Sunday, 6 October 2013

Policing and The Future of NYC

               Nearly a week has passed since the biker gang attack on Manhattan-native Alexian Lien and his family set the NYPD into motion. Yet the larger debate about what this attack means on the future of New York City has just begun. Lien, who supposedly hit one of the biker’s vehicles after being cut off, was chased down by the gang over the course of several miles before he was pulled from his car and beaten in front of his wife and two-year-old daughter. The attack, which was recorded by one of the gang members, has triggered an impassioned response from both New Yorkers and the broader American public. Many New Yorkers have cited police inaction as the cause while many others have looked to Bloomberg’s perceived light policing policies as the root.
              Regardless of the underlying cause, this attack is indicative of a trend of violent attack in New York City. One policy specifically has become a central target for candidates in the mayoral election to rally for or against- Bloomberg’s infamous “Stop and Frisk.” The policy has drawn an immense amount of controversy surrounding its implementation which many are constitutes racial profiling. The Democratic candidate, Bill de Blasio, firmly stands against the measure, while Republican candidate, Joe Lhota, takes a more nuanced approach to the measure asserting that it is acceptable in some cases. Nonetheless both candidates have promised substantial reforms to the policy.
              However, as this most recent attack illustrates, the candidates are having the wrong type of discussion. There has been such a great emphasis on supposed civil rights infringements that the discussion about policing efficacy has lost its foundation. Straightforward measures such as greater police presence in problem areas could curb the trend of violence in NYC. It is important to realize that the future of NYC is at the heart of this discussion. Whoever NYC elects in the wake of Bloomberg, it is going to be asking for a safer, more secure city.

Saturday, 5 October 2013

Twitter IPO: Speculation

With Twitter only recently announcing its interest in performing an IPO, investment banks were already fighting over who should get to do the underwriting. Anthony Noto, a dot-com era analyst and head banker for Goldman Sachs, got the nod. The twitter IPO will be the largest IPO for a U.S. technology company and Goldman Sachs will be the lead underwriter. Twitter released its IPO filing this past week via the U.S. Securities and Exchange Commission, using a $1 billion placeholder amount.

This deal is a success not only for Twitter but also for Goldman Sachs. Goldman Sachs has secured the
largest social-media deal in history. This helps Goldman Sachs bounce back after the investment bank was overcome by Morgan Stanley for the top spot on social-media deals from LinkedIn Corp.  and Facebook Inc. Noto, the co-manager of technology investment banking with George Lee, has helped drive new deals for Goldman Sachs, especially one with his past employer, the NFL. His profile as a banker, already coming from an established one, has magnanimously increased. What can we expect from this IPO?

If Twitter were to raise the amount it reported as the placeholder amount in the filing, then this would be Goldman Sach’s largest IPO underwriting of a U.S. technology company. While Noto and Goldman Sachs were able to secure the IPO above Morgan Stanley and other banks, the bigger battle still lies ahead: selling the IPO to public-market investors still recovering from Facebook’s offering last year. The Facebook IPO was incorrectly priced, perhaps too high at $38 apiece, and eventually investors didn’t find that much value in the stock, driving it to lose half its value over the next few months. What this did was upset consumer preferences and will definitely make investors going forward concerned with the legitimacy of the pricing of the IPO. As a result, Twitter is likely to leave money on the table and pricing the IPO at a price slightly below its sensible price just so that the stock sees great returns. This is obviously a risky move as not only Twitter but Goldman Sachs could lose a lot of money.

The true pricing of the IPO is still to come and the final price will be the only determining factor of whether or not Goldman Sachs did well. Until then, one can only speculate the outcome. 

Friday, 4 October 2013

Government Shutdown: Is it Fair to Hold the Country Hostage?

As the government shutdown seems poised to continue into the weekend, debates rage on as to which side is to blame. As many non-essential government employees continue to miss work, Congress continues to fight a battle of public opinion with each side attempting to portray the others as holding the American People Hostage. As the battle drags on and more people are effected, whether it be by missing vacations due to national park closures, possible delays on veteran's benefit payments, and much more, public opinion will simply sway against the political establishment. Congress, already with extremely low approval ratings, will receive more negative publicity as the will seem out of touch with everyday Americans. The President, if he refuses (as he asserted) to sign piecemeal funding bills, will have to answer to the people as well.

