Facebook, One Year Later: What Really Happened in the Biggest IPO Flop Ever

After Facebook's disastrous debut, the preferred clients of big banks walked away with huge profits. How? Public documents and interviews with dozens of investment bankers and research analysts reveal that the Street caught wind of something the public didn't. The social network and the banks told half the story. Here is the other half.

Uma Swaminathan tuned the television set in the living room of her ranch style home in the suburbs of East Brunswick, N.J. to CNBC. It was 9:00 a.m. on May 18, 2012, a day the retired schoolteacher thought might make her rich. She logged onto her Vanguard brokerage account on her computer and placed an order for 5,000 shares of Facebook at $42 a share.

On TV, wearing his trademark hoodie, 28-year-old Mark Zuckerberg, creator of the world's largest social networking site, stood in the courtyard of Facebook headquarters in Menlo Park, California. A crowd of eager Facebook employees held up company license plates and posters for the cameras. They'd stayed up all night at an employee "hack-a-thon" to celebrate the big day when Facebook was finally going public, in what might have been the most anticipated initial public offering in history. The boyish, blue-eyed Zuckerberg grinned, standing next to Bob Greifeld, chief executive of Nasdaq-OMX Stock Market, Inc., the largest electronic stock exchange in the United States.

With short hair, brown skin, and few wrinkles, Swaminathan looks much younger than her 68 years. She spent most of adult life as a suburban mom, making tofu for her daughter's friends at theater rehearsals, taking her three sons to soccer practice and Boy Scouts, and volunteering in the local community. She served a term as president of the Indian American Association of New Jersey.

Her interest in the stock market didn't develop until her husband died about 13 years ago. Her four children had already moved out to attend college or to pursue their careers. Swaminathan was left with her late husband's 401(k) retirement account, when she started dabbling in the market, investing in stable companies like Microsoft. Not long after, she began to follow the news coverage of initial public offerings (IPOs) -- when private companies enter the public market -- and came to know of the phenomenon known as the first day "pop." On the day that companies would debut on the stock market, the price would tend to shoot up before stabilizing. A year earlier, she watched as social networking site LinkedIn's stock price closed up 109 percent on its opening day.

She'd never placed such a big bet on just one stock, but she felt a personal connection to Facebook. She had been using the site to connect with family and friends since 2009, and almost everyone she knew had an account.

Now, as she watched the TV in eager anticipation, millions of shares were going to leave the hands of private investors and start trading, giving anyone with enough money a chance to own a slice of the social network giant. Silence descended as Zuckerberg came forward to deliver his speech: "I just want to say a few things, and then we'll ring this bell and we'll get back to work. Right now this all seems like a big deal. Going public is an important milestone in our history. But here's the thing: our mission isn't to be a public company. Our mission is to make the world more open and connected..."

Finally he reached the moment so many were waiting for: "So let's do this!" And the opening bell sounded as he signed the digital screen on the podium before him: "To a more open and connected world," he wrote. His handwritten message instantaneously appeared in Times Square just above the giant illuminated NASDAQ exchange ticker.

Facebook shares hit the market at an opening price of $38. Minutes later, Swaminathan's online order was executed, and the retired schoolteacher had just spent approximately half her life savings.

I: THE OFFERING

For Mark Zuckerberg, selling Facebook shares on the public market had a clear downside. Besides the headache of releasing a company's financial details to the public, he worried that increased scrutiny and push for profits would compromise Facebook's mission.

But like any growth-stage company, Facebook needed money, and private companies face restrictions on how much stock they can issue for cash. In early 2011, Goldman Sachs helped Facebook conjure IPO-type money without an actual IPO by creating a special investment product to sell its private shares to Goldman's wealthiest clients. But when the New York Times exposed the plan, the SEC began to investigate the transaction. Soon after, Zuckerberg decided to take the company public. In late 2011, the Wall Street Journal reported that Facebook was anticipating an IPO valuation of $100 billion -- nearly four times more than Google's market cap when it went public in 2004.

On February 1, 2012, Facebook filed its Form S-1 -- effectively a birth certificate for publicly traded companies -- containing everything an investor needs to know before buying shares at an IPO, including basic financial information and the business model. Facebook's S-1 showed that the company was primarily in the display-advertising business, with a net profit of $1 billion in 2011 from total revenue of $3.7 billion.

