Social Media - Online Communties

I remember several years ago, before Social Media really became a wide spread phenomenon - I didn't recognize its importance right away. Many people I knew were using Friendster or Myspace at that time. The sensation of instantly sharing with friends or followers, ideas, web discoveries, your own personal websites, photos, shared calendars that could send invites to your groups, was pretty remarkable. I now take it for granted, but I credit those early adapters who were using it before it got big and attracted millions of users across the planet. From this back drop, I watched the emergence of Facebook. I didn't join in the early days, but I watched carefully as others did. Many had Friendster or MySpace accounts, and opened I carefully observed the emergence and evolution of Facebook. Although I was not an early adapter, I watched as my friends, family, and colleagues opened Facebook accounts. One of my buddy's makes music videos and posts them online. They usually go somewhat viral attracting up to 8,000 views a month from YouTube alone. On his MySpace page, he has over 3 million profile views, and a butt load of friends. I asked him how he did it, and his reply was an early adapter of MySpace and when it got big, many people added him as friends to their social networks, increasing his access to be viewed by the friends of the new friends. That combined with the natural occurrence of search engines as a method to search for internet sites by content type has helped him get such a large following. He was a new adapter to Facebook after I introduced it to him about a year and a half ago. He was reluctant and did not want to switch (I could hardly blame him, his profile views were in the millions over four five years). Now however, he focuses his time staying in contact with his friends and new fans on Facebook, as well as sharing his music. Although he maintains both accounts, I only see him on Facebook when we are hanging out. Social Media has grown his list as it has for many, but it has also connected people with each other who did not have that option before.





The freedom of sharing your creativity or interest with others creates online communities the same way it creates them offline. The connectedness social media brings, is exactly what makes it "social" and the ability to print and write your ideas (in most countries anyway) means media has opened its definition to include more than just large media corporations. Social Media lets the online community share and essentially become producers of media in their own right, by sharing and the possibility to reach millions. Out of this environment emerged Facebook, Youtube, Twitter and others. Companies that organized the capacity into a tangible usable medium. Angel and Venture Investing These Social Media companies continues to allow them to expand their reach and add memberships, across the world. The question is will Social Media continue to grow into the future? Some Investors are betting the answer is a definite, "YES."

For example, recently the Investment firm, T. Rowe Price Funds, has invested in social media and related internet companies. The firm has $482 Billion in assets under management, and although it makes the $500 million they've invested in social media already, they can always invest more. Recent filings for example, shows the firm has invested $71.8 Million with Zynga - maker of games such as Farmville on Facebook - and $86.6 Million in Groupon. Here is an Article I found about the Investment Firm's Facebook Stake disclosed recenlty. T.Rowe Price's investments in Social media and related companies, is reported to be spread over more than a dozen of the firm's funds. As access to the internet continues to expand around the world, Investing in Social Media may end up being a wise investment after all. As participation on Social Media sites grow, so will the Ad revenue generated. This may very well attract even more investment dollars to the Social Media sphere, allowing them to grow and constantly enhance the social media experience. I've watched over the years, valuations of some of these companies, keep going up. Twitter and Facebook are valued at their highest ever. a few weeks ago, the NY Times reported Twitter had a valuation of $4.1 Billion.

Massive Shorting Denied by Goldman Sachs

A 650 page report titled, Wall Street and the Financial Crisis: Anatomy of a Financial Collapse was published last week by the Senate Permanent Subcommittee on Investigations. Many in the Senate including Senator Carl Levin from Michigan, believe Goldman Sachs saw the impending economic and market collapse, as early as 2005-2006, and positioned themselves accordingly, essentially betting against the market values of outstanding debt that was backed by mortgages. The CEO of Goldman, Lloyd Blankfein, denied last year in a hearing that Goldman had a massive short position, particularly on housing. I see this issue resurfacing, it will be interesting watching the latest developments and any further investigations.

Goldman Sachs CEO Faces Inquiry

Many believe large firms like Goldman Sachs were not only over leveraged with too much risks on their balance sheets, but that the severity of the 2008-2009 market drop was partly do to Goldman Sachs Shorting the Stock Market, while also betting against bonds that were backed by mortgages, sub prime mortgages in many instances. Senator Levin is now considering sending the matter to the Justice Department, as he's convinced Goldman Sachs misled not just investors, but the committee set up to investigate the market collapse. By having a huge short position, when things went bad, stocks would fall and fall hard. This is exactly what they did from 2008 to 2009. Goldman is accused of profiting heavily from this and using their influence to dodge committee questions or further investigations. The New York Times reported Mr. Blankfield had told a close friend, he was thinking of retiring, saying he was exhausted from leading the firm; and may step down soon.





