Opinion

Ben Walsh

from Counterparties:

Alibaba’s New York debut

Ben Walsh
Mar 19, 2014 21:57 UTC

Alibaba, the Amazon, eBay, and Paypal of a country with 618 million internet users, is going public. The company will raise around $20 billion at an approximately $150 billion valuation, with the roadshow scheduled to begin March 25; the underwriting banks are expected to make $400 million in fees on the deal.

That valuation is built in part on assumptions about the future growth of Chinese ecommerce. China already buys more by dollar value online than the US does, and KPMG estimates that by 2015, online transactions in China will hit $540 billion, up from $190 billion in 2012.

The market isn’t without competition. Alibaba is currently in the midst of fighting for payments and messaging users with Tencent, a gaming and social media company. Forrester Research's Bryan Wang calls it “one of the most expensive competitions in online history”.

Tencent recently reported that its profit increased just 1% from the third to fourth quarter. Both companies would be significantly affected if the Chinese government followed through on recent hints and regulated third-party payment systems.

One thing Alibaba is unlikely to have to contend with is meddlesome shareholders. Reuters’ James Saft points out that the company chose to list on the NYSE rather than in Hong Kong for reasons of simple regulatory arbitrage. Last year, Hong Kong regulators rejected Alibaba’s proposed dual share structure, so the company decamped to New York instead. The NYSE allows dual-class listings, and some exemptions from the Sarbanes-Oxley Act for foreign companies. Bloomberg View’s James Pesek thinks the decision to list in New York has drawbacks for Alibaba, including “greater accounting scrutiny, increased exposure to lawsuits and far more stringent intellectual property rights laws”.

from Counterparties:

McCarthyisms

Ben Walsh
Mar 18, 2014 21:37 UTC

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Ryan McCarthy has decided to leave the world’s most prestigious Canadian-British news agency to join the local paper of a small, disenfranchised mid-Atlantic district.

Before he goes, we wanted to remind you all what we’re losing. For starters, the person who wrote headlines like “950 shades of grey”, “MOOC ado about nothing”, “Aging bull”, “Madvillainy”, “Beef Rogoff”,  “Where synergies go to die”, and “Our sweet creamy center cannot hold”.

from Counterparties:

Take that, copper!

Ben Walsh
Mar 13, 2014 22:26 UTC

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In the last week, the price of copper on the London Metal Exchange has dropped 9%, to its lowest level since 2009. The start of the decline coincided with China’s first corporate bond default. BofA analysts called the default China’s “Bear Stearns moment” -- the first major event of a what could be a severe financial crisis. With China consuming 40% of the world’s copper, a Chinese crisis would be trouble for global copper prices (among other things).

The FT’s Jamil Aderlini called BofA’s characterization a “bold, attention-seeking call that is also patently ridiculous”. Aderlini points out that the default was by a small Chinese company in the always-on-the-verge-of-crisis industry of solar panel manufacturing. It’s rare for a single analyst note to cause an extended sell-off, and Joe Weisenthal points to two more plausible reasons for the decline: “Copper has a reputation for being a good global economic bellwether... Copper also plays a role in the Chinese financial system (as collateral)”.

from Data Dive:

America’s job market: still not good enough

Ben Walsh
Mar 11, 2014 21:23 UTC

On Tuesday morning, the most recent Bureau of Labor Statistics Job Openings and Labor Turnover (JOLTs) data showed that the rate of hiring, turnover, and the number of open jobs was basically flat.

A little explanation: The hiring rate is the number of peopled hired as a percent of total employment. The JOLTs report also tracks the quits rate, which is the number of people who have voluntarily quit as a percent of total employment. Taken together, the quit rate and the hire rate represent a good proxy for the level of choice workers, particularly the already employed, have in the job market.

This chart shows that the level of choice in the job market within the workforce plummeted during the Great Recession. It has gradually improved over the last four years, but is still at right around 2008 levels. And this is likely still not fully representative of the job market: because it tracks quits, and there is a bias to hire the already employed, this chart more accurately reflects job choice among the employed than the unemployed.

from Counterparties:

The London Eye

Ben Walsh
Mar 10, 2014 22:06 UTC

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“In their capital city, the English are no longer calling the shots. They are hirelings”. That’s Ben Judah’s description of present day-London, in a NYT op-ed which went viral over the weekend. To Judah, London is a place filled almost exclusively with Russian oligarchs, Qatari princes, tottering post-colonial diplomats, Eastern European laborers, skyscrapers, and slums. Its mission is to placate Russians and their money, most recently in the form of Ukraine policy. Judah sees the Shard -- which is Europe’s tallest building and will be filled with offices, Michelin-starred restaurants, and mega-residences -- as an emblem of London’s decline. As it seems he intended, Judah elicited strong feelings by lacing his piece with hyperbole and caricature.

