Tag Archives: Financial Times

The End Or the Beginning of Facebook?

How on Earth can people put a price on something like Facebook? It isn’t even a company – it’s some kind of hybrid-corporation! In fact, if we would look at Facebook the same way we look at all other public listed companies, the face value of the Facebook shares would be zero. The shareholders have nothing to say when it comes to managing the company. The advertizing isn’t going that great, either. So why is the stocks trading at nearly  50 times estimated earnings? Well, investors are starting to turn away from Facebook, too…

“This may be the start of an ongoing trend.”

MarketWatch

Mark-Zuckerberg

Social media alternatives to Facebook are increasing as users discover more networks that fit their needs. Financial Times reported a couple of days ago that investors are turning to alternative social media networks, and that Facebook is no longer at the top of the list.Benchmark Capital and Greylock Partners are two recent examples of companies that are branching out beyond Facebook. MarketWatch reports that Facebook lost 1.4 million users in December, and that this may be the start of an ongoing trend.

So, will it turn out that Facebook is just another hype, after all?

3q5tctThat is, of course, too early to say, but let’s have a look at some of the stuff that’s been reported about Mr.Zuckerberg and his gigantic Facebook lately.

Bloomberg reported on Feb. 12 that David Sze, who was an early investor in Facebook andLinkedIn, has decided to support the startup Nextdoor. And the Financial Times lists Nextdoor and Snapshot as two recent competitors.

But also other networks, that  have been available for several years, and are now seeing growth among their users.

Orkut, Google’s social network, has 33 million users around the world and is still one of the most popular networks in Brazil and India.

Zorpia, founded in 2003 by Jeffrey Ng, has grown to 26 million users while expanding its features to include photo albums and online journals in addition to social networking.

Badoo has grown to 121 million users and has reached 180 countries.

It seems clear that the gap between alternative networks and Facebook is beginning to get smaller – and investors are noticing this.

Although Facebook is not disappearing and will continue to attract users, its growth in certain markets is being stalled.

Facebook is still banned in China and other countries. Despite the ability of some users to get past the block, the ban has allowed alternative social media networks to flourish. Facebook is apparently slowly beginning to lose users. Facebook lost 1.4 million users in December, according to MarketWatch. And this may be the start of an ongoing trend, the financial web site says.

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Out of Date – Out of Time?

Is journalism about to become history, noted in the ebooks as an antiquarian profession? There seem to be those who thinks traditional, fact-finding, journalism may already be dead. The major European finacial newspaper, Finacial Times Deutschland makes its last edition tomorrow, December 7. It will be like a funeral.

“News is becoming ever more streamlined. The concept of whole, complete article is out of date.”

Sascha Lobo

Image

The Financial Times Deutschland is hitting the newstands for the last time on December 7, and the Frankfurter Rundschau is insolvent. Behind this, lies a development that is bigger than the Internet, says media guru Sascha Lobo: news is becoming ever more streamlined. The concept of whole, complete article is out of date.

Food for thoughts her, at www.europress.eu:

“Don’t shoot the messenger” is the English proverb, meaning “Don’t punish the bearer of bad news.” Sure – but it’s hard not to.

The dying of the print media in Germany seems to have begun, and apparently the victims range from the left (Frankfurter Rundschau) to the centre (Financial Times Deutschland) – from the higher echelons including business magazine Impulse, to the lower ones such as lifestyle magazinePrince, which will be sold strictly online as of January 2013.

A lively discussion about the causes, and conclusions that must be drawn, has begun. Often it’s about business models, newspapers and of course the Internet. Less commonly, it’s about how the concept of news itself has changed, whether printed or pixilated.

Behind this lies a development bigger than the Internet. The history of technology is a history of streamlining: apparently, humanity has always striven to make the world fluid – and the Greek aphorism “Panta Rhei” (“Everything flows”) is to be grasped not as a declaration but as a clarion call.

Ironically, printed newspapers, which emerged in the early 17th Century, promoted streamlining in a crucial way; they were much faster at getting information across than the books that had been used until then. Digitisation and networking followed.

Written news therefore, whether on paper or via the Internet, comes in article form, which is the customary way it is consumed. But perhaps that will change, just because the audience also expects that same streamlining here. News gives you the feeling that you are up to date with the latest events. Perhaps it is not the printed newspaper, but the static coverage and the concept of a completed news article that lies at the heart of the crisis.

Brave news world

In the print media, those who avoid the streamlining culture best, are those outlets which remove themselves from mere reportage.

The printed magazine Landlust (covering life in the German countryside), which can be counted as a success, as it covers topics that keep it at a safe distance from the world of traditional news.

The Economist, hailed as a role model in both its printed and pixelated versions, sums up world news events in the print edition in one to three sentences; the remainder of the articles are analyses, background reports and opinion pieces. That is, texts that will help to understand the news process, rather that putting a reporter on them to flash-freeze them at a point in time.

A news article, regardless of the medium, is no longer enough to describe the world. The growing streamlining can be seen on the Internet as well, and for that reason the static article of news coverage we have grown used to has become obsolete. The news process does not tolerate any downtime.

Read the rest here.

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The Sociopathic Banking System of Europe

In spite of the recently conducted stress test of European banks, concluding that most of them have enough core capital to weather a “worst case scenario,” we now learn that they will need at least EUR 200 billion more to be on the safe side – and probably more. Here at the EconoTwist’s we’re not the only ones who think this is getting way out of hands: It seems like no one is really sure of the banks real risk exposure, not even the banks themselves, the stress test have once again proved to be a joke, and who the Hell do they think they are? – the IMF and the banking associations who think they just can demand the euro zone governments to fill up their bottomless buckets?

