Sunday, September 12, 2010

Making Easy Money

Eton Park, the hedge fund founded and ran by Goldman's youngest partner, Eric Mindich, has just joined Paulson and Soros in making GLD his largest common stock position at $800 million (in addition to owning calls and puts on GLD for another $1.1 billion in gross notional). The fund also owns puts for almost $900 million gross in the MSCI Emerging Markets index, but without having any detail on the strike and duration, this position could be equivalent to a net notional of anything (not to mention possible arbs with non-disclosable CDS and other OTC products). Either way, as Eton Park had no GLD common holdings at March 31, it is now clear where a substantial buying interest in the ETF came from in Q2.

Elsewhere, Soros posted an update on his own holdings, which dropped by over 40%, from $8.8 billion to $5.1 billion, signifying the Hungarian manager may be getting more bearish on the economy. Further confirming his departure from stocks, aside from his top GLD position at 5.2 million shares, Soros' other key top 10 positions were convertible bond positions in Linear (3.125% 2027), Lawson (2.5% 2012), Flextronics (1% 2010), RF Micro (0.75% 2012), Epicor (2.375% 2027), RF Micro (1% 2014), Diodes (2.25% 2026), Cadence (1.375% 2011), Blackboard (1.5% 2027), JDS (1% 2026), and Ceradyne (2035), in order of size.

The problem is that now that most funds have blown their easy money on accumulating GLD stakes, any incremental purchases in GLD will likely not be as easy on the margin. And with some of the biggest hedge funds in the world having made GLD their top position, and the likelihood that at least some of them have made wrong bets in their other holdings, a potential drop in the market, which could incite a flash round of margin calls, will likely see liquidations in GLD which is now liquidity of first resort for many of the top 10 worldwide hedge funds. This indeed foots with Goldman's recent upgrade on gold (PT of $1,300), which we took very skeptically. Our concern was subsequently validated by Robbin Griffiths in the following King World News interview:

So! Ping launched earlier this week, and more than a million people have signed up. I’m not one of them. I use iTunes for downloading music but I always decline when prompted to update this or that new version. As described by the AFP, Ping “allows users to view photos and videos of their favorite musicians and receive information about concert dates.” There’s also a social component but honestly, I get what I need from Twitter, Facebook, Tumblr and, most importantly, YouTube, which is the first place I go when I want to hear a song (and before music types get all cranky, it’s usually followed up by a visit to iTunes for a download, so there). Point being, I love music and love learning about new stuff, but after reading about it didn’t really see how Ping could add value to my life. After reading VC/thought-leader Fred Wilson’s take yesterday, I felt vindicated – but also piqued:


In summary, Ping is not very social and it is not really about music. It is about music purchases and celebrities.


If you want to see a social network about music, check out last.fm. It knows what I am listening to right now no matter where I am listening (not in iTunes hopefully). It knows what music I like and it doesn’t ask me to tell them what that is. It knows who likes the same kind of music I do.


Ping shows what a command and control culture thinks a social network is. I am sure millions of people will use Ping. And I am equally sure that it will not advance the state of the music business one bit.


Two things here. First, the piquing was about last.fm, which Wilson evangelizes for frequently that I finally went to his channel, fredwilson.fm, to put his money where my ears are. There I found a whole bunch of new, great music. Bookmarked. Second, his description of Ping made me think not of Apple, but of Twitter.


I was recently annoyed to discover that my malfunctioning Tweetdeck was not the result of an overworked computer (my default assumption always) but rather Twitter deciding to kill some of its darlings. Or rather, some of your darlings — apps that users have become used to, that they have integrated into their behavior (Business Insider has an extensive list). I get why that has to happen — should happen, and is natural to happen, even — but I’m keeping my eye on how it’s happening.


It happened imperiously, top-down-ly, dare I say Facebook-ly. Sending out an email that your filter couldn’t distinguish from follower and DM notifications, instructing you to update your applications without so much as a prompt (they just…won’t work) and doing it during the last week of August — when people have tons of time to dedicate to reading emails from Twitter, and tending to their malfunctioning technology — all that doesn’t exactly maximize the user experience.


And Twitter is all about user experience — the fact that it is so easy, so clean, so unencumbered has won it so many users and fans, for so many different reasons. So when it starts to become annoying — with too many ads in the feed, too cluttered an interface, too many fail whales etc. — the less committed amongst us will bolt. I wrote about that in November when those lists were launched, and found it a “time-consuming, burdensome process users,” rolled out in such a way as to create an urgency about making lists now lest you be left off the gravy train. (Not to be confused with the “Suggested Users” gravy train which was also more about brands and celebrities than anything else.) And it’s new “Suggested Follow” user confuses me because, unlike last.fm, it does not seem to know “what I am listening to right now,” since it keeps suggesting people I already follow. There doesn’t seem to be much “listening” going on at all.


So that phrase — “a command and control culture” — doesn’t only sound like Apple, with its beautiful but un-openable iPad, but also Facebook with its top-down maze of privacy settings, and now Twitter with its weirdo Orwellian OAuth lingo (like something that might one day, say, enslave drones like these). The jury’s out on whether Twitter’s reassertion of control is better for users — I can’t help but agree with the note of caution sounded by Chris Dixon —  but the more they behave like ”a command and control culture” the less they will ”advance the state [of the] business.” In the words of Cory Doctorow: “Incumbents make bad revolutionaries.”


I was halfway through writing this post when I remembered that Fred Wilson was not only the evangelizer of the free-and-social last.fm but was also the key investor who brought forth Twitter’s app-killing message. Hmm. Discrepancy? Hopefully not — maybe that will mean he’s aware of the pitfalls, and will keep an eye on Twitter lest it become more like Ping than Last.fm. Because I have to say, I worry about Twitter. Not that it will survive — they don’t need my blessing for that — but that it will stay the kind of open, community-enhancing-and-enabling site that made it flourish at the outset. The kind of site that got people of influence not only using it, but evangelizing for it. I worry about the incumbents vs. revolutionaries dichotomy, I worry that, as Chris Dixon said, “having one company control a core internet service hinders competition and therefore innovation,” I worry about its stability, like Caroline McCarthy of CNET did last year, when she noted its not-infrequent wobbles and mused that “the prominence of Twitter as a communications channel in the Iranian crisis raises the question of whether a pre-revenue company — no matter how cushy its venture backing — is up to task.” But honestly, between the closed “Suggested Users” list, the rollout of lists, its lack of support for the businesses that banked on it early — from outfits like Stocktwits to TwitPic, which amazingly is threatened now (despite this Twitter-cred-making moment), and this top-down UE-ignoring OAuth stuff, I worry that they are becoming a site that I use but don’t care about, or root for. Like Facebook.


Yes, I know that Facebook has 600 million users or some such crazy thing. It doesn’t need me, but anyway, I still use it. But MySpace has shown what happens when users don’t love using anymore. So, too, did Friendster (and man was I on that thing every other minute back in the day). So while I know that Twitter is doing just fine with or without my 140-character contributions, I also know that people are fickle, and when using something becomes too annoying, they stop. Using Twitter this week was annoying. So, all things being equal, I’d rather they stop than the rest of us.


Related:

Here’s Who Just Got Screwed By Twitter [Business Insider]

Don’t Get Cocky, Twitter

Twitter’s Youth Is Over

Why does it matter that Twitter is supplanting RSS? [Chris Dixon]

“There’s a plane in the Hudson”


Photo of Steve Jobs from Pocket-Lint.com; Twitter illustration from LaurenceBorel.com. Now-iconic Hudson plane pic by JKrums on Twitpic.

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eric seiger

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