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eBay To Spin Off PayPal

alexander_686 Re:lol capitalism. (64 comments)

Look at the PayPal's press from 15 years ago. They were going to revolutionize the payment industry – distributing old players. Read BitCoin's press from last year and you get the idea.

And then for the next 10 years . nothing. Don't get me wrong, it is a nice niche player but it has not innovated like Square.

And now comes Apple. One Touch was what PayPal was promising 15 years ago. I suspect this is just the first narrow wedge. Apple will expand its payment services.

So how is PayPal going to get its grove back? Shuffling the boxes on a company's org chart is probably just step one.

2 hours ago
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eBay To Spin Off PayPal

alexander_686 Re:lol capitalism. (64 comments)

Anecdotal evidence. You have 1 example. Here are my 3.

Warren Buffet's hostile bid on fabric manufacturer Berkshire Hathaway
Steve Jobs vulture bid on hardware manufacturer Pixar
KKR's hostile bid for RJR Nabisco, where executive where lining their pockets at the expense of shareholders.

Which takes us to being a Monday morning quarterback or a armchair general. Not know the particulars of your experience, most of the “striping” operations are over zombie companies that are slowly dying – worth more dead than alive. Isn't it better to do something with them before they are completely run into the ground?

And yes, like you, I have been though one of these as a employee.

2 hours ago
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eBay To Spin Off PayPal

alexander_686 Re:You're not a stock owner, are you? (64 comments)

Hey, have you read “Barbarians at the Gate?”. It is a old but good book.

O.K., let walk though the logic. eBay is currently at $56.30. Let us assume you own eBay. Ergo, this mean you think it is undervalued.

First question, would you be willing to by my stock in eBay at $75? $60? 56.80?

Second question, if it is undervalued, why are you not buying up eBay until it's fair value? You have a compelling story and strong logic. Why not try to convince your friends to by the stock and charge them a fee? That is what essentially Hedge Fund managers do.

Third question – can you tell me specifically why you think eBay is priced below it's fair value. Using your logic every single stock being traded is being traded below it's fair value.

I can answer part of your third question. Some people buy stock because they want to own a fraction of future earnings. Other people hold onto the same stock because they think the company sucks but that there will be some type of catalytic event that will release shareholder value – such as an outside hostile bidder that will buy out the company, kick out the incompetent managers, and turn the company around.

Of course, it all comes down to one's opinion – right? When there is a hostile bid there is no reasons why people like you can't bid the stock up to the right level – it has happened . But when managers fight are they fighting for you for your own jobs. I will point out that 9 times out of 10, when a hostile takeover is launched – or even just a proxy fight – things happen. The company decides to sell itself off to another company, major restructurings, mass firings of board members.

2 hours ago
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Grooveshark Found Guilty of Massive Copyright Infringement

alexander_686 Re:Funny, however.. (123 comments)

It is in there. The plan was to violate copyright holders today, build up the business, ask for forgiveness, and then negotiate licensing fees.

7 hours ago
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eBay To Spin Off PayPal

alexander_686 Re:Then eBay can become a bank. (64 comments)

More excellent examples.

The Master Card is a example of a "branded' cards – it carries the Pay Pal's brand but issued by a unrelated 3rd party bank. It is the 3rd party bank that has to deal with the heavy regulations of being a bank. I would also guess they pick up most of the profits.

The Dollar General is an example of Pay Pal being a "money transfer agent" – which has very low regulations. So while it is a financial institution, it is not acting as a full blow "bank".

8 hours ago
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eBay To Spin Off PayPal

alexander_686 Re:Then eBay can become a bank. (64 comments)

That is an exclent example to my point. BillMeLater is explicitly not a bank and does not offer loans, credit card services etc. It is a payment system. The "Bill Me Later" part is handled by a outside 3rd party - Comenity Capital Bank

9 hours ago
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eBay To Spin Off PayPal

alexander_686 Re:I am an economics nub (64 comments)

Yes – the reason to merge is to "synergize." However, you are assume that mergers always lead to the expected benefits. This only actually happens about 1/3 of the time. About a 1/3 of the time you get "bleh". And about 1/3 of the time you get dissynergies. Not all marriages work out to be happily ever after.

10 hours ago
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eBay To Spin Off PayPal

alexander_686 Re: lol capitalism. (64 comments)

I don't think you mean "Arbitrage" – I think you mean Mergers and Acquisitions. There was something called "Mergers Arbitrage" back in the 80s, but mostly that was speculators hiding behind the boring name of "Arbitrage".

