Finance Geek

"One of the little appreciated facts of American history: the Westward expansion was funded mostly by..."

Wed, 02 Dec 2009 13:02:29 -0500

“One of the little appreciated facts of American history: the Westward expansion was funded mostly by credit money. Banks and companies would set up shop with tiny gold reserves, people would use their money as currency, and the banks would regularly explode, making the issued money worthless paper. Why on earth would anyone back such a hare brained scheme? Simple, really: there was no other form of money available, because the government removed vast amounts of money from circulation in the form of greenbacks (fiat money which funded the Civil War) and silver notes. That, combined with the very real economic expansion brought on by new technologies and exploitation of new resources in the American West required much more money than was available. So, seemingly silly monopoly money was the only game in town. This caused problems to the people who held a lot of cash backed by an exploding bank, but it solved more problems than it caused, as it enabled markets, trade and economic growth at an important time in American history. You think derivatives are complicated? At the outbreak of civil war, there were over 7000 different kinds of Bank issued credit money in circulation in America; and there were no computers to sort this all out.”

- A peregrination on the nature of money « Locklin on science (via nonolet)

"It’s one of those numbers that’s so unbelievable you have to actually think about it for..."

Wed, 02 Dec 2009 10:02:19 -0500

“It’s one of those numbers that’s so unbelievable you have to actually think about it for a while… Within the next 12 months, the U.S. Treasury will have to refinance $2 trillion in short-term debt. And that’s not counting any additional deficit spending, which is estimated to be around $1.5 trillion. Put the two numbers together. Then ask yourself, how in the world can the Treasury borrow $3.5 trillion in only one year? That’s an amount equal to nearly 30% of our entire GDP. And we’re the world’s biggest economy. Where will the money come from?”

- Porter Stansberry - The bankruptcy of the United States is now certain

"China’s banking regulator issued a stern warning to banks to strictly comply with capital..."

Tue, 24 Nov 2009 03:52:42 -0500

“China’s banking regulator issued a stern warning to banks to strictly comply with capital requirements or face sanctions, the clearest sign yet Beijing is worried about possible risks building in the country’s financial system after a year of blow-out lending.”

- Denis McMahon in China’s banking regulator talks tough about complying with capital-adequacy rules - WSJ.com (via quotingthecrisis)

"Ultimately, Chinese growth is the result of a great skyhook: an artificially cheap currency. That..."

Tue, 17 Nov 2009 21:35:19 -0500

“Ultimately, Chinese growth is the result of a great skyhook: an artificially cheap currency. That skyhook says: Chinese prosperity is in many ways simply an economic fiction. That currency manipulation can’t last forever — and without it, China will have to confront the same problems every industrialized society does: the tremendous costs of a model of growth that places “product” over people.”

- What’s Your Strategy for the Next Decade? - Umair Haque - HarvardBusiness.org

"A new decade’s breaking, and in it, people, companies, and countries will have to strategize..."

Tue, 17 Nov 2009 18:34:00 -0500

“A new decade’s breaking, and in it, people, companies, and countries will have to strategize differently. The story the macroeconomic tea leaves foretell isn’t one of power shifting from America to China or anywhere else. It is a story of global economic might everywhere wavering and falling, unable to meet the new challenges of the 21st Century, The Age of Decline isn’t just American: it’s global, a descent into a new kind of economic dark age - unless different choices are made.”

- What’s Your Strategy for the Next Decade? - Umair Haque - HarvardBusiness.org

Lots of people make a living saying that the sky is falling. Umair is the only one I take seriously.

"Debt didn’t get dangerously out of scale because the system was broken. It got out of scale, in..."

Mon, 16 Nov 2009 11:58:26 -0500

“Debt didn’t get dangerously out of scale because the system was broken. It got out of scale, in part, because the system worked.”

- How the tax code encourages debt : The New Yorker

I switched majors from history to finance once I figured out which one of those two fields drove the other.

Fri, 13 Nov 2009 20:16:56 -0500

unsolicitedanalysis:

The biggest thing we’re doomed to repeat is failed monetary policy. That’s been true from the Romans to the Russians.

continuum: In a time of renewed scrutiny for the banking...

Fri, 13 Nov 2009 17:14:35 -0500

continuum:

In a time of renewed scrutiny for the banking sector, many are fighting against the tide. For consumers, managing their finances has never been so difficult - which could be why the use of prepaid debit cards is on the rise.

continuum: Keynesians say you cannot save out of a recession. While true, you can’t either spend...

Thu, 12 Nov 2009 18:42:08 -0500

continuum:

Keynesians say you cannot save out of a recession. While true, you can’t either spend out of a multi-trillion debt hole. #austrianeconomics

"We all know at this point that our banking system is being used as an unregulated bonus-seeking..."

Thu, 12 Nov 2009 15:30:20 -0500

“We all know at this point that our banking system is being used as an unregulated bonus-seeking mechanism for bankers, now underwritten by taxpayers with $23.7 trillion worth of national wealth. Bankers lent pretend money to home buyers to award themselves actual money in bonuses — making home prices balloon and, in the process, bankrupting America’s treasury, currency, the states, and many of its citizens. To simply let the housing market rapidly correct itself (or more likely over-correct) would result in massive societal disruption, possible violence and unnecessary suffering.”

- Dylan Ratigan | Veterans Get Lip Service, Bankers Get Billions & We Get Foreclosures (via poortaste)

"…42% of American men with fathers in the bottom income quintile remain there as compared to:..."

Fri, 30 Oct 2009 13:33:56 -0400

“…42% of American men with fathers in the bottom income quintile remain there as compared to: Denmark, 25%; Sweden, 26%; Finland, 28%; Norway, 28%; and the United Kingdom, 30%.”

- Inequality Begets Inequality (via azspot)

The American Dream may be just that

Editorial - Ongoing Agony of the Banks - NYTimes.com

Thu, 29 Oct 2009 18:43:12 -0400

Editorial - Ongoing Agony of the Banks - NYTimes.com:

quotingthecrisis:

continuum:

It is hardly surprising that GMAC is circling back to the government for a third helping of taxpayer money. GMAC is struggling under the double whammy of bad car loans and the fallout from its misguided foray into mortgage finance at the height of the housing bubble. After the government applied stress tests to the banks last May, it was the only big bank that could not raise the capital it was deemed to need.

Quotation Of The Day

Tue, 27 Oct 2009 15:07:08 -0400

quotingthecrisis:

ataxiwardance:

mattpayton:

“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.”

- Robert Reich

Buffettism

Tue, 27 Oct 2009 12:06:19 -0400

taitran:

• 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

http://news.bbc.co.uk/2/hi/business/8322921.stm

tmblg: Due to the volatile economic climate, we’ve decided to...

Wed, 21 Oct 2009 21:12:33 -0400

tmblg:

Due to the volatile economic climate, we’ve decided to diversify the business. Check out our latest venture!

Tough times have hit Metalab Design

"The theory that bailout benefits sans meaningful reform will trickle down and benefit the average..."

Sun, 18 Oct 2009 16:37:22 -0400

“The theory that bailout benefits sans meaningful reform will trickle down and benefit the average Joe (as much than or more than bankers) is the kind of perverse logic only an economist could love. It’s is faith-based economics — and it’s Barack Obama’s biggest mistake. (Consider for a moment that 20+ per cent of hedge funds misrepresent info.) For years, George Bush hunted for phantom WMDs, while terrorist networks flourished under his nose. Now Barack Obama is hunting for a phantom prosperity, while the greatest robbery in the world is happening right under his nose.”

- Reinventing Wall Street From the Bottom Up - Umair Haque

"If they’re too big to fail, they’re too big,” Greenspan said today. “In 1911 we broke up Standard..."

Fri, 16 Oct 2009 14:15:23 -0400

““If they’re too big to fail, they’re too big,” Greenspan said today. “In 1911 we broke up Standard Oil — so what happened? The individual parts became more valuable than the whole. Maybe that’s what we need to do.””

- Alan Greenspan

"When you take any money at all from a big VC in a seed round, you are effectively giving them an..."

Mon, 12 Oct 2009 17:45:03 -0400

“When you take any money at all from a big VC in a seed round, you are effectively giving them an option on the next round, even though that option isn’t contractual. And, somewhat counterintuitively, the more well respected the VC is, the stronger the negative signal will be when they don’t follow on.”

- Chris Dixon (via entrepreneurwisdom)

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.

(via mikehudack)

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?

(via caterpillarcowboy)

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.

(via mikehudack)

"One interesting thing that I’ve always found about the film business from an economic point of..."

Thu, 08 Oct 2009 11:24:52 -0400

“One interesting thing that I’ve always found about the film business from an economic point of view is that unlike in any other business I can think of, the cost of manufacturing the product has no affect on the purchase cost to the consumer. For example Honda can make a cheaper car with less features and cheaper finishes than BMW without losing all of their customers to the superior car because they sell their product for less. You spend less to make something, you charge less for it. Makes complete and obvious sense. Not so in the film business.”

- Marginal Revolution: the unusual economics of the film industry

Economics: The Science of Explaining Tomorrow … | The Big...

Wed, 23 Sep 2009 15:59:05 -0400

Economics: The Science of Explaining Tomorrow … | The Big Picture