Opinion

Ben Walsh

from Counterparties:

A long home run

Ben Walsh
Sep 24, 2013 21:24 UTC

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It’s been a very, very good first seven months of the year for home prices. The WSJ’s Nick Timiraos notes that home prices rose in the first seven months of 2013 at the fastest rate since 2004, the approximate start of the housing bubble. “The year-to-date gains,” he adds, “are the most eye-opening”:

Prices in July stood 11.2% above the level of December 2012. By contrast, prices in the same period last year were up 5.8%. In 2004, prices rose by 11.3% year-to-date through July.

Extend the timeframe to a year and things still look rosy, bordering on bubbly depending on your perspective: Bloomberg’s Shobhana Chandra writes that the 12-month increase of 12.4% is the biggest annual gain since February 2006. Calculated Risk’s Bill McBride notes that this mean that “in real terms - and as a price-to-rent ratio - prices are mostly back to early 2000 levels”.

There are indications that some investors are ready to use strong price increases as a reason to exit investments made after the financial crisis. Goldman Sachs, JP Morgan, and George Soros are filing to sell a little more than half of their $500 million initial investment in mortgage insurer Essent.

The opportunity cost of buying iPhones and Cronuts

Ben Walsh
Sep 20, 2013 22:33 UTC

Quartz’s Ritchie King did some excellent reporting this morning, producing the infographic of the day: “The line for new iPhones vs the line for cronuts”. The line for new iPhones is 250 meters, or 92% longer than the line for the iPhone.

What this analysis fails to capture is the opportunity cost of waiting in line for the iPhone compared to The Cronut™. Here’s a back of the envelope calculation:


Conclusion: The Cronut™ has lower opportunity costs in absolute dollar terms, but far higher relative opportunity costs. Also, if you going to wait in line for an iPhone, buy a 5S. Interestingly, while Dominique Ansel is selling a baked good, the cost to his customers almost entirely consists of waiting in line.

from Counterparties:

Retweet to Wall Street

Ben Walsh
Sep 13, 2013 22:04 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com. After a series of coy comments stretching back to December, yesterday Twitter announced it had filed for an initial public offering. We know this because the company tweeted so, not because the registration documents, or the company’s financial disclosures, are publicly available.

Under the the JOBS Act that President Obama signed into law on April 2012, Twitter’s IPO documents don’t need to be made public until 21 days before the company starts meeting with potential investors.

The filing is not, as it has been variously described, a secret IPO. It’s more of a confidential negotiation process, made possible by the JOBS Act. Matt Levine points out that during Twitter’s extra-quiet period, the SEC can request changes to the company’s filings, which should in theory mean fewer last minute addendums to its prospectus.

No, it’s not secret – a guide to Twitter’s confidential IPO filing

Ben Walsh
Sep 13, 2013 17:54 UTC

Twitter filed for an initial public offering: we know this because the company tweeted so, not because the registration documents, or the company’s financial disclosures, are publicly available. Twitter didn’t even have to tweet what it did: its not legally required to say that it has filed registration documents with the SEC (it did that voluntarily).

When did the process of filling IPO documents become confidential?

Here’s how the JOBS Act alters the IPO process:

    Its changes only apply to companies with less than $1 billion in annual revenue. Anything more, and the standard IPO process applies: registration documents, including a prospectus and financial details like revenue and profit, are public as soon they are filed with the SEC; and amended with increasing detail as the company gets closer to selling its shares.

    These companies (referred by the law as emerging growth companies) are allowed to file their IPO registration documents confidentially with the SEC.

Inflation is too low; how does it get too high?

Ben Walsh
Sep 13, 2013 13:30 UTC

“Inflation can be too low as well as too high.” That was Fed governor Jerome Powell’s warning back in June. The data show that, based on the Fed’s own target of 2%, inflation is too low:

An interesting question is why post-crisis inflation has been so low, and what causes high inflation. Here’s a rundown of some of the debate.

Low inflation doesn’t seem to be for lack of effort

Mike Konczal made an important point in June. “Inflation is collapsing in 2013”, he wrote, despite the fact that “the Federal Reserve took extraordinary actions at the end of last year to hit its inflation target… The fact that inflation is falling even when more action is being taken should have us questioning whether a 4% move would have any traction”.

from Counterparties:

Golden delicious

Ben Walsh
Sep 10, 2013 22:03 UTC

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Apple has decided that there can, in fact, be more than one. The company announced today it is releasing two new iPhone designs: the iPhone 5S and the 5C.

The 5C starts at $99, with contract. In another first for Apple, the 5C comes swathed in variable shades of high molecular mass petrochemical polymers (aka plastic). The more expensive 5S, which starts at $199 with contract, also breaks new visual ground by coming in a golden, vaguely champagney color last seen in mid-1990s Mercedes sedans.

Chart: Selling the headline, buying the complete transcript

Ben Walsh
Sep 6, 2013 17:22 UTC

At the G20 today, Russian President Vladimir Putin spoke about about Syria. His comments were reported by Bloomberg “will provide assistance if the U.S. launches military action against the country [Syria]“, under the headline “U.K. Stocks Drop as Putin Says Russia Will Help Syria“.

Both the FTSE 100 and the S&P 500 dropped as the story was published at about 9:45 EST. At its lowest, the S&P fell 20 points, or about 1.2%, and the FTSE 100 fell 55 points, or about .8%.

The full context of Putin’s comments seemed to be less worrying to international stability than they initially appeared, and in fact were in line with his previous comments on Syria. As this was digested, both markets recovered.

from Counterparties:

G20 economic questions

Ben Walsh
Sep 5, 2013 22:00 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

Under normal circumstances, the most important things to happen at a G20 meeting are cordial handshake photo ops. (Here’s our roundup of April’s meeting.) This G20 gathering, hosted by Russia in St. Petersburg, is already looking quite different. Here’s our guide to the major themes being discussed at the G20:

Syria:

Reuters’ Timothy Heritage reports that the split between the US and Russia over Syria is likely to overshadow a meeting that was supposed to be focused squarely on jumpstarting the global economy. The Council on Foreign Relations’ Stewart Patrick says that as a result, this G20 will be the “summit of compartmentalizing... focus on economic recovery while ignoring the elephant in the room”. Sort of the international relations version of how you get along with your family.

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