Will The Backlash Against Facebook Be The Doom Of Its Acquisition Spree?

Spending your inordinately over-valued 'currency' on an ever-reaching (and increasingly over-valued) portfolio of dreams may have been the stuff of expanding multiples and social media stock-lovers; but for the creator of Minecraft (among the world's most popular games), Facebook's move to buy Oculus was the last straw. As WSJ reports, Markus Persson just cancelled his company's deal with Oculus explaining that he "did not chip in ten grand to seed a first investment round to build value for a Facebook acquisition."

As WSJ reports,

The ripples from Facebook’s deal to buy Oculus VR are spreading quickly.

 

Not long after news broke that the videogame-goggle company was getting acquired, the creator of one of the most popular videogames today said he was canceling an Oculus Rift project. Markus Persson, creator of “Minecraft,” said the company he founded, Mojang, was in talks to bring the game to Oculus before the Facebook deal.

 

Not anymore.

As Persson notes on his personal blog,

Facebook is not a company of grass-roots tech enthusiasts. Facebook is not a game tech company. Facebook has a history of caring about building user numbers, and nothing but building user numbers. People have made games for Facebook platforms before, and while it worked great for a while, they were stuck in a very unfortunate position when Facebook eventually changed the platform to better fit the social experience they were trying to build.

 

 

I have the greatest respect for the talented engineers and developers at Oculus. It’s been a long time since I met a more dedicated and talented group of people. I understand this is purely a business deal, and I’d like to congratulate both Facebook and the Oculus owners. But this is where we part ways.

It seems shareholders are agreeing today…


    



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The Anatomy Of Panic: How A Rumor Mutated Into A Three-Day Chinese Bank Run

Yesterday we showed the end result of what happens in a China, in which bankruptcy and default are suddenly all too real and possible outcomes for the country’s hundreds of millions of depositors, when the risk of losing all of one’s money held in an insolvent bank becomes all too real in “What A Bank Run In China Looks Like: Hundreds Rush To Banks Following Solvency Rumors.” Today, we look in detail at all the discrete elements that culminated with hundreds of Chinese residents lining up in front of a bank in Yancheng and rushing to withdraw their money only to find their money not available (at least until the regional government was forced to step in with a bail out to avoid an even greater panic).Why is this a useful exercise? Because since we will certainly see many more example of it in the near future, it pays to be prepared. Or least it certainly prevents one from losing all of their money…

This is what happened, and when it happened, it happened quick. From Reuters:

The rumour spread quickly. A small rural lender in eastern China had turned down a customer’s request to withdraw 200,000 yuan ($32,200). Bankers and local officials say it never happened, but true or not the rumour was all it took to spark a run on a bank as the story passed quickly from person to person, among depositors, bystanders and even bank employees.

 

Savers feared the bank in Yancheng, a city in Sheyang county, had run out of money and soon hundreds of customers had rushed to its doors demanding the withdrawal of their money despite assurances from regulators and the central bank that their money was safe.

 

The panic in a corner of the coastal Jiangsu province north of Shanghai, while isolated, struck a raw nerve and won national airplay, possibly reflecting public anxiety over China’s financial system after the country’s first domestic bond default this month shattered assumptions the government would always step in to prevent institutions from collapsing.

 

Rumours also find especially fertile ground here after the failure last January of some less-regulated rural credit co-operatives.

And since nothing beats a first person account here is just that, courtesy of Jin Wenjun who saw the drama unfold.

He started to notice more people than usual arriving at the Jiangsu Sheyang Rural Commercial Bank next door to his liquor store on Monday afternoon. By evening there were hundreds spilling out into the courtyard in front of the bank in this rural town near a high-tech park surrounded by rice and rape fields.

Bank officials tried to assure the depositors that there was enough money to go around, but the crowd kept growing.

In response, local officials and bank managers kept branches open 24 hours a day and trucked in cash by armoured vehicle to satisfy hundreds of customers, some of whom brought large baskets to carry their cash out of the bank.

Jin found himself at the bank branch just after midnight to withdraw 95,000 yuan for his friend from a village 20 kms (12 miles) away.