As speculation of a succession plan began circulating, Goldman Sachs appears to be once again in the hot seat with the feds. William D. Cohan is the Author of the new book, "Money and Power - How Goldman Sachs came to rule the world." I haven't personally read it yet, but added it to my books to read. I'm curious as to how Goldman's rise is portrayed, whether accurately or biased. Ordered today, will blog about it later after I've read it. I'm currently reading another book written about Goldman Sachs that is entitled, Chasing Goldman Sachs by Suzanne McGee. So far, it is very interesting. I know that many bankers appeared to have taken too much risk and consequently were bailed out by Tax payer dollars. Now that some of that risk taking is coming to light, we are getting a glimpse into the world that Goldman Sachs influences through its standing as one of the largest investment firms in the world. The way its reputation seems to be getting tarnished, could put downward pressure on the company's share price in the near term while the recession and anger at bankers is clearly visible not just in the U.S. but around the world, similar to sentiment for years after the Great Depression.

United States Government Debt Outlook

Global preference to the dollar has helped America secure a stellar Credit Rating from rating agencies including Standard and Poor's and Moodys. As the world largest economy, the U.S. has long had an economic engine that provides trust and security when investors buy its government issued debt. Something happened yesterday however that has brought question to America's debt sustainability. Can the U.S. government pay interest on outstanding treasuries notes and treasury bills. On Monday, one of the major rating firms in the world - Standard & Poor's - lowered its outlook on the united states rating to negative. This does not mean the U.S. has lost or been downgraded from its actual rating of AAA, but it's the first time since Standard & Poor's started issuing outlooks for countries in 1989, that its outlook for the U.S. was something other than "stable." The three U.S. major indexes which are the Dow, Nasdaq, S&P 500, were all down more than 1% after the news was announced. Here's an Editorial from the NY Times About it: Good Advice from S&P.

Treasury yields - the interest the U.S. government pays on its debts - spiked on the announcement. The U.S. has more than $9 Trillion outstanding in government debt to the public. When the Treasury Yield goes up like that, it means the interest payments that are going to be made towards paying the United States National Debt, increase. This effectively increases the debt burden because interest payments to debt holders cost the government more money to pay. Since interest rates are so extremely low right now, whether its the 30 year mortgage rate of 4.87 or the 60 month car loan of 5.97 (I remember when this was 6.17 several months ago) rates in the short to midterm, will eventually go up. This increases the debt the government pays out or issues because it becomes more expensive for them to borrow. Good economic policy in which the economy is once again firing on all cylinders, is what is needed here in my opinion. The U.S. would have to borrow less if its tax receipts and economy were strong and showing promise of sustainability, bringing investors off the sidelines. Of course more money in the Treasury, means the ability to pay off debt, preventing a potential downgrade in near future. The U.S. must focus on Economic growth and tax reform right now.

Medical Device Company in Talks with J&J

buyout talks with Johnson & Johnson and a Medical Device Maker, Synthes, announced the talks between the two companies were ongoing. I found the announcement interesting especially after learning a bit more about who was at the helm of Synthes. It is the Chairman of the Board and also the Chief Executive, Hansjorg Wyss. Collectively, he and his family control about 47.8% of the company. Not only that, he is one of Switzerland's richest citizens with an estimated net worth of $6 Billion, according to Forbes magazine. Mr. Wyss is a 1965 graduate of Harvard Business School and did not joined Synthes until 1977. In 2008, he set a record by donating $125 million to Harvard, the schools largest single gift in history. This man's Harvard education undoubtedly contributed to his ability to run a major company, while amassing a fortune in the process. His graduate degree came from 1965, this makes me realize the education must have consisted of teaching students how to conduct research to keep up with the changing times in industry, technology, business, and government. The fact Mr. Wyss is selling to Johnson & Johnson makes me wonder what he has in mind for his next venture, maybe a Harvard Professor?

The Chinese Real Estate Market Heats Up

The Chinese Real Estate market was the focus of an article I read today in the NY Times, regarding China's unrelenting Real Estate boom, which has driven prices up nationwide 140% since 2007. Keep in mind, this is about the time American and European housing markets began collapsing, sending real-estate values plummeting. In Beijing alone, real-estate prices have increased by as much as 800% over the past 8 years! This increase has frozen many working class buyers completely out of the market. At the moment, there is an estimated 65 million apartments across all of China bough as speculative investments, currently sit empty. The rise in prices have many economist and analyst worried that a Real-Estate bubble has formed and if it pops, it could be disastrous. Although I'm not sure if I agree with this assessment, I have watched as the Chinese Government has actively intervened to prevent economic and market chaos, seen in countries where the Real-Estate Bubble did indeed burst. This government intervention helped China through the recent Global Recession. Here is an article related to this post, it came out three days after this post, I've come back to add it since its relevant and informative:Inflation in China

I believe the Chinese have been watching the world's unfolding mortgage melt down and aftermath, very closely and will work very hard to prevent it happening in their country. The central government has undertaken several measures recently to address the concern of an overheating property market, by Raising Interest Rates, and requiring banks to hold more on reserves. Instituting these types of polices is suppose to reflect the Central governments attempt to reign in available credit and slow down the speculation that has sent prices soaring. As the Chinese middle class emerges from this world's most populous country, policy makers there, have their hands full for determining economic policy that both stabilizes the country, and makes it attractive to investors. China must balance its growth with price stabilization, like many countries around the World.