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All Ponzi’s disciples

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Madoff story continues to occupy the news these days (e.g., this one from NYTimes). Yesterday, Satyam, the No. 4 Indian IT outsourcer, broke the news with giant accounting scandal (BBC news, wiki: Satyam).

But the story does not end here. In my mind, there are many other ponzi schemes in our lives, and sometimes people just ignore it for various reasons (don’t want to face reality; irrational exuberance etc).

Big ones
Dot com technology bubble: new stock holder (trader) bail out previous stock holder (trader);

Housing bubble: new home owner (speculator) bought high from previous home owner (speculator).

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Baidu: got a bit evil?

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On Nov 17, Baidu (Nasdaq: BIDU), China largest web search company got a huge blow in the market as the news of “Baidu placed “faked doctors and drug ad” broke (see BW for more details). This reminds me of the Focus Media (Naqdaq: FMCN) Spam text messaging story about 7 months ago. In both cases the news was broke in CCTV, Chinese national TV channel and a part of offical Chinese media. Some people may not know CCTV has large market share in the TV Ad market. Some people may sympathize with Baidu and call for “buy” the BIDU stock amid this temporary weakness.

Before this news about Baidu, actually there were reports that Baidu was guilty of “intensionally hiding the China San’lu milk powder scandal” during August this year (Olympics time). Luckily to them, local goverment officials did the exact same thing to keep the big party on. But this time they got caught. Some financial analysts naively think those Ad. made up a small portion of the Ad. revenue. This maybe true. But I don’t the problem is that simple.

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Is Advertisement too Invasive ?

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Ad is everywhere these days, from Newspaper, TV to Internet. In China there is such thing called LCD sreen ad. Focus Media (FMCN) made big money out of this, although recently some residential home owners got a bit tired of this because they want some peace in their apartment’s elevator.

In the US it appears to me TV is coming to Internet more and more, I mean, the video clips, such as this one from Fisher Investments, a wealth management firm managed by Ken Fisher. I used to receive (junk) mails from them, now I can see the ad on Forbes. Fisher was a columnist on Forbes.

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Focus Media FMCN is on the Focus

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It will report the earnings after market today. The Street est. earning is $0.62, but I think the whisper number is much higher. In other words, even if it beats the earning, if it issues a soft guidance, the stock may get punished tomorrow. This is the danger of  “playing ERs” with hot stocks. Interestingly, Sage Brennen has this question regarding “does this screen work”. Actually I had same question before, one of the reasons I did not buy FMCN.

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Focus Media FMCN is hotter than BIDU

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It seems not very intuitive that Focus Media (FMCN), a LCD media advertising company, has done better than Baidu (BIDU), the No. 1 search engine in China. After all , putting up the LCD screen, soliciting the advertising customers, and creating those short films are not high tech as “search engine”, which involves creating a large number of clustered computer, and complicated search algorithm. But this is the reality, Focus Media (FMCN), closed above $80 today amid the new offering of $500 m, the PE (ttm) is about 76, market capital 4.4 B. Since its debut in July 2005 (at 20s), it’s up about 300%.


How about Baidu (BIDU), it debuted on August 2005 at about $120, and it closed at $124.50 today. Here is the chart. The PE is about 165 and market capital 4.2 B.

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