A lawsuit alleging price fixing among some of Silicon Valley's largest companies will proceed to trial, says U.S. District Judge Lucy H. Koh in San Jose, California. The defendants include Google (GOOG), Apple Inc. (AAPL), Intel Corp. (INTC), Adobe Systems Inc. (ADBE), Walt Disney Co. (DIS)’s Pixar animation unit, Intuit Inc. (INTU) and Lucasfilm Ltd. There was collusion in Silicon Valley to hold down salaries paid to technical employees. Apple was a prominent promoter of "no recruit" agreements, and Steve Jobs himself threatened Palm with unrelated patent litigation in order to bully Palm into complying.
The Verge: The no-hire paper trail Steve Jobs and Eric Schmidt didn't want you to see
Slashdot: Steve Jobs Threatened Palm To Stop Poaching Employees
Techcrunch: Apple, Google, 5 Others To Be Denied Dismissal Of “No Poach” Conspiracy Case
Bloomberg: Apple, Google Must Face Employee-Poaching Ban Antitrust Lawsuit
The lawsuit uses some of the evidence uncovered by a Department of Justice settlement in 2010 with the same companies, as reported by Vorpal Trade earlier (High tech hiring runs afoul of RICO?). So far, no compensation has been paid to employees who were the supposed victims of the collusion to hold down salaries, though a fine was paid to the U.S. Government.
More on the settlement:
Wall Street Journal, 9/17/10: DOJ, TechFirms Near Deal in Hiring Probe
AllThingsD, 9/24/10: DOJ, Tech Companies Settle Hiring Probe
BizJournals, 9/24/10: Tech giants settle hiring probe; Microsoft says it wasn't targeted
Sort of in the same category, but not nearly as real, and smacking greatly of wishful thinking, was AngelGate, in which it was alleged that a small group of angel investors in high-tech conspired to hold down the valuations of start-up companies they would fund.
Tuesday, February 12, 2013
Saturday, February 9, 2013
NY Times, Fooled, Says Mortgage Rates Elevated
The markets send clear signals about their condition. Last fall Peter Eavis wrote a Dealbook analysis piece that seemed to show that banks and mortgage companies were overcharging for 30-year mortgages.
But there was another explanation: Perhaps a 30-year mortgage rate of 2.8% is too low on an absolute level. Perhaps banks refuse to go that low because they predict they will lose large amounts of money when interest rates go back up. If banks lend at 2.8% and short term rates are 4%, they would lose 1.2% just on the interest rate difference alone, not to mention costs of servicing the loan. Short term funding rates obviously aren't 4% now, they are closer to 0.25%. What if you were making the loan from your own funds, to a stranger who needed to take 30 years to pay it back to you? Would you lend your money at 2.8% for that long? What if you were able to borrow at short term rates and were making 2.8% mortgages to friends, family, and random strangers. Would you feel comfortable making 2.8% loans? Wouldn't you be worried that 0.25% short term rates won’t last forever, especially with oil at $100/barrel?
Rather than ascribing evil motives to lenders, it makes much more sense that the entire mortgage industry is very leery of low rates, and predicts that funding costs will increase in the coming years. Mortgage lenders are signaling higher rates to come. To dive down to extremely low mortgage rates would be going out on a limb, betting aggressively on a long-term moribund economy that never sees inflation or higher, boom-market interest rates again. Short- and long-term rates for Treasury bills, bonds, corporate bonds, mortgages, CDs, savings accounts, and other debt are at record or historic lows, at least for the last several generations. High and growing levels of U.S. Federal debt indicate significant potential for future inflation and higher rates of interest across all debt classes.
This leads rather directly to the conclusion that you should not be buying bonds, investing in long-term CDs, and lending at fixed rates for long periods. As we've written before, large bond investors like PIMCO are in for lean times, and even investors as storied as Bill Gross are having difficulty in coming to terms with the coming shift, as we wrote in August 2012.
