(BN) Facebook Is Said to Plan $10 Billion IPO, Valuing Network at $100 Billion

November 28, 2011

Quick, everyone commit Facebook suicide now! Join Google+.

Only thing better than a proposed record IPO and valuation for FB would the largest loss of value in the shortest amount of time.

Nothing personal, the site just sucks. If they weren’t such abusers of the security settings someone might actually trust them.

Someone should create the 2010-2011 ETF that shorts all the new Dot Coms. Valuations are crazy.

I’d bet Facebook, Groupon, Pandora, Zillow, Opentable, etc all end up being worth less combined than anyone of them are this year. Didn’t we learn this lesson in 2000? Or do we just have a whole new generation of suckers.

Facebook Said to Plan $10 Billion IPO at $100 Billion Valuation

Nov. 28 (Bloomberg) — Facebook Inc. is considering raising about $10 billion in an initial public offering that would value the social-networking site at more than $100 billion, a person with knowledge of the matter said.

Facebook may file for an IPO before the end of the year, said the person, who asked not to be identified because the deliberations are private. Exact timing for the filing hasn’t been determined, the person said.

At $10 billion, the offering would raise more money than any other technology IPO, a sign investors are eager to get a piece of the top social-networking company. The amount would dwarf that of the previous record holder, Infineon Technologies AG, which generated $5.23 billion in its 1999 debut. Agere Systems Inc. raised $4.14 billion in 2000, putting it second.

Facebook’s $100 billion valuation would be twice as high as it was in January, when the company announced a $1.5 billion investment from Goldman Sachs Group Inc. and other backers at a worth of $50 billion. Facebook is currently pegged at $66.6 billion on SharesPost Inc., which handles trading of closely held companies.

Facebook expects to be required by U.S. regulators to disclose financial results by April 30, 2012, if it doesn’t go public by then, the company said in January. The social- networking company decided to wait until 2012 for its IPO to give Chief Executive Officer Mark Zuckerberg more time to gain users and boost sales, three people said last year.

Jonathan Thaw, a spokesman for Palo Alto, California-based Facebook, declined to comment.

The Wall Street Journal reported earlier today that Facebook is discussing a $10 billion IPO with a valuation of more than $100 billion. The company aims to go public between April and June, the Journal said.

To contact the reporters on this story: Douglas MacMillan in San Francisco at dmacmillan3 Brian Womack in San Francisco at bwomack1

To contact the editor responsible for this story: Tom Giles at tgiles5

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Thoughtful Chart of the Day

November 28, 2011

If true, this chart has dramatic implications for the longer term effects of global sovereign debt problems.

Common sized cuts in government spending would have dramatically different implications on possible future unemployment scenarios, with Europe and even China looking to be in a more precarious position than the US if sovereign funding dries up.

One can certainly see the roots of a possible future that rhymes earily with the western European economic ills that lead to WWII.

It’s certainly a long way from here, but time has a way of moving quickly.


(BN) Apple’s ‘Digital Pacifier’ IPad Has Parents Emptying Their Wallets: Tec h

November 28, 2011

My son gets iMad when he can’t play “monkey game”.

Apple’s IPad-Crazed Toddlers to Spur Holiday Sales Rush: Tech

Nov. 28 (Bloomberg) — One iPad isn’t enough for Patrick Smith’s family.

Smith, an American Web designer living in Germany, has two kids vying for their tablet computer. The youngest started tapping and finger-swiping the screen by age 1, leading to tussles over who gets to play with the Apple Inc. device. Now Smith is considering buying another tablet for Christmas.

“It’s usually a fight to decide whose turn it is,” said Smith, whose sons are now 2 and 5.

The family jockeying shows how big the youth market may be for Apple and its tablet competitors, including Amazon.com Inc. and makers of Android devices. Among kids age 6 to 12, the iPad is the most-wanted holiday gift for the second year in a row, according to Nielsen Co. Even so, the industry faces hurdles. That includes setting a price parents can live with and dealing with concerns about kids getting hooked on technology too early.

