No: Twitter Remains the Same


Twitter shareholders just voted against studying the feasibility of turning Twitter into a company owned by its users rather than investors.

At Twitter’s shareholder meeting, held on May 22nd, shareholders considered Proposal No. 4 to investigate whether Twitter should be reorganized as something else, such as a cooperative or an employee owned company.

Citing the Green Bay Packers, REI, and the Associated Press as examples, the site,, thought the change would make Twitter more “democratic”.

Unfortunately for, in this election, 323,830,975 Twitter shareholders were against the proposal while 15,978,718 were in favor.

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Snap discloses a mostly all cash acquisition after yesterday’s earnings call. Released today, Snap’s first 10-Q details the $20 million purchase of a company operating a “cloud-hosted platform for building content online”. Acquisition of the undisclosed company occurred in March 2017. Snap hopes the acquisition will enhance its own platform.

Buffett Wrong about TECH


“I was wrong” were words spoken by Warren Buffett about IBM at the Berkshire shareholder meeting attended by investors, the press, and the ignorant.

Each year people make the pilgrimage to worship the Oracle of Omaha. As with other idols, Buffett can cannot help you, but he can hurt you if you listen to him. There is the Buffett, who says he doesn’t understand technology, and then the other one who buys the former tech icon, IBM.

His reversal on IBM is the latest example why piggybacking on his trades won’t work. Forget that Buffett also deals in the private markets and that time has long passed for his Graham, Dodd, and Fisher strategy to work. Another reason Buffett can’t help you is he often says one thing and then does another.

While equating derivatives with mass destruction, Buffet sold, to the now defunct Lehman Brother, over-the-counter (OTC) equity index option contracts. (You can read more here on page 55). OTC options contracts sold by Buffett where the type of custom derivatives that Big Banks bought and sold before the 2008 financial crisis.

Warren Buffett obviously knows what he’s doing, but you may not. Other than Buffettology, Buffet doesn’t detail his investment approach. So save yourself a trip and follow Dalio or Soros who do share their strategy; then you can only blame yourself if you are wrong.

More Snap Exclusives


Snap is really good at exclusives.

On Thursday, Scripps announced its deal to bring shows to Snap’s Discover Platform. On the same day, the Wall Street Journal reported on the media companies – Disney and NBCUniversal – that are already producing content for Snap along with potential new ones such as Fox and CBS.

The Wall Street Journal even quoted Snap VP, Nick Bell, that Evan Spiegel was involved in the media companies’ efforts. News of media companies working with Snap isn’t really new: NBCUniversal parent, Comcast, is a late, but enthusiastic investor in Snap.

And it’s not unusual for the normally silent Snap to speak exclusively with the Wall Street Journal. In September 2016, the Wall Street Journal Magazine featured a piece on Snap’s newly released Spectacles that were modeled by Evan Spiegel.

Ahead of Snap’s earnings call next week, it’s also not strange that news comes of exclusive shows coming to Snap; proprietary content is something Facebook can’t copy.

Yale Pays for Access

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Yale recently defended its payment of high investment fees at time when other larger investors are using low cost, passive equity strategies. While Yale’s use of illiquid assets is partly the reason for the high fees, the debate really illustrates the rise of the private over public equity markets.

Despite having $26 billion in assets, Yale said in its latest annual report that it could not negotiate lower fees because…

“Venture capital and leveraged buyouts present the greatest challenge, as the overwhelming demand for high-quality managers reduces the ability of limited partners to influence deal terms”

Said another way, the demand for talent (managers) exceeds the supply of money (investors). Some have argued the demand for venture capital and leverage buyout investments is driven by performance which has surpassed that of hedge funds since the 2007-2008 financial crisis.

Andrew Lo of MIT said:

“Fee negotiations really depend on the leverage that the parties have. Hedge fund managers have not been producing tremendously attractive returns, they are not going to have much leverage to negotiate better fees….

On the other hand, very successful venture capital companies and private equity companies have produced very attractive returns, and will have much more negotiating power.”

The demise of hedge funds signals the decline of public equity markets. With the rise of information, technology, and hedge funds, public equity markets have become so liquid that there is little chance for most to outperform the market.

Kenneth Griffin of Citadel reflected this week on the state of the hedge fund industry…

“It’s harder to create alpha today, there’s more competition, there’s a lot of very sharp people trying to find opportunities in the market place. This is causing some of the second-tier players to fall by the wayside.”

Unlike public markets, it is difficult for most to access the illiquid, private markets. Rather than paying for performance, Yale could be paying high fees simply to access the deal flow of venture capital and leverage-buyout firms.


Facebook Finally Buys Class A Shares


Facebook repurchased some of its voting, Class A shares during the quarter ended March 31, 2017. Last fall, Facebook announced a $6 billion stock repurchase plan beginning in 2017.

So far this year, Facebook has purchased $228 million of the Class A stock. Facebook’s repurchased stock could later be used for another acquisition since founders, due to tax reasons, may prefer voting stock over cash.

Apple’s Cash Will NOT Top $250 Billion


Apple doesn’t have a big cash hoard. Most of Apple’s cash is overseas, and it’s less than you think. By now, everyone realizes that repatriating Apple’s overseas cash means a large tax bill; so Apple has borrowed against the overseas cash to pay dividends and repurchase stock.

At the end of its last quarter, on December 31, 2016, Apple had cash of $245 billion, of which $230 billion was held overseas. On the other side of the ledger, Apple had $77 billion in long-term debt and if paid back today, Apple would have cash of about $170 billion.

S & P Seeks Snap Feedback


Index providers – FTSE, MSCI, and S & P Dow Jones – are currently deciding whether and/or when Snap’s sole, zero-voting stock should be included in an equity index. After considering feedback from market participants, MSCI will deliberate Snap’s fate in May while FTSE will do the same in June. S & P Dow Jones’s decision will take a little longer.

S & P Dow Jones markets and maintains many indices, including its namesake, the S & P 500 Index. Inclusion in the index is done annually by committee. Currently, S & P is seeking comments from market participants on whether companies with dual class or non-voting shares should be included in the S & P Dow Jones indices. Market participants have until May 3, 2017 to complete a confidential online survey.

Pushing for index exclusion is the Council of Institutional Investors (CII), who is very angry with Snap. The CII does not like that Snap’s sole, zero-voting stock breaks with the tradition of giving investors a say in management in exchange for cash. In addition, the CII does not like that Snap’s stock lacks financial disclosure which was made permissible under the Jumpstart Our Business Startups Act of 2012.

On April 27, 2017, the CII made public its confidential feedback to S & P Dow Jones. Besides Snap, the CII is very angry with the NYSE for listing Snap’s sole, zero-voting stock and letting the dogs loose. The CII fears that other companies will issue non-voting stock or “Snap-lite” securities. Since stock exchanges are financially motivated to list companies, the CII believes index providers are their last chance to catch the runaway dogs.