In addition, with the federal government set to hit its borrowing limit on October 17th, the political and economic effects may only get worse. As Republicans continue trying to defund and repeal Obamacare while Democrats refuse to make any budget concessions, progress seems extremely slow. The question that the entire shutdown comes to is whether or not this is an appropriate way to force change in the government. Though the effects of a shutdown and lack of a debt ceiling or budget deal are detrimental to many individuals, I believe that these serious crises are the only things that can cause true change to occur. Without being under the gun, the political establishment will continue to simply pass on the responsibilities to a later generation of elected officials while the nation's finances continue to deteriorate. This is the time to make change happen towards a more responsible fiscal future, and the country must take advantage.

-Varun Sawhney

Now It's Twitter's Turn

Now it's Twitter's turn. It hesitated for the past year or so. This week (Oct., 2013) it bravely stepped into IPO waters, taking the first big step by sharing publicly its SEC filing and letting the financial world see its bottom line.

Twitter's hesitation, like all companies contemplating issuing stock to the public for the first time, results from trying to determine the optimal moment to sell stock in equity markets. That's often tied to market interest in the stock issue, supply and demand for the stock, and general equity-market trends.

Its hesitation may have also resulted from other factors: (a) its being shy about letting the world pore through its true financial performance and (b) its desires to avoid the IPO debacle Facebook experienced last year at Nasdaq with Morgan Stanley as the lead underwriter.

Twitter through the years has had to wrestle, too, with management and organizational issues. Some of those problems have been resolved, and the company has moved on to capitalize on its soaring popularity around the world.  In the filing, Twitter reports 218 million users on average each month this year, up 44% from a year ago.  Not quite Facebook numbers, but sufficient growth to get prospective investors interested and excited. Twitter might argue that the value or meaningfulness of ongoing usage is different than account activity in, say, Facebook or Linkedin. Hence, it's not how many use the site, it could argue as it sells new stock, but who uses it and how it's used. 

Because of the planned IPO, Evan Williams and Jack Dorsey, Twitter founders, can now calculate more accurately their fortunes (over $400 million each). A handful of venture investors will have a nice payday, as well.

Twitter in the filing divulged what many thought was the case. It continues to have losses with no signs those losses will turn into profits in the short term.  Investors in its stock, therefore, will bet that the company will continue to experience stellar growth in users, will find even more effective ways to generate advertising revenues, and will eventually turn losses into steady, growing profits by keeping costs under control.

The company will raise $1 billion in the IPO offering.  Investment bankers advising Twitter have suggested the company today has an implied market value of about $10 billion. How then does the company have such value, the corporate-finance novice asks, when the company reports losses with no expectations of profit in the short term?  SEC documents indicate the company lost $79 million last year and $69 million in 2013 to date.

Investors who will buy the stock are assuming profits are on the horizon. They will come because there are still vast opportunities to grow the number of users, grab more advertising dollars, and, therefore, increase total revenues substantially. They will buy the stock based on expectations, not based on history.

For now, investors and those who assess the value of the firm will value the company based on a reasonable estimate of growth prospects and based on refined projections of users and revenues. Revenues for the six months, 2013, doubled from the previous year, Twitter reports, while number of users continues to grow.

Investors and advising banks have Facebook and Linkedin as convenient benchmarks:  They study and compare current market values of those companies' stocks, their numbers of users, the activity in the millions of accounts and the level of sales and sales growth.  Investors will, too, assume the company, now under the guidance of CEO Dick Costolo, will invest in whatever technology is necessary from year to year to keep the engines going.

Twitter has few competitor threats. No other social network is about to topple it in doing what it does best in those 140 characters. But Twitter, along with Google, Facebook, and Linkedin, all chase after the same pool of advertising dollars. Companies seeking to advertise digitally must decide where they can get the biggest Internet bang without particular regard to the specific roles social networks play.

Goldman Sachs, winners of the investment-banking shoving match, will be the lead underwriter and will be assisted on the front lines by Morgan Stanley and JPMorgan.  The challenge they have as advisers, besides setting precisely the price of a single share, is to form a view of markets in the face of October's U.S. Government shut-down and recent equity-market uncertainty. But that's why they will be paid tens of millions of fees. They must step up and make such decisions and, especially after last year's rough launch, avoid a 2012 Facebook near-catastrophe.

