Opinion

Ben Walsh

from Counterparties:

China’s other internet IPO

Ben Walsh
May 22, 2014 21:40 UTC

The Chinese internet IPO you haven’t been waiting for is finally here. JD.com, whichBloomberg Businessweek’s Bruce Einhorn calls “the closest thing to a Chinese version of Amazon.com”, priced its $1.8 billion offering at $19 a share, above the initial $16 to $18 range. It opened today on the NASDAQ at $21.75 and gained 10% in its first day of trading, valuing the company at approximately $30 billion.

Above-range pricing plus a nice opening day pop is as good a way as any to please both those selling stock in the IPO and those buying it. JD.com’s selling shareholdersinclude the company’s founder and CEO Richard Liu, Chase Coleman’s Tiger Global (best known for 45% returns in 2011), and Yuri Milner’s DST (an early investor in Facebook who helped Goldman Sachs to become a later investor in Facebook).

Interestingly, Alibaba is also probably pretty happy with the reception for one of its main ecommerce competitors. JD.com’s IPO, says Reuters David Gaffen, is seen as a precursor to Alibaba’s offering. The latter is a much, much larger compnay, both in terms of ecommerce – with 47 times the gross merchandise value of JD.com – as well as its sheer range of businesses.

The WSJ’s Michelle Yuan thinks JD.com’s successful-so-far listing could help Chinese tech stocks more broadly, if only by improving their vibes. (Which as methods for predicting short-term stock movements go is about as good as anything.) If you are looking for best-in-class governance, it’s better to look elsewhere, says DealBook’s Robyn Mak: the company revealed on Monday that it gave Liu $591 million in amusingly euphemistic “immediately vesting restricted stock units” (aka “stock he can sell immediately”).

What the company does offer, writes Quartz’s Gwynn Guilford, is a sort of Chinese online retail moonshot: a chance to convert inland provinces, which have 125 cities with a million plus residents, to ecommerce. The company, Guildford says, is going to spend more than a billion dollars of its newly raised capital on delivery infrastructure. That may please investors, but it won’t produce as immediate returns as the company’s first day of trading. — Ben Walsh

from Counterparties:

Glocalization hits home

Ben Walsh
May 21, 2014 21:26 UTC

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For a select few real estate markets, “location, location, location” is taking on a new meaning. Price is no longer a block by block or neighborhood by neighborhood consideration. There is, says James Surowiecki, an emerging global market for real estate. The case study is Vancouver, which has the median income of Reno but the costly property prices of San Francisco:

Sotheby’s examined more than twelve hundred luxury-home sales in Vancouver in the first half of 2013 and found that foreign buyers accounted for nearly half of sales. In Miami, a huge influx of money from Latin America has enabled the city’s housing market to recover from the bursting of the housing bubble, and has set off a condo-construction spree. Australia has become a prime market for Chinese investors, who Credit Suisse estimates will buy forty-four billion dollars’ worth of real estate there in the next seven years.

These locations are what Surowiecki, quoting urban planner Andy Yan, calls “hedge cities”. Legal, political, and social stability are extremely high. Foreign buyers who can afford to are ready to pay what to locals seem like frothy prices. The calculation is simple: it’s better to lose some of your principal on a condo in a Vancouver housing bubble than to lose everything in a coup.

from Counterparties:

Job insecurity

Ben Walsh
May 19, 2014 21:39 UTC

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Even positive news about long-term unemployment is depressing. 3.4 millionAmericans have been out of work for more than 27 weeks, a million less than last year. (27 weeks is the widely used definition of long-term joblessness.) Despite its recent decline, there’s still more long-term unemployment in the U.S now than in any pre-recession period since data-keeping began in 1948.

Matt O’Brien finds that your chances becoming a member of the long-term unemployed are almost twice as bad today as after the dot com bust. “Long-term unemployment isn't a story about lazy people choosing to live on the dole instead of getting a job”, says O’Brien. “It's a story about people who want a job not being able to find one... It’s a story about  macroeconomic bad luck”. The long-term unemployed are, on average, about as well educated as the shorter-term unemployed. (And the often-talked-about skills gap issomething of an urban myth across the board, according to Inc.’s Cait Murphy).

Paul Krugman thinks O’Brien refutes the idea “the long-term unemployed are workers with a problem”. In Krugman’s view, it’s not personal:

from Counterparties:

Renters get owned

Ben Walsh
Dec 19, 2013 23:15 UTC

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In 2012, the federal government spent $240 billion on housing aid, according to a new study by the Center on Budget and Policy Priorities. Despite the fact that 65% of American households are homeowners, 75% of housing aid, or $180 billion, is set aside for homeowners. Not only is federal housing aid disproportionately targeted to homeowners, it’s disproportionately targeted to the wealthiest homeowners. Here’s the CBPP:

The bulk of homeownership expenditures go to the top fifth of households by income, who typically could afford to purchase a home without subsidies... More than half of federal housing spending for which income data are available benefits households with incomes above $100,000.  The 5 million households with incomes of $200,000 or more receive a larger share of such spending than the more than 20 million households with incomes of $20,000 or less.

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.

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 Felix Salmon:

Counterparties: Government’s governance problem

Ben Walsh
Jun 12, 2013 22:21 UTC

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The US and UK have a unique sort of corporate governance mess on their hands. Both countries are trying to deal with the complications of owning a multi-billion dollar financial institution, and are having a hard time doing so.

Britain’s problem is RBS, which the government owns 81% of as a result of 2008 bailout that ended up costing $71 billion. In the US, it’s Fannie Mae and Freddie Mac, the mortgage giants that have been under federal conservatorship since 2008.

from Felix Salmon:

Counterparties: Living longer with less

Ben Walsh
Jun 10, 2013 22:31 UTC

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Americans with $1 million in savings may be in for a dispiriting surprise -- they still haven’t saved nearly enough. The problem, reports the NYT’s Jeff Somer, is that bond yields have fallen and life expectancies have risen.

A  65-year old couple with a $1 million nest egg of tax-free municipal bonds that withdraws 4% per year, Somer says, has a 72% chance of running through their retirement savings before they die. The even larger problem is that the millionaire 65-year old couple is far from typical. The median household retirement account balance for Americans aged 55-64 is just $120,000.

from Felix Salmon:

Counterparties: America’s consistently dissatisfying jobs market

Ben Walsh
Jun 7, 2013 21:44 UTC

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America's jobs market seems to have found its boring, dissatisfying comfort zone.

The Labor Department announced today that the US economy added 175,000 thousand jobs in May. (Unemployment ticked up a notch to 7.6%.) Matthew O’Brien writes that this is basically the same thing that’s been happening for the past two and a half years. “There were 175,000 new jobs a month in 2011, 183,000 in 2012, and 189,000 so far in 2013.” Kevin Roose thinks “there's something to be said for this kind of quiet, steady progress”.

from Felix Salmon:

Counterparties: The unbearable lightness of silicon beings

Ben Walsh
Jun 4, 2013 22:04 UTC

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If you build a company on something lighter-than-air, will it inevitably float back to earth? Kara Swisher reported yesterday that Zynga is laying off 520 employees and closing its LA and New York offices. The company’s core business -- selling desktop games for Facebook -- is declining, and the company says it is focusing on the faster-growing but less profitable mobile market. Zynga’s stock is now down 70% since it went public in December 2011.

Two years ago, Zynga was declared the winner of the “great social game Gold Rush”. Better than anyone, it figured how to make money out of the inordinate amount of time wasted on Facebook. It never was, and won’t ever be, a “frighteningly ambitious startup”. Despite being a big financial success, Zynga always had limited ambition.

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