“He was uncomfortable. It was late and he couldn’t wait, so he left me his ID card to withdraw his cash,” Jin said.

By Tuesday, the crisis of confidence had engulfed another bank, the nearby Rural Commercial Bank of Huanghai.

“One person passed on the news to 10 people, 10 people passed it to 100, and that turned into something pretty terrifying,” said Miao Dongmei, a customer of the Sheyang bank who owns an infant supply store across the street from the first branch to be hit by the run.

Claiming to be a Yancheng resident, one user of Sina Weibo’s Twitter-like service repeated the story on Monday about the failed 200,000 yuan withdrawal, adding that “rumours are the bank is going bankrupt.”

When later contacted by Reuters online, he said he had heard the rumour from his mother when she came back from town. Huanghai and Jiangsu Sheyang banks declined to comment.

China’s banks are tightly controlled by the state and bank bankruptcies are virtually unheard of, so the crisis has baffled many outsiders.

Yet in Sheyang, fears of a bank collapse resonate.

In recent years, this corner of hard-strapped Jiangsu province has experienced a boom in the number of loan guarantee, or ‘danbao’, companies and rural capital co-operatives.

These often shadowy private financial institutions promised higher returns on deposits than banks, but many have since failed.

Qu Guohua, a spiky haired former migrant worker in his 50s, nearly lost 30,000 yuan in a credit guarantee scheme that went up in flames.

What saved him one day in January 2013 was a tip-off from a friend at a rural co-operative just down the street from the loan guarantee company where he had his money.

He told me the other one was going to go out of business and I better go get my money quick,” he said.

Qu managed to get his cash, but others behind him in line were not so lucky, he said.

That helps explain why lines formed so quickly once the rumours started circulating this week. Luck has it, he deposited the cash in a bank next door: Sheyang Rural Commercial Bank.

Banks are different than credit co-operatives and guarantee companies in that they are regulated by China’s banking watchdog and subject to strict capital requirements.

On Wednesday, officials’ painstaking efforts to drive that message home were in full swing.

Bank managers stacked piles of yuan behind teller windows in full sight of customers to try to reassure them that they had plenty of cash on hand. Local officials used leaflets, radio and television to try to calm nerves.

Near one of the troubled banks, a branch of the China Commercial Bank – one of China’s ‘Big Four’ state-owned banks – was running a ticker message on an electronic board over the entrance stating: “Sheyang Rural Commercial Bank is a legal financial organisation approved by the state, just like us”.

While small groups of depositors still gathered at several bank branches in and around this part of Yancheng, some arriving by motorbike, others by three-wheeled motor vehicles common in the Chinese countryside, there were signs that the banks’ efforts were bearing fruit.

Jin said he did not panic when the rumours were spreading and on Wednesday, like many others, he made a deposit.

Others, like Qu, are holding their nerve. On a visit to see his hospitalised daughter, he decided to nip into a local bank where he still has about 10,000 yuan – just for a look.

“I’m not nervous about my money in the bank. It’s protected by national law.

* * *

The same international law that “protected” the Cyprus banking system?

In the meantime, perhaps one should ask: why is it that people everywhere around the globe are so jittery, be it Chinese bank depositors, or E*trade baby high frequency “investors” in US stocks? Is it because everyone sense that fundamentally the system is more broke and insolvent than ever?

* * *

In short, the US has a stock market, which everyone knows is fake and manipulated, but as long as it keeps going higher, it is “safe” to put even more cash into epically overvalued equities. And since everyone is confident they can pull their money before everyone else does, the downswings are sharp and violent (and usually require the Plunge Protection Team to get involved and halt them), and in many ways a complete one-sided panic.

Just like in China. Only in China, instead of being stuck behind their computers, people actually have to go out on the street and withdraw their physical cash before everyone else does.

The problem, of course, is that once the lies and the illusions end, and they will, there will not be enough physical claims to satisfy everyone, be it due to a deposit or equity flight. Because in a fractional reserve system already stretched to the max and leveraged to record levels, one thing is certain: once the upward momentum dies, only devastation and guaranteed 90%+ losses for most, await.


