Finance Matters

Archive for March 6th, 2010

The amazing things going on in New York’s digital scene have finally bubbled their way up to the New York Times.

The thesis, essentially, is that Silicon Alley is back.  This isn’t surprising, considering that it never left.  But the last few years have indeed seen a major and more sustainable resurgence, one that is clearly here to stay.

Jenna Wortham, the writer, also mentions Caterina Fake’s observation about the most important difference between the New York tech scene and Silicon Valley’s, which is the relatively small number of folks who have previously been involved with wildly successful startups.

The startup game is distinctly different from Wall Street, consulting, mainstream media and other professions that have long dominated New York’s economy.  For those driven by money, it’s feast and famine, all or nothing.  Folks who have grown up in the cushy get-along-with-everyone-and-get-good-performance-reviews-and-you’ll-slowly-get-rich world of consulting, law, and Wall Street aren’t well-prepared for the “I worked my ass off for 5 years and then lost everything” world of startups.

What prepares people well for this world is being part of a culture that understands the startup process and values it.  What also prepares people well is being part of startup that worked, especially one that worked huge.  One of New York’s most successful tech companies, DoubleClick, has thrown off dozens of successful entrepreneurs.  The current generation of New York startups will do the same. 

As Caterina has noted, it would help immensely for the city to have a Google to call its own (although, with more than 3,000 people here, Google itself is serving this purpose). Even without one, however, New York’s digital scene is here to stay.  And as the old media industry crumbles, the new digital winners will increasingly rise up to dominate the city’s consciousness.

Here’s Jenna Wortham in the NYT:

THE two dozen or so people arranged around wooden tables, warming their hands and bellies with steaming mugs of coffee and plates of homemade biscuits, looked like just another Sunday brunch set in New York. But members of this group had braved knee-deep snow to gab about cutting-edge ideas and as they introduced themselves the roll call sounded like a Who’s Who of digital start-ups: Foursquare, Hot Potato, Six Apart, Flickr, Flavorpill, Trust Art, Vimeo.

“There’s a lot happening right here in our ZIP code,” said Dorothy McGivney, a former Google employee who is a co-coordinator of this group, the North Brooklyn Breakfast Club, and runs Jauntsetter, a travel site for women. Like the others, she had come to the brunch to help foster the growth of her little local community of entrepreneurs.

Keep reading at the NYT >

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See Also:

• OUTRAGE OF THE DAY: iPad Won’t Tether To The iPhone
• Here’s The Case For Being Bullish On Google Right Now
• WARNING: CNBC Advertiser May Be Scamming You

(This post comes courtesy of the Mad Hedge Fund Trader)

Something Amazing is Happening With the Payroll Figures. The February non-farm payroll showed a further loss of 36,000 jobs, versus an expected loss of 75,000, and the unemployment rate remained unchanged at 9.7%. December was revised up by 41,000 and January was revised down by 6,000, so netting everything out there was essentially no change. Those hired now exactly equal those fired, about 3 million a month.

There were continued big losses in construction, and decent gains in temps. This month I decided to take advantage of former Labor Secretary Robert Reich’s course on labor statistics which I took at UC Berkeley, and dig through the supporting data at the Bureau of Labor Statistics website (click here for the link). Something amazing is happening.

There is a barbell effect in the labor markets which no one seems to see, which is rendering the aggregate payroll figures meaningless. There is a barbell effect taking place, where the 40% who have been jobless for more than six months, who worked in the bubble industries of real estate, housing, and  construction, are never going to see their jobs come back.

The 60% who are short term unemployed, who recently lost jobs in finance, accounting, and health care, are getting rehired very quickly. In fact, 20% of the jobless are getting rehired in only six weeks. There is another effect at work. While the employment rate for those with no high school diploma is 16%, the kind of worker who lost their manufacturing jobs to China, the jobless rate for those with college degrees is only 4.5%. This is proof that the dying sectors of the US economy is delivering the highest unemployment rates, and that America is clawing its way up the value chain in the global race for economic supremacy. It is what America does best, creative destruction with a turbocharger. There is a third influence here, which could be huge. The BLS only contacts existing businesses for its survey.

