Finance Geek

Senate Finance Committee Chairman Max Baucus, an architect and supporter of the Affordable Care Act (ACA), recently caught the Administration’s attention when he voiced his concerns about the implementation of the health exchanges — the centerpiece of Obamacare now scheduled to go live on October 1 — saying that he sees “a huge train wreck coming.”
President Obama responded to concerns about implementation, emphasizing that he is 110 percent committed to getting implementation done right, but he also cautioned that there will be mistakes and hiccups.
While the Administration…

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Many commentators have wondered why the stock market has done so well during a period when the economy has been relatively weak. A common explanation has been that the Federal Reserve has pushed interest rates so low that investors have little choice but to buy stocks in hopes of returns that exceed inflation. There is some truth to that, but another reason is the gridlock on Capitol Hill.
A poorly kept secret is that almost all laws are bad for business. Some regulation is necessary. Clear rules are beneficial to business. But changing regulations frequently is bad for business and reduces…

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When you get right down to it, the political targeting and stalling of tax-exempt applications by the IRS was an effort to defund the Tea Party.
Rick Santelli, a Tea Party founder and my colleague, made this point first. I’ve taken it a step further: The IRS took the Tea Party out of play for the 2012 election to avoid a repeat of 2010 and another Tea Party landslide.
There are a lot of numbers out there.
Some say Tea Party applications for tax-exempt status averaged 27 months for approval, while those from liberal groups averaged nine. In one extreme case, according to the Washington…

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In the United States, the college experience typically begins with an acceptance letter. And around four years later, for seniors like Reaz Khan who told us his story in the accompanying video, it ends with a very different type of mail…bills from student loan issuers. Related: Are Millennials a “Lost Generation”? Sixty percent of of [...]

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It’s been a rough week for gold. Prices fell for a seventh day in a row Friday morning, marking the worst slump since March 2009, according to Bloomberg Businessweek. By mid-morning gold futures were trading at $1,362 an ounce, down almost 2% from the previous close and 28% from the September 2011 high of $1,920. [...]

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I’ve just read Bill Barnett’s article on Winning as a self-fulfilling prophecy which argues that optimists’ irrational belief in their chances of success makes them to try longer and harder to get there and makes them better motivators and leaders of teams. They are therefore more likely to succeed than people who are more even headed. He cites Steve Jobs as an example:

Steve Jobs was said to have been surrounded by a “reality distortion field,” in that he would believe in possibilities even when others saw them as unthinkable.  Of course, once Steve believed, then others would too – making his vision more likely to come true.

As an investor I want to back the entrepreneurs who are most likely to succeed, and as described above that means optimists. On top of that we also like optimists because they take on bigger challenges. So we back optimists. But we want our own decisions to be the best they can be, and that means seeing reality for what it really is.

Reading Bill Barnett’s article it struck me for the first time that one of the most common sources of post investment tension between investors and entrepreneurs is a tension between optimism and realism. When the relationship between investor and entrepreneur is strong that tension is healthy, but when the relationship breaks down it often leads to each side losing faith in the other’s judgement. Investors’ realism can start to look like (and may become) undue pessimism and scepticism, and entrepreneurs’ optimism can start to look like (and may become) naive optimism and an irrational unwillingness to change course.

I write this in the hope that it will help investors to better understand where entrepreneurs are coming from and vice versa, and thereby help to keep relationships trusting and healthy. There is more than a grain of truth in the old joke that the investor-entrepreneur relationship is like a marriage, but harder to get out of, and just like a marriage the relationship will work best when the differences are both understood and valued. Good investors understand that optimism is a very helpful trait and strong entrepreneurs value the check on their optimism that investors can provide.

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J.C. Penney (JCP), the beleaguered department store chain, reported a net loss of $348 million, or $1.58 per share, for the first quarter, more than double its loss from the same quarter last year. Total sales were down 16.4% to $2.67 billion and the company’s gross profit margin fell nearly 7 percentage points to 30.8% [...]

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U.S. markets opened in positive territory Friday morning after taking a breather from their recent record-breaking rally. The S&P 500 fell 0.5% on Thursday — its biggest one-day drop since May 1. Whether you believe in this rally or not, don’t fight it, says Barry Ritholtz, the CEO of Fusion IQ and author of “The [...]

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In many ways, Google+ is still struggling to define itself. But there’s been one clear success story inside the Google social network: Video “Hangouts,” which have proven popular in group communications, from academia to large corporations to startups.

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There had been two speculative attacks only a few years previous against the Thai baht, successfully defended by monetary officials in Bangkok. Related to the Mexican peso crisis, in January 1995 the baht started to drop against the floor set by the peg to the US dollar. It followed up again in March 1995, this time as the yen began an astonishing turn upward in the face of a stalled economy in Japan. In both cases the speculators were unsuccessful in forcing a devaluation.
The Bank of Thailand approached both episodes exactly the same. Encased in an economy dubbed one of the “Asian…

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Recent headlines proclaim “deep trouble” in the European cap-and-trade system for greenhouse gases, evidenced by the decline in allowance spot prices from over $25 per metric ton of carbon dioxide in June 2008 to about $3 this month. Although many press articles have referred to an “oversupply” of emissions permits, suggesting some kind of intrinsic imbalance, the markets are clearing just fine. It’s just that the price is lower than forecast. Whether this represents trouble or not depends on what you think the goal of the program should be. If the goal is to ensure…

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A day after topping $900 for the first time ever, Google shares were taking a bit of a breather Thursday, recently trading down 1.2% to $905. Meanwhile, Tesla shares continued their phenomenal run, jumping 6% to over $90 in recent trading following last night’s news that founder Elon Musk will invest $100 million of his [...]

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Thursday’s economic data was mixed: weekly jobless claims unexpectedly rose while housing starts in April unexpectedly fell. The Labor Department reported that the number of people who applied for new unemployment benefits jumped 32% to 360,000 in the week ending May 11, the highest level in a month and a half. But the average of [...]

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In 2006, Congress passed the Military Lending Act, which was designed to prevent predatory lenders from targeting men and women in uniform. But a new report from ProPublica and Marketplace entitled Beyond Payday Loans suggests aggressive lenders have merely shifted tactics and are still very actively going after military personnel. Rather than a loophole, installment [...]

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The Dow (^DJI) and S&P 500 (^GSPC) hit yet another record high Wednesday but Apple extended its decline, closing just under $429 and capping a 22% decline year-to-date. Apple’s story isn’t an outlier– tech stocks have lagged the broader market this year. The Technology Select Sector ETF (XLK) has gained just 6.3%–less than half the [...]

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