“This is the second time it has happened.”

 Elena Salgado

Yesterday, the IMF leaked its calculations of required capital for a recapitalization of the banks in the euro zone, well ahead of the publication of IMF’s financial stability report later this month. This amount is now  EUR 200 billion. And of course it has triggered a debate within the euro zone. But the discussion is also rather skewed: the main issue is the actual number, 200? 300? Who cares? The real problem is that we still don’t know the health of our financial system – three years after the crisis hit!

The staff at the International Monetary Fund  have triggered another fierce dispute with euro zone authorities over their estimates, showing even more cracks in the European  banks’ balance sheets, related to their holdings of troubled euro zone sovereign  debt.

Christine Lagarde

(Yeah, another quarrel – just what we need….)

The analysis, which was discussed by the IMF’s executive board in Washington  on Wednesday, are strongly rebutted by the European Central Bank and the euro zone governments, which say it is partial and misleading.

Is there anybody trustworthy, these days?

According the Financial Times, the IMF’s analysis, currently in a drafted version of its regular Global Financial  Stability Report (GFSR), uses credit default swap prices to estimate the market  value of government bonds of the three euro zone countries receiving bailout money from the IMF – Ireland, Greece and Portugal – in addition to the bonds of Italy, Spain  and Belgium.

Although the IMF analysis may be revised, two officials says one estimate  show that marking sovereign bonds to market would reduce European banks’ tangible common equity – the core measure of their capital base – by about EUR 200 billion (USD 287 billion), a drop of 10-12 per cent.

The impact could be increased  substantially, perhaps doubled, by the knock-on effects of European banks  holding assets in other banks, Financial Times writes.

In other words: the IMF estimates are just as worthless as the stress tests – the only thing that is certain is that most banks will need more substantial capital injections if they are going to survive.

Anyway – the ECB and the euro zone governments strongly rejects these estimates.

Elena_Salgado

Spanish finance minister, Elena Salgado, told the Financial Times yesterday that the fund makes a mistake by  looking only at potential losses without also taking account of holdings of German Bunds, which have risen in price.

“The IMF vision is biased,” she said. “They only see the bad part of the  debate.”

Now, that’s another “truth with modifications,” because the gains in Bunds are comparatively small in relation to the losses on other sovereign bonds.

“This is the second time it has happened,” the Spanish finance minister points out, referring to the fund’s  October 2009 GFSR, which estimated that euro zone banks had only written down USD 347 billion of USD 814 billion of probable losses from the financial crisis. IMF later revised down that total of probable total losses.

Well, I’m afraid it will not be the last time, either…

Mrs. Salgado goes on saying that the European stress tests of banks is a better indication of  their vulnerabilities.

Now, that’s just plain wrong!

The stress tests do not only lack credibility, they also assume no losses on sovereign debt holdings in the bank’s books.

As www.eurointelligence.com rightfully underlines, it is very likely that investors in Greek and peripheral debt securities will ultimately face losses, especially given the European Council has already agreed to accept a degree of private-sector participation.

Considering the decline in economic growth, now evident throughout the whole euro zone, those losses will increase substantially.

This means that the IMF estimate of an additional EUR 200 billion in bank aid most probably is overoptimistic underestimation.

But this line of argument is really a total derailing of what’s ought to be the real discussion:

In the view of the EconoTwist’s we’re looking at a 3-part problem.

First, the accounting system that has developed into a untransparet jungle of techniques, making it totally impossible for both regulators, analysts and policy makers to gain complete oversight of the bank’s real risk exposure.

This includes the off-balance sheet financing, that once upon a time was created as a special solution to fund important high-risk projects, but now being used for pure speculation – just as the traditional derivatives.

Then we have the cross-border activity. The fact that the financial industry have globalized faster than any other industry, and faster than national (local) authorities are able to handle, have created a situation where banks may speculate, taking advantage of different rules in different countries, taking on more risk with little or no need for reporting and disclosure.

To make things even more confusing, international regulators invoked a special set of rules in the aftermath of the Lehman collapse, allowing the banks to put whatever price tag they see adequate on the toxic, worthless assets they possess.

This is called a “mark-to-mark” principle.

However, new rules, now being implemented through the Basel III regulations requires that banks return to the old principle of “mark-to-market.” That means putting the actual market valuation of their assets on their balance sheet.

EU officials involved in the debate say the “mark-to-market” principle explains much of the recent fall in EU’s commercial banks’ share prices, including  French and German institutions that have large holdings of euro zone sovereign debt.

“Marking to market is a fairly brutal exercise, but these are the estimates  that hedge funds are currently making,” one official says to the FT, following criticisms  of European banks made by the International Accounting Standards Board, which sets the common bank accounting rules, to the European Securities and Markets Authority,  EU’s markets regulator.

And the third unresolved problem is called the “shadow banking system.”

See also: Major Banks Still Hide $Trillions In The Shadows

Officials say the IMF staff do not claim their estimate is a comprehensive  measure. But they say that the analysis strongly suggests European banks need to  raise more capital, an argument  recently made by Christine Lagarde, the fund’s new managing director.

No one disputes that fact.

The final report will be published in three weeks’ time just before the  IMF’s annual meetings, and is subject to revision depending on the debate  between fund staff and the fund’s executive board.

But these authorities and their officials can evaluate, calculate and estimate all they want:

Before the regulatory mess is cleaned up, things are not going to look any better and more nasty surprises can be expected.

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Filed under International Econnomic Politics, Laws and Regulations, National Economic Politics, Philosophy