The S-1 is especially meaningful to investment banks. Facebook listed its underwriters -- the banks picked to buy and sell shares on the IPO -- near the front of the document, from left to right, in order of responsibility, with Morgan Stanley in the coveted "left lead" position.

This put Facebook's IPO in the hands of one of Silicon Valley's most celebrated bankers: Michael Grimes, co-head of global technology banking at Morgan Stanley's Menlo Park office, located just a few miles north of Facebook's headquarters.

by Khadeeja Safdar, The Atlantic |  Read more:

Image: uncredited

How to Buy Happiness

If experiences increase happiness and giving increases happiness, can we combine them to create the perfect happiness intervention? We tried this in a recent experiment, in which we handed out Starbucks gift cards on a university campus.

We told some people to head to Starbucks and buy something for themselves. We told others to pass their gift card along to someone else. And we told a third group of people to use the gift card to buy something for someone else — with the additional requirement that they actually hang out with that person at Starbucks.

Who was happiest? Those who treated someone else and shared in that experience with them. So the cost of increasing your happiness may be as cheap as two cups of coffee.

Taken together, the new science of spending points to a surprising conclusion: How we use our money may matter as much or more than how much of it we've got. Which means that rather than waiting to see whether you find $1 million under your mattress tomorrow, you can make yourself happier today. Switching your spending to buying experiences — for both yourself and others — can lead to more happiness than even the most amazingly Amazonian rain shower.

by Elizabeth Dunn and Michael Norton, LA Times | Read more:
Image: Anthony Russo / For The Times

Argument with Myself

Memory creates our identity, but it also exposes the illusion of a coherent self: a memory is not a thing but an act that alters and rearranges even as it retrieves. Although some of its operations can be trained to an astonishing pitch, most take place autonomously, beyond the reach of the conscious mind. As we age, it distorts and foreshortens: present experience becomes harder to impress on the mind, and the long-forgotten past seems to draw closer; University Challenge gets easier, remembering what you came downstairs for gets harder. Yet if we were somehow to freeze our memory at the youthful peak of its powers, around our late twenties, we would not create a polished version of ourselves analogous to a youthful body, but an early, scrappy draft composed of childhood memories and school-learning, barely recognisable to our older selves.

Something like this happened to the most famous case of amnesia in 20th-century science, a man known only as ‘H.M.’ until his death in 2008. When he was 27, a disastrous brain operation destroyed his ability to form new memories, and he lived for the next 55 years in a rolling thirty-second loop of awareness, a ‘permanent present tense’. During this time he was subjected to thousands of hours of tests, of which naturally he had no recall; he provided data for hundreds of scientific papers, and became the subject of a book (Memory’s Ghost by Philip Hilts) and a staple of popular science journalism; by the 1990s digital images of his uniquely disfigured hippocampus featured in almost every standard work on the neuroscience of memory. Since his death his brain has been shaved into 2401 slices, each 70 microns thick, compared in one account to the slivers of ginger served with sushi. Suzanne Corkin, an MIT neuroscientist, first met him in 1962 and after 1980 became his lead investigator and ‘sole keeper’. Permanent Present Tense is her account of Henry Gustave Molaison – his full identity can finally be revealed – and the historic contribution he made to science.

Corkin had a reputation for strict policing of access to Henry, a charge she happily concedes: ‘I did not want him to become a sideshow attraction – the man without a memory.’ After the death of his mother, his last thirty years were spent at a Connecticut nursing home in strict anonymity, with staff sworn to secrecy and filming prohibited. More than a hundred carefully screened researchers were admitted over the years to perform brain scans and cognitive tests, but were never told his name. Corkin’s lucid, well-organised telling of Henry’s story merges intimate case history with an account of the current scientific understanding and how it was reached.

Henry’s surgery was undertaken in an era of freewheeling experiment in pursuit of the idea that memories were indelible snapshots of sense experience, stored in chronological sequence like the frames of a celluloid film. Over the course of his decades as a test subject, the field was colonised by information theory, the processes of memory divided like those of a computer into encoding, storage and retrieval. Now the post-mortem scanning and mapping of Henry’s brain is exposing the artificiality of these divisions and revealing complexities that no computer can emulate.

by Mike Jay, London Review of Books |  Read more:

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Angelina Jolie and Brad Pitt , by Steven Klein.
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Sharon Corr

Mná na hÉireann

in a hurry
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Could WordPress be the next Tumblr?

