Opinion

Ben Walsh

from Counterparties:

Greenspan shrugged off

Ben Walsh
Oct 21, 2013 22:12 UTC

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Based on the reviews of his new book “The Map and The Territory”, Alan Greenspan’s stock has fallen precipitously since he left the Federal Reserve to widespread acclaim in 2006.

Bloomberg’s Daniel Akst calls the book infuriating, writing that the “plodding text oscillates maddeningly between equivocation and chutzpah”. Akst slams Greenspan for calling the financial crisis “almost universally unanticipated”, despite what Akst says were “a host of indicators that were pointing to trouble”. Akst is frustrated that despite the book’s subtitle (“Risk, Human Nature, and the Future of Forecasting”), and the author’s self-professed expertise in economic forecasting, how Greenspan could have not seen danger ahead is barely explored. Furthermore, Greenspan’s claimed concern for federal deficits is undercut, Akst writes, by his endorsement of both of President Bush’s rounds of tax cuts.

The WaPo’s Steven Pearlstein says Greenspan’s effort at introspection simply yields a reiteration of his prior “unshakable faith in free markets, an antipathy toward market regulation, and a conviction that progressive taxes and social spending are to blame for slow growth, stagnant wages and exploding deficits”.

Paul Krugman expands the criticism, pointing to “Greenspan’s amazing track record since leaving office — a record of being wrong about everything, and learning nothing therefrom”. Greenspan’s refusal to accept responsibility for his misjudgment makes him, in Krugman’s view, not just a “bad economist... he’s being a bad person”.

from Counterparties:

Twitter economics

Ben Walsh
Oct 16, 2013 21:57 UTC

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As its mid-November IPO approaches, Twitter is losing money at an accelerating pace. The company’s amended filings show that last quarter it approximately doubled revenues to $168.6 million compared to a year ago, while its net loss more than tripled to $64.6 million. Fortune’s Stephen Gandel digs into the new numbers, and how Twitter changed the way it's booking revenue:

Twitter derives most of its revenue from advertising. Most of the deals it strikes with advertisers are not fixed upfront... Twitter says that in most instances it only counts the revenue from a deal after the services have been delivered and the company knows how much it will get paid. But it says in some more complicated deals, it resorts to estimating what it might get paid.

from Counterparties:

Janet Yellen, in other people’s words

Ben Walsh
Oct 9, 2013 22:15 UTC

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Janet Yellen today accepted the President's nomination to be the next chair of the Federal Reserve. We're here to help you get up to speed:

"Yellen continued her tradition of standing in the cafeteria lunch line with the proletariat and eating with the staff." - Bloomberg Businessweek

from Counterparties:

Emerging slowdown

Ben Walsh
Oct 8, 2013 21:34 UTC

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The IMF’s latest projections on the fate of the world economy are out: if you’re interested in 249 pages of “Transitions and Tensions,” which is this year’s theme, read the full report. The shorter version is that the world economy, the IMF writes, is in “low-gear”. The US is engaging in “excessive fiscal consolidation” (read: the sequester and shutdown); Japan’s economy is growing, but fiscal policy should tighten next year; and the Euro area is “tepid.” The Economist breaks the report down in interactive chart form. As Reuters notes, this is the sixth straight time in less than two years that the IMF has cut its global growth forecasts.

Neil Irwin sums up the report in four words: “Not good at all.” The IMF’s global growth projection for 2013 was revised down to 2.9% from 3.2% in July. US growth was also revised down to 2.6% from 2.7%, and Euro growth was revised up the same amount to 1%. Things look even worse in emerging markets: India’s growth projections were slashed by 1.8%, Mexico’s was cut 1.7%, and Russia’s was down 1%. Yesterday, the World Bank also cut its growth forecast for China and East Asia.

from Counterparties:

Following Twitter’s #IPO

Ben Walsh
Oct 4, 2013 21:00 UTC

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Twitter has finally filed public IPO papers, giving the world a look at its financials for the first time. The news sent shares of Tweeter, a home sound system company, up 1,500% at one point simply because its ticker, TWTRQ, can be confused with TWTR, the symbol Twitter will use when it actually does go public. Dan Primack’s sources tell him that will happen on November 8.

The reaction to Twitter’s financial disclosures was a bit more muted. Kara Swisher has a good rundown of the numbers: The company lost $79 million in 2012 on revenue of $317 million, and lost $69 million on $254 million in the first half of this year. Peter Eavis writes that Twitter’s IPO could value the company at $12 billion. Even at Twitter’s August valuation of $9.7 billion, investors valued the company at 22 times revenue, which he says is high for a tech company. Facebook is currently trading at 12 times the revenue analysts project it will earn next year, Eavis adds. Cyrus Sanati argues that Twitter is lagging its rivals in the online ad space, and is simply not ready for Wall Street.

from Counterparties:

Getting highs (and lows) with Bitcoin

Ben Walsh
Oct 3, 2013 22:19 UTC

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The FBI has shut down Silk Road, a website where users could anonymously “buy any drug imaginable”. The site’s founder, Ross Ulbricht (screenname Dread Pirate Roberts), was indicted for narcotics trafficking, computer hacking, money laundering, and allegedly ordering the assassination of two online enemies.

This is all very bad news for the more than 900,000 registered Silk Road users looking to buy illegal goods. Gerry Smith writes that Silk Road copycats are already popping up to fill demand for drugs. But counterintuitively, it’s good news for Bitcoin, argues Kevin Roose:

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.

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.

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