Banks will demand bigger down payments

The subprime meltdown is living proof of the infinite number of systemic failures within mortgage origination practices applied by many, if not all of the lenders in the USA.

Today, WSJ’s Mitra Kalita presents us with a brief analysis on what could potentially be the uprising of a new mortgage origination era, one that could lead lenders and borrowers to act in a more responsible and conscious way.

Even though, some of you could argue that tougher loan origination policies may restrict credit accessibility for potential home buyers with little or no cash available, it’s also true that the recent subprime crisis was caused by both irresponsible lenders and borrowers that took advantage of the widely spread origination malpractice that allowed them to extensively profit either from lending money, debt securitization, speculating with properties' artificially increasing prices or from borrowing money that they could never pay back. Even though lenders, mortgage brokers, real estate agents, as well as sellers and buyers gained from such strategy, their actions consequently sparked a loss to us all.

I believe that the demand of bigger down payments will help strengthen our financial industry and will boost a sustainable growth in Real Estate markets across the USA. Certainly not everyone will profit or benefit from new responsible practices: housing markets will move slower, property inventories will suffer from smaller rotation and many of us will not be able to buy our dream home unless we actually have the means to do so (that’s not too bad, is it?).

Its common sense…which is in fact the less common of all our senses.
Not everyone will profit or benefit from responsible lending, but it is time to learn from mistakes of the past, to instead strengthen sustainable growth for all to benefit from.

Hope you like the reading:

http://online.wsj.com/article/SB10001424052748703312904576146532935600542.html?mod=WSJ_hp_MIDDLETopStories#dummy

Santiago H.

Startups = Jobs

Looking for Jobs in All the Wrong Places: Memo to the President
6:04 PM Wednesday January 26, 2011 by Henry R. Nothhaft with David Kline

Dear Mr. President,

Your State of the Union address last night offered hope to a nation made weary by an economy stubbornly resistant to job growth. But I must take issue with your claim that "None of us can predict with any certainty...where the new jobs will come from."

Brand new research conducted just last year by multiple teams of economists confirmed what many entrepreneurs such as myself had long suspected: startup businesses are responsible for all of America's new job growth.

Until now, the conventional wisdom has always been that small businesses create most jobs. But thanks to a new Census Bureau database called Business Dynamics Statistics (BDS) that correlates job creation with the annual number of new business starts, we now know that it's actually new businesses that do so (although most are obviously also small).

According to a recent study by the Kauffman Foundation, for example, all net job growth in the U.S. since 1977 has been due to start-ups. The data show that if you took start-ups out of the picture and looked only at large established firms, job growth in the U.S. over the last 34 years would actually be negative.

"When it comes to U.S. job growth," said Kauffman Foundation economist Tim Kane in his report, "start-up companies aren't everything. They're the only thing." In your address last night, Mr. President, you correctly noted that, "The first step in winning the future is encouraging American innovation." Here, too, start-ups are the driving engine of our nation's global innovation leadership.

It is startups who have generated virtually all of our nation's major technological breakthroughs in the last hundred years — from cars and planes to semiconductors, PCs, software, and the Internet — and in the process sparked the creation of whole new industries and millions of new jobs. And as economists have demonstrated, this kind of start-up-led innovation is the source of virtually all economic growth and increases in living standards in the U.S.

In other words, Mr. President, everything depends upon start-ups: Job creation. Our standard of living. Our prosperity as a nation. The American Dream itself. So if the target of national policy is job creation, then the bullseye of that policy must be centered on startups. Yet policy makers in both parties continue to aim at the wrong target.

Last month, Mr. President, you held a summit meeting with 20 of the nation's top CEOs to look for ways to spur job creation. But Fortune 100 CEOs are exactly the wrong people to talk to about jobs. Big Business is not a major job creator. Indeed, as one commentator put it, the guest list at this summit meeting represented "a who's who of outsourcing American jobs."

Then, this past Monday, you appointed General Electric CEO Jeffrey Immelt to chair your new council on jobs and competitiveness. Jeff Immelt is by all accounts an excellent CEO and a strong advocate of American competitiveness. But again, Mr. President, he is exactly the wrong person to talk to.

Instead, you should be meeting with the one group of people in America who actually creates jobs: entrepreneurs. Last night you spoke so compellingly about the "small business owner who dreams of turning a good idea into a thriving enterprise." But unfortunately, entrepreneurs are still largely invisible to policy makers. Everyone else has a voice in Washington — Big Business, retailers, insurers, doctors, bankers, and every other interest grouping you can think of. Only entrepreneurs lack a voice.

Mr. President, I have been a high-tech serial entrepreneur and CEO for more than 35 years. And in that time, I've created more than 6,000 jobs and returned $8 billion to investors. So please trust me when I say that one of the biggest roadblocks to job creation is the huge logjam at the patent office that prevents entrepreneurs from getting the patents they need to obtain venture funding. Without those patents and the funding they attract, few start-ups can afford to hire the people they need to develop their new products, services and medical treatments for the public.