Giant media and internet companies keep scooping up social-media services: among others, MySpace went to News Corp, YouTube to Google, Instagram to Facebook, and now Tumblr to Yahoo. For the young founders and their investors, the trajectory in each case has been 1) create a proprietary platform; 2) lure gazillions of users; 3) sell for huge amounts of money to a profitable enterprise that will figure out how to monetize all those users.

Now consider a 20-something entrepreneur named Matt Mullenweg. Like the founders of so many other important platforms, he has been coding most of his life. In the decade of its existence, his blogging software,WordPress, has become an essential part of the internet, powering about 20% of all websites. If the media and internet giants were bidding on Automattic, the parent company of WordPress.com and a variety of ancillary products, I'm betting they'd wave checks in the range of the $1.1bn or so that Yahoo is said to be paying for Tumblr.

Here's the thing, though. WordPress isn't like the other products I just mentioned, and Mullenweg, who told me late last year he has no intention of selling out, is a different kind of founder. I consider WordPress to be the most important platform around because it is a) open and b) controlled by a young man and team whose hearts and minds, from my perspective, are precisely in the right place at the right time. I admire them enormously.

It's not that Mullenweg is against making money. In fact, he and Automattic make a lot of it (though he doesn't say how much) via WordPress.com, which offers free, hosted blogs and a variety of for-pay services, including major corporate and media customers such as the New York Times, the Wall Street Journal and CNN. The revenues are enough that the company has sunk "tens of millions" of dollars into WordPress development, to improve it and support its millions of users, individual and corporate.

That's WordPress.com, the commercial arm of Mullenweg's operations. But more important, in the long run, is WordPress.org, which offers the software for free, open-source. This means anyone can download it at no charge, modify it at will and use it on his or her own server. I'm among the countless people who have done that, and I've come to rely on it for several blogs I maintain. (I also have several WordPress.com blogs, such as a place for some classroom work).

The WordPress community is enormous in part because, like other major open-source projects, it has become the center of an ecosystem. There are tens of thousands of extensions available for WordPress – software add-ons that do everything from curb comment spam to create online stores to you name it, plus vast numbers of "themes" that give users flexiblity in how the site will look and feel for the user. Automattic has created a few of the plug-ins, but third-party developers have done the vast majority. Some are free to use, like the core software, while others come with a charge.

Contrast this with all of the other major for-profit platform operations, such as Google, Facebook, Twitter, et al. To a greater or lesser degree, they allow developers to create applications to run on or alongside their platforms, but they are absolutely in control. The third-party developers and their products live essentially at the whim of the platform owners, and so does the content that we (you and I) put into their computers. We get convenience in return, but we need to always keep in mind who's running things. With WordPress.org sites, we are in control.

by Dan Gillmor, The Guardian |  Read more:

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Maxed Out on Everest

An hour above high camp on the Southeast Ridge of Everest, Panuru Sherpa and I passed the first body. The dead climber was on his side, as if napping in the snow, his head half covered by the hood of his parka, goose down blowing from holes torn in his insulated pants. Ten minutes later we stepped around another body, her torso shrouded in a Canadian flag, an abandoned oxygen bottle holding down the flapping fabric.

Trudging nose to butt up the ropes that had been fixed to the steep slope, Panuru and I were wedged between strangers above us and below us. The day before, at Camp III, our team had been part of a small group. But when we woke up this morning, we were stunned to see an endless line of climbers passing near our tents.

Now, bumper to bumper at 27,000 feet, we were forced to move at exactly the same speed as everyone else, regardless of strength or ability. In the swirling darkness before midnight, I gazed up at the string of lights, climbers’ headlamps, rising into the black sky. Above me were more than a hundred slow-moving climbers. In one rocky section at least 20 people were attached to a single ratty rope anchored by a single badly bent picket pounded into the ice. If the picket popped, the rope or carabiner would instantly snap from the weight of two dozen falling climbers, and they would all cartwheel down the face to their death.

Panuru, the lead Sherpa of our team, and I unclipped from the lines, swerved out into open ice, and began soloing—for experienced mountaineers, a safer option. Twenty minutes later, another corpse. Still attached to the line of ropes, he was sitting in the snow, frozen solid as stone, his face black, his eyes wide open. (...)