About 61 percent of iPad buyers are parents, estimates BlueKai Inc., which compiles consumer data. The market’s growth isn’t just generating revenue for tablet makers, it’s increasing demand for kid-oriented content. Companies ranging from Walt Disney Co. to small startups are developing games, interactive books and other software to appeal to children.

“Kids just get it — they touch it and it moves,” said Jamie Pearson, founder of BestKidsApps.com, a review website with almost 300,000 monthly page views, 40 percent of which are for apps aimed at kids under 5. “It’s like any other natural language at that age; they just pick it up.”

Learning to Write

According to Forrester Research Inc., 29 percent of tablet owners regularly share the device with their kids. Among mothers, it’s 65 percent. One Apple commercial shows a young child learning to write using the iPad 2.

For Apple, the youth market presents opportunities and challenges. While the iPad is the top-selling tablet, many parents may opt for lower-cost models if they know they’re putting them in the hands of children. Amazon’s Kindle Fire is less than half the price of the iPad.

When asked to choose between the $199 Kindle Fire and the $499 iPad, 51 percent of consumers opted for the Amazon product, according to a survey by Parks Associates. Smith said he is considering a Kindle Fire for his family’s second tablet.

“It’s a low enough price point that it forces that couch- potato consumer to get up off the couch and buy something like this,” said Sucharita Mulpuru, an analyst at Cambridge, Massachusetts-based Forrester. “There’s almost no reason not to.”

‘Digital Pacifier’

Still, tablets have raised concerns among child advocates. As much as kids enjoy playing with an iPad, parents should limit the amount of time they spend plopped down with the device, said Gwenn O’Keeffe, a pediatrician in Boston who has studied the effects of technology on children and works with the American Academy of Pediatrics. Toddlers under 2 shouldn’t play with an iPad unless it’s only being used to display books, she said.

Victoria Nash, a researcher at the Oxford Internet Institute who also has studied the topic, said some parents use gadgets as a “digital pacifier.”

“We know already that there are dangers with watching too much television and doing too much online gaming,” she said.

A new book, “Goodnight iPad,” a parody of the popular children’s book “Goodnight Moon,” reminds parents to unplug by poking fun at the how much time is spent in front of computer and television screens each day.

Apple has sold more than 28.7 million iPads since the product’s debut last year, generating $18.4 billion. Apple may sell a record 20 million iPads globally during the holiday quarter, according to Forrester.

Games, Books

Companies are lining up to capitalize on that growth. Disney has released an iPad game linked to its movie “Cars” in which kids can drive a small plastic car along a road shown on the iPad. Bertelsmann AG’s Random House has released interactive versions of “Dr. Seuss” books as apps. Smaller companies such as Callaway Digital Arts and TouchyBooks also are introducing titles tailored to youngsters.

Steve Jobs, Apple’s late co-founder, saw potential for applications aimed at children. Jobs introduced Callaway Digital Arts founder Nicholas Callaway to Kleiner Perkins Caufield & Byers, a venture firm that then led an investment round of almost $7 million in the startup. Callaway Digital Arts makes titles based on “Sesame Street” and “Thomas & Friends.”

Rex Ishibashi, chief executive officer of the company, puts the U.S. market for kids’ iPads apps at more than $500 million.

“The kids are gravitating towards these devices because they make sense,” he said. “They are intuitive.”

Tapping the TV

Ilan Abehassera, an Internet entrepreneur in New York, has his own tales of iPad-infatuated kids. His 2-year-old son constantly reaches for his iPad to see YouTube clips and interactive books. That’s forced Abehassera to limit how much time the boy spends with the tablet.

“When we don’t give it to him, he goes crazy,” Abehassera said.

The iPad will be many children’s first experience with a computer, a phenomenon that will affect the design of future consumer electronics, said Tom Mainelli, an analyst with Framingham, Massachusetts-based IDC.

A popular YouTube video shows a toddler frustrated with a magazine because she can’t zoom in on the pictures. In Abehassera’s case, his son taps the television screen to try to get it to play videos.

“The generation that is growing up with touch is going to demand it on all their devices going forward,” Mainelli said.

