Category: Business

I’ll be the first to admit that I’m not a real estate expert. But when browsing through the online WSJ today, I was struck by some of the data in their article about the ‘subprime’ mortgage market. Here’s a few tidbits:

– At least 20 subprime mortgage lending companies have either closed, been sold, and/or filed for bankruptcy.
– Almost 1.2 million foreclosure filings were reported in 2006, a 42% increase from 2005. That is a rate of one per every 92 US households.
– “Creative” subprime loans (such as interest-only and no-doc aka ‘liar’ loans) accounted for 47% of total loans issued in 2006. At the start of the decade, these types of loans were less than 2% of total mortgage loans.

As I said, I’m not an expert, but none of that looks like particularly good news to me. Even Ben Bernanke is starting to mention it as a possible concern.

One thing does make me wonder, though — this article seems to be treating the market as if each of these mortgages were acquired by individual households. Yet it’s also true that this recent real estate boom included a lot of speculation, and at least some of that speculation was financed via these same exotic subprime mortgages. (Casey Serin is a good example; he used a number of different subprime mortgages to unsuccessfully speculate on at least 6 properties). So — my question is — is the impact really going to be as broad as this article suggests, or will it be more localized?

I have no desire at all to ride out another recession so soon after that last one, so my hope is that things don’t turn out as badly as they could. Whether I’m indulging in wishful thinking or not … well, we’ll see.

Whether any of this is true or not, Mark Cuban doesn’t know (nor do I) but it does pass the smell test and is an interesting ‘behind the scenes’ take on the Google-YouTube acquisition:

In the months preceding the sale of YouTube the complaints from copyright owners began to mount at a ferocious pace. Small content owners and big were lodging official takedown notices only to see their works almost immediately reappear. These issues had to be disclosed to the suitors who were sniffing around like Google but Yahoo was deep in the process as well. (News Corp inquired but since Myspace knew they were a big source of Youtube’s traffic they quickly choked on the 9 digit price tag.) While the search giants had serious interest, the suitors kept stumbling over the potential enormous copyright infringement claims that were mounting.

[snip]

So the parties (including venture capital firm Sequoia Capital) agreed to earmark a portion of the purchase price to pay for settlements and/or hire attorneys to fight claims. Nearly 500 million of the 1.65 billion purchase price is not being disbursed to shareholders but instead held in escrow.

Thios passes my sanity check because it would be utterly irresponsible to not make some kind of provision for future copyright infringement claims against YouTube. Actually, 500 million might even be a low number, depending on how many lawsuits get filed.

The letter Cuban cites, however, goes on to explain how the whole game will be rigged so that the actual artists whose content has beeen reposted will not see any of the revenue the media companies collect from YouTube. That seems a bit more farfeteched to me, but I don’t know the entertainment biz at all, perhaps that is SOP for them.

Who knows, the whole thing could just be sour grapes on Cuban’s part, but it’s still interesting reading.

According to Ram Shriram, there’s not enough middle managers out there. I also heard this meme from three sales executives in a speaker panel organized by one of my professors the other week.

Memories must be short around the Valley. Remember what happened a few years ago? The big tech bubble bust. Companies cut headcount and went out of business in droves. That cut the guts out of a lot of people’s careers. An awful lot of the folks who should have spent 2001-2006 working their way up into those middle-management roles instead struggled to find work, got out of the business altogether, hunkered down in survival jobs, moved out of the area, or stagnated in roles they were overqualified for. Others went into their own startups or have made the leap to the executive level. At any rate, now that things are better, there’s a great big hole in a lot of people’s careers where the last 5 years should have been.

The real question is, why are any of these executives surprised by this?

Although to be fair, Shriram is not quoted as being surprised, so it might be incorrect to suggest that.

Maybe someone should rewrite that old folk song ‘Where have all the flowers gone’ and turn it into a YouTube video to help raise awareness of this critical business issue. What do you think?

This is just the beginning of more to come, if we’re lucky:

[Massachusetts] state yesterday shut down seven mortgage brokers … and banned a variety of deceptive lending practices in what regulators called a sweeping crackdown on rogue brokers who steer customers in poor urban neighborhoods to loans they cannot afford.

[snip]

Regulators have also gathered evidence of other abuses in the industry, including brokers discouraging homebuyers from hiring lawyers to scrutinize mortgage documents and persuading borrowers to sign blank loan applications. As a result, the division has adopted emergency, and permanent, regulations banning fraudulent practices, particularly scams that target poor consumers with limited English skills.

Here’s hoping other states follow suit, and quickly. Like, say, two years ago.

Here’s some perspective on the minimum wage for you, courtesy of the WSJ:

The minimum wage was last raised in 1996, when Congress bumped it up 90 cents to $5.15 an hour. In inflation-adjusted terms, the minimum wage reached its peak in 1968, when it was $1.58, which equals $7.75 in 2006 dollars.

This caught my eye while browsing through some blogs with my morning coffee:

If you’re not sure what that is, you’re looking at no fewer that twenty-five links to different social tagging / bookmarking services gracing the bottom of a blog post.

Can anyone say “lessons of the last boom not learned?” Social bookmarking as a market has not crossed the chasm. It may never do so. Why any entrepreneur (or VC for that matter) would think that yet another “me too!” del.icio.us copycat is the idea that will make them millions is just beyond me.

18 months from now, my bet is that no more than nine of those links will still work, and of those nine, three will be basically ghost sites. Even that sounds more generous than it actually is, because another three of those slots have in all liklihood already been filled — by Fark, Yahoo, and the Yahoo-owned del.icio.us.

If it sounds like I’m hating on startups, I am not. I’ve worked for several and even had one of my own back in the Dark Ages. I’m just a little frustrated at the rampant lack of creativity. No matter what Dharmesh Shah says about trendspotting versus trendsetting, only so many people can jump onto any given bandwagon before the wagon is too full.

When I think about startups that I’d like to see, I tend to think more about video than I do geek toys like social bookmarking. Why? Video has long since crossed over into mainstream America, but despite the plethora of video uploading services, the potential of video has not even begun to be fully tapped. As Michael Mace pointed out a month or so ago, home video is very popular, but despite its having gone mainstream well over a decade ago, video still has some significant unsolved issues.

What are some of the possibilities out there? What about the ability to tag not just an entire video, but parts of a video, for more efficient searching? Or the ability to embed text within a video and make the whole thing searchable? How about more / better video editing tools for consumers? Maybe even some kind of online classroom to teach video camera owners how to shoot more interesting home videos so that less editing is actually needed in the first place?

Perhaps some of those startups are out there & I just haven’t noticed them, or possibly all of these solutions have been thought up already and they’re all off in stealth mode. If I had even half a clue about video technology I might even try to do a startup in the field myself.

At any rate, those are my Saturday morning coffee thoughts.