How different it was 50 years ago when, on May 1, 1963, James Whittaker, accompanied only by Sherpa Nawang Gombu, became the first American to reach the summit of the world. “Big Jim” did it by climbing the Southeast Ridge, the same route pioneered in 1953 by the peerless New Zealander Edmund Hillary and Sherpa Tenzing Norgay. Whittaker had climbed Mount McKinley a few years before, and it was Gombu’s third trip to Everest. Three weeks after Whittaker and Gombu’s ascent, in an unprecedented act of boldness, teammates Tom Hornbein and Willi Unsoeld clawed their way up a completely new route, the West Ridge. (The two men had been teammates on the 1960 American Pakistan Karakoram Expedition.) On that same day Barry Bishop and Lute Jerstad made the second American ascent of the Southeast Ridge. The two teams managed to meet below the summit, but by then it was dark, and they were forced to bivouac at 28,000 feet—a risky, last-ditch option never before attempted. Without tents, sleeping bags, stoves, Sherpas, oxygen, water, or food, they weren’t expected to survive.

Our team was on Everest to mark the anniversary of that expedition. Yet as we witnessed, the mountain has become an icon for everything that is wrong with climbing. Unlike in 1963, when only six people reached the top, in the spring of 2012 more than 500 mobbed the summit. When I arrived at the apex on May 25, it was so crowded I couldn’t find a place to stand. Meanwhile, down below at the Hillary Step the lines were so long that some people going up waited more than two hours, shivering, growing weak—this even though the weather was excellent. If these throngs of climbers had been caught in a storm, as others were in 1996, the death toll could have been staggering.

Everest has always been a trophy, but now that almost 4,000 people have reached its summit, some more than once, the feat means less than it did a half century ago. Today roughly 90 percent of the climbers on Everest are guided clients, many without basic climbing skills. Having paid $30,000 to $120,000 to be on the mountain, too many callowly expect to reach the summit. A significant number do, but under appalling conditions. The two standard routes, the Northeast Ridge and the Southeast Ridge, are not only dangerously crowded but also disgustingly polluted, with garbage leaking out of the glaciers and pyramids of human excrement befouling the high camps. And then there are the deaths. Besides the four climbers who perished on the Southeast Ridge, six others lost their lives in 2012, including three Sherpas.

Clearly the world’s highest peak is broken. But if you talk to the people who know it best, they’ll tell you it’s not beyond repair.

by Mark Jenkins, National Geographic |  Read more:

Photo: Subin Thakuri, Utmost Adventure Trekking

Happening - 10 Magazine #47 Summer 2013
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David Byrne Interview

Hagiwara, Tsuneyoshi, Early Spring, 2000.
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Dr. Frankenstein Needs His Own Hippocratic Oath

In the next war, instead of a soldier going on a reconnaissance mission into enemy territory, consider this possibility: a cloud of “micro air vehicles,” flying cyborgs, with built-in cameras and microphones, that could be guided by remote control. What military commander wouldn’t want that?

DARPA, the research wing of the Department of Defense, has been on the case. A decade ago, they experimented with building synthetic drones. The Nano Hummingbird can stay aloft for eleven minutes; the DelFry Micro for just three. Then they realized that a far better type of flying machine already existed. In addition to being able to cover long distances while economizing energy, insects have a simple nervous system that was relatively easy to harness.

Scientists at the University of California Berkeley have discovered how to stimulate a beetle’s brain to make it start and stop flying. They poked a hole in the exoskeleton, threading in microscopically thin steel wire. A package of electronics mounted with beeswax on the beetle’s back carries the camera. When electricity is sent into the beetle’s optic lobe, the bug took flight. The lab experiment was a success.

The vignette appears midway through Frankenstein’s Cat, Emily Anthes’ fascinating book about our latest methods of transforming animal bodies. While the technology she describes is new, humans have been altering animals, in a sense, for hundreds of thousands of years. The first animal we started tailoring may have been ourselves, when a distant ancestor dried an animal skin and managed to wrap it around her torso such that it could hold a baby securely (as described in “We Built These Bodies” from the premier issue of Nautilus). This saved a lot of energy, freed up her arms to perform other tasks, and changed the course of our evolution, allowing babies’ brains to develop more outside the womb. With the advent of agriculture, humans became much more sophisticated about breeding animals and crossing varieties of plants. Shaping the living things around us emerged as a defining feature of our species. Now transgenic technology—tinkering more directly with an organism’s genome—is poised to again transform the bodies of animals around us. Yet our society is far from having clear conclusions or policies on what modifications we should allow ethically.