The Telegraph’s Sean Thomas skewers Judah’s Shard-as-symbol thesis:

What did you do over the sunny weekend? If you are a Londoner, you probably drank a crate of champagne with your best friend Ivan and several nude escorts, in your flat on top of the Shard. Or so the New York Times would have us believe, according to a rhapsodically stupid article published on Friday.

from Counterparties:

Finding Nakamoto

Ben Walsh
Mar 6, 2014 22:48 UTC

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Satoshi Nakamoto invented bitcoin in 2008.

Who is he? In the past few years, there have been no shortage of theories:

Tatsuaki Okamoto, a researcher at NTT, the Japanese telecom company.

Micheal Clear, a 23-year old graduate student at Trinity College, Dublin.

Vili Lehdonvirta, a Finnish programmer.

Shinichi Mochizuki, a math professor at Kyoto University.

Neal King, Vladimir Oksman, and/or Charles Bry, whose names were on a 2008 patent application for “updating and distributing encryption keys”.

Jed McCaleb, the co-founder of now defunct bitcoin exchange Mt Gox.

Dustin Trammell, a security researcher.

Or, Satoshi Nakamoto, a 64-year old, LA-area, Prius-driving model-train enthusiast, who Newsweek’s Leah McGrath Goodman tracked down with the help of forensic researchers.

from Counterparties:

How Mt Gox died

Ben Walsh
Feb 28, 2014 23:01 UTC

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Mt Gox is filing for bankruptcy. CEO Mark Karpeles says that the nearly $500 million in bitcoin held by the company are gone. The four-year-old Mt Gox, which was the oldest and largest bitcoin exchange, has $63.7 million in liabilities, $37.6 million in assets and 127,000 creditors, Reuters reports.

The problem appears to be in part because of something called transaction malleability attacks. Those attacks work like this: each bitcoin transaction has a unique, individual -- and theoretically impossible to fake -- ID code. The problem is that the user digital signature (the part of the transaction code that shows which user the transaction came from) was vulnerable. That signature could be altered and still potentially accepted. As a result, the same transaction could be sent into the system multiple times: once as a valid transaction from a valid user, and other times as an invalid transaction that looked like a valid transaction.

from Counterparties:

Griffindor

Ben Walsh
Feb 20, 2014 22:30 UTC

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Harvard, a $33 billion hedge fund with a university attached, has received the largest donation in its history. Citadel founder Ken Griffin has pledged to give the university $150 million.

The donation will support 800 eponymous scholarships, and a new business professor. The office of financial aid, along with its director, will also be renamed in his honor. Harvard already employs need-blind admissions, and has made no indications that it is under any financial pressure to end that policy. 60% of its students receive financial aid.

from Counterparties:

$10.10 wins

Ben Walsh
Feb 19, 2014 23:33 UTC

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President Obama has made increasing the minimum wage a centerpiece of his push to address income inequality. The Congressional Budget Office has now weighed in on the economic consequences of that proposal.

The CBO estimates that raising the federal minimum wage to $10.10 (a level the President reportedly supports) would increase wages for 16 million Americans, lift 900,000 people out of poverty -- and cost the economy 500,000 jobs.

from Counterparties:

The disturbing rash of finance suicides

Ben Walsh
Feb 18, 2014 19:41 UTC

There's been a spate of suicides among current and former finance workers recently. Earlier today, a 33 year-old committed suicide by jumping from the roof of JP Morgan's Asia headquarters in Hong Kong.

    January 26: William Broeksmit, a former Deutsche Bank executive, was found hanging in his London home. Broeksmit joined Deutsche from Merrill Lynch in the 1990's and helped start the German firm's investment banking business. After the financial crisis, he worked to shrink the company's balance sheet and reduce risk. January 28: Gabriel Magee fell to his death from JP Morgan's London Canary Wharf offices. Magee was a vice president in the banks corporate and investment bank technology group. Magee's death is being treated by London law enforcement as non-suspicious. January 31: Mike Dueker, the chief economist at Russell Investments, was found dead of an apparent suicide next to a Washington State highway. He had been reported missing by his family two days earlier. Dueker worked at the Saint Louis Fed from 1991 to 2008. February 4: Richard Talley, the founder and CEO of American Title Services killed himself in his Colorado home, reportedly shooting himself seven to eight times with a nail gun. American Title Services was under investigation by Colorado's insurance regulator.

In September, Steven Stack, a West Virginia University professor who studies suicide, told the International Business Times that "we know very little about the degree of suicide risk for this small occupational group". Cause of death is recorded by at the state level; states, Stack said, don't necessarily record the occupation of the deceased. The result is haphazard, incomplete, and unreliable data.

Occupational stress, the trigger so often associated with banker suicides, is only one of four main risk suicide factors, according to Stack. The other three major risk factor Stack identifies are: demographics (the white, the middle-aged, and men have higher a higher risk of killing themselves); "pre-existing psychiatric morbidity"; and ease of access to a means of death. The latter may explain why what data is available shows healthcare workers with ready access to lethal drugs have higher suicide rates.

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