    



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A First Look at a New Report on Crony Capitalism – Trillions in Corporate Welfare

One of the primary topics on this website since it was launched has been the extremely destructive and explosive rise of crony capitalism throughout the USA. It is crony capitalism, as opposed to free markets, that has led to the gross inequality in American society we have today. Cronyism for the super wealthy starts at the very top with the Federal Reserve System, which consists of topdown economic central planners who manipulate the money supply and hence interest rates for the benefit of the financial oligarch class. It then trickles down through lobbyist money into the halls of Washington D.C., and ultimately filters down to local governments and then the average person on the street gaming welfare or disability.

As such, we now live in a culture of corruption and theft that is pervasive throughout society. One thing that bothers me to no end is when fake Republicans focus their criticism on struggling people who need welfare or food stamps to survive. They have this absurd notion that the whole welfare system doesn’t start with the multinational corporations and Central Banks at the top. In reality, it is at the top where the cancer starts, and that’s where we should focus in order to achieve real change.

That’s where a new report from Open the Books on corporate welfare comes in. In a preview of the publication, the organization notes:

If Republicans are going to get truly serious about cutting government spending, they are going to have to snip the umbilical cord from the Treasury to corporate America.  You can’t reform welfare programs for the poor until you’ve gotten Daddy Warbucks off the dole. Voters will insist on that — as well they should.

So why hasn’t it happened? Why hasn’t the GOP pledged to end corporate welfare as we know it?

Part of the explanation is that too many have gotten confused about the difference between free-market capitalism and crony capitalism.

Federal_Contract_Spending_Spirals

And part of the problem is corporate welfare that is so well hidden from public view in the budget that no one has really measured how big this mountain of giveaway cash to the Fortune 500 really is. Finding out is like trying to break into the CIA.

continue reading

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John Stossel on How FDA Bullies Harm Americans

The U.S. Food and Drug Administration (FDA) seems
like one of the most helpful parts of government. It supervises
food and drug testing to make sure greedy companies don’t sell us
dangerous stuff. Reasonable people can debate whether the FDA
actually assures product efficacy and safety. But the regulatory
boot always presses toward delay, and this harms patients, argues
John Stossel. Most never know they were harmed, because
we never know what we might have had. But fewer
medical options are the price of bureaucratic “caution.” 

View this article.

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Bursting Biotech Bubble Bounce Fades Fourth Day In A Row

It’s deja vu all over again in Biotech bubble land. For the 4th day in a row, and opening salvo of hope-fueled buying has faded quickly into a sea of red-faced selling as The Nasdaq Biotech Index holds down 13% from the highs at is 100-day-moving-average. Will 4th time be the charm for the revival of the bubble? or is today the break?

 

 

Charts: Bloomberg


    



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Video: Exotic Pets Threatened Due to Ohio’s Pointless New Regulations on Animal Ownership

“Exotic Pets Threatened Due to Ohio’s Pointless New Regulations
on Animal Ownership” is the latest video from ReasonTV. Watch above
or click on the link below for video, full text, supporting links,
downloadable versions, and more Reason TV clips.

View this article.

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A Dark Cloud Of Disillusionment

Submitted by James H. Kunstler of Kunstler.com,

Was it such a good thing in the post-cold-war decades that the US was regarded as the supreme sole super-power? Look what we did with that privilege: fumbled around like an overfed stumblebum, blundering from one foreign occupation to another, breaking a lot of things and killing a lot of people — under the clownishly-conceived rubric of a “war on terror.”

Why is it in our interest which way Ukraine tilts? It has been in the Russian orbit for hundreds of years under one administration or another. Are we disappointed now that Kiev won’t answer to the floundering Eurocrats of Brussels? Was that ever a realistic expectation? Really, the best outcome for western Europe would be a return to the prior condition of Ukraine as a mute bearskin rug with oil and gas pipelines running through it to the oil and gas starved West. The idea that the US could supply Europe with oil and gas instead of Russia is a preposterous fantasy. Anybody wondering whether Ukraine might turn its armed forces loose on Russian forces supposedly massing at its border should ask themselves how Ukrainian soldiers will get paid.