To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1 Katie Linsell in London at klinsell

To contact the editor responsible for this story: Tom Giles at tgiles5

Find out more about Bloomberg for iPhone: http://m.bloomberg.com/iphone/

7.7 Trillion Dollars

November 27, 2011

That was the largest dollar amount funded, guaranteed or otherwise backstopped by the Fed during the financial crisis. US GDP is a little more than twice that.

We need a more distributed financial system. The cost of concentration now vastly exceeds the efficiencies of scale.


Solar Wars Continue

November 25, 2011

CNBC.com Article: China Probes US Subsidy For Renewable Energy

China’s Commerce Ministry on Friday announced an investigation into U.S. government policy and subsidy support for renewable energy, after a U.S. decision earlier this month to probe sales of Chinese-made solar panels in the United States.

Full Story:

J. Giels Bank

November 16, 2011

Original lyrics from the J. Geils Band

You owe her
But she owes him
And he owes somebody else
You just can’t win
And so it goes
Till the day you die
This thing they call risk
It’s gonna make you cry
I’ve had the blues
The reds and the pinks
One thing for sure

(Banks stink)
Banks stink yeah yeah
(Banks stink)
Banks stink yeah yeah
(Banks stink )
Banks stink yeah yeah
(Banks stink )
Banks stink yeah yeah

Two by two and side by side
Risk’s gonna find you yes it is
You just can’t hide
You’ll hear it call
Your bank will fall
Then risk gets high
It’s gonna soar
I don’t care for any counter-party thing
All I can say is
Banks stink

(Banks stink)
Banks stink yeah yeah
(Banks stink)
Banks stink yeah yeah
(Banks stink )
Banks stink yeah yeah
(Banks stink )
Banks stink yeah yeah

I’ve been through Lehman
I’ve called a Brinks
I’ve been through it all
Banks stink

(Banks stink)
Banks stink yeah yeah
(Banks stink)
Banks stink yeah yeah
(Banks stink )
Banks stink yeah yeah
(Banks stink )
Banks stink yeah yeah
(Banks stink)

JPMorgan Joins Goldman Keeping Italy Derivatives Risk in Dark

Nov. 16 (Bloomberg) — JPMorgan Chase & Co. and Goldman Sachs Group Inc., among the world’s biggest traders of credit derivatives, disclosed to shareholders that they have sold protection on more than $5 trillion of debt globally.

Just don’t ask them how much of that was issued by Greece, Italy, Ireland, Portugal and Spain, known as the GIIPS.

As concerns mount that those countries may not be creditworthy, investors are being kept in the dark about how much risk U.S. banks face from a default. Firms including Goldman Sachs and JPMorgan don’t provide a full picture of potential losses and gains in such a scenario, giving only net numbers or excluding some derivatives altogether.

“If you don’t have to, generally people don’t see the advantage to doing it,” said Richard Lindsey, a former director of market regulation at the U.S. Securities and Exchange Commission who worked at Bear Stearns Cos. from 1999 through 2006. “On the other hand, if there were a run on Goldman Sachs tomorrow because the rumor was that they had exposure to Greece, you’d see them produce those numbers.”

A case in point: Jefferies Group Inc., the New York-based securities firm, disclosed every long and short position it held on European debt earlier this month after its shares plunged more than 20 percent. Jefferies also said it wasn’t relying on credit-default swaps, contracts that promise to pay the buyer if the underlying debt defaults, as a hedge on European holdings.

‘Funded’ Exposure

By contrast, Goldman Sachs discloses only what it calls “funded” exposure to GIIPS debt — $4.16 billion before hedges and $2.46 billion after, as of Sept. 30. Those amounts exclude commitments or contingent payments, such as credit-default swaps, said Lucas van Praag, a spokesman for the bank.

Goldman Sachs includes CDS in its market-risk calculations, of which value-at-risk is one measure, and it hedges the swaps and holds collateral against the hedges, primarily cash and U.S. Treasuries, van Praag said. The firm doesn’t break out its estimate of the market risk related to the five countries.