We don’t want shampoo being rubbed in Snuffy’s eyes to test the new no-tear formula, but if Snuffy were a pig whose organs could be genetically modified to assimilate easily into human tissue, polls say the majority of us are in favor. We nod our heads when Peter Singer calls the prioritization of human needs “speciesism,” but now what about those new pig lungs for your nephew with cystic fibrosis?

by Luba Ostashevsky, Nautilus |  Read more: 

Illustration by Diego Patino/SciAm/FSG

How to Legalize Pot

[ed. The NY Times has been reading Duck Soup. See: Holding Our Breath]

The first time I talked to Mark Kleiman, a drug policy expert at U.C.L.A., was in 2002, and he explained why legalization of marijuana was a bad idea. Sure, he said, the government should remove penalties for possession, use and cultivation of small amounts. He did not favor making outlaws of people for enjoying a drug that is less injurious than alcohol or tobacco. But he worried that a robust commercial marketplace would inevitably lead to much more consumption. You don’t have to be a prohibitionist to recognize that pot, especially in adolescents and very heavy users, can seriously mess with your brain.

So I was interested to learn, 11 years later, that Kleiman is leading the team hired to advise Washington State as it designs something the modern world has never seen: a fully legal commercial market in cannabis. Washington is one of the first two states (Colorado is the other) to legalize the production, sale and consumption of marijuana as a recreational drug for consumers 21 and over. The marijuana debate has entered a new stage. Today the most interesting and important question is no longer whether marijuana will be legalized — eventually, bit by bit, it will be — but how.

“At some point you have to say, a law that people don’t obey is a bad law,” Kleiman told me when I asked how his views had evolved. He has not come to believe marijuana is harmless, but he suspects that the best hope of minimizing its harm may be a well-regulated market.

Ah, but what does that look like? (...)

One practical challenge facing the legalization pioneers is how to keep the marijuana market from being swallowed by a few big profiteers — the pot equivalent of Big Tobacco, or even the actual tobacco industry — a powerful oligopoly with every incentive to turn us into a nation of stoners. There is nothing inherently evil about the profit motive, but there is evidence that pot dealers, like purveyors of alcohol, get the bulk of their profit from those who use the product to excess. “When you get a for-profit producer or distributor industry going, their incentives are to increase sales,” said Jonathan Caulkins of Carnegie Mellon, another member of the Washington consulting team. “And the vast majority of sales go to people who are daily or near-daily consumers.”

What Kleiman and his colleagues (speaking for themselves, not Washington State) imagine as the likely best model is something resembling the wine industry — a fragmented market, many producers, none dominant. This could be done by limiting the size of licensed purveyors. It would help, too, to let individuals grow a few plants at home — something Colorado’s new law permits but Washington’s does not, because polling showed Washingtonians didn’t want that.

If you read the proposal Kleiman’s team submitted to Washington State, you may be a little boggled by the complexities of turning an illicit herb into a regulated, safe, consumer-friendly business. Among the things on the to-do list: certifying labs to test for potency and contamination. (Pot can contain, among other nasty things, pesticides, molds and salmonella.) Devising rules on labeling, so users know what they’re getting. Hiring inspectors, to make sure the sellers comply. Establishing limits on advertising, because you don’t want allowing to become promoting. And all these rules must account not just for smoking but for pot pastries, pot candies, pot-infused beverages, pot lozenges, pot ice cream, pot vapor inhalers.

by Bill Keller, NY Times |  Read more:

Image: CBS/IsTockPhoto

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Moby Ben, or the Washington Super Whale

In February 2012, a number of hedge fund traders noted one particular index--CDX IG 9--that seemed to be underpriced. It seemed to be cheaper to buy credit default protection on the 125 companies that made the index by buying the index than by buying protection on the 125 companies one by one. This was an obvious short-term moneymaking opportunity: Buy the index, sell its component short, in short order either the index will rise or the components will fall in value, and then you will be able to quickly close out your position with a large profit.

But February passed, and March passed, and April rolled in, and the gap between the price of CDX IG 9 and what the hedge fund traders thought it should be grew. And their bosses asked them questions, like: "Shouldn't this trade have converged by now?" "Have you missed something?" "How much longer do you want to tie up our risk-bearing capacity here?" "Isn't it time to liquidate--albeit at a loss?"

