China Stocks Drop on Zhou Bubble Warning: World's Biggest Mover (Bloomberg)
The Chinese stock market dropped 3.7% after central bank governor Zhou Xiaochuan warned of "irrational exuberance". Just kidding. Maybe something got lost in translation, but it sounds like he just said that stocks may be overvalued and that the country may be forced to raise interest rates in order to reign things in. A number of stocks plunged by the maximum allowable on the news. But, c'mon people, it's not like you didn't know that Chinese officials have been skittish.
Report on Amaranth Collapse Is to Be Made Public (NYT)
A Senate subcommittee is set to release a report on the Amaranth crash. You know, typical government stuff -- What happened? What went wrong? How can we avoid this in the future? Undoubtedly, the report will come alongside some prescriptive policy recommendations. It's pretty unlikely that the Senate will have anything fresh to say that most people don't already know, but even worse, they'll probably miss the point. What would be interesting is if someone did a report about how such an enormous, highly-leveraged fund could collapse with such a small ripple. Why didn't the collapse cause more of a panic? Why haven't other funds and banks collapsed as a result of Amaranth's collapse. Unfortunately, we can't expect an answer to these questions.
Yen rebounds as profit-taking knocks carry trades (Reuters)
The Yen moved upward, as traders (allegedly) unwound positions based on the so-called carry trade. There are fears that the currency's weakness and low interest rates are anomalous and unsustainable, and thus it's only a matter of time before the fun is all over. It's funny how long it can take for a certain arbitrage opportunity to disappear. Billions of dollars can be allocated just for the purpose of closing some interest rate gap, and yet it doesn't happen. Even after everyone thinks it's all over (like this March for example), it's not over. As studies have shown, it's the pervasive sentiment that an opportunity is over, which keeps the profits coming for those who seek to exploit it.
US apple growers brace for China rivals (AP)
Chinese apple farmers grow five times as many apples as their US counterparts, but at this point, there are no Chinese apples in the country. Ostensibly the country has to go through some safety review process before its apples can be sold here, but in the meantime it's a nice trade barrier for the protection of US growers. Eventually, however, they will come, and US farmers will just have to deal. Here's a recommendation: fix the goddamn red delicious. What was once a proud apple is now inedible. Yes it's pretty, but that's only because the skin is so tough and thick, much to the detriment of the eating experience. If you want to stave off the Chinese, bring back the delicious in the red delicious. Personally, as an apple fanatic, we're looking forward to any new varietals that could hit American shores.
Sales of Digital Music Players Fall (AP)
A few research reports and a couple of quarterlies suggest that sales of digital music players (like the iPod) are starting to slow. This had to happen eventually. Seeing as pretty much everyone you know has an iPod, it's inconceivable that they could grow at a blistering pace forever. Granted, they're still growing rapidly, and the slowdown may be overstated by analysts looking to make a name for themselves. But, in the end, it comes down to physics.
The Carried Interest Tax Debate (A VC)
We've been mainly discussing the PE side of the carried interest tax stuff, but if there's a change, it's not only going to affect Blackstone. It'll hit venture capital as well, as local VC Fred Wilson discusses. Wilson has a good discussion of the subject, ultimately coming down in support of a change. If you want a whole blog devoted to the subject (no, not Dealbreaker, jerk), Wilson points to CarriedInterestTaxation.com. Clever name, eh?
Hernando De Soto for Chief Economist (The American)
When it comes to economic development, guys like Jeffrey Sachs, Amartya Sen and Mohammad Yunus get a lot of attention. But at one point, it was the Peruvian economist Hernando de Soto, author of the Mystery of Capital, that was the hot one. Then he sort of disappeared. The first Bush was apparently a big fan of de Soto's work, but to be perfectly honest, it doesn't seem like the type of thing to interest this Bush, and thus return him to a place of prominence. de Soto's basic argument is that the developing world has tons of "dead capital" that could be turned into real capital if only some form of property rights were outlined. Thus, various assets could be collatoralized, and used to get things like loans. Frankly, his ideas are a lot more interesting than Jeffrey Sachs, and it'd be good if he got some attention.
GLG set to list hedge fund in New York (Financial Times)
The world of publicly traded alternative finance vehicles is set to expand slightly. British hedge fund GLG is set to go public on the NYSE via a reverse merger. "Acquiring" it will be Freedom Acquisition Holdings, a firm established for the purpose of finding acquisitions. Meanwhile, it's interesting that British hedge fund would choose to list in New York, even though the regulatory environment is supposedly so much friendlier in the UK. Guess it's not that big of a difference.
LinkedIn To Open Platform In Response To Facebook (TechCrunch)
In the last few weeks, social networking site Facebook has received insane levels of buzz, even among professionals who feel it might be superior to LinkedIn. To be honest, it wouldn't be hard to be superior to LinkedIn, cause LinkedIn is pretty much useless. Like, you go there, and then what? LinkedIn is obviously feeling the heat, and so it plans to open up its network a la Facebook and let outside developers build applications to go inside LInkedIn. We're not sure what kind of applications will appeal to the LinkedIn set -- probably not slideshows, YouTube embedding and places to put favorite song clips. Maybe something more along the lines of Blackberry syncing.