Berko: Fitbit sure to be a flop in the future

Dear Mr. Berko: Fitbit Inc. makes wristbands that track pulse, heart rate and the number of steps you take, and measure the distance you go. Several people who are in the stock business tell me that this stock could run to $80 in a year, and that I should consider buying 1,000 shares. I’d appreciate your opinion.

I also think the price of gold will run back to $1,900 an ounce. Which gold coins would you advise that I buy in my individual retirement account?

— C.L., Rochester, Minn.

C.L.: Only in America! Fitbit’s (FIT-$44.50) wristband, along with Google Glass, is an example of the idiocy of many American consumers. Can you imagine a Korean, a Czech or even an Austrian wearing a Fitbit device? FIT’s wristband, which monitors fitness activity by tracking the calories burned or the running/walking distance covered, is easily among the dumbest and most useless products of the century. Unfortunately, consumers who pay as much as $700 for those things reproduce and vote. Though the Pet Rock might have been one of the 20th century’s most useless products, in a pinch it could be used as a doorstop, a paperweight or a weapon. FIT’s wristband has no salvageable value; it can’t make you stronger, smarter or more svelte, increase your stamina or get you to work on time.

FIT came public in mid-June at $20 and quickly ran to $48.98, a testament to the frantic desperation of U.S. investors. It has benefited from the clever hype of Morgan Stanley, Deutsche Bank and Bank of America, but FIT should never trade above $14.30.

FIT was founded in 2007 by James Park and Eric Friedman, who may be laughing their heads off at the stupids who bought FIT and made them billionaires overnight. Just as amazing is that FIT’s revenues might reach $1 billion in 2015, certainly a consequence of our nation’s health craze, despite 35 percent of Americans 20 or older being obese.

FIT’s wristbands have no redeeming value, but FIT’s marketing has taken a page from U.S. beer commercials. It suggests that those who wear a FIT wristband are slender, good-looking, happy and healthy, have beautiful teeth and beautiful friends, and are attractive to the opposite sex. As I’ve said before, if you have a useful, excellent product, you advertise it; if you have a useless, dumb product, you market it. And FIT’s folks have had great marketing success. But even more amazing is that FIT will be profitable this year and could earn more than $1 a share.

The popularity of this will wane by this time next year, revenue growth will slow significantly and profits by 2017 will be difficult to come by. And unlike Apple’s cellphones and Microsoft’s browser — which can be upgraded, upgraded and upgraded — this thing has limited technology. FIT does not have the talent to develop and market a 3G or 4G wristband. Though it has deep pockets, FIT is a stand-alone, single-product company that will have competition from Samsung and Garmin. Some say that FIT would be an interesting acquisition for Adidas, Nike or The North Face. However, most observers believe that FIT is overpriced at $44.50.

No on gold coins

I don’t like gold coins as an IRA investment. The problem with gold coins is that their prices are not based solely upon the metal content. In most instances, their perceived historical value also is reflected in the price. And no matter what the ads say, the hidden dealer markups (premiums) on gold coins are often significant.

Meanwhile, you can’t personally hold an IRA asset in your hands, and gold storage fees can sometimes knock your socks off.

Lastly, I don’t care for gold coins in an IRA because coins don’t pay dividends. A better option for your IRA would be an exchange-traded fund such as SPDR Gold Shares (GLD-$105), which tracks the spot price of bullion to the penny. GLD is infinitely more liquid than gold coins and more accurately reflects the changes in the price of gold than would a coin.