SeanReadsTheNews

Reformed Broker on High Tech Trading War

I meant to blog Scott Patterson's Wall Street Journal's article on the escalating technology battle between high frequency traders and the big brokerages this morning but I didn't get around to it, and good thing too because Josh Brown at The Reformed Broker has put up a definitive post on the subject and the article.

Since human beings evolved in Africa side by side with large beasts, Africa's animals evolved defenses to avoid being hunted to extinction.  Unfortunately, the giant animals of North America or Europe (16 foot tall rats, a moose the size of a rhinoceros) had no such history of tandem evolution, so when humans arrived, they were easily killed off.  They hadn't the time to develop defenses.

The parallel here is a simple one, high frequency trading has doubled in terms of it's percentage of trading in less than a ten year time frame.  The big buyside market participants, like mutual funds, pension funds and asset managers, now barely stand a chance when trading with the machines.  They are being scalped, rooked and shaken every minute of the day.

Thanks Josh for doing SeanReadsTheNews' job for me!

Fortune on Detroit Artist Community: Redevelopment Porn?

One of my least tapped categories is "Unemployment porn," or articles about how someone exceptional used an unorthodox idea to create a career - such as getting rich selling crafts on Etsy.  The idea was inspired by Penelope Trunk's "Mommy Porn" theme of hyping oddball parenting strategies as trends that make it look like working mothers can have full-time careers without sacrificing on the family side.

That brings us today's David Whitford article on Fortune.com about how Detroit made use of an obsolete factory by turning it into an artists community, which could be the first example of an entry in redevelopment porn.

As the former headquarters of Murray Corp., which made bodies for Ford in the glory days, this plant, too, is inhabited by ghosts. Here, however, the ghosts share quarters with some spirited company: a menagerie of glass blowers, cabinetmakers, architects, seamstresses, a sneaker designer, and three women who teach pole dancing, among others -- 160 small-business tenants in all, most of them operating on the frontlines of Detroit's burgeoning creative economy.

I'm happy to see this as a success story.  One area where Americans are infinitely creative is making use of real estate when zoning laws and other restrictions are out of the way.  Let's just not hype urban artist communities as an answer to revitalizing rust-belt cities. 

This sort of thing worked wonders for Jerome Arizona, a former mining community that has become the Northampton of its region - but for a city the size of Detroit, it's a drop in the bucket.

Whitford, to his credit, acknowledges this in the story as well as noting that the building is a private enterprise and not part of an ill-advised top down redevelopment plan.

Heidi Moore Echoes Me on Green Investing

Yesterday I criticized a Fortune story for hiding the true costs of alternative energy in a too-accommodating story about a solar power installation company.

Today, Heidi N. Moore, who is filling in for Colin Barr for a week or two at Fortune.com, makes essentially the same argument when writing about Tesla's pending IPO - and one that I made earlier when covering NPR's report on same.

So cleantech may be great for society, but for the past few years, it has been ruinous to investors' wallets. One banker noted that investors looking at clean tech companies first ask whether the company has enough funding to last until it reaches profitability; almost none of the companies do.

The first rule of blogging is noting when someone important agrees with you, particularly about something you said first.  Consider it fulfilled.

Forbes Satire: What If BP Rig Had Blown in China?

This Forbes.com satire on what would have happened if BP's rig had blow in China was just funny. I especially like the joke about how Tony Hayward regretted being sentenced to death in absentia because he'd have to miss the Shanghai Expo.

That's all.

TIME Weighs in on For-Profit Colleges

After reading this TIME story by Elizabeth Dias, I've decided that for-profit colleges are turning into the new health insurance companies.  As a former health insurance industry PR representative, I noticed that decisions to restrict treatment or try to cut payments to doctors by health plans got completely different treatment from the news media than when Medicare or Medicaid attempted to do the same thing.

Similarly, while public colleges and universities continue to consume massive amounts of direct and indirect subsidy, allowing them to gussy up their campuses like they were resort hotels and soak parents of means within a penny of their lives, similar actions by the for-profit education sector attract rigorous media scrutiny.

That doesn't make observations by Dias or her sources incorrect and the article rightly shines a light on how tuition subsidies might not serve a public good - but it would be fun to see, say, CUNY Law School, get the same scrutiny.

Government money, lightly supervised institutions, unchecked supervising bodies and debt-trapped students — it all sounds similar to the subprime-mortgage collapse that is still fresh in America's mind. "The analogies are unbelievable," said Barmak Nassirian of the American Association of Collegiate Registrars and Admissions Officers, linking the for-profit education boom to the savings-and-loan crisis of the 1980s, the dotcom boom of the '90s and the recent mortgage bubble, which was helped along by lax credit-rating agencies and loose regulation.

All of that is also true of tuition support going to schools like Harvard and Princeton with huge endowments and monied graduates who only serve the very intellectual elite of society.  University of Phoenix Online may only exist because it can transfer its costs in large portion to the taxpayer - but at least they are an egalitarian institution serving all comers.

I blogged separately today an article on a solar panel installer in Los Angeles that reveals toward the end that the company only survives by taking subsidies.  This level of scrutiny of that issue would have been valuable there as well.

This is also the third story on this subject I've noticed recently - I blogged a couple from NPR but there were others.  Unless it's the public universities driving their media contacts to stamp out the competition, I don't see why this story is so hot all of a sudden.

Fortune: Has a Start-up Found a Way To Deliver Affordable Solar Power?

I've mocked cities and companies for relying on green energy jobs to boost their economies because an attempt to game the system so that federal subsidies land disproportionately in your lap is not a winning long-term strategy.

