Tuesday, May 13, 2014
Monday, May 12, 2014
Sunday, May 11, 2014
The Limerick of Finance for 05/11/14
High leverage comes with a price
Money pros need to stop and think twice
Why borrow so much
When it's due in a clutch
And returns are a roll of the dice
Saturday, May 10, 2014
The Haiku of Finance for 05/10/14
Dumb people funding
Portal rules prevent mistakes
Amateurs go nuts
Portal rules prevent mistakes
Amateurs go nuts
Amateur Investors May Go Nuts With Crowdfunding
Crowdfunding is in full bloom. Portals are springing up all over the gall-dang place. Startups are drafting pitch decks and sticking them willy-nilly on these portals with nary a thought about the audience that can now reach them. Here's how the average amateur investor can get in trouble.
One guru at a tech conference last year openly wondered why amateur real estate investors are allowed to make poor home investing decisions but have been prohibited from seeking risk in startup investments. I won't name this dude but I think of his diatribe more often now that crowdfunding portals are filling my inbox with startup pitches. The difference between buying a house and buying into a startup has usually been about the due diligence banks put into a home loan application. Home buyers must prove that their income, net worth, and credit history are sufficient to meet the bank's loan risk criteria. Startup investors in a massively decentralized investing landscape never had to prove any of those things prior to the crowdfunding revolution.
Laws and SEC regulations growing around crowdfunding are bringing further specificity to crowdfunding investors' eligibility requirements. The regulatory climate needs to be tight before large commercial banks start buying crowdfunding portals to expand their retail investment offerings. Someone's grandparent is bound to log into their bank account someday and see a tab for "crowdfunding." Clicking on that tab and viewing a bunch of slide decks promising 30x returns may look too good to pass up for someone who doesn't know that most startups fail. Your grandma and grandpa are used to watching their savings grow. They're going to blow a whole lot of dough on failed startups if the finance sector doesn't get the controls in place now.
Amateur investors can be pretty dumb sometimes. Creditworthiness matters in real estate and competence should matter in startup investing. Crowdfunding can hurt a lot of people who won't know any better. Regulations requiring proof of assets protect investors from their own tendency to overestimate their competence.
One guru at a tech conference last year openly wondered why amateur real estate investors are allowed to make poor home investing decisions but have been prohibited from seeking risk in startup investments. I won't name this dude but I think of his diatribe more often now that crowdfunding portals are filling my inbox with startup pitches. The difference between buying a house and buying into a startup has usually been about the due diligence banks put into a home loan application. Home buyers must prove that their income, net worth, and credit history are sufficient to meet the bank's loan risk criteria. Startup investors in a massively decentralized investing landscape never had to prove any of those things prior to the crowdfunding revolution.
Laws and SEC regulations growing around crowdfunding are bringing further specificity to crowdfunding investors' eligibility requirements. The regulatory climate needs to be tight before large commercial banks start buying crowdfunding portals to expand their retail investment offerings. Someone's grandparent is bound to log into their bank account someday and see a tab for "crowdfunding." Clicking on that tab and viewing a bunch of slide decks promising 30x returns may look too good to pass up for someone who doesn't know that most startups fail. Your grandma and grandpa are used to watching their savings grow. They're going to blow a whole lot of dough on failed startups if the finance sector doesn't get the controls in place now.
Amateur investors can be pretty dumb sometimes. Creditworthiness matters in real estate and competence should matter in startup investing. Crowdfunding can hurt a lot of people who won't know any better. Regulations requiring proof of assets protect investors from their own tendency to overestimate their competence.
Friday, May 09, 2014
The Haiku of Finance for 05/09/14
Board of directors
Should control top management
Not just roll over
Should control top management
Not just roll over
Thursday, May 08, 2014
Wednesday, May 07, 2014
Tuesday, May 06, 2014
Monday, May 05, 2014
Financial Sarcasm Roundup for 05/05/14
I have been quite busy these past few weeks and I have not had much time to generate a whole lot of analysis. You people will have to busy yourselves with my haiku until things settle down. Here's some sarcasm to keep you motivated or make you upset. I truly don't care how any of you feel after reading my genius language.
The National Stock Exchange is preparing to cease operations. Who are these people anyway? I've never heard of them and I'm really in step with the markets. They should have done what IEX Group did to beat the dark pools at their own game but I guess routing slower trades never occurred to them. Maybe a couple of squirrels could use their system to trade acorns after they turn the lights out.
Norway is transferring its sovereign wealth fund from JPMorgan to Citigroup. Oh for crying out loud, that is a dumb move. Switching from the Rockefeller's family bank to a bank that needed massive government bailouts shows how little the Norwegians understand about the American aristocracy. The Rockefeller institutions have proven remarkably resilient. JPM is one domino that will stick straight up as others fall thanks to its elite connections. Just ask Warren Buffett, who has owned JPM in his personal portfolio.
American banks are cutting their exposure to Russian transactions. I think a lot of bicoastal preppies will run short of imported caviar if Russian exporters can't get credit lines at US banks. Further sanctions could very well force these banks to sell off what remains of their Russian loan portfolios, in a discounted gift to any European banks able to line up bids. Our banks have very limited exposure to Russia anyway.
Here's something that America's home-grown conspiracy nuts won't like. Deutsche Bank is telling its US clients to close their accounts because FATCA's reporting requirements are too onerous. Our Treasury notes these concerns by saying it won't stringently enforce FATCA through 2015. That noise is small consolation for non-US banks that don't want to comply with US assertions of sovereignty outside American borders. The stupid Americans who opened accounts overseas thinking they can escape federal tax scrutiny are about to get their fingers broken hard as foreign doors slam shut. American citizens will comply with federal tax reporting and they will learn to like it.
There hasn't been a whole lot in the news lately to make me angry. I have been quite happy lately noting that there are a lot of attractive women walking around my local area wearing shorts, tight skirts, and yoga pants. I just might invite them over to my place where they can unburden themselves of said clothing, if I can find the time in my schedule.
The National Stock Exchange is preparing to cease operations. Who are these people anyway? I've never heard of them and I'm really in step with the markets. They should have done what IEX Group did to beat the dark pools at their own game but I guess routing slower trades never occurred to them. Maybe a couple of squirrels could use their system to trade acorns after they turn the lights out.
Norway is transferring its sovereign wealth fund from JPMorgan to Citigroup. Oh for crying out loud, that is a dumb move. Switching from the Rockefeller's family bank to a bank that needed massive government bailouts shows how little the Norwegians understand about the American aristocracy. The Rockefeller institutions have proven remarkably resilient. JPM is one domino that will stick straight up as others fall thanks to its elite connections. Just ask Warren Buffett, who has owned JPM in his personal portfolio.
American banks are cutting their exposure to Russian transactions. I think a lot of bicoastal preppies will run short of imported caviar if Russian exporters can't get credit lines at US banks. Further sanctions could very well force these banks to sell off what remains of their Russian loan portfolios, in a discounted gift to any European banks able to line up bids. Our banks have very limited exposure to Russia anyway.
Here's something that America's home-grown conspiracy nuts won't like. Deutsche Bank is telling its US clients to close their accounts because FATCA's reporting requirements are too onerous. Our Treasury notes these concerns by saying it won't stringently enforce FATCA through 2015. That noise is small consolation for non-US banks that don't want to comply with US assertions of sovereignty outside American borders. The stupid Americans who opened accounts overseas thinking they can escape federal tax scrutiny are about to get their fingers broken hard as foreign doors slam shut. American citizens will comply with federal tax reporting and they will learn to like it.
There hasn't been a whole lot in the news lately to make me angry. I have been quite happy lately noting that there are a lot of attractive women walking around my local area wearing shorts, tight skirts, and yoga pants. I just might invite them over to my place where they can unburden themselves of said clothing, if I can find the time in my schedule.
Sunday, May 04, 2014
Saturday, May 03, 2014
The Haiku of Finance for 05/03/14
Forecasting earnings
Just add historic growth trend
Subtracting nothing
Just add historic growth trend
Subtracting nothing
Friday, May 02, 2014
Mobile Money Spells Economic Annihilation For Credit Cards
I don't let hype over US-Russia economic sanctions take my eye off the ball. Other wanna-be global powers can talk all they like about creating alternative global settlement systems to the US-based SWIFT system. Russia will not succeed even with help from China until both of their economies are completely open. Transparency and the rule of law have enterprise value even though they are weakening in the US. The relative advantage still lies with the Anglo-West and even Asian banks prefer more transparent interbank transfers.
The real action worth tracking is in mobile P2P payments. The emerging tech for smartphones is an existential threat to the major credit card companies. Any combination of Google Wallet and M-Pesa is a knockout blow to credit card payment systems. The combo will eventually metastasize in the developed world.
Vendors who migrate from card payments to mobile payments will find many advantages. They won't lose gross margin by paying credit card charges. Reducing the number of steps in a transaction means less friction for purchases. Consumers will love the simplicity of mobile transactions and spend even more of their dwindling middle-class paychecks. The unbanked poor in the US will finally join the mobile revolution once they see how quickly M-Pesa fills their SNAP accounts. Everybody wins.
The real action worth tracking is in mobile P2P payments. The emerging tech for smartphones is an existential threat to the major credit card companies. Any combination of Google Wallet and M-Pesa is a knockout blow to credit card payment systems. The combo will eventually metastasize in the developed world.
Vendors who migrate from card payments to mobile payments will find many advantages. They won't lose gross margin by paying credit card charges. Reducing the number of steps in a transaction means less friction for purchases. Consumers will love the simplicity of mobile transactions and spend even more of their dwindling middle-class paychecks. The unbanked poor in the US will finally join the mobile revolution once they see how quickly M-Pesa fills their SNAP accounts. Everybody wins.
Thursday, May 01, 2014
Subscribe to:
Posts (Atom)