So the hedge fund traders began asking who their counterparty was. It seemed that they all had the same counterparty. And so they began calling their counterparty "the London Whale". They kept buying. And the London Whale kept selling. And so they had no opportunity to even begin to liquidate their positions and their mark-to-market losses grew, and the risk they had exposed their firms to grew.

So they got annoyed.

And they went public, hoping that they could induce the bosses of the London Whale to force him to unwind his possession, in which case they would profit immensely not just when the value of CDX IG 9 returned to its fundamental but by price pressure as the London Whale had to find people to transact with. And so we had 'London Whale' Rattles Debt Market, and similar stories

The London Whale was Bruno Iksil. He had been losing, and rolling double or nothing, and losing again for months. His boss, Ina Drew, took a look at his positions. They found they had a choice: they could hold the portfolio and thus go all-in, or they could fold. They could hold CDX IG 9 until maturity--make a fortune if a fewer-than-expected number of its 125 companies went bankrupt, and lose J.P. Morgan Chase entirely to bankruptcy if more did. Or they could take their $6 billion loss and go home. They could either take their losses, or sing "Luck, Be a Lady Tonight!" and bet J.P. Morgan Chase on a single crapshoot. After all, what could they do if the bet went wrong and they had to eat losses at maturity? J.P. Morgan Chase couldn't print money. So Drew stood Iksil down, and the hedge fund traders had their happy ending.

In late 2008, the Treasury bond went haywire. The interest rate on the Ten Year Nominal Treasury bond fell to 2.1% in the panic--clearly overpriced. In the late 1990s with the debt-to-annual-GDP ratio on the decline the Treasury bond had traded between 5% and 7%. In the 2000s with a weak economy the Treasury bond had traded between 4% and 5%. With the Federal debt exploding even faster than it had around 1990, it seemed to hedge fund traders very clear that the long-term fundamental value of the Ten-Year Treasury bond probably carried an interest rate of 7%, or more--and was at the very least more than 5%. So smart hedge fund traders shorted Treasuries, and waited for the Treasury Bond to return to its fundamental value.

And they ran into the widowmaker.

So they scrambled around, wondering: "Why did the interest rate on the Ten-Year Treasury peak at 4%? And why has it gone down since then? And why won't it go back to its 5%-7% fundamental." And they looked around. And they found Ben Bernanke:

The Washington Super-Whale.

He had printed-up reserve deposits, and used them to buy Treasury Bonds, and in so doing, they thought, had pushed the price of Treasuries up well beyond their fundamentals. Yet rather than easing off, taking his lumps, and letting the market "clear" he kept buying and buying and buying and buying, leaving the hedge fund traders with larger and larger and larger short positions in Treasuries that had to be carried at a loss. And every year that they carry those positions is a -2% times the size of the long leg negative entry in their cash flow.

Bruno Iksil, they thought, had been pulled up short by his boss Ina Drew's unwillingness to bet the firm and risk bankruptcy. Ben Bernanke, they thought, ought to have been pulled up short by his regard for financial stability--by his promise to keep inflation at its target, for the counterpart to J.P. Morgan Chase's bankruptcy and liquidation would be the national bankruptcy that is another episode of inflation like the 1970s. But Ben Bernanke wasn't pulled up short by the risk of inflation. He had no supervising CEO. And he dominated the Federal Open Market Committee.

But what Bernanke was doing, they thought, was as unprofessional as it would have been for Ina Drew to tell Bruno Iksil: "You turn out to have made a large directional bet that we can sell unhedged protection and profit? Let's see if you are right: let it ride!"

And so they went public with the Washington Super-Whale, as they had gone public with the London Whale. Perhaps somewhere out there was an equivalent of Jamie Dimon who could tell Bernanke that it was time to unwind the Federal Reserve's balance sheet now? Jeremy Stein, perhaps?

From my perspective, of course, the hedge fundies' analogy between the London Whale and the Washington Super-Whale is all wrong--the hedge fundies are thinking partial-equilibrium when they should be thinking general equilibrium. CDX IG 9 has a well-defined fundamental value: the payouts should each of the 125 companies go bankrupt times the chance that they will. What Bruno Iksil does does not affect that fundamental value. He can bet, and drive the price, but he cannot change the fundamental.