And no, your logic does not make sense. The only reasons as a stockholder that I would agree to a merger or acquisition is because it would make money for myself. Do other parties make money off the deals – yes. Do they take too large of a cut of the profits? O.k. But your logic is arguing that newspapers hire journalist to burn down factories so they can sell stories about fires. I mean this has happened in the past but it is now how newspapers survive day to day.

10 hours ago
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eBay To Spin Off PayPal

alexander_686 Re:Then eBay can become a bank. (64 comments)

There is a huge regulatory difference. (At least from the US perspective. I think Europe is roughly in line.)

Pay Pal is currently a "money transfer agent". That has fairly light regulatory requirements, mainly around money laundering.

If Pay Pal began offering financial services – like credit cards, then it would be treated as a real bank. This means a whole new world in terms of regulations. It also means that the Federal Reserve would not only regulate Pay Pal but would also regulate eBay as a bank holding company.

11 hours ago
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eBay To Spin Off PayPal

alexander_686 Re:lol capitalism. (64 comments)

First, it has nothing to do with Alibaba's IPO and everything to do with Apple's new one touch payment.

Second, being opposed to hostile takeover is a bad thing. I will put it simply, if you owned some stock of eBay, why would you want to discourage somebody offering you a price that is higher than it is trading for today? I mean, yes, one could insert poison pills and stuff to damage and tarnish your stock, decreasing it's value so people would stay away, but once again why?

Most of the time it is managers, not the owners, who are opposed to hostile takeover. They face a bum choice. They could work hard to keep the stock price. Or they could slack off, be bought up, and then be fired. Of course they have pay packages in the millions so I don't feel too sorry for them.

11 hours ago
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The Secret Goldman Sachs Tapes

alexander_686 Re:is anyone really surprised here (195 comments)

I am not sure what you mean by "a properly-regulated insurance industry regulates itself." I am sensing a paradox between "properly-regulated ", which implies external, and "regulates itself", which implies internal. So I am not sure what you are trying to say.

But on to your point. Everything you say is true about property insures and CDS. Both tend to low ball rates to collect today's bonus. Both structure their contacts to minimize moral hazard. Investors in both lose money when the insurance company behaviors irrational.

And both buy and sell insurance on "assets" which the policy holder's don't own in unregulated markets. I will use California earthquake insurance as a specific example. Insurance companies that offer earthquake insurance don't have enough assets to cover all claims in the event of an earthquake. In order to cover their potential losses they buy re-insurance policies or sell catastrophe bonds (a.k.a. cat bonds). The insurance company then turns around and sells re-insurance policies or buys cat bonds in some other area – Tokyo earthquakes, Gulf hurricanes, etc. None of these are tied to a specific asset to needs to be damaged in a California earthquake but are instead tied to a generic event. Since it is tied to a generic event, these polices can be standardized and thus lower costs.

I will point out that before re-insurance and cat bonds, natural disasters would always wipe out an insurance company or three. However, thanks to these unregulated securities which insure items that people don't own, insurance companies no longer go bust. Which suggests that the implantation of CDS (low rates due to a credit bubble pushing down real yields, with everybody searching out for an extra 10 bps) rather than the idea that was flawed.

13 hours ago
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Lenovo Set To Close $2.1 Billion Server Deal With IBM

alexander_686 Re:IBM is dying (48 comments)

"Hollowing Out" is a valid concern, but let me make an argument on being "stuck in the middle".

One can either thrive by either being a low cost provided or by differentiation. If you go the low cost route, you squeeze every penny out of production and thus tend to offer generic products. If you go the differentiation route you get to charge premium prices but you also have to offer more expensive custom products. Wal-Mart or Sacks. Companies that try to do both tend to failure miserable at both.

http://en.wikipedia.org/wiki/P...

As an aside, I once worked in an upscale subsidiary in a mass market company. Everybody was miserable. The subsidiary did much better when it was spun out of the parent company.

  Which takes us back to IBM. What core skills are they losing? They are still making servers, so not those skill sets. What they are losing are the mass manufacturing / distribution skills, which I count as a modest loss.

yesterday
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Lenovo Set To Close $2.1 Billion Server Deal With IBM

alexander_686 Re:IBM is dying (48 comments)

IBM's stated goal is to ditch the low end commodity business and invest in high end high touch business. i.e. custom solutions provide by consultants and custom hardware. IBM has been shedding their commodity business for years. When Lenovo bought their desktop / laptop business – servers where not commodities. Now the x86 servers are – so away they go.

yesterday
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Apple Faces Large Penalties In EU Tax Probe

alexander_686 Re:I would like to see a return... (120 comments)

If you have "a" presence in a given country, you pay taxes in that country.

