Thursday, October 23, 2008

Like Rabbits: The Current Social Media Master Lists

Guy Kawasaki points out a couple of omnibus-type social network lists. Distribution lists, meet steroids.

LinkedIn: Selling the Stream

BusinessWeek blogger Stephen Baker, after getting "scooped", if you will, by one of his magazine's other sections, asks the rhetorical question of why McGraw-Hill, SAP, and Goldman would want to invest in LinkedIn? Answer: the data. Baker probably gets this more than most, judging by what I've read so far in his book The Numerati. Data streams will continue to increase in value. How that value is measured depends upon the purchaser and what has to be provided to the data subject to obtain their data. I understand that I give up some privacy and potentially subject myself to some advertisement by providing LinkedIn with my data. However, the benefit of managing my network and mining opportunities from it is a worthwhile trade-off (to me and several million other users, at least).

What would it take to get YOUR data? What data wouldn't you give up?

Backhanded Talking Points

This post from the online edition of Foreign Policy is actually titled "(Not Quite) 101 Things Sarah Palin Should Know About the World", but it's more important than that. As Americans, we often fail to see things through the eyes of other world citizens. That's the theme of The Post-American World by Fareed Zakaria and Ron Suskind's The Way of the World, two excellent books I read within the last few months. Why is this so important? As we face an economic downturn and foreign hostilities, understanding your world neighbors is no different than understanding customers in business, or understanding voters in politics. Our ability to act in a unilateral manner as a nation has been, and will likely continue to be, greatly diminished due to a number of economic and geopolitical factors. Even if that were not the case, though, there are good arguments for being good neighbors. It increases demand for our involvement in affairs and markets. It decreases obstacles in our path that carry a number of costs. Perhaps most importantly, it revalidates our standing within the world community. I have no doubt that much of the world still sees the United States as a "city on a hill". Yet, our shine has lost some of its luster. It would be counter to our history as a nation to simply shine "bright enough". It's our obligation not to act to inspire other or outshine others, but to live up to the standards that we claim.

To quote A Bronx Tale, one of my favorite movies, "The saddest thing in life is wasted talent". Arguably, the greatest resources we have are the proliferate talent pool of our population, and the freedoms to use those talents. Here's hoping we start using our talents based on dialogue with others, not pre-conceived notions or senses of entitlement.

Monday, October 20, 2008

To Be, Or Not To Be...Libertarian

Most of my friends know that to associate with me entails catch the occasional hand grenade. This post is one of those weapons. Now, I will say that the author focuses strictly on the economic implications of libertarianism, or laissez-faire capitalism, and doesn't touch social libertarianism (which I find much more important, and infinitely easier to defend). While I'm most definitely a capitalist, I do appreciate anyone who's willing to recognize the dangers of being an ideologue. That means people will just have to deal with a little cognitive dissonance...including me.

Friday, October 17, 2008

How It All Got So Screwed Up: A Roadmap

A lot of people still seem to think that this crisis is merely a matter of simple bad assets or mispricing. Not by a long shot. The Deal has provided a great flowchart that lets you follow along and see how the toxins spread (and grew) throughout the system.

You can read the whole article here.

Smart Money Wants To Keep The "Free" In "Free Market"

A close friend of mine sent an email out yesterday to most of his address book. This person has been involved in GOP politics at substantial levels for quite awhile. He's a recognized authority on finance, and someone to whom I always listen whether I agree or not. With the exception of one identifiable remark that I've omitted, I'm reposting his email with his permission. Everyone regardless of political affinity should read it and consider his points.

With the exception of routinely voting against ***** *****, I don't think I have ever voted for a Democrat before, but I will be voting for Obama. The people in charge are the worst administration in history (with the possible exception of FDR). We are in fact looking at a Great Depression scenario.. and not the way that the pundits have described it for the last few months. It has nothing to do with a big bust must follow a big boom. Recessions have been getting shorter and milder as we have off-shored most of our cyclicality and our domestic markets are able to shift and reach equilibrium quicker and quicker.
The reason we now face a depression scenario is the petty dictator Paulson and the bumbling and corrupt GOP beaureacracy in Washington.

They are destroying the markets through policy decisions, or in some cases the uncertainty created by a lack of policy decisions. As in the depression, markets are freezing due to constantly changing rules and perverse incentives. The first article I link to below is one small example.

The other day, the petty dictator Paulson called in the heads of the largest banks and told them they must sign on the dotted line before they leave the room. This is unprecedented. Good banks.. bad banks.. good decisions.. bad decisions.. no longer mean anything in the marketplace.

Paulson is going to borrow ~750 billion from the credit markets: the very same credit markets that he claims are frozen, in order to prop up said credit markets. The credit markets are frozen due to uncertainty, that is all. If capital is available to loan to Paulson, then it is available to loan to these banks. It is not going to the banks because nobody wants to loan to a group of a**holes who pay out 50% of net revenues to employees while leverages up 30-1 on subprime mortgages. There is no free lunch. ~750 billion to bad credit risks is ~750 billion that will not go to good credit risks. It is a straight transfer of assets from productive centers of the economy to unproductive ones. The long term damage is huge.

