But being a bear can be tough. As I see it, there are three major bearish bets that could be made:

1. Betting against treasuries directly. This is primarily betting against the deficits. This is one of my major positions, and needless to say, it’s been a pretty good past couple of weeks for me. Global appetite to fund Washington’s never-ending deficits is souring quickly. The Chinese won’t buy our long-term notes, domestic savings are not nearly enough, and there isn’t any fiscal sanity on the horizon, given the outlook for Medicare and Social Security. Of course, as long term rates rise, the Fed may (emphasis on may) just start printing money and buying the long-term notes, pushing yields down. Most would agree this would only work for the short-term.

But unfortunately, timing matters a lot in this case. In my opinion, the best way for the retail investor to bet against treasuries is to short the TLT (if your broker is able to borrow the shares, which he may not) and buy put options for the TLT.  Options are obviously time sensitive.

The TBT, the double inverse of the TLT, is not a good play. If you look at any inverse ETF, the volatility and leverage kills these returns because down days (for the ETF in this case, positive days for the TLT) get weighted more than negative days.  Just look at the SKF (the double inverse of the financials) going all the way back to the markets peak in October 2007. If you put all your money betting against financials (leveraged I might add), you would think you would make a fortune. Wrong. You’re down 40%, about as bad as the rest of us average chumps.  Thus, betting against treasuries for your average investor means finding shares to short that are difficult to find or buying options, not a fun game.

2. You could short the market. I think this is a good play in the short to medium term but not the long term. I do believe the Fed will monetize the deficits more (errr quantitative easing). If they don’t do it, Pelosi will somehow manage to make it happen. This will spark inflation, which drives everything up in price, including stocks. Inflation means cash is trash, and shorting a stock partially means the cash you get from selling the stock is worth something.

Of course, the Fed may not monetize or it may do a very light amount. The Fed may suddenly become huge inflation hawks, which would make shorting the market a good bet in the face of depression-like combo of high interest rates and a weak economy.

3. You could buy gold, silver, and other inflation hedges. This is betting that debt monetization happens. If there is no monetization though, and instead it is just economic stagnation, these positions will likely stagnate as well. They may even go down in value. In silver’s case, the precious metal absolutely crashed during the deflationary scare in the fall.

My guess is long-term interest rates will rise and stocks will fall in the short to medium term, so 1&2 are good bets for now. I think gold/silver may even go up during this mess due to dollar devaluation, general fear, and fear of monetization. Once the Fed really starts to step on the gas (or the S&P 500 hits the 500-600 range), it’s time to cover all those stock shorts and go into full gear inflation mode.

Disclosure: Long SLV, GLD, and mining stocks. Short TLT. Short SSO and various consumer discretionary companies.

Internet advertising is maturing. It is easy to target ads by location and context. There are no ‘monetization issues’ anymore for large sites. If your site is not making much money, it is because the traffic is not worth that much. End of story.

Unlike television, where you are sending out a message to millions of random people, internet advertising is highly personal….and in the internet world, all people are not created equal.

Some traffic is much, much more valuble than other traffic. Someone in North Carolina searching specifically for debt consolidation or a divorce lawyer? A firm in one of these industries will pay a hefty price for that lead since that sort of lead is very valuable to them and will likely convert into a paying customer.

This isn’t a theoretical debate. Internet traffic can be tracked 100% of the way. The law firm in the above example can track the clickthrough rate of the ad, the lead generation rate, and the amount of revenues derived from the ad. Thus, they can tell if the ad is making or losing them money. It’s truly capitalism at its best.

The effect of this so far on internet advertising rates? Someone searching for a high-margin service  is worth literally 1000 times (at least) that of some random facebooker looking around profiles.

I see this phenomenon on own websites. The more targeted and the better paying the niche means the traffic is worth more. Someone actively searching for say, relationship advice, is worth a lot more than someone in a relationship just browsing Facebook or some internet forum. Facebook would have you think otherwise, but they are deluding themselves.

Someone actively looking for relationship advice is more likely to buy a product to improve their relationship. Someone that happens to be in a relationship may be curious as to the ad, but is less likely to click, and even less likely to buy the product.