This leads rather directly to the conclusion that you should not be buying bonds, investing in long-term CDs, and lending at fixed rates for long periods. As we've written before, large bond investors like PIMCO are in for lean times, and even investors as storied as Bill Gross are having difficulty in coming to terms with the coming shift, as we wrote in August 2012.
Thursday, February 7, 2013
The Desperate Yearning to Fade the Other Guy
The equities market is like Lake Woebegone, where everyone is above average. Every day brings the opportunity to find out what the other guy is doing, and if your opinion of him is low enough, to do the opposite. But that brings a new problem: How do you find out what the other guy is doing?
Recently there has a been a rash of articles on this perpetual problem. Ameritrade recently created an index of investor sentiment based on their own customers' equity positions, a kind of giant, anonymized disclosure of your secret portfolio holdings. Fidelity Investments has one too. Yahoo Finance reported on the both of them in The Struggle to Profit From Investor Emotion.
The American Association of Individual Investors publishes its own survey, but this is based on freely given opinions, not taken from private portfolios. It is updated frequently.
If you want to pay for emotion measurements, you could try www.sentimentrader.com, a newsletter that covers broad ground, with over 20 different indicators that they track.
Then there are the social media-based funds. A supposedly Twitter-based hedge fund, which never attracted enough money to be a profitable enterprise, was Derwent Capital Markets, but it folded. Picking up the idea, and repackaging so that other people might make the same mistake, is DCM Dealer (advertising at the company website here), where the idea is that retail investors can buy access to the aggregated tweet flow data indicating market sentiment.
Recently there has a been a rash of articles on this perpetual problem. Ameritrade recently created an index of investor sentiment based on their own customers' equity positions, a kind of giant, anonymized disclosure of your secret portfolio holdings. Fidelity Investments has one too. Yahoo Finance reported on the both of them in The Struggle to Profit From Investor Emotion.
The American Association of Individual Investors publishes its own survey, but this is based on freely given opinions, not taken from private portfolios. It is updated frequently.
If you want to pay for emotion measurements, you could try www.sentimentrader.com, a newsletter that covers broad ground, with over 20 different indicators that they track.
Then there are the social media-based funds. A supposedly Twitter-based hedge fund, which never attracted enough money to be a profitable enterprise, was Derwent Capital Markets, but it folded. Picking up the idea, and repackaging so that other people might make the same mistake, is DCM Dealer (advertising at the company website here), where the idea is that retail investors can buy access to the aggregated tweet flow data indicating market sentiment.
Wednesday, February 6, 2013
New Legal Conditions for Reading Vorpal Trade
Back in 1985 the Securities and Exchange Commission lost a legal case against a newsletter publisher. The SEC insisted that the publisher was a financial advisor. The publisher insisted that they were exercising their First Amendment rights. The U.S. courts ruled in favor of the publisher against the SEC.
I don't know whether that seems unfair to you not, but consider another situation: A publisher of information doesn't know what the reader will do with it. The reader could invest $1000, nothing, or $100,000,000. Suppose the reader invests $100 million, loses half of it, and sues the publisher to make them whole, even though they paid the publisher just $100 for an annual subscription. Do you think the publisher is liable for the losses? Let's suppose you do, and take the tentative position that the publisher really does owe the reader some compensation for the bad advice.
So let's back up, then, to the moment just before the reader placed their subscription order. These thoughts occurred to them:
1. "If I invest $100 million, and lose half, then I'm out a bunch of money, and its my fault."
2. "But if I can invest $100 million, lose half, and sue the publisher, then maybe I won't lose anything because the publisher has to reimburse me!"
3. "On the other hand, if I invest $100 million and my investment goes up by $50 million, then I keep the whole thing and don't have to share the profits. I keep the whole thing."
4. "There's no way to lose! If I make money, I keep it, and if I lose money, I blame it on the publisher and I break even. Yahoo!"
5. "Boy, that newsletter publisher sure is stupid!"