Therefore, I'm obligated today to cover Steve Hargreaves' Fortune article on California-based SolarCity, which is pushing an end-to-end solar installation service that is inexpensive and transparent to the consumer.

Morris is an installer for California-based SolarCity, one of a handful of companies pioneering an all-inclusive approach to solar, making it as easy and cheap for the consumer as possible.

Under the company's model, customers agree to a monthly lease and sign the rights to claim subsidies over to SolarCity.

In return, homeowners get a solar array installed on their roof, maintained for the life of the lease. They're hooked up to the electric grid, so when they need more power than the panels provide, there's no disruption. And SolarCity guarantees the panels will produce a set amount of power, which the company says should offset the electric bill and more than compensate for the monthly fee.

I'm not, however, obliged to ignore the fact buried in an article whose headline is "Solar Power Done Cheap," that the only reason this company is in business is because 50% of its costs are paid by government subsidies.

If SolarCity's customers and employees seem happy with the arrangement, they owe one entity a big thanks: the government.

Thanks to a mix of federal, state and local incentives, some 50% of the costs of solar power are subsidized.

Many of those subsidies are set to expire in eight years. The solar industry thinks it can compete without them, but it's clear costs will have to come down.

My guess is that the managers will decide its easier to buy enough government support to keep the subsidies going.  The article is another green-energy con job - Hargreaves found an interesting story to report but he still buried the lede.

Ryan Singel of Wired on the .XXX Domain

Much will be written about the approval for a .xxx domain reserved for online pornography but none will be as level-headed as Ryan Singel's article from Wired.

His argument that the .xxx domain will increase freedom of expression online even if almost everyone rightfully ignores is the best one in favor of the new domain.

An easily avoided, bad neighborhood in a big, big world run on principles of openness and fairness is better than having the net devolve into a Disneyland run by the whims of whomever happens to be in charge or who is swayed by threats from whatever country happens to have the most carrier fleets.

So here’s to .xxx. May it live and be mostly ignored.

Singel provides common sense on hot-button issues like this one and is always worth reading.

NYT: Irish Austerity Measures Not Working

As I've posted before about how proud I am of the Irish for taking hard steps to deal with the aftermath of their credit binge, I feel obligated today to post Liz Alderman's New York Times article observing that the cuts don't seem to be working.

“When our public finance situation blew wide open, the dominant consideration was ensuring that there was international investor confidence in Ireland so we could continue to borrow,” said Alan Barrett, chief economist at the Economic and Social Research Institute of Ireland. “A lot of the argument was, ‘Let’s get this over with quickly.’ ”

Rather than being rewarded for its actions, though, Ireland is being penalized. Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus money, the Irish economy shrank 7.1 percent last year and remains in recession.

Joblessness in this country of 4.5 million is above 13 percent, and the ranks of the long-term unemployed — those out of work for a year or more — have more than doubled, to 5.3 percent.

In fairness to the Irish, Alderman is working from the assumption that the government borrowing would have actually extended growth to the private sector, which famously has happened in the U.S. despite much deeper pockets.

And the benefits of not saddling the next generation of Irish with more debt are a long way off, something she doesn't acknowledge in the article, either.

Former Wall Street Journal Publisher Wants to Soak the Rich - Bloomberg

Peter Kann of Princeton, NJ, and formerly the publisher of The Wall Street Journal and its notoriously conservative editorial page, has decided that the solution to his town's budget woes is to soak the nearest deep pocket, or what his former charges would call "class warfare."

As reported by Moira Herbst of BusinessWeek:

“The town budget is strapped and schools are looking at laying off teachers,” said Princeton Borough resident Peter Kann, former chairman and chief executive officer of Dow Jones & Co. and the co-chair of Princeton Future, a civic organization. “Then there is this enormously rich university. They give the appearance of being wonderful donors to the town, but compared with what they would be giving if they were paying property taxes it’s really trifling.”

Herbst is a journalist who knows what she wants when she goes looking for a quote and doesn't give up until she finds it.  I some cases, she even argues with a source to try and get him or her to say what she needs.  In this case, she didn't seem to need to work very hard to get someone to say that Princeton Township being forced to cut its budget wasn't as good a solution as the rich neighbor contributing more to the public coffers.

This isn't really a business story but I thought the prominence of Kann's quote was funny, so here it is.

NYT: Start-up Banks on Long Hold Waits

Andrew Adam Newman, last seen around these parts chasing the World's Fastest Nudist, today reports on a start-up company that has found a way to automate return calls from customer service lines during long hold times.  I love stories about new companies finding a better way to deal with perpetual annoyances like this one.

A new company, LucyPhone, is offering a solution: when put on hold, users can hang up, and are then called back when a customer service representative finally picks up. On the free service’s Web site, LucyPhone.com, users type in a customer service number (or click on one of many stored on the site), as well as their own. The company also has submitted a free iPhone application to Apple, which it expects to be approved soon.

I recall again a long-ago observation from a journalist that he was inherently suspicious of any company whose story was "(something routine) done on the Internet," such as sell pet supplies or shoes.  LucyPhone is an example of a company broadly interesting because of what it can accomplish for a great number of people.

They were already off to a good start in consumer coverage, as Newman reports, but kicked themselves up a notch into the Times' Business Section by a strategic (if routine) use of Twitter.

It has set up a real-time search of messages sent by Twitter users for phrases like “on hold with,” which are apt to be complaints about customer service. Through its own Twitter account, LucyPhone automatically signs up to follow those users, who, when they notice new followers, often click on their profiles out of curiosity.

Between the novelty of the application and the strategic and measurable use of new media, they were guaranteed a story.  Well done by all.