Welcome back, View fans. Here are your morning links.
The stock was down as much as 18 percent in late trading yesterday after the company reported fourth-quarter results. Sarah Frier of Bloomberg News and Tiernan Ray at Barron’s have good roundups. A couple of metrics -- “average monthly active users” and “timeline views” –- came in light. For an unprofitable company trading for 46 times revenue, that means trouble.
The bright side of getting downgraded to junk status.
Some investors said this week’s rating cut by Standard & Poor’s on Puerto Rico general obligations “spurred buyers who had been delaying purchases in anticipation of a planned debt offer from the commonwealth,” according to Bloomberg News. Yields on some Puerto Rico bonds fell to a two-month low. The U.S. Treasury Department said it isn’t considering financial assistance for Puerto Rico, now rated BB+ by S&P, the highest speculative-grade level. Then again, the Treasury Department also used to say that Fannie Mae and Freddie Mac had no implicit government guarantee. And look where they are now.
Are some European governments too broke to bail out?
The Federal Reserve Bank of Minneapolis released a staff report yesterday that concludes the answer may be yes. The gist: “In January 1995, U.S. President Bill Clinton organized a bailout for Mexico that imposed penalty interest rates and induced the Mexican government to reduce its debt, ending the debt crisis. Can the Troika (European Commission, European Central Bank, and International Monetary Fund) organize similar bailouts for the troubled countries in the Eurozone