Tracy Williams

See also:

CFN:  Facebook:  The Lucky Underwriters, 2012
CFN: Facebook Stock:  What's Going Wrong? 2012
CFN:  Did Goldman Overpay for its Facebook Stake? 2011

American Energy Independence

While America has long talked about the problems of importing vast quantities of oil, due to advancements in fracking technology the country has recently become the largest producer of oil and natural gas in the world. The US has overtaken Russia producing around 7.5 million barrels of oil per day in 2013 and will increase production to 8.4 million barrels per day. With the price of oil currently around $100 per barrel, calls to export some American oil production have begun. This along with the expected opening of export terminals in the southern US and possible approval of the Keystone pipeline, make exporting an attractive proposition.

                However despite America’s newfound production boom in oil, it remains a net importer buying around 8 million barrels per day. Furthermore 40 years of policies restricting the export of oil, make it extremely difficult to sell American produced oil internationally. Therefore America should instead focus on the much more plausible goal of energy independence. Official estimates suggest that increasing oil production by around 6 million barrels per day will reach that goal. Another option would be engaging in limited exchanges, in which the US would export light oil in exchange for heavy oil produced abroad. By taking such steps America could become virtually energy independent, and so focus on areas other than energy policy. 

by Ashish Sathe 

Thursday, 3 October 2013

Bitcoin Prices Plunge as the "Amazon of Drugs" Shuts Down

On Tuesday, October 1st, at a San Francisco public library, Ross Ulbricht, creator of the world's largest online black market primarily for drugs, was arrested.

Ulbricht, 29, was charged with narcotics trafficking conspiracy, money laundering conspiracy, and computer hacking conspiracy, for creating “the Amazon of drugs.” His website, The Silk Road, mediated $1.3 billion worth of illicit transactions since opening in 2011, and it collected roughly $80 million in commissions. The FBI’s criminal complaint states that Ulbricht, along with a few accomplices, was responsible for creating the “most sophisticated and extensive criminal marketplace on the Internet today.”

The Silk Road rose to black market prominence as a place where people seeking drugs could buy them safely without their online purchases being traced. Through the use of the digital currency, Bitcoins, users could anonymously buy not only almost any drug, but they could buy counterfeit currency, firearms, sensitive personal information, like lists of names and social security numbers, and hits on other people. Ulbircht himself is accused by the FBI of paying a Silk Road solicitor to kill another user that attempted to extort money from him.

The Silk Road was one of the largest marketplaces where Bitcoins could be used, and between the beginning of 2011 and mid-2013 the Bitcoin had appreciated over 40,000% against the US dollar. As news broke that The Silk Road domain had been seized by the FBI and shut down, Bitcoin prices plunged more than 30% on the Mt. Gox exchange in Japan - the largest Bitcoin exchange.

The Bitcoin has consistently been a subject of speculation and criticism because of the complex ways in which supplies of Bitcoins are created and what real usable value they have. Some analysts say that now as one of the largest marketplaces in which they could be used is gone, Bitcoin demand might never resurge to previous levels, while others say that increased desire for online privacy amid news of government surveillance could continue to drive Bitcoin prices up.

Mitch Lagrasta

Monday, 30 September 2013

Career Lessons from Breaking Bad

AMC's Breaking Bad ended with a bang last Sunday, leaving viewers generally content and definitely shell shocked. Though the ride is over, we can finally look back at the series and reflect on how we can learn from both Heisenberg's victories and mistakes. How can a meth kingpin help you and your future careers? Here are some takeaways :

1. Be hard to replace : Find a specific skill set and make sure you are good enough that nobody can quickly take your place. Whether it be modeling, analysis, writing, communication, or even a certain product with a 99.1% purity, having a specific niche or strength can ensure job security. Just try not to kill fellow associates to eliminate competition.

2. Associate with the right people : If you are the smartest person in the room, you're in the wrong room. Surround yourself with people who you believe can bring out the best in you. Doing business with a high school dropout and drug addict will certainly lead to complications in the future, as Walt found out. Gus, on the other hand, was very strict on who he dealt business with. Only those who met his criteria and who had a low risk profile were considered. The moment he made an exception ultimately led to his downfall.

3. Be genuine : Walt has been manipulating Jesse for the entirety of the show. From poisoning Brock to letting his girlfriend die, he repeatedly lies to him. Had Walt just tried to be honest, Jesse would not have gone to the DEA, Hank would still be alive, and many of this season's shockers would probably not have happened, perhaps to the dismay of the audience. In order to foster relationships in the future, being genuine and caring for the interests of others will go a long way.

4. Always be the one who knocks

- Jesse Chai