Consider the case of Silicon Valley start-up Innate Immune, founded by world-renowned Stanford immunologist Sam Strober. It developed a new treatment for lupus, but has waited more than 7 years for a patent to be issued by an overburdened, underfunded USPTO groaning under a backlog of 1.2 million patent applications waiting for review.

"Hundreds of thousands of groundbreaking innovations are sitting on the shelf literally waiting to be examined," conceded your own patent office chief, David Kappos. And how many jobs are left un-created along with them? "Millions," said Kappos. "Millions of jobs."

My own analysis — conducted with retired Chief Judge Paul Michel of the nation's main court for patent appeals and reported in our New York Times op-ed last year — found that the U.S. could create as many as to 2.25 million new jobs just by clearing the patent backlog. A mere $1 billion spent on such an effort would create the most cost-effective jobs program in history.

To be sure, the patent backlog is not the only barrier to job creation. Start-ups today are also burdened by tax rates that are 50 percent higher than the average in Europe, belying your promise to "make America the best place on earth to do business."

And as for regulation, I applaud your promise to "reduce barriers to growth and investment." But if you could accomplish just one thing here, Mr. President, I hope it will be to end this nation's mindless one-size-fits-all approach to regulatory policy.
Who ever said that it was either smart or fair to impose on start-ups the same burdensome regulations meant to keep Big Business from sinking the whole economy again?

Perhaps the biggest job killer — and it's the greatest threat to the survival of America's once-vibrant middle class — is the systematic offshoring of our high-tech manufacturing capacity.
For 30 years now, we have all been fed the carefully-cultivated myth that so long as America did the creative work, the inventing, then we could let other nations like China do the so-called "grunt work," the manufacturing.

But in our arrogance and naiveté, we failed to realize that a nation that no longer makes things will eventually forget how to invent them.

Sincerely,

Henry R. Nothhaft

The Genius Dilemma - Newsweek

The Genius Dilemma - Newsweek

Just how essential is a company’s visionary founder? Apple and Google are about to find out.

Yale's Jeffrey Sonnenfeld writes about visionary founders and the companies that need to outlast them. Could Apple, Berkshire, Google and many others survive to their own leaders and continue to outperform their competitors? It goes well beyond Corporate Governance and Succession plans.

Hope you enjoy the reading!

Is Facebook worth $50 billion?

Is Facebook worth $50 billion?

By Jennifer Valentino-DeVries

http://blogs.wsj.com/digits/2011/01/03/facebooks-valuation-by-the-numbers/

The social-networking giant raised $500 million from Goldman Sachs Group Inc. and Russian firm Digital Sky Technologies, putting its valuation at $50 billion, the Journal’s Anupreeta Das confirmed. The New York Times had earlier reported the investment.
Does that number make sense? First, let’s compare Facebook’s valuation to the market capitalization of other Internet companies — Yahoo, EBay, Amazon and Google. Yahoo comes in at $21 billion, and Google is at about $190 billion. (Sure, it’s not apples to apples. Among other things, the other companies are more mature. And Amazon and EBay, as e-commerce companies, aren’t competing for Web surfers’ eyeballs the way Google and Yahoo are. But still. Worth a look.)

When you take a look at revenue, Facebook is bringing up the rear, as far as estimates for fiscal 2010 go.

But when it comes to reach, Facebook is a real competitor, J.P.Morgan analyst Imran Khan points out today in his 2011 Internet investment guide. As a percentage of U.S. Internet users, Facebook is behind both Yahoo and Google, but people spend more time on Facebook — and Facebook usage is growing.

And it’s not just about traffic, Mr. Khan says. He makes the case that Facebook has an edge on portals like Yahoo because it doesn’t have to rely on advertising space. Instead, he says, Facebook’s value is as a “platform” — like a credit-card company, it can enable other businesses and charge them a small fee when users buy from them. And he’s not just talking about social games like FarmVille; he means e-commerce, online payments and even fees for content.

That’s the bullish case. The bears, of course, point out that social networking is still in its infancy, especially as a moneymaking “platform.” Facebook is moving to cement its ubiquity, with log-ins across the Web, but the space could still face a shake-up. And the company still has a ways to go to before it makes as much money from each user as Yahoo and Google do; the J.P. Morgan analysts estimate Facebook generates $4 per user, while Yahoo gets $8 and Google gets $24.

For Goldman, though, this long-term speculation might not matter, Felix Salmon at Reuters points out. The investment means Goldman will be sitting pretty when it’s time for Facebook to pick a bank to lead its IPO, and that alone could generate massive fees. “Facebook doesn’t need to stay worth $50 billion forever — Goldman just needs to engineer an IPO valuation somewhere north of that, then exit quietly in the public markets,” he writes.

Readers, what do you think? Was this a good move by Goldman? And does Facebook merit this valuation?

Why top talent earns so much money: Malcolm Gladwell

"There was a time, not very long ago, when people at the very top of their profession—the “talent”—did not make a lot of money. In the postwar years, corporate lawyers, Wall Street investment bankers, Fortune 500 executives, all-star professional athletes, and the like made a fraction of what they earn today. That era was an upside-down version of our own: when society gazed upon captains of industry and commerce, it marvelled at how ordinary their lives were. The truly rich in the nineteen-fifties and sixties were people who had inherited money. And then, suddenly, the world changed..."

