Google splits: Ed’s Daily Notes for April 3rd   Leave a comment


Bloomberg: New Google Shares Hit Market as Founders Cement Grip With Split

Big news for Google owners today:

More than 330 million new shares of Google Inc. (GOOG) land in the U.S. equity market today, completing a two-year process through which Sergey Brin and Larry Page are cementing control of the world’s third-biggest company.

Stock in the largest search-engine owner is effectively splitting via a dividend distribution, with the price of existing Google A shares, which hold one vote each, expected to fall by half.

Outstanding common shares in the Mountain View, California-based company more than doubled with the addition of non-voting C shares, which closed at $567 yesterday on a when-issued basis ahead of today’s debut. The shares sold at a discount of $1.67 compared with the A shares that have been trading on an ex-distribution basis in the past week. The existing A shares closed yesterday at $1,135.10.

Nasdaq OMX Group Inc. (NDAQ), operator of the Nasdaq Stock Market where Google shares are listed, is adding the Class C shares to its indexes under the “GOOG” symbol. Class A shares will be renamed “GOOGL” and subsequently removed from indexes when the exchange operator rebalances them on June 23.

It is hard to decide what to do with this mess. I was considering selling my C shares and adding more A shares, but not if they are de-listing the A shares. At the moment, I am taking a “wait and see” approach with both classes.

Fox News: One third of wearable device wearers ditching them

Bad news for the tech industry:

Maybe it’s because there’s no killer device yet. Or maybe it’s because we hate charging yet another gadget. Whatever the reasons, a large number of consumers just aren’t sticking with wearable devices–like smart watches and fitness trackers–after they buy them.

A new study from research firm Endeavour Partners says that one-third of American consumers who have owned a wearable product stopped using it within six months. That number goes to 50 percent for activity trackers like the Fitbit, despite the fact that 1 in 10 U.S. adults already owns one.

The wearables market is still very young, but it’s expected to grow by leaps and bounds, reaching $19 billion in sales by 2018. That’s according to Juniper Research, which had predicted $1.4 billion in wearable sales for 2013. However, if wearable device owners continue to abandon their gadgets, perhaps the category won’t explode like some predict.

You could blame some of the fatigue on clunky first-generation hardware. The original Samsung Galaxy Gear, for example, suffered from a bulky design, short endurance and slow performance. The next wave of devices, including the futuristic-looking Gear Fit, promises to improve on some of those beta-style shortcomings.

Other major players have yet to enter the market. Google made a splash with its Android Wear watch announcement, but those devices won’t reach shelves until the summer. What’s encouraging about Android Wear-powered watches like the Moto 360 is that they don’t look like calculator that’s strapped to your wrist.

Apple is also rumored to be entering the wearable space with an iWatch late this year, which purportedly will feature a curved glass design and the ability to run iOS apps (though they may be of a scaled-down variety). Apple’s device is also expected to place a heavy emphasis on fitness.

The problem isn’t the “bulky design”. The problem is limited apps.

Look at your forearm. A watch takes up about an inch of the space there. What can you do with a watch, other than tell time? Not much. For most people, their forearm has space for a keyboard and about the same size screen that is currently on their smartphone. Add that much device to your forearm, and suddenly you have enough memory for all kinds of apps, not to mention better battery life.

The problem is the tech industry is still stuck on the “smartwatch” idea. Until they start thinking “outside the watch”, that is all they will be able to make.

Bloomberg: ECB Decision Day Guide From Low Inflation to Quantitative Easing

Here’s what to look for when the European Central Bank’s 24-member Governing Council releases its monthly interest-rate decision for the euro area at 1:45 p.m. and ECB President Mario Draghi holds a press conference in Frankfurt at 2:30 p.m.

— Benchmark rate: Only 3 of 57 economists in a Bloomberg News survey predict a cut in the main refinancing rate from the current record-low 0.25 percent. Credit Agricole CIB and Danske Bank A/S say the ECB will lower the rate to 0.15 percent, and Goldman Sachs Group Inc. predicts a reduction to 0.1 percent.

— Inflation: If the ECB opts not to ease monetary policy, Draghi should explain why subdued inflation isn’t yet a threat to price stability. Consumer prices in the euro area rose 0.5 percent in March from a year earlier, the weakest pace since 2009 and a quarter of the ECB’s goal of just under 2 percent. The numbers are distorted by the timing of the Easter holiday and Vice President Vitor Constancio said this week that he expects them to correct in April.

— Exchange rate: The euro has climbed more than 7 percent against the dollar in the past 12 months, adding downward pressure to prices in the currency bloc. While the exchange rate isn’t an ECB policy target, Draghi has said that he’s looking at it “with attention.”…

— Quantitative easing: [Governing Council member Jens] Weidmann…said that an asset-purchase program to inject liquidity into the financial system is in principle permissible. Analysts from UBS AG to Barclays Plc have said his comments shouldn’t be interpreted as a signal of imminent action. While the policy is used by the Federal Reserve, Bank of England and Bank of Japan, it is more controversial in the euro area as the ECB is banned from monetary financing of governments.

What the ECB should do, from nearly any economic perspective, and what they will do, are two very different things. One thing I have noticed about the ECB is they tend to be unlikely to take any action, so when they do it tends to surprise markets.

Washington Times: Supreme Court strikes down overall limit on campaign giving

Chris posted this story yesterday:

The Supreme Court overturned aggregate campaign finance limits Wednesday, freeing wealthy Americans to give to as many federal candidates as they want — though the justices left in place the cap on how much can be given to any one person.

…Under the old limit, a donor couldn’t give more than $123,200 to candidates, parties and political action committees in an election cycle. Of that, just $48,600 could go directly to candidates.

That meant the maximum $5,200 donations to federal candidates could be limited only to nine.

I have mixed feelings about this. The Supreme Court did the right thing, because this law is arbitrary. However, our current campaign finance system is ridiculously broken. The Supreme Court made the best decision they could have made with our absurd system.

In my opinion, campaign finance is one of the few areas where socialism of the system sounds good. How else can you level the playing field for all candidates? Feel free to offer your own ideas.


Posted April 3, 2014 by edmcgon in Economy, Editorial/opinion, News, Politics, Stocks, Technology

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