I’m sure Russia can’t afford to annex all of Ukraine. Russia can barely maintain its paved roads. But it obviously couldn’t afford to give up its rented warm water ports and naval bases in the Crimea, either, with the new Kiev government making so much anti-Russian noise since the “revolution.” The annexation of Crimea changes nothing materially about the disposition of Russian military force in the region. They were already there. Given the size of their navy compared to the other nations in the neighborhood, the Black Sea is Russia’s bathtub and has been as long as anyone can remember. Was the brass at the US State Department shocked to discover this two weeks ago?

The recognition that there are some places on the planet where the US can’t exert its influence has also come as a shock to the so-called American Deep State — that matrix of bureaucratic toxic sludge that labors to pretend to control everything and succeeds mainly in embarrassing itself in a world that is now deeply tending away from the centralized control of anything. Nations are breaking up everywhere and for the moment there is no coherent public discussion of the ramifications. Venice voted the other day to secede from Italy — that is, to not send anymore tax revenue to Rome. That should be interesting. How about Scotland’s independence vote scheduled for September? Judging by the British newspapers, there is next-to-zero concern about that. Then there is the list of failed states, Egypt, Syria, Yemen, and probably half the manufactured nations of sub-Saharan Africa, places with no viable economy or polity and too many clamoring poor people. These are parts of the world that will neither develop nor redevelop. In a hundred years they could be no-go zones or just return to howling wilderness.

The US would be better served these days to literally mind its own business. With Detroit in bankruptcy, why would we send Kiev billions of dollars? American urban infrastructures — water, sewer, gas, and electric lines — are falling apart. We have no idea how we’re going to manage most of the crucial economic activities of daily life in ten years, when the illusions of shale gas and shale evaporate in a dark cloud of disenchantment, when we no longer have an airline industry, and most Americans won’t have the means to own automobiles, and there’s not enough diesel fuel to plow Iowa mega-farms, or enough oil and gas based fertilizers or herbicides to pour into the eroding topsoil, and not enough fossil water left in the Oglala aquifer or enough electricity to run the center-pivot sprinklers where the prairie meets the desert? How are Americans going to live and eat and get from Point A to Point B and keep a roof over our heads in this beat-down land?

We’re having no conversation about these things and the political landscape in this country is a wasteland of mirages and dust devils. That is the true weakness of the USA now. We’re incapable of seeing the disorder in our own house. Why should we even glance overseas at others?


    



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Dear Ukrainians, Your Gas Bill Goes Up By 50% On May 1, Have A Nice Day

We assume this is not what President Obama meant when he said "costs"…

  • *UKRAINE TO RAISE GAS PRICES FOR HOUSEHOLDS 50% FROM MAY 1
  • *UKRAINE TO RAISE GAS PRICE FOR HEATING UTILITIES 40% FROM JULY

As we warned previously, "the honeymoon is over" and it seems, from today's address, President Obama is about to mandate who and where the free market for natgas delivers it supply.

Of course, this is not about to get better anytime soon:

  • *NAFTOGAZ UKRAINY SAYS GAS DEBT TO GAZPROM IS $1.7B: KOBOLYEV

But President Obama is disappointed in the free market.

“We’ve already licensed, authorized the export of as much natural gas each day as Europe uses each day; but it’s going into the open market; it’s not targeted directly,” President Obama says.

 

It’s going through private companies who get these licenses and they make decisions on the world market about where that energy is going to be sold,” Obama says at news conference in Brussels

Time for another executive order? We suspect a 50% gas price hike may just be another tipping point…(as we noted before)

What is certain, is that the struggling population, most of whom never wanted the recent political overhaul and were quite happy with life as it was, will suddenly demand a return to the living standards under the old, if "horrible" regime, and demand an even quicker overhaul of the current administration.

Something Putin knows all too well.

Why does he know it? Because current events are a carbon copy of what happened in 2007 that led to the infamous 2008 Ukrainian political crisis.

What happened in 2007? This:

Ukraine agreed to pay close to $180 for every thousand cubic meters of natural gas it gets next year from Russia, Russia's state-run gas monopoly said, marking a nearly 40% increase over current prices.

