Monday Links

Bubbles & Malinvestments

• Meet the guy who created the latest internet bubble: Two years ago Yuri Milner, through his investment firm DST, disrupted the traditional Silicon Valley venture capital model when he began investing in the hottest startups – companies like Facebook, Zynga and Groupon – at very high valuations and extremely easy deal terms. He looks brilliant in hindsight, with all of his U.S. investments at significantly higher valuations since he invested.
• One response: If start-ups begin approaching me and asking for uncapped convertibles with no discounts as standard terms, I will view this is a phase in space and time akin to junk bonds trading at 200 bps over Treasuries. My response as an investor to such market conditions? Just say no.
• [B]usiness cycles are best understood though the framework of Batesian mimicry, an endogenous mechanism for booms and busts thru a misallocation in the horizontal structure of production
• Chinese Take a Cotton to Hoarding: Yu Lianmin, a cotton farmer in Huji, China, harvested 6,600 pounds of cotton this year. Despite record cotton prices, he didn't sell any of it. Instead, mounds of cotton are piled up in two empty rooms of Mr. Yu's home... Prices shot up early in the season, then dropped late last year before rising again. Mr. Yu decided during the downturn to hang on for higher prices.
• When life gives you lemons, make lemonade:A decade ago, Mr. Souki warned of an impending natural gas shortage, and set out to build a network of gas import terminals after none had been built in a generation. [...] But the sudden boom in gas drilling that took off around 2005 created a glut, ruining Mr. Souki’s dream. [...] Now he is trying to recoup his investment by making the opposite bet: that he can profitably export cheap American natural gas to Europe and Asia, where prices are roughly twice as high.
• When it comes to measuring national income, we’re generally valuing expenditures at cost, rather than tracking productivity in terms of results. In other words, our statistics may be deceiving us — by accepting, say, our health care and educational expenditures at face value. This theme has been emphasized by the PayPal co-founder Peter Thiel in his public talks and by the economist Michael Mandel in his writings. And I’ve stressed it in a recent e-book, “The Great Stagnation.”
• Starting Monday, the Securities and Exchange Commission will release the actual market value of money market funds' holdings as opposed to the steady $1 price at which investors buy and sell shares.
• Barron's says don't blame the Egypt riots for the selloff
• "For Google to make a change that would wipe out Demand Media, I'd be surprised," says John Andrews, an SEO consultant in Seattle. "They are carrying Google's ad inventory." Yet on Jan. 21, Matt Cutts, the engineer overseeing Google's search quality team, posted on the company's official blog, explaining that as pure Web spam decreased, the company had shifted its focus and made two major "algorithmic changes" over the past year targeting mills. "Nonetheless," wrote Cutts, "we hear the feedback from the Web loud and clear: People are asking for even stronger action on content farms and sites that consist primarily of spammy or low-quality content."