No, I am not saying that the answer is a perfectly textbook Austrian approach. The reality is that markets don't adjust immediately as they do in textbooks. If all the banks are allowed to go under, it will hurt the economy as the structural difficulties in liquidating banking assets and passing them on to new owners would take a long time. The gov't does, however, have the power to effectuate one week
bankruptcies.. that is, when a bank goes under, take it over, prop it up for a few weeks, wipe out the equity, and sell off the ongoing business to the highest bidder (possibly wiping out the bondholders as well).

Meanwhile, while facing a lending crises, who does have the power and the structural ability to quickly adjust to conditions and lend to the sectors of the economy that need it most? The hedge funds do, yet Paulson is trying to wipe out the hedge funds, having put a scarlet letter H on their chests. (See the other link at bottom of page)

Let's be clear, the Democrats (as much as they suck) would never have gotten away with this. If John Kerry were President, he would probably would have proposed some dumbass Keynsian "pump priming" solution that would be bad, but it would not be shutting down our entire free enterprise system the way Paulson is.

The people in power must lose, and they must lose resoundingly and everything they have done must be rejected and repudiated, and I will do my small part in that.

."Utah foreclosure auction flops"
Grace Leong - DAILY HERALD
An auction that netted $7.5 million in bids on 56 distressed Utah
properties fell through last week after the owners -- three banks and
two private lenders -- decided they may get a better deal by holding
out for the government's bailout plan.

"There were buyers, but we couldn't sell the homes because free
enterprise has gone out of the market," said Eric Nelson, founder of
Las Vegas-based Eric Nelson Auctioneering.

An email from from Richard Fuld Jr., Lehman Brothers Holdings Inc.'s
chief executive to Lehman General Counsel Thomas Russo on April 12,
2008, shows why hedge funds are so worried. In the email, Mr. Fuld,
summarizing the points from a dinner with Treasury Secretary Henry
Paulson, said Mr. Paulson wants to "kill the bad Hedge Funds and
heavily regulate the rest.

This comment (while obviously not in favor of any presumptive Democratic policy suggestions) should underscore just how seriously financial professionals view the current economic situation and this administration's proposed fixes. The very fundamentals of the market are being diminished by Paulson's proposals. Those proposed measures provide yet another example of how so many people trumpet "free market" this and that, but expect an exemption when they make a mistake and face "punishment" by the very same market. You can have a free market, or you can have a proposed bailout that may or may not work. You CANNOT have both.

Tuesday, October 14, 2008

THE Capital Market

Great post by Union Square Ventures' Fred Wilson at A VC today. Because of the basic risk/reward ratio, private equity and particularly venture capital received compounded effects from market changes:

I guarantee that there are some financings happening right now that are getting done at valuations which would have made sense nine months ago but don't make sense right now, at least to the uninformed observer. I also guarantee that there are some financings happening right now that are getting done at valuations at half or even less of what they would have commanded nine months ago, even though the public markets have only gone down about 33% year to date.A VC, Oct 2008

Fred goes on to state that capital in general is more expensive now than it was last month (trending back to late last year). Companies need to tighten both their belts and their operating plans, while investors need to realize that we may have officially entered a buyer's market for early-stage companies.

Friday, October 10, 2008

Secret Comes Out in Palin Ethics Investigation?

Sources report that Sarah Palin's ethics investigation regarding her conduct in the dismissal of former public safety commissioner Walter Monegan is all for naught. Palin was reported to have removed Monegan for his failure to fire Trooper Mike Wooten, Gov. Palin's former brother-in-law for numerous infractions, including fraud and using a taser on his step-son.

Recently, however, it was discovered that Wooten has recently resurfaced after a mysterious moose-hunting accident. He now resides in New York City, and works for the NYPD. He has achieved the rank of detective, and is renowned for his insight into the criminal mind. His colleagues claim that Wooten, who now goes by the name Matt Parkman, is such a great partner that "it seems as though he's reading your mind, and projecting his thoughts inside your head." Wooten appears to have forsaken his times to the Palin family, and shows no signs of the injury that prompted the intial fraud accusations. He does appear to have lost some weight and received some type of hair transplant or regrowth. When asked about his resurgent hairline, Wooten cryptically answered, "Save the cheerleader, save the hair..."

Thursday, October 2, 2008

US Broadband's poster boy...?

First, a couple of disclosures:

  1. I'm a Democrat, and an Obama supporter, and
  2. I tend to side with free markets when questions of governmental industry regulation arise.
That being said, McCain, if this article is to believed, has been no friend to improving the U.S.'s broadband Internet service level or its spread. Obama gets the Internet, and understands how broadband levels the playing field for the distribution of many services (not the least of which being education).

How about this proposal: we force big telco and cable to grant access to their carrier lines for broadband services, and in return we grant school choice to rural districts with charter and private schools based on distance learning models? Decisions, decisions....

What are we thinking? Apparently, Some of Us Aren't

Jim Chanos, poster boy for the short-selling community, argues that we've got liquidity problems because people aren't being rational. Irrationality seems like it's a double-edged sword for Chanos and other short-sellers; they count on people "not getting it" to provide them with trading opportunities.

You can read the NYT article with Chanos' comments here.