Venture Capitalist Forced To Defend Only Making 31,200% Return

Venture Capitalist Forced To Defend Only Making 31,200% Return

http://kevindayhoff.blogspot.com/2012/04/venture-capitalist-forced-to-defend.html

As a venture capitalist who really-really understood it when CODY WILLARD wrote the following for the Wall Street Journal’s Market Watch – “The Cody Word”:

“So Web Bubble 2.0 is at a place where journalists and pundits and people who have never written huge venture capital checks and seen it evaporate less than a year later (note: I have) are criticizing someone who has just turned a quarter of a million into three quarters of a hundred million…”

Mr. Cody’s piece, “How to profit on this Apple stock bubble” - http://blogs.marketwatch.com/cody/2012/04/25/how-to-profit-on-this-tech-bubble/ - is an interesting read…

On top of the whole newly minted national discussion on venture capitalists that at times has caused my head to spin and spew pea soup through my nose…

“Apparently I’m supposed to be angrier over what former Massachusetts Governor and venture capitalist Mitt Romney does with his money than what President Barack Obama does with mine…”

Venture Capitalist Forced To Defend Only Making 31,200% Return

How to profit on this Apple stock bubble

April 25, 2012 COMMENTARY By CODY WILLARD

I saw something recently that blew my mind and I need to share with you. A venture capitalist having to defend making a 31,200% return — in two years.

Seriously, read this post from Ben Horowitz, Netscape founder Marc Andreeseen’s investing partner. They were seed investors in Instagram, recently sold for $1 billion to Facebook… http://blogs.marketwatch.com/cody/2012/04/25/how-to-profit-on-this-tech-bubble/

[…]

Mr. Horowitz goes on to layout an ethical dilemma that prevented his fund from participating in a follow-on round (sidebar: if you’re getting your MBA right now, I require that you read this).  But here’s the point I want to make:

When someone is attacked for turning $250,000 into ‘only’ $78 million, we are in an enormous bubble.

Hat Tip: Venture Capitalist Forced To Defend Only Making 31,200% Return http://www.huffingtonpost.com/2012/04/26/venture-capitalist-forced_n_1455132.html?ref=topbar

Labels: Bus Econ, Bus Econ 2012, Bus Econ Apple, Bus Econ Venture Capitalists, Business Econ Hedge Funds, Facebook, People Romney Mitt

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20080520 Wall Street Journal: Hauser’s Law You can’t soak the rich by David Ranson

Wall Street Journal: Hauser’s Law You can’t soak the rich by David Ranson

Hat Tip: R2

You Can't Soak the Rich

By DAVID RANSON May 20, 2008; Page A23

Kurt Hauser is a San Francisco investment economist who, 15 years ago, published fresh and eye-opening data about the federal tax system. His findings imply that there are draconian constraints on the ability of tax-rate increases to generate fresh revenues. I think his discovery deserves to be called Hauser's Law, because it is as central to the economics of taxation as Boyle's Law is to the physics of gases. Yet economists and policy makers are barely aware of it.

Like science, economics advances as verifiable patterns are recognized and codified. But economics is in a far earlier stage of evolution than physics. Unfortunately, it is often poisoned by political wishful thinking, just as medieval science was poisoned by religious doctrine. Taxation is an important example.

The interactions among the myriad participants in a tax system are as impossible to unravel as are those of the molecules in a gas, and the effects of tax policies are speculative and highly contentious. Will increasing tax rates on the rich increase revenues, as Barack Obama hopes, or hold back the economy, as John McCain fears? Or both?

Mr. Hauser uncovered the means to answer these questions definitively. On this page in 1993, he stated that "No matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5% of GDP." What a pity that his discovery has not been more widely disseminated.

The chart nearby, updating the evidence to 2007, confirms Hauser's Law. The federal tax "yield" (revenues divided by GDP) has remained close to 19.5%, even as the top tax bracket was brought down from 91% to the present 35%. This is what scientists call an "independence theorem," and it cuts the Gordian Knot of tax policy debate.

The data show that the tax yield has been independent of marginal tax rates over this period, but tax revenue is directly proportional to GDP. So if we want to increase tax revenue, we need to increase GDP.

What happens if we instead raise tax rates? Economists of all persuasions accept that a tax rate hike will reduce GDP, in which case Hauser's Law says it will also lower tax revenue. That's a highly inconvenient truth for redistributive tax policy, and it flies in the face of deeply felt beliefs about social justice. It would surely be unpopular today with those presidential candidates who plan to raise tax rates on the rich – if they knew about it.

Read the entire piece here: You Can't Soak the Rich

Mr. Ranson is head of research at H.C. Wainwright & Co. Economics Inc.

See all of today's editorials and op-eds, plus video commentary, on Opinion Journal¹.

And add your comments to the Opinion Journal forum².

URL for this article:
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Hyperlinks in this Article:
(1) http://online.wsj.com/opinion
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20061016 Hedge Funds Draw Insider Scrutiny

Hedge Funds Draw Insider Scrutiny

October 16, 2006

For my financial-geek colleagues out there who share my passion for economics and the financial markets; the e-mail I received earlier today from the New York Times “DealBook,” edited by Andrew Ross Sorkin, (For tips, feedback: e-mail dealbook@nytimes.com; Subscriptions: http://www.nytimes.com/dealbook) called attention to an article in the New York Times today By Jenny Anderson: “As Lenders With Easy Access, Hedge Funds Draw Insider Scrutiny.”

Mr. Sorkin introduces the piece by saying: “Hedge funds have crashed the once-clubby world of corporate lending in a big way, and the increased presence of these lightly regulated funds is raising some concerns, especially as relates to the use of inside information. In at least one case, regulators are taking note. The Securities and Exchange Commission is looking into whether hedge funds who were lenders to Movie Gallery took their inside knowledge of the company's recent struggles and traded on it.”

She begins the article by saying:

“In early March, executives from Movie Gallery, a big movie rental chain, held a private conference call for their lenders to talk about how disastrous 2005 had been for the company. A string of Hollywood flops had kept customers away. More people were recording movies from television instead of renting them from a store. The executives said they needed more time to fix the problems, which included more than $1 billion in debt.

Most of the roughly 200 lenders were not bankers, but hedge funds. And what they heard was supposed to be confidential: it was inside information, as valuable to investors as a tip about an imminent takeover.

During the next two days, though, Movie Gallery’s shares were heavily traded, and its stock plummeted 25 percent.

A coincidence? Regulators are not so sure. The Securities and Exchange Commission is now looking into whether any of the hedge funds on the private call with Movie Gallery took their inside knowledge of the company’s struggles and traded on it. Movie Gallery announced earnings results to the public nearly two weeks after the private conference call.”

You can read the rest of the article here. The more you read, the more its gets curiouser and curiouser.

Kevin Dayhoff writes from Westminster Maryland USA. E-mail him at: kdayhoff@carr.org www.thetentacle.com Westminster Eagle Opinion and Winchester Report www.thewestminstereagle.com www.kevindayhoff.com has moved to http://kevindayhoff.blogspot.com/