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from Chrystia Freeland:

‘Kumbaya’ capitalism collides with self-interest

DAVOS, Switzerland--George Soros is a traitor to his class. That’s not an insult or a tabloid exaggeration. It is, instead, a direct quote from my conversation with the billionaire investor and philanthropist at the World Economic Forum here.

‘‘I am a traitor to my class,’’ Soros said. ‘‘I think that the income differentials are too wide and ought to be narrowed,’’ he added, which is why he favors a bigger hit on those, like himself, at the very top.

But among his plutocratic peers, he said, that is very much a minority opinion. In fact, Soros, who helped spearhead the muscular Wall Street support for Barack Obama in the 2008 presidential election, particularly among hedge fund and private equity investors, believes the president’s call for higher taxes is the reason he has been ditched by the financiers: ‘‘That has led my hedge fund community to abandon Obama in favor of any Republican, because they don’t like to be taxed.’’

Henry Blodget, a former (and formerly disgraced) Wall Street analyst who has been resurrected as one of the smartest writers on business and politics, agrees that the financial class is strongly attached to its tax breaks. After his Wall Street friends have had a few drinks, he said, ‘‘they are cackling that they have fooled everybody into thinking that there’s some justification for this.’’ ‘‘This’’ is the carried interest tax provision, which allows some private equity and hedge fund managers to pay tax at 15 percent.

But the cackling may be coming to an end — and the hostility toward the president mounting — following his State of the Union speech on Tuesday. A centerpiece of that address, and most likely a central theme on the campaign trail over the next nine months, was Obama’s insistence that the 1 percent must pay up.

‘‘Right now, because of loopholes and shelters in the tax code, a quarter of all millionaires pay lower tax rates than millions of middle-class households,’’ Obama said, in an oblique attack on the carried interest tax break and on Republican candidate Mitt Romney, who paid an effective tax rate of 13.9 percent on income of $21.6 million in 2010.

‘‘Tax reform should follow the Buffett Rule,’’ the president said. ‘‘If you make more than a million a year, you should not pay less than 30 percent in taxes.’’ And, like Soros, the president has decided not to duck charges of class war: ‘‘Now you can call this class warfare all you want. But asking a billionaire to pay at least as much as his secretary in taxes? Most Americans would call that common sense.’’

from Geraldine Fabrikant:

Steven Rattner and the art of the comeback

By Geraldine Fabrikant

The opinions expressed are her own.

Last spring, several months after Steven Rattner, a cofounder of the private equity firm Quadrangle Partners, settled separate charges totaling $16.2 million that related to a kickback scheme involving New York state pension funds, he hosted a dinner at his sprawling upper east side co-op overlooking New York’s Central Park.

Always an avid courtier of the media, among the guests that night were Charlie Rose, Financial Times U.S. managing editor Gillian Tett, journalists Alexis Gelber and Mark Whitaker and literary agent Amanda Urban as well as Rattner’s friend and champion Mayor Michael Bloomberg.

The dinner came in the wake of his very public battles with former attorney general Andrew Cuomo; a settlement with the government; a series of negative stories in the press; and an ongoing battle with Quadrangle Group, the firm he helped to found. Among other issues, Rattner charged that Quadrangle had held seized money that was owed to him when he left the firm to work as the car czar. Neither Mr. Rattner nor Quadrangle would comment for the story. The case is currently in arbitration (see editor's note below)litigation. In April 2010 when Quadrangle settled with the Attorney General’s office over the case of attracting pension fund money, it said that Rattner conduct was “inappropriate, wrong and unethical.”  But that battle seemed well in the past to one attendee the evening who said the dinner felt like a coming out party reflecting Rattner’s determination to put the past behind him. It was business as usual, or as one guest recalled it: “the typical Upper East Side dinner party,” filled as it was with brand-name power brokers.

How exactly does one come back from being publicly dragged through the mud? Why do some from the land of the formerly disgraced manage to launder their reputations, while others disappear? Part of the answer is that you’ve got to work at it, and--with the possible exception of Michael Milken, the disgraced junk bond guru, or Eliot Spitzer, the former governor who resigned in the wake of a prostitution scandal—few have worked as assiduously as Rattner has to put themselves back in the limelight. He asked to write for both the New York Times and the Financial Times and actively promoted his book “Overhaul” chronicling his role in bailing out the auto companies.

from MediaFile:

Tech wrap: Microsoft still into Yahoo

Microsoft Corp is considering a bid for Yahoo Inc, resurfacing as a potential buyer after a bitter and unsuccessful fight to take over the Internet company in 2008, sources close to the situation told Reuters on Wednesday.

Microsoft joins a host of other companies looking at Yahoo, which has a market value of about $18 billion and is readying financial pitch books for potential buyers, they said. Those companies include buyout shops Providence Equity Partners, Hellman & Friedman and Silver Lake Partners, as well as Chinese e-commerce giant Alibaba and Russian technology investment firm DST Global, the sources said.

Rival smartphone makers could exploit a rare letdown by Apple in the launch of its new iPhone 4S model, which failed to wow fans, and grab a bigger share of the most lucrative part of the phone market.

In a sign that even Facebook is not immune to market volatility, the WSJ reports that the price of shares for the social network has slowed on secondary markets, falling 8 percent since July.

India launched what it dubbed the world's cheapest tablet computer Wednesday, to be sold to students at the subsidized price of $35 and later in shops for about $60.

Reuters blogger Felix Salmon, who has had an ongoing spat with Business Insider founder Henry Blodget, had this to say about Blodget ringing the opening bell at the NYSE: "Blodget’s VIP status on the floor of the NYSE today shows how far he’s come from the dot-bust days of his disgrace."

from Felix Salmon:

With all due respect to Reed Hastings, the Netflix-Qwikster split sucks for customers

This post originally appeared at Business Insider.