In other words, if you assign strict liability to the publisher for bad calls, then they take on unlimited liability for trillions of dollars of losses, without any possible sharing of gains. Were this to become legal precedent, then no advice would ever be given to anyone ever again. And that would include medical and legal advice, not just financial advice, or even just a few comments in a blog about financial matters.
So, in response, we have posted our legal page with our terms and conditions for reading Vorpal Trade. We think it highlights just how absurd, in an artistic sort of way, many legal contracts can be when they are trying to remove obstacles from the path of truth.
(P.S.: There is no resemblance whatsoever between the DOJ legal case against S&P and our contract. None whatsoever.)
2/9/13 Update:
Various materials regarding the First Amendment and the SEC's regulatory operations that have come into opposition with the Constitution:
Wall Street Journal, 9/5/12: The SEC and the First Amendment
The New Capitalist, 3/11/11: The SEC’s Problem With the First Amendment
Forbes (warning: many advertisements), 9/18/12: Under Congressional Mandate, SEC Slowly Moves Towards Recognition of First Amendment
Restrictions on securities solicitations are a response to abuses of the 1920s and 1930s. SEC rules about solicitations are intended to curtail activity that could result in the sale of inappropriate securities to unsophisticated investors. Forbes' Glenn G. Lammi: "SEC Chairman Schapiro seems sympathetic to the concerns voiced in letters from various activist groups that freer speech will unleash a flood of fraudulent activity."
I don't know whether that seems unfair to you not, but consider another situation: A publisher of information doesn't know what the reader will do with it. The reader could invest $1000, nothing, or $100,000,000. Suppose the reader invests $100 million, loses half of it, and sues the publisher to make them whole, even though they paid the publisher just $100 for an annual subscription. Do you think the publisher is liable for the losses? Let's suppose you do, and take the tentative position that the publisher really does owe the reader some compensation for the bad advice.
So let's back up, then, to the moment just before the reader placed their subscription order. These thoughts occurred to them:
1. "If I invest $100 million, and lose half, then I'm out a bunch of money, and its my fault."
2. "But if I can invest $100 million, lose half, and sue the publisher, then maybe I won't lose anything because the publisher has to reimburse me!"
3. "On the other hand, if I invest $100 million and my investment goes up by $50 million, then I keep the whole thing and don't have to share the profits. I keep the whole thing."
4. "There's no way to lose! If I make money, I keep it, and if I lose money, I blame it on the publisher and I break even. Yahoo!"
5. "Boy, that newsletter publisher sure is stupid!"
In other words, if you assign strict liability to the publisher for bad calls, then they take on unlimited liability for trillions of dollars of losses, without any possible sharing of gains. Were this to become legal precedent, then no advice would ever be given to anyone ever again. And that would include medical and legal advice, not just financial advice, or even just a few comments in a blog about financial matters.
So, in response, we have posted our legal page with our terms and conditions for reading Vorpal Trade. We think it highlights just how absurd, in an artistic sort of way, many legal contracts can be when they are trying to remove obstacles from the path of truth.
(P.S.: There is no resemblance whatsoever between the DOJ legal case against S&P and our contract. None whatsoever.)
2/9/13 Update:
Various materials regarding the First Amendment and the SEC's regulatory operations that have come into opposition with the Constitution:
Wall Street Journal, 9/5/12: The SEC and the First Amendment
The New Capitalist, 3/11/11: The SEC’s Problem With the First Amendment
Forbes (warning: many advertisements), 9/18/12: Under Congressional Mandate, SEC Slowly Moves Towards Recognition of First Amendment
Restrictions on securities solicitations are a response to abuses of the 1920s and 1930s. SEC rules about solicitations are intended to curtail activity that could result in the sale of inappropriate securities to unsophisticated investors. Forbes' Glenn G. Lammi: "SEC Chairman Schapiro seems sympathetic to the concerns voiced in letters from various activist groups that freer speech will unleash a flood of fraudulent activity."
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