How does that work? If you have a presence in 2 countries you pay 78%? (2 X 39%) In 3 countries 117%?

I will point out that America the only major country which works on a "domicile" approach – If you are a US subsidiary in a foreign country you pay US and local taxes. This can result in taxes over 100% - which the US fixed by putting in loopholes.

The rest of the world work on a saner approach and uses "residency" – profits earned locally pay the local corporate tax rate. This still leaves the issue of transfer payments – figuring out what portion of the profits belong to which country.

2 days ago
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Mystery Gamer Makes Millions Moving Markets In Japan

alexander_686 Re:Largest Ponzi Scheme Ever (113 comments)

Nope. The magic phrase is Future "Free Cash Flow" (FCF ) to Shareholders.

Now, how do you model FFC? Do you care if a company pays out dividends or takes the same cash and does a stock buy back? The only difference between the 2 methods is because of differences in taxes - and maybe some psychological signaling. When does it matter if a company stops paying a dividend but reinvests those earnings into new projects?

The Dividend Discount Model is a classic model but is one of the simpler ones. I prefer models that use earnings, not dividends. This allows to figure out what I should be paying for a company that has profits but does not pay out a dividend, like Amazon or Google.

.

2 days ago
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Mystery Gamer Makes Millions Moving Markets In Japan

alexander_686 Re:Isn't random 50%? (113 comments)

So who is selling when he is buying? Wouldn't he constantly be behind the curve? Paying too much for the stock and selling for too little?

You are touching on one of the great debates. Momentum trading is one of those anomalies that should not work in theory but does in practice. Why? Ideas have been kicked around for the last 20 years. Here is a link to a possible explanation.

http://www.economist.com/news/...

2 days ago
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Mystery Gamer Makes Millions Moving Markets In Japan

alexander_686 Re:Largest Ponzi Scheme Ever (113 comments)

As Warren Buffet says, in the short run the stock market is a voting machine, in the long run a weighing machine.

In the long term, the value of a stock is it's future free cash to shareholders, discounted by time and
risk. Over time this has been proven to be true. P/E is backwards looking, so the fact that you can find a few companies without P/E ratio doesn't prove much. (but yes, it is easier to model and discount cash flows when you have a stable and positive P/E ratio.)

Short run – yeah – the market runs off on supply and demand, and tends to go with what is popular.

2 days ago
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Mystery Gamer Makes Millions Moving Markets In Japan

alexander_686 Re:Buy low, sell high (113 comments)

Which is a momentum strategy. There are plenty of hedge fund that plays that game.

And that works just fine on the short side as well. You sell short what people are selling. That is hard to do when there is a up-tick rule in place, but I don't know if Japan has that rule or not.

2 days ago
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The Secret Goldman Sachs Tapes

alexander_686 Re:is anyone really surprised here (195 comments)

To the point that the notional value (which is always far less than the economic or market value) of CDS was greater than the economy AND that this could have been avoid if we had only insured what people owns points to the fact that you don't understand how the market worked. I will use your excellent example of how insurance can offset risk by going to the reinsurance market. Insurance companies are heavily regulated. However, the reinsurance market – just like the CDS market – is a overseas unregulated market.

Let me run you through a example of how CDS work.

I am a portfolio manager who has a 100m portfolio that I want to ensure. So I call up broker X and we structure a custom contract, where I buy a CDS for 5 years.

  It is a year later and my risk profile has changed. Old CDS is not providing the protection that I want. I call up broker X to cancel the contract but they are going to charge me a arm and a leg. However, broker Y is interested, so I sell him a custom 100m CDS for 4 years at a lower price than X. I than buy a new CDS from broker Z for 100m for 5 years.

So at this point I have 300m notional value of CDSs on my books but I am only net 100m - If we ignore counter party risk – the risk that broker X, Y, or Z would fail. Which was a huge deal during the finical crisis.

The answer is not to create custom contracts that match what a portfolio holds at a given time. Costly and inflexible. The answer is create generic standardized products that can be cheaply traded and netted – like through a clearing house. I would point to the reinsurance market and CAT bonds as a way to do it correctly.

4 days ago
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The Secret Goldman Sachs Tapes

alexander_686 Re:is anyone really surprised here (195 comments)

Yawn. I am so not impressed with that argument. Can you tell me why this is so bad? Most of the time to goes to dark conspiracy theories with people burning down companies just for the insurance money but nobody can point to an actually case.