It doesn’t survey companies operating out of someone’s garage in startup mode. Given the huge ongoing dislocations in our industrial structure and the incredible advances in software, the Internet, and cloud computing, this could be one of the biggest job creators of all. So far, it is not being counted at all. The bottom line is that payroll figures are much better than they appear at first glance. Red Alert! The markets don’t know this.

Get more market commentary at The Mad Hedge Fund Trader >

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See Also:

• Good News: Unemployment Holds Steady At 9.7%
• CHART OF THE DAY: The Scariest Job Chart Ever
• What Today’s Jobs Numbers Really Mean For Our Economy

Televised poker isn’t quite as hot as it used to be in the US, but this makes for some wild TV. Just this evening, a tournament in Berlin was stormed by armed robbers, who apparently made off with nearly 1 million euros.

Here’s a clip.

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See Also:

• How Regulators Plan To Limit Leverage, And Make Retail Currency Trading Go The Way Of Online Poker
• The Young Online Poker Studs Who Make Way More Money Than You Do
• How To Make Millions Playing Poker

The Wall Street Journal brings us up to speed on the efforts of Gary Gensler and the CFTC to drastically limit the leverage available to retail currency speculators:

The Commodity Futures Trading Commission has proposed rules that would reduce the amount of borrowed funds that retail investors can use when investing in the U.S. foreign-exchange market to as much as 10-to-1, from the existing 100-to-1 for major currencies.

Under current rules, a customer putting up a security deposit of $1,000 in cash will be able to trade a notional amount of $100,000, a common contract size for currencies such as the dollar and the Japanese yen. The new rule would cap that amount at $10,000.

Let’s be clear here. This isn’t about limiting retail forex trading, it’s about killing retail forex trading. See when you’re talking about currency, there’s really nothing to get excited about if you can’t leverage out the wazoo. When a move of a few hundredths of a cent is considered a notable move, 10x leverage is boring and hardly worth the effort.

This week lawmakers grilled Gensler, and were concerned that if this happened, trading would simply migrate overseas.

This will undoubtedly happen, at which point the only natural response will be to ban US punters from putting money with London (or Gibraltar or Bermuda) based shops, just like forex.

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See Also:

• Warren Buffett Sounds Really Sexy When He Talks Forex
• The Dollar Is The New Dow
• The Young Online Poker Studs Who Make Way More Money Than You Do

Don’t believe claims that the Census will help the recovery, as even the BLS admits this is far from certain. A report they released last month predicts the two-month boost in hiring and spending will be followed by a two-month slump:

• 800,000 temporary jobs will lower the unemployment rate by several tenths of a percentage point in April and May (with lesser effects beginning in January).
• Around $14 billion in government spending could boost GDP by 0.1 percentage point in 2010Q1 and 0.2 percentage point in 2010Q2.
• The end of the program may cause GDP to fall by an equal amount in Q3 and Q4.
• Unemployment, too, may rise by an equal amount.

In fact, net unemployment is likely to increase as the census draws in thousands of discouraged workers, who are not currently included in the 9.7%.

But here’s why the Census will have a worse effect than the BLS admits.

800,000 Census workers are 800,000 people who are not finding a steady job. They are nearly a million Americans who will not actually contribute to the GDP.

That wasn’t a problem in 2000 or 1990, but it will be a serious problem in 2010.

Grosvenor’s Richard Gold makes an apt comparison in the CS Monitor: “This is the government’s version of the Olympics.”

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See Also:

• Mass Layoffs Jump In January After Four Straight Months Of Decline
• David Goldman: Here’s Why Unemployment Will Remain In Nosebleed Territory FOREVER
• Obama, Take Note Of Job Creation In New York City