We have nothing but respect for Netflix CEO Reed Hastings, who has demonstrated again and again a willingness to take the long view instead of an easier short-term one -- making tough decisions that cause near-term pain in order to improve the company long-term.

In the middle of last decade, for example, Reed decided to cut Netflix's pricing to neutralize a competitive threat from Blockbuster. Hastings and Netflix were scorned at the time for this decision -- Netflix would obviously go broke -- and Netflix's stock collapsed.

Well, we know how that one turned out: Netflix won the battle, and its stock blasted off for the moon. Blockbuster, meanwhile, went bust.

And now Hastings has gone and made another earth-shaking decision -- enacting a major price increase for DVDs-by-mail and splitting Netflix into two companies. And the market has responded by chopping Netflix's stock price in half.

We suspect, eventually, that Reed Hastings will once again be proven right about the price increase and that those who have written the company off for dead will once again have to hang their heads in shame.

And we can also certainly understand why, from the company's perspective, it makes sense to split the DVD and streaming businesses into two separate companies: They're different businesses, with different cost structures and different delivery, marketing, licensing, and management challenges, and they will be easier to run better if they're managed separately.

from The Great Debate:

Buffett cash won’t solve Bank of America’s problems

By Keith Mullin, Editor at Large, International Financing Review The views expressed are his own.

Warren Buffett's $5 billion injection will not stop the rot at Bank of America.

If anything, it proves that the bank's naysayers were right to be wary.

In the aftermath of the news, dealers aggressively marked BofA's CDS levels tighter, and the stock leapt from $6.99 at Wednesday's close to an intra-day high of $8.80 Thursday. But the stock slid all the way back down to close at $7.65. Even at that momentary intra-day high, it was still down 38 percent YTD and 81.5 percent off the long-term high of October 2007. Hardly inspiring.

Frankly I expected a bit more enthusiasm, but then again given the extent of the bank's longer-term issues, perhaps my expectations were overdone. CEO Brian Moynihan still has a lot of work to do to avoid the slow grind to ignominy. I think the Buffett episode actually undermines Moynihan and makes him look a bit, well if not a bit of a fool, then certainly desperate.

This is, after all, the man who said publicly that the bank didn't need to access capital markets, and that he would get the bank up to higher capital adequacy levels and stabilise the ship via a combination of retained earnings (tough in a potentially recessionary environment), disposal of risk-weighted assets ($150 billion or so), lay-offs, and the sale of non-core businesses.

Not only has Moynihan been forced to take in new capital, he clearly gave the impression that his only option was to go cap in hand to Buffett and accept a very expensive deal: cumulative prefs with a 6 percent dividend plus a ton of discounted warrants. And he can only get out on payment of a chunky exit premium that'll cost him $250 million. I reckon that's pretty embarrassing. I can't imagine that existing shareholders are happy that an interloper has come in through the back door and got the better of them on price.

from MediaFile:

YouTube’s mythbusters: When blogs attack

It's taken a while but YouTube is officially pushing back at the various estimates on how much money it costs parent Google by satisfying our collective hunger for million of video clips every day. Google paid $1.65 billion for YouTube in 2006, when it bought the site from Chad Hurley and former CTO Steve Chen (pictured).

Various YouTube executives we've spoken to privately over the last year have bristled at the idea that they are an expensive experiment for Google without a clear profit-making business model. Google CEO Eric Schmidt took the first step in a change of communications strategy in an group interview with reporters at the Sun Valley conference two weeks ago, and to more listeners on the Google earnings call on Thursday. His central point was that everyone's favorite video site is on the path to profitability.

On Monday, two of YouTube's PR executives hit back at some of the myths about YouTube's business with a blog titled "YouTube myth busting." These include claims that it only features short-form, grainy user-generated content when in fact it has deals with Hollywood partners and features HD content. They also said more than 70 percent of AdAge Top 100 marketers ran campaigns on YouTube in 2008.

But two disputed myths that raised the hackles of the tech blogosphere were related to 1) estimates of YouTube's cost structure and 2) the "oft-cited" stat that YouTube only monetizes 3-5 percent of the site, which the PR execs said was "old and wrong." The bloggers wanted some numbers and they didn't get any from this YouTube's blog

Here's Henry Blodget of Business Insider:

Enough already. We're glad that YouTube has not turned out to be a disaster. (We weren't among those who thought it would be). But we can't stand this attitude. If Google is tired of people "picking any number to fit any theory," then they should just publish the facts.

Peter Kafka of AllThings Digital calls it 'modest boasting':

from MediaFile:

Icahn helps himself to some Yahoo

Activist investor Carl Icahn helped himself to some early Thanksgiving turkey, buying more shares in Yahoo on Wednesday.

Here's Silicon Alley Insider's Henry Blodget with the basics:

Well, don't accuse Carl Icahn of cutting and running. After losing $1 billion on his massive Yahoo bet--he bought 69 million shares last spring at about $25--Carl Icahn has (figuratively speaking) doubled down.

In the past three days, the raider has bought another 6.7 million shares of Yahoo for about $65 million, bringing his total to 75.6 million shares. At today's closing price of $10.58, Carl's stake is worth $800 million, about $900 million less than he paid for his original position. The 76 million shares amount to 5.4% of the company.

The Associated Press explains why this could be important:

Yahoo is looking for a new leader after co-founder Jerry Yang said earlier this month that he will step down as chief executive as soon as the company's board finds a successor.

Icahn has been among the loudest voices arguing for a new direction at Yahoo. He threatened to nominate a new slate of directors after the Sunnyvale, California, company rejected a $47.5 billion takeover offer from Microsoft this summer. Yahoo gave him a seat on its board and two other slots for members of his choosing.