 

The deal, which comes after months of negotiations between Moscow and Kiev, is part of what Russia describes as an effort to stop giving energy supplies to former Soviet republics at cut-rate prices.

 

That effort escalated into a full-blown dispute two years ago, when Russia cut supplies to Ukraine. The dispute affected some European countries, raising concerns about Russia's reliability as Europe's main energy supplier.

 

OAO Gazprom said Ukraine agreed in a deal signed by Ukrainian Energy Minister Yury Boiko to pay $179.50 for every thousand cubic meters it buys from Russia next year. Gazprom said transit prices would be set at $1.70, the price for gas shipping across Russia.

 

Ukraine currently pays $130 for every thousand cubic meters of gas from Russia.

 

In October, Russia urged Ukraine to make good on what it said was a $1.3 billion debt for gas shipments, a demand described by some Ukrainian officials as an effort to influence Ukrainian politics after September's parliamentary elections.

 

The deal comes a week after Gazprom said it would pay as much as 50% more next year for natural gas from Turkmenistan. Russia controls nearly all gas exports from the Central Asian nation.

Funny how history not only rhymes, but sometimes repeats itself. Verbatim.


    



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Obama Administration Promises Obamacare’s Open Enrollment Deadline Won’t Be Extended—Right Before Extending Obamacare’s Open Enrollment

On March 12, in a hearing
before Congress, Health and Human Services Secretary Kathleen
Sebelius was asked whether the Obama administration would extend
Obamacare’s open enrollment period beyond its scheduled close date
of March 31. “No sir,” Sebelius responded.

Later that day, a spokesperson for the Center for Medicare and
Medicaid Services, expanded on that point. “We have no plans to
extend the open enrollment period,” she said. “In fact we don’t
actually have the statutory authority to extend the open enrollment
period in 2014.”

The message was unmistakable: The administration would not, and
could not, extend Obamacare’s enrollment period.

There’s just one catch. Last night, the administration
confirmed
to The Washington Post that the open
enrollment period would be extended for anyone who wants it
extended.

The gimmick here is that, technically, open enrollment will
still end on March 31, as planned. But the administration now says
they will allow for a special extended enrollment period for those
people who tried to sign up before March 31 and, for some reason,
could not complete the process. People will be able to request this
extension until some not-yet-determined date in the middle of
April.

And how will the administration determine if someone is eligible
for this period? Here’s how The Washington Post explains
the verification process:

Under the new rules, people will be able to qualify for an
extension by checking a blue box on HealthCare.gov to indicate that
they tried to enroll before the deadline. This method will rely on
an honor system; the government will not try to determine whether
the person is telling the truth.

The verification process is that there is no verification
process. Absolutely anyone who checks the box will be able to get
an extension. It’s a de facto extension of open enrollment
for anyone who asks for it.

The upshot is that the administration is now doing exactly what
they said would not do, and did not have the legal authority to do,
simply by describing it in a slightly different way. To put it
another way, the administration is using the fiction of a limited
special enrollment period as cover for a lie and an illegal
action.

This isn’t even the first time the administration has done this.
On the same day that HHS Secretary Sebelius promised that
enrollment would not be extended, she also promised that the
individual mandate to purchase insurance would not be delayed.
Again, it’s not—technically. But the administration
expanded and clarified the rules for the law’s “hardship
exemption”
in such a way as to essentially give anyone a pass.
There are
14 ways to avoid the mandate
, the last of which is a vague
catch-all category for unspecified hardships, no documentation
required.

The pattern reveals the administration’s shallow commitment to
keeping its word: When they promise they won’t do something, you
can bet they won’t—but that they very well might do the exact same
thing by a different name instead. 

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The Real Inflation Fear – US Food Prices Are Up 19% In 2014

We are sure the weather is to blame but what happens when pent-up demand (from a frosty east coast emerging from its hibernation) bumps up against a drought-stricken west coast unable to plant to meet that demand? The spot price (not futures speculation-driven) of US Foodstuffs is the best performing asset in 2014 – up a staggering 19%

 

 

h/t Bloomberg’s Chase van der Rhoer


    



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