When a person is searching, you know what is on their mind. They spell it out to you what sort of product they are looking for. If they are just browsing a friend’s Twitter or Facebook page, all they are doing is browsing. Even if you base ads on what the person gives you in his or her profile, let’s say they are a dog lover, there is only so many dog advertisements you can throw at someone. They may also not be looking for any dog-related products anytime soon.

You are guessing at what they want; they are not telling you. You are hoping they look at your ad; they are not actively looking for your product.

Ad blindness, in particular, is a major issue. It is well-known in the internet business that new visitors are worth more, much more than returning visitors for an advertising-based site. Previous visitors are likely ad blind to the site. They are also less likely searching for something to buy through the site’s advertisements; they are more likely just reading for recreation. 

If Twitter has not been able to monetize successfully by now, I doubt they will likely do so in the future. From what I can tell, Facebook is well monetized and their advertisers are likely grossly overpaying. This is just my personal speculation, but based on reports I have read, I would guess that Facebook’s CPM is around $.40 (or better), which is well over 5-10X what a website similar to Facebook would get. That’s a hefty premium, especially considering Facebook’s traffic is a bunch of ad-blind college kids mindlessly browsing the site. Facebook will always command a premium, it is after all a ‘cool,’  large website, but I doubt this sort of premium will continue for long.

It’s not 1999 anymore. If an internet company with a tremendous amount of traffic is not able to make money, it is because their expenses are too high and their business model is poor. The ‘build traffic and the profits will come’ is a good line to sell to technically-unsavvy investors throwing money after the latest fad, but it can only work so long, especially in this deleveraged environment.

I doubt Google will buy Twitter, and even if they do, the size of the acquisition is too small to matter to Google. Even if Twitter is truly worth zero and Google pays $1 billion for it, that is less than 1% of Google’s market cap. However, letting Yahoo gobble up Facebook for $5-$10 billion would be a great reason to short YHOO. It could well end up being Yahoo’s Vietnam War, or should I say AOL acquisition.

Today’s tulip speculator is the person paying over 10X EBITDA for either of these sites. From what I can tell, their valuations well supercede this, even in the illiquid private market.

Disclosures: None.

Congress has made it clear any company that makes exorbitant profits is at risk. Oil companies, in particular, are on close watch. Most of the talk last year about a windfall profits tax was once oil crept over $110/barrel and the price of gas was $3 or more at the pump.

With the Fed’s printing press going full blast and the continued decline in the dollar, no offshore drilling ban premanently removed, and other factors, we can expect oil to creep back up to $100 by the summer again. I think this will mainly be an inflationary event caused by the expanded money supply, but natural supply/demand will play a part as well. Nonetheless, whatever the reason is, once oil creeps above $80-$90 a barrel, Congress will officially begin its oil company witch hunt again.

Of all the dumb populist measures, the windfall profits tax is the most easy one to pass. Take money away from evil oil companies, invest it in happy renewable energy and tax cuts for the middle class, of course it will pass! I can just see Obama saying “The stock price of XYZ Oil has doubled in the past month…yet the unemployment rate is about 10% It’s time XYZ Oil gives back some of its profits and invests in the future of our country.”

At first, the tax won’t have much effect, since whatever the firms are producing, they’ll continue to produce. Windfall profits taxes don’t so much affect current production but discourage investment. The tax will pretty much kill any investment in the US in fossil fuels, whether its oil or natural gas, so we’ll have less domestic supply, higher energy prices, and become more reliant on foreign countries.

More foriegn imports, less domestic production, more of a trade deficit, less domestic jobs, more money printing to take care of that, more inflation, and before we know it, gas at the pump is $8/gallon, gold is $2000 an ounce or more, and life is just miserable. The stagflation scenario that the gold bug uber bears talk about comes into effect through an energy crisis, much like our financial crisis begain as a subprime issue. I expect Peter Schiff will begin his worldwide “I told you so” tour sometime in early 2011.

On that note, have a nice weekend everyone!