Great article on free markets, libertarianism, and how it is possible for governments to take care of all their constituents without completely screwing up the market for healthcare.
Because the US government is lending money to the big banks at near-zero interest rates. And the banks are then turning around and lending that money back to the US government at 3%-4% interest rates, making 3%+ on the spread. What’s more, the banks are leveraging this trade, borrowing at least $10 for every $1 of equity capital they have, to increase the size of their bets. Which means the banks can turn relatively small amounts of equity into huge profits—by borrowing from the taxpayer and then lending back to the taxpayer.” —God It’s Great To Be A Banker
What are your top three trend predictions for the virtual goods sector in 2010?
More people wake up to the fact that selling 100% replicable pixels for dollars is more profitable than selling black sugar water.
Global virtual goods market over USD 10 billion: the US market was about $1B in 2009 and our estimated for Asia was a conservative $7B. Factor in growth in US (maybe $2B next year) + Asia ($9B?) + rest of the world and we’re there easily.” —
$KO takes in ~$30B a year, so it definitely isn’t true today. I do think that the turning point is coming, though.
Interesting anecdote about the history of $BARE
Lots of people make a living saying that the sky is falling. Umair is the only one I take seriously.
The biggest thing we’re doomed to repeat is failed monetary policy. That’s been true from the Romans to the Russians.
Keynesians say you cannot save out of a recession. While true, you can’t either spend out of a multi-trillion debt hole. #austrianeconomics
“And now there are five — five Wall Street behemoths, bigger than they were before the Great Meltdown, paying fatter salaries and bonuses to retain their so-called ‘talent,’ and raking in huge profits. The biggest difference between now and last October is these biggies didn’t know then that they were too big to fail and the government would bail them out if they got into trouble. Now they do. And like a giant, gawking adolescent who’s just discovered he can crash the Lexus convertible his rich dad gave him and the next morning have a new one waiting in his driveway courtesy of a dad who can’t say no, the biggies will drive even faster now, taking even bigger risks.”
• Rule No.1: Never lose money.
Rule No.2: Never forget rule No.1
• Be fearful when others are greedy. Be greedy when others are fearful
• It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price
• Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down
• Price is what you pay. Value is what you get
• It takes a lifetime to build a reputation and five minutes to ruin it
• Cash combined with courage in a crisis is priceless
• Never invest in a business you cannot understand
• Only buy something that you’d be perfectly happy to hold if the market shut down for ten years
• Someone is sitting in the shade today because someone planted a tree a long time ago
• Risk comes from not knowing what you’re doing
• If you don’t feel comfortable owning something for 10 years, then don’t own it for 10 minutes
• If a business does well, the stock eventually follows
• I wouldn’t mind going to jail if I had three cellmates who played bridge
• The fact that people will be full of greed, fear or folly is predictable. The sequence is not predictable
Yes. This always bothered me. I’d rather raise from a group of great angels (and therefore herd a lot of cats) than run the risk of having a seed VC not lead the next round. And if they do end up leading there are lots of distorted incentives that can cause serious problems for the entrepreneur. Negotiate too hard and you lose your lead and end up sending a really negative message to other prospective investors. Not good.
Thanks for the advice, would love to hear more about it. About to go through this now for the first time. Definitely leaning towards doing a syndicated angel deal than a VC seed round that also requires a board seat and other strings. Pros / Cons?
Your angels should get a board seat. More specifically, the lead should represent them as a class on the board. I guess this doesn’t always happen. It’s the way it worked for us, and it worked reasonably well. At some point they should expect to give up their seat as they get crammed down by professional venture investors in later rounds.
I think there are many reasons to go with an angel syndicate over a VC in an early seed round. The follow-on issue is only one of them. You also get more diverse advice. You also get friends. No investor is really your friend, but angels are probably as close as any investors get. Most angels invest because they love it, not so much for the returns. VCs are professionals that are fiduciaries for LPs (pension funds, university endowments, etc). They’re more likely to be dicks because sometimes they have to be dicks. You want investors who you can grow with.
There are exceptions to every rule. I think it would be tough to turn down a seed round from USV, for example. But imagine how much it must suck to have Fred put in $500,000 and then refuse to participate in your next round. Everyone out there thinks Fred has one of the best noses around. How do you explain to potential funders that Fred won’t be participating? This is always a problem, but it’s much more pronounced early in a company’s history when concrete metrics are hard to come by and you’re still to a large degree selling vision.
I’m sure if I took the time to grok it would become sensical, but at the moment it would be much more pleasing to simply say “reverse repurchase agreements?” Are you f*cking kidding me?
What’s worse is that the industry term for such transactions are “reverse repos” which a lyaman would bring to mind getting your unpaid car given back to you … which isn’t really how we want American’s thinking the government is treating the banks and all the loans. It sounds like we’ll be giving the banks back the money that we loaned them
I’ll try and break it down a bit more. You’re right that ‘repo’ sounds like repossession, but hopefully Bloomberg readers at least know that there is a difference between the Federal Reserve and a no-credit-check discount car leasing company.
When the Federal Reserve wanted to stimulate the banking system they bought up securities (it used to just be government bonds, but has now expanded beyond that) with money from the treasury. Now, they want to sell these securities back to the public (and by public, I mean large institutional investors and banks) to pull back in some of the money to reduce the risk of inflation/devaluation of the US dollar.
That’s the gist of it, at least.
“Venture capital is like sex. When it’s good, it’s really good. When it’s bad, it’s still good.” —
Comment by @rodmaz