JPMorgan said in its third-quarter SEC filing that more than 98 percent of the credit-default swaps the New York-based bank has written on GIIPS debt is balanced by CDS contracts purchased on the same bonds. The bank said its net exposure was no more than $1.5 billion, with a portion coming from debt and equity securities. The company didn’t disclose gross numbers or how much of the $1.5 billion came from swaps, leaving investors wondering whether the notional value of CDS sold could be as high as $150 billion or as low as zero.

Counterparty Clarity

“Their position is you don’t need to know the risks, which is why they’re giving you net numbers,” said Nomi Prins, a managing director at New York-based Goldman Sachs until she left in 2002 to become a writer. “Net is only as good as the counterparties on each side of the net — that’s why it’s misleading in a fluid, dynamic market.”

Investors should want to know how much defaulted debt the banks could be forced to repay because of credit derivatives and how much they’d be in line to receive from other counterparties, Prins said. In addition, they should seek to find out who those counterparties are, she said.

JPMorgan sought to allay concerns that its counterparties are unreliable by saying in the filing that it buys protection only from firms outside the five countries that are “either investment-grade or well-supported by collateral arrangements.” The bank doesn’t identify the counterparties.

Citigroup, Morgan Stanley

Bank of America, Citigroup Inc. and Morgan Stanley also don’t list gross amounts of CDS on GIIPS debt in their filings. All three banks provide figures within their disclosures that they say include a net of their credit-default swaps bought and sold on the five countries.

Citigroup’s net funded exposure as of Sept. 30 was $7.2 billion, and its unfunded commitments were $9.2 billion, the New York-based bank said in a filing and a presentation. Bank of America, based in Charlotte, North Carolina, said total net exposure was $14.6 billion for the five countries, while New York-based Morgan Stanley listed $2.1 billion.

Jon Diat, a Citigroup spokesman, declined to comment, as did Bank of America’s Jerry Dubrowski, JPMorgan’s Howard Opinsky and Morgan Stanley’s Mark Lake.

Banks exchange collateral, usually cash or liquid securities such as U.S. government debt, with trading partners as the value of their credit-default swaps fluctuates and their perception of one another’s ability to repay changes.

Bungee Cords

If the value of Italian bonds drops, as it did last week, a U.S. firm that sold a credit-default swap on that debt to a French bank would have to provide more collateral. The same U.S. company might be collecting collateral from a British bank because it bought a swap from that firm.

As long as all three banks can make good on their promises, the trade doesn’t have much risk. It could all unravel if the British firm runs into trouble because it’s waiting for a payment from an Italian company that defaults. The collapse of Lehman Brothers Holdings Inc. in 2008 demonstrated some of the ripple effects that one failure can have in the market.

“We learned from Lehman that all of these firms are tied together with bungee cords — you can’t just lift one out without it affecting everyone else in the group,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York who previously worked at Lehman Brothers and Morgan Stanley. More disclosure “may push the stock prices down when it becomes clear how big the bungee cords are. But it certainly would be a welcome addition for an analyst.”


The Financial Accounting Standards Board in 2008 started requiring companies to disclose the worldwide gross notional credit protection they’ve written and bought. As of Sept. 30, JPMorgan said it had sold $3.13 trillion of credit-derivative protection and purchased $3.07 trillion, up from $2.75 trillion sold and $2.72 trillion bought at the end of 2010, filings show. Goldman Sachs disclosed it had written $2.07 trillion and bought $2.20 trillion, about the same amount it reported at year-end.

At the end of the second quarter, those two firms accounted for 43 percent of the $24 trillion of credit derivatives sold and bought by the 25 largest banks in the U.S., according to the Office of the Comptroller of the Currency. The top five account for 97 percent of the total, the data show.

Guarantees provided by U.S. lenders on government, bank and corporate debt in Greece, Italy, Ireland, Portugal and Spain rose by $80.7 billion to $518 billion in the first half of 2011, according to the Bank for International Settlements.


Neither FASB nor the SEC requires banks to disclose how many of those derivatives are written by country or region. That’s something Richard Fisher, president of the Federal Reserve Bank of Dallas, would like to see changed.

