April 3, 2012

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Groupon’s first set of financial statements as a public company did not go well: The company is being examined by the SEC in the wake of its restatement of revenue. And Andrew Ross Sorkin is using the news to ask President Obama why he supports weaker protections for investors. The bill, Sorkin writes, could open the door for companies like Groupon to conceal information from investors. If you bought Groupon when it opened, he notes, you’d have already lost 41 percent of your investment in just five months:

Its goal is noble: start-ups and small businesses are the lifeblood of our economy, and it is hard to argue with helping entrepreneurs build businesses and hire employees.

However, the legislation, in the name of creating jobs, dismantles some of the most basic protections for the most susceptible investors apt to be drawn into get-rich-quick scams and too-good-to-be-true investment “opportunities.”

Henry Blodget said Sorkin was confusing investor protections with the investors’ well-established tendency to overvalue stocks. Investor emptor, in other words.

The Harvard Business Review‘s Justin Fox smartly triangulated between these positions:

Most of the money lost by individual investors in financial markets is lost to bad luck and poor decision-making, not inadequate accounting rules or financial regulation. Individual investors should be disabused of the notion that investing in IPOs like Groupon’s is a safe and responsible path to financial security. So is the way to do that with more rules and disclosure, or by offering fewer regulatory assurances and cultivating more of a caveat emptor attitude among investors?

So, depending on how you look at it, investor protections are either crucial to the public interest or a potentially misleading stamp of approval from regulators. Confused? There’s more here on the good and bad of the JOBS Act.

Beyond Groupon, today was the day the econoblogosphere got its version of a cute baby animal GIF: this encouraging entry for the Wolfson Economics Prize, made by an 11-year-old from the Netherlands, complete with a hand-drawn chart showing a pizza currency-exchange mechanism. If that doesn’t warm your heart, well…

On to today’s links.

Will Wilkinson tears into Weisenthal’s Romney-is-good-for-the-economy argument – The Economist

Reinhart and Rogoff: The U.S. may not return to trend growth after the crisis – Bloomberg
“The cost of too little growth far outweighs the cost of too much” – Bloomberg

I am quitting Goldman Sachs and despite what you have may heard, it was fantastic – Wall Street Oasis

Billionaire Whimsy
Jim Dolan accuses Mort Zuckerman of extortion – Forbes

Financial Arcana
Muni CDS now one step closer to being exchange-traded – WSJ

Old Normal
U.S. child miners from the 1900s – Retronaut

Eye of the Beholder
Meet the Utah man whose anti-Obama art is selling for six figures – Buzzfeed

Primary Sources
RBC charged in multi-hundred-million-dollar tax-evasion trading scheme – CFTC
Full FOMC minutes: Economy “a bit stronger overall,” unemployment still “elevated” – Federal Reserve

Firsthand Accounts
Quant prop trader: “I wouldn’t try to raise the price of rice and starve China” – The Guardian

You absolutely do not want Carl Icahn to run your company – Harvard Business Review

New Normal
America has seen no increase in college graduation rates in the last 30 years – Middle Class Political Economist

GSA chief resigns over Las Vegas conference that featured “a clown, a mind reader and a $31,208 reception” – WashPost

Long Reads
Why exports will “resurrect the United States as a dominant global economic power” – American Interest

James Murdoch steps down as chairman of BSkyB – Reuters

Close Encounters
What happens when Joe Nocera meets Jamie Dimon in an elevator – NYT



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