Representing one of my favorite writers, Malcolm Galdwell presents an interesting take on the evolution of salaries and our increased interest for "talent", money and recognition.

Is money the only way to acknowledge talent? I believe it is not. Recognition is much more than how much we get paid. Even though money is important and it provides us with certain "social status", we should re-consider our set of social values and principles. For me, an individual's contributions to society and to the well-being of those around him should provide the base upon which society and corporations acknowledge talented individuals.

"Invest in people...a management that is full of integrity and talent" Warren Buffett

Read more about "Talent Grab" article at http://www.newyorker.com/reporting/2010/10/11/101011fa_fact_gladwell#ixzz17MNAqeDX

Read the complete article at http://www.scribd.com/doc/40469336/Talent-Grab

"What good is Wall Street?" The New Yorker Article

Wall Street, investment bankers, and social good: newyorker.com

Is our financial and economic model out of place? Can we justify the fact that the most profitable industry in the world is one that doesn't produce, build or sell a single tangible thing?

As investment banks and wall street "smartypants" investors come back on track with millionaire gains, mainstreet keeps wondering whether Wall Street it's absolutely neccessary for the world's economic and social development.

Here is an interesting article on how key players in the industry, such as Citigroup's Vikram Pandit, are assuming new leadership approaches whithin their industries and organizations.

What good is Wall Street?

Two lessons from Mary Buffett and Ferran Soriano

Last Thursday, I had the opportunity to attend the “Management Lessons 2010” conference sponsored by HSBC Premier and ExpoManagement 2010. The conference took place in México City at Centro Banamex and had Mary Buffett (Best-seller author and Warren’s daughter in-law) and Ferran Soriano (Former Barcelona F.C’s CEO) as guest speakers.

Of course, my primary interest was to hear what Mary Buffett had to say about her father in-law and to learn some valuable insight on his personal life, his numerous investment principles, and strategies.

Mary Buffett began her speech explaining why she was so interested in Buffett’s strategies and knowledge: she was not only married to Buffett`s younger son, Peter, but she was also a business consultant and analyst herself. “If you like business and you are sitting beside one of the most successful investors in history, it would be stupid not to ask him questions and not to write his answers down…” she said. I couldn’t agree more.

Mary spent a great amount of time listening to Warren talk about business with industry tycoons, politicians, decision-makers and influential leaders. Through participation on Trips, conferences, family dinners, and vacations, she took advantage of almost every single minute she got to spend with him during the past 12 years and turned all that knowledge into 7 best-seller books.

“Buffett has 4 principles upon which he makes investment decisions… (1)Trust your Judgment, (2)Look for a durable competitive advantage,(3)invest in good companies at a fair price and (4)look for a good management”. Sounds quite simple, and it actually is, but the key is to know how to find those undervalued companies that fulfill Buffett’s principles.
For Mary, the most important of these principles is the fourth one: invest in a good management.

For her, the key to Warren’s success as a value investor is to evaluate a company for its good or bad management. Warren always says “Invest in people…good managers always lead to profits, good managers usually lead to a reputation crisis”. Hence, whenever he is in the search for a company to invest in, he always pays close attention to the people in charge of running the business.

Businesses are people, and if we understand that management is a key factor in the value equation, we will start making better investment decisions. That’s the first lesson from last week’s conference.

The second lesson came when Ferran Soriano made his appearance. To be honest with you, I was quite surprised by his approach to soccer as a 360º business. When he assumed the position of Barcelona’s CEO in 2003, the team was roughly making US$130 MM in sales and assuming US$72 millions in annual losses.

For Ferran, the opportunity couldn’t be better. Changing Barcelona’s business model from one of a circus (with tickets sales accounting for more than 70% of the total income) to one based on Walt Disney Co. was a challenge of great proportions. “At that time our business model was obsolete and that we need to change immediately. Barcelona had a great brand, great stadium and great players so we needed to understand that our business wasn’t selling tickets but selling entertainment content”

According to Soriano, the Barcelona turn around needed to begin by transforming the stadium into a theme park. “In Europe we have great stadiums and it is no secret that Clubs make a lot of money not only by selling tickets during game days, but also by selling tickets for guided visits to their stadiums during normal days”. Guided visits to Barcelona`s “Nou Camp” add US$40 MM to the club`s total income.

The second great change came when Ferran invited a group of professional specialists to assume key positions as top managers. For marketing he brought a former P&G expert and for Finance he brought a well-known Colombian banker. “The people who know about business should run the office. The people who know about soccer should run the team”. Professionalizing the executive team meant having a good management onboard. That makes absolute sense if we consider the lesson we learned from Mary Buffett.

The third change came with approaching soccer as a selling content business. Good soccer means good spectacle and along with that comes the marketing and merchandising as motors to increase revenue and broaden Barcelona’s presence in the world.
Ferran resumed his strategy as one focused in changing mentalities, embracing change and working hard. But the most important fact for him, once again, was having a good executive team on board.

It shouldn`t surprise us that the lesson from Ferran, is also the same lesson we learned from Mary Buffett: a good management is the key to success.