“We should have ultra-transparency on those institutions,” Fisher said of the biggest financial firms in a Nov. 14 interview at Bloomberg headquarters in New York. “They should report both their gross and their net CDS exposure, and they should do it country-by-country. After all, they need to inform their shareholders.”

Banks are reluctant to provide the figures in part because doing so would reveal too much information about their positions and operations, said Jon Fisher, a portfolio manager at Fifth Third Asset Management in Minneapolis, which manages more than $16 billion. The sheer size of the numbers may also be a deterrent, investors said.

‘Biggest Fear’

“I think the biggest fear is the numbers are so large that even though they offset, it would maybe shock people,” said Ralph Cole, a senior vice president in research at Ferguson Wellman Inc. in Portland, Oregon, which manages $2.8 billion including JPMorgan stock. “Maybe they don’t think that disclosure will be treated fairly or understood well.”

Still, “they need to give us a good reason why we shouldn’t see that,” he said. “More disclosure is better, and you can see that in their valuations right now.”

Bank of America, Citigroup, Goldman Sachs and Morgan Stanley have each fallen more than 40 percent this year, while JPMorgan has dropped 23 percent. Each of the lenders trades at least 24 percent below book value, indicating investors are questioning the assets on the firms’ balance sheets.

Lloyd C. Blankfein, 57, Goldman Sachs’s chairman and chief executive officer, said in an interview with the Financial Crisis Inquiry Commission staff last year that the amount of the firm’s derivatives trades shouldn’t be a cause for alarm.

‘Longs and Shorts’

“We either have netting agreements, or they foot, or they cancel each other out, or they’re longs and shorts on the same instrument,” he said, answering a question about how the firm manages so many contracts in a crisis. “The only way you can run a business like that is to have these systems work so they can aggregate stuff, so you can run the business on a macro basis, and also so you can get the details quickly if you need them. And that’s all systems and technology.”

Lindsey, the former SEC official who’s now president of New York-based Callcott Group LLC, which consults on markets and market operations, said few firms have systems that can portray their real-time exposure to trading partners.

“That’s very difficult for any firm to have a good handle on all of that — you know large positions and you know what certain positions are, but to be able to say I’ve adequately aggregated all of my long exposure and all of my short exposure to a specific counterparty may be very difficult,” Lindsey said. “I don’t know of a firm where it’s not pulled together by a phone call, where somebody says, ‘OK, we need to know our exposure to X,’ and a lot of people stop their day jobs and try to find an answer.”

‘Needlessly Cause Reaction’

Lindsey said banks may be wary of disclosures that could confuse investors. Figures such as gross notional exposure — the total amount of debt insured by credit derivatives — give investors an exaggerated sense of the risk and could “needlessly cause reaction,” he said.

Other methods, such as stress-testing, scenario analysis or so-called value-at-risk estimates, rely on models that may underestimate risk because historical data on sovereign defaults show them to be unlikely.

“If you’re looking at your exposure to a defaulting sovereign, there’s a relatively low frequency rate,” Lindsey said. “So it really depends on what they’ve done internally to back up their ideas of what their assessment of the probability of default is.”

To contact the reporters on this story: Christine Harper in New York at charper Michael J. Moore in New York at mmoore55

To contact the editor responsible for this story: Rick Green at rgreen18

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CNBC.com Article: Tax Burdens Tilt Coastal, and System’s Fairness Is Debated

November 14, 2011

Interesting article on the inequality in the tax code between geographies in the US.

As a New Yorker, effectively middle class, I can vouch that earning $250k in NYC does not get you very far. Interesting point made at the end that our currant system effectively taxes urban living to support suburban lifestyles. This is extremely wasteful as urban living is and has much better potential to be the best sustainable model. We ought to be driving people into the cities, not out of them.

CNBC.com Article: Tax Burdens Tilt Coastal, and System’s Fairness Is Debated

In tax proposals, President Obama has defined the wealthy as those that earn at least $250,000 a year, but on the U.S. coasts that doesn’t buy as much as it does in, say, Iowa or Alabama. Why doesn’t the tax code account for regional differences in tax burdens? The New York Times reports.

Full Story: