of others strongly disagreeing with them who are very interesting
to listen as well.

<http://www.youtube.com/watch?v=ykT3z2qy1LI>

