Gunny Walker

So here's an interesting article about Pixelon. It's a company that was mentioned in All The Rave: The Rise And Fall Of Shawn Fanning's Napster. (Yes, I am still reading that book. It's not that great, okay? Leave me alone. I actually read four books while I had put it down.)

  This tells the quote that I was going put up much simpler than the book. Except there are some things not mentioned in the article. It's from pages 112 and 113...

  Such lack of scrutiny made for some appealing companies. While there are now hundreds of examples, it is worth recalling a few for the sake of context. There was Pixelon, which claimed to have a new system for transmitting video over the Web. In fact, the firm's top-secret locked boxes guarded off-the-shelf goods bought from other companies. Michael Fenne, the entrepreneur behind Pixelon Inc., raised $30 million from investors, none of whom bothered to get a routine records check, which would have shown Fenne was not what he claimed. He was actually one David Stanley, a fugitive from a Virginia embezzlement charge. What really set Pixelon apart, though, was what it did with the money it raised. Fenne blew more than half the take on one of the largest parties Las Vegas had ever seen, hiring performers such as the Dixie Chicks, Tony Bennett, and the Who to play. The concert was recorded, theoretically to be made available to internet viewers for a fee. Instead, it became a goodbye party. The expenditure prompted a board enquiry that led to Fenne's ouster, eventual exposure, and arrest.

  Now remember this the next time you hear comments about how bad the economy has become, our current recession, and just how bad 401k's are right now. It's not just Martha Stewart, Enron, and Worldcom, folks. There are tons of companies just like this one with no profits, no plans for profits, and stock valuations greater than that of Microsoft. They have obscure names like Napster, The Globe, Snowball.com. They planned to survive simply on advertising mainly from other companies that were burning through investors cash like a wildfire through California forest. These companies were invested by folks who manage your 401k's. This was the tech boom. When it died, there were a lot of sad techies, whom had no idea where they might find a job that would pay them exorbitant amounts for not actually producing anything. Much less one that would allow "a bring your monkey to work day" or ride your overpriced Razor scooters from office to office.
  But things are better now according to some. After all, the stock market is rebounding. There have been some positive gains in the market, but here's the catch. Has anything changed? Have you heard of anyone reducing their 401K? I know I haven't and I would assume that no one else has either. I still plug my ten percent just like I always have. The problem is that if most of us still put our ten percent into 401k's (i.e. the stock market) then it will naturally go up again. So have really had a recession? Did we have such good times in the nineties? The truth is that I believe that this was a market correction, when it crashed. The fact that a lot of companies that made absolutely no money could get such financing proves this. It also proves that a lot of good people lost their minds.
  Okay, so I may be wrong. Maybe the market is going up for all the right reasons, but if I am right, do you have a back up plan? How many 401k crashes can you take. That's why it's important to diversify your portfolio. Things like stocks and government bonds. A little bit of blue chip and crazy tech (After all, that crazy tech might be the next Microsoft).
  The question is, "Can you afford a back up plan?" Can you not afford one?
  (I promise folks. I will return tomorrow to wacky headlines and things going on in my life. I didn't have anything exciting to write about today so I broke out the soapbox. This is supposed to be a page about investing after all. Remember the plan?)