But the Washington Super-Whale is different.

by Brad DeLong |  Read more:

Image: uncredited

It's a Wonderful World

[ed. Who knows if this is true or not? The fact that it's believable is enough.]

They are 1 percenters who are 100 percent despicable.

Some wealthy Manhattan moms have figured out a way to cut the long lines at Disney World — by hiring disabled people to pose as family members so they and their kids can jump to the front, The Post has learned.

The “black-market Disney guides” run $130 an hour, or $1,040 for an eight-hour day.

“My daughter waited one minute to get on ‘It’s a Small World’ — the other kids had to wait 2 1/2 hours,” crowed one mom, who hired a disabled guide through Dream Tours Florida.

“You can’t go to Disney without a tour concierge,’’ she sniffed. “This is how the 1 percent does Disney.”

The woman said she hired a Dream Tours guide to escort her, her husband and their 1-year-old son and 5-year-old daughter through the park in a motorized scooter with a “handicapped” sign on it. The group was sent straight to an auxiliary entrance at the front of each attraction.  (...)

Passing around the rogue guide service’s phone number recently became a shameless ritual among Manhattan’s private-school set during spring break. The service asks who referred you before they even take your call.

“It’s insider knowledge that very few have and share carefully,” said social anthropologist Dr. Wednesday Martin, who caught wind of the underground network while doing research for her upcoming book “Primates of Park Avenue.”

“Who wants a speed pass when you can use your black-market handicapped guide to circumvent the lines all together?” she said.

“So when you’re doing it, you’re affirming that you are one of the privileged insiders who has and shares this information.”

by Tara Palmeri, NY Post |  Read more:

Image: Reuters

Oh no...Tumblr to be Acquired by Yahoo

The board of Yahoo, the faded Web pioneer, agreed on Sunday to buy the popular blogging service Tumblr for about $1.1 billion in cash, people with direct knowledge of the matter said, a signal of how the company plans to reposition itself as the technology industry makes a headlong rush into social media.

The deal, which is expected to be announced as soon as Monday, would be the largest acquisition of a social networking company in years, surpassing Facebook’s $1 billion purchase of Instagram last year.

For Yahoo and its chief executive, Marissa Mayer, buying Tumblr would be a bold move as she tries to breathe new life into the company. The deal, the seventh since Ms. Mayer defected from Google last summer to take over the company, would be her biggest yet. It is meant to give her company more appeal to young people, and to make up for years of missing out on the revolutions in social networking and mobile devices. Tumblr has over 108 million blogs, with many highly active users.

Yet even with all those users, a basic question about Tumblr and other social media sites remains open: Can they make money?

Founded six years ago, Tumblr has attracted a loyal following and raised millions from big-name investors. Still, it has not proved that it can be profitable, nor that it can succeed on mobile devices, which are becoming the gateway to the Internet. Even Facebook faces continued pressure from investors to show it can increase its profits and adapt to the mobile world.

“The challenge has always been, how do you monetize eyeballs?” said Charlene Li, the founder of the Altimeter Group, a consulting firm. “Services like Instagram and Facebook always focus on the user experience first. Once that loyalty is there, they figure out how to carefully, ideally, make money on it.”

A Yahoo spokeswoman declined to comment. A representative for Tumblr did not respond to requests for comment.

If the deal is approved, Ms. Mayer will face the challenge of successfully managing the takeover, given Yahoo’s notorious reputation for paying big money for start-ups and then letting the prizes wither. Previous acquisitions by Yahoo, like the purchase of Flickr for $35 million and a $3.6 billion deal for GeoCities, an early pioneer in social networking, have been either shut down or neglected within the company.

Because of this, Ms. Mayer will face pressure to keep Tumblr’s staff, led by its founder, the 26-year-old David Karp, who dropped out of high school as a 15-year-old programmer. It is unclear whether all of Tumblr’s 175 employees, based in New York City, will move over to Yahoo.

At the same time, analysts and investors are likely to question whether buying a site that has struggled to generate revenue makes sense.

“This is not an inexpensive acquisition, but they’re willing to pay to get back some of what they’ve lost,” said Colin Gillis, an analyst at BGC Partners. “They want to be hip.”

by Andrew Ross Sorkin and Jenna Wortham, NY Times | Read more:
Image:Laurent Gillieron/Keystone, via Associated Press

Gioacchino Pagliei, “The Naiads” (1881).
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