Every once in a while, even the tech untouchables make mistakes that are so obvious and obnoxious that the world, and even the stock market, is forced to take notice. We're watching a few of these unrecoverable errors take hold right now and slowly leak into the consciousness of the general public. That can't be good news for these companies.
Twitter continues to extinguish millions of fake accounts and discloses that, as a result, its recent apparent growth in users is gossamer. More ominously, this looks more like a race that Twitter will never win because the machines can spawn new bots and fake accounts much more quickly, easily and cost-effectively than the troops at TWTR can swat them away. The situation at Facebook is no better, and probably much worse, because at least the guys at Twitter are trying to address the issues while the frauds at Facebook still largely have their heads in the sand.
I've been a big fan of FB forever, but the romance is finally over. As they lurch stupidly from one crisis to another and offer a continuing stream of lame excuses and amateurish apologies, the youth, insulation and inexperience of the FB management team led by the Zuck is becoming more obvious; and he looks more foolish and out of touch every time he opens his mouth. Anyone who thinks that there's nothing fake about denying the Holocaust is a moron. The Zuck is leading the pack straight into the swamp and taking a well-deserved beating at the same time.
Here's a flash. You don't ever want to be this season's pin cushion or poster boy for arrogance and ignorance when the world starts throwing shade. What we're seeing right now is Schadenfreude on steroids. Ordinarily, seeing the boys get their comeuppance would be somewhat entertaining, but unfortunately, when the big tech guys stumble, the little guys (like us) eventually take it in the shorts.
I expect that the longer-term (and surely negative) financial consequences are just beginning to be felt by the masses in the market and that can't be good news for IRAs or 401(k)s, whether they're stuffed with tech stocks or just holding tracking funds subject to the same downturns. We could be looking at the beginning of the end of the party. The traders are already starting to make their moves and, typically in these cases of rapid and radical downturns, we civilians are always the ones left holding the bag because we can't get out of harm's way fast enough. FB, Netflix (which will likely weather the storm and come back) and TWTR are just the first dominos to fall. (Note: I do not own these stocks.)
I say this with clear understanding that the vast majority of traders don't care about much of anything substantive except stock movement, velocity and volatility. For them, any directional action is apparently equally okay as long as things just keep moving up or down. As Jackson Browne wrote in My Opening Farewell: "there's a train everyday, leaving either way." And, I've also come to realize (no surprise here) that money doesn't really care who makes it and that morals and some basic decency don't really matter much to the market.
When the world gets sufficiently angry, and never mind the fact that these "kids" have been given corporate protections and crazy governance provisions that essentially make them totally secure in their positions, there will come a time and a reckoning when even their clueless and greedy directors can no longer take the heat and will have to make at least some cosmetic changes in the clubhouse. They will need to bring in some grownups.
This actually isn't good news for us or for these stocks because the grownups don't have any idea of how to keep growing these businesses (maybe no one does at this point) and they have even less ability to solve some of the nasty problems and clean up the stuff that's been shoved into various closets. Worse yet, they're going to take their sweet time in doing anything because they don't want to make things worse if that was even possible.
All of which means that there's only one direction for the stock prices of these companies to move for the foreseeable future, and that's further down. Hanging on to these stocks and hoping for the best is a lot like trying to nail Jell-O to a tree. Even the biggest hammer and the strongest nail won't keep the stuff from ending up in a puddle at your feet.