Good morning

The headlines:

  1. Facebook director sells most of his shareholding.

    Link: when the going gets tough…

    Peter Thiel sold most of the rest of his stake in Facebook when the lock-up period ended on Thursday.

    Usually, these things are seen as signals to the market – because if a director and founder is cashing in…

  2. Groupon backers also sell their stakes.

    Link: run.

    On the topic of founder-directors cashing out, two of the early Groupon backers have also divested their stakes recently. And not surprisingly:

    That is the definition of a plummeting share price. Battery Ventures has sold all 15.99 million of the shares it held, and Andreessen Horowitz sold 5.1 million of his shares in June.

    The share price is currently at around 20% of its IPO price. Which brings me back to my original observation about internet companies: why did they list?

    If it’s not to raise capital, then it must have been to cash in. At which point, an investment bank got involved. And the banks are heavily incentivised to sell the shares when the market hype is at its highest so that the most amount of money can be sucked from the investors.

    Internet company investments were awesome when they were unpopular. Now? Now I’d want a clear and plausible reason as to why they want the money raised…

  3. US Banks are buying treasuries.

    Link: what else do they do with their money?

    There’s a growing gap between deposits and amounts lent (deposits > lendings) in the American banks.

    So they need to do something with the extra money. Which means that they’re buying treasuries. And given that yields on treasuries are practically below 1%, the bankers are not so happy.

    My favourite quote: “Banks may be forced into more risky assets and lending practices if yields continue to hover about record low levels”.

    Sounds like the beginnings of a Subprime Mortgage Crisis!

  4. Romney calls for an audit of the Fed.

    Link: I don’t understand why the Fed has such an issue with this.

    The Fed is saying that this will impact their independence.


    The Fed has the unfettered power both to debase the American currency and to make economic policy decisions that BY DESIGN are meant to change the way that the economy functions.

    And they’re saying that they would like to do this without any form of supervision whatsoever?

    I think that a little independent auditing would not go amiss. Just to check that Ben is adding things correctly and isn’t boldly going where no calculator has gone before.

  5. Belize nears default.

    Link: where’s a CDS when you need it.

    Belize is that spot of green somewhere between Mexico, the Caribbean sea and Honduras.

    Belize has missed a payment on $544 million worth of bonds. In my mind, “missing a payment” is not just “nearing default”. It is “cruised straight into default”.

    However, the Belize government is currently in a grace period of 30 days. According to their finance minister, the government does not have the capacity to make the $23 million payment. On August 8, the government published three attempted plans at restructuring the bonds, all of which were rejected by the bondholders.

    And when the suggestion is that the coupon rate on these “superbonds” get cut from 8.5% to 2%, with a 15 year grace period on the repayment of principal and an extension of the bond maturity date from 2029 to 2062 (by THIRTY THREE YEARS), then you too would be saying “nought, bru – at that price, I’d rather forgo the money and see you burn, you F*****G MOTHERF*****S!”

    According to one analyst, “By not paying the coupon, the government is trying to force bond holders into an exchange that will get investors pennies on the dollar”. He goes on to describe this as “one of the worst restructurings for bondholders in recent emerging markets history”.

    That’s probably about right.

  6. Citigroup issues first sole-branding China credit card.

    Link: why do I feel like I’ve seen this headline before?

    It’s because we have. China is slowly lifting the rules. And this is the first time that a foreign bank has been allowed to issue a credit card without having to be in alliance with one of the local Chinese banks.

    It is progress.

  7. Apple’s share price.

    Link: iPhone optimism.

    Apple is now more valuable than Microsoft was in its heyday (December 27, 1999).

    At close of trading (New York) yesterday, the share price hit $665.15. This is apparently a surge around excitement for the new iPhone announcement on September 12. And it should be exciting – Apple derives around 70% of its profit from iPhone sales.

    Apple really is awesome. Compared to the S&P 500 since it came about:


That’s all for now.

Have a good day.