Good morning

The headlines:

  1. The US IRS found that one in 189 High Earners paid no tax in 2009. Link: But what does this mean? Ah statistics – thou art a creator of headlines. What it means is that the number “jumped” from 0.51% to 0.53% (ie. in 2008, it was one in 196). What it also means is that some high income earners took advantage of tax breaks and/or one of the TWO ways that the IRS defines “income” and/or one of the TWO ways that the IRS defines “taxation”. Doesn’t it sound like a fiscal buffet*? Okay so yes, the headline may be a little misleading; but the need for some tax reform is clear. If you offer loopholes, people will take them, and still claim to be patriotic. Take the patriotism away from the Americans by leaving them with fewer options. I fully support the free choice to not pay tax: but that decision must be tax evasion and not tax avoidance. Because then there are consequences, and someone is throwing the dice.
  2. Facebook shares drop below $29. Link: Welcome the options traders. Options trading on Facebook began yesterday, with the number of puts** exceeding the number of calls*** by 1.77 to 1. The most highly traded were June $30 puts, followed by June $32 calls and June $34 calls. Which is interesting – because it looks like the market bears (the pessimists) don’t think that the Facebook price will rise above $30 by June, and are willing to pay for the right to force-sell at $30. The market bulls (the optimists) are happy to take the $30 bet (by selling the puts to the bears), and at the same time, some are buying upside potential by buying calls at $32 and $34 (meaning that they can buy Facebook shares at these prices if the stock price goes above them). The point is: doesn’t look like Facebook is returning to its IPO price any time soon.
  3. And there are rumours of a Facebook Phone. Link: “we think every mobile device is better if it is deeply social”. Question though: aren’t Facebook behind the wave? Maybe they’ll use some of that capital they just raised to buy out RIM and we’ll all use Faceberries to status-update-constantly on BFF messenger chat. Two fails making a turnaround success story and suddenly “the Social Network Part 2: the Pride of Zucky”. But seriously though – a facebook phone seems like a good idea that will be a bad idea. If Google and Apple are good at anything – it’s creating brand loyalty. Short of an epic international fail (like RIM’s last year) and/or my insolvency, I will never leave Apple. My Android friends – well I don’t have any because they all mostly disowned me after an Apple VS Android comment fight on a facebook status****. I think that a facebook phone will struggle – particularly when facebook thinks that their strategy should be to make mobile devices “deeply social”. Uh yes – that’s what a telephone is. If you can give me a holographic transmitter as “deeply social” experience before Apple/Google does – maybe I’ll give up my iPhone. Anything less…
  4. RIM’s shares plunge after it reports a “surprise loss”. Link: But are we really that surprised? Analysts had predicted a profit of $261 million. No one is saying how much the loss really is – but I’m saying that at least part of it is a write-down of that inventory balance I mentioned yesterday. RIM has JP Morgan “evaluating their options”. All the buzzwords are floating around: “strategic alliances”, “forging partnerships”, “improved business models”, “organisational efficiencies”. Those are all euphemisms.
  5. China has no plan for large scale stimulus. Link: “Let the world slow, bitches”. That’s according to the Xinhua News Agency. Well – not the “let the world slow” part. That was my interpretation of Chinese foreign policy. The news article mentions that the using stimulus to inflate growth is unsustainable; the government would rather encourage investment in infrastructure.

That’s all for now.

Have a good day.

*As compared to a fiscal Buffett, which would only have one meal option that most high-end clients would find distasteful.

**A “put” is the right to sell the share (to the person selling you the put) at a set price (known as the strike price) at some future date (the exercise date).

***A “call” is the right to buy the share (from the person selling you the call) at a set price (known as the strike price) at some future date (the exercise date).