Here is the truth. CDS are insurance contracts on credit instruments. Portfolio managers can buy them for bonds that they hold. The problem with buying exactly the credit protection on the bonds they own they need to write a custom contract with a counter party. This is expensive to buy and hard to liquidate if a portfolio manager changes their holding. Or they can buy a generic CDS that does not exactly cover what they need but is close enough. That cuts their fees by 90% and can be traded.

No, the issue was that they priced the insurance too cheaply. It was a quick way to juice the returns. A example would be insurance companies offering cheap earthquake insurance. All of the premiums they take in is free money until the big one hits. Then they all collapse. Which speaks to a different type of regulation.

4 days ago

Submissions

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Microsoft to Buy Nokia's Devices Unit for $7.2 Billion

alexander_686 alexander_686 writes  |  1 year,27 days

alexander_686 (957440) writes "On the heels of CEO Steve Ballmer announcing his resignation, it looks like Microsoft is going to be buying Nokia’s handset unit. Nokia is currently a big cheerleader for the Window’s 8 phone. Stephen Elop was a Microsoft employee, then Nokia’s CEO, and is now stepping down. He will be the head of the handset division after the sale is finial. Elop is the current front runner to replace Ballmer when he steps down in a year."
Link to Original Source
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Microsoft may invest $1B-$3B in Dell buyout

alexander_686 alexander_686 writes  |  about a year and a half ago

alexander_686 (957440) writes "We have talked about Michele Dell In Buyout Talks With Private-Equity Firms

Now the Talk is that Microsoft may invest 1 to 3 billion. I personally doubt Microsoft is going for majority ownership but it would be a significant stake. Dell is worth around 22b to 25b. Speculation is that investors would put up 5 to 7b in equity, borrowing the rest. You can do the math to determine the ownership percentage. As a point of reference, Michele Dell’s stock is worth 3.6b

We know about Microsoft’s relationship with Nokia – both in terms of ownership, swap of key personal, and the Window’s phone. Is this a repeat?"

Link to Original Source
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AT&T- Verizon collude to offer poor service

alexander_686 alexander_686 writes  |  about 2 years ago

alexander_686 writes "I recently found a very good about article How AT&T and Verizon Manipulate Your Smartphone by Susan Crawford. It’s the 2nd excerpt from her book “Captive Audience.”

The two kinds of Internet-access carriers, wired and wireless, have found they can operate without competing with each other. The cable industry and AT&T- Verizon have divided up the world much as Comcast and Time Warner did; only instead of, “You take Philadelphia, I’ll take Minneapolis,” it’s, “You take wired, I’ll take wireless.”

I am a free market type of guy. I do recognize the abuse that can come from natural monopolies that utilities tend to have, but I have never considered this type of collusion before."
Link to Original Source

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SEC investigates Netflix CEO Reed Hastings over Facebook Posting

alexander_686 alexander_686 writes  |  about 2 years ago

alexander_686 (957440) writes "SEC investigates Netflix CEO Reed Hastings on Facebook Posting

Hastings said in the filing the SEC is questioning his July 1 Facebook posting, seen by 200,000 followers, in which he said customers watched “over 1 billion hours” of videos on Netflix in June. He had previously posted on his company blog that members were viewing “nearly a billion hours per month.”

Rarely, outside of Carl Sagan, have I heard people saying that one billion not significant."

Link to Original Source
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Knight Trading Losses

alexander_686 alexander_686 writes  |  more than 2 years ago

alexander_686 writes "Apparently old code never dies – it comes back to haunt you.

From Bloomberg, "Knight Capital Group Inc. (KCG)’s $440 million trading loss stemmed from an old set of computer software that was inadvertently reactivated when a new program was installed, according to two people briefed on the matter.""

Link to Original Source
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Harvard and MIT to provided online classes

alexander_686 alexander_686 writes  |  more than 2 years ago

alexander_686 writes "Harvard and MIT are launching edX with 60 million dollars to offer “low fee” online classes. No word yet on classes offered or who will be teaching. No college credit but certificates will be offered.

The technology used will be open source. Other institutions will be invited at a later date.

I hope low cost means low cost. (Under $25) I have really enjoyed the Stanford University free online classes."

Link to Original Source
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The Nook: From Android to Windows?

alexander_686 alexander_686 writes  |  more than 2 years ago

alexander_686 writes "It looks like Microsoft is buying a large chunk of Barnes & Noble, specifically the Nook and it’s college businesses. While nobody has said anything specific, I think the writing is on the wall on what the next OS system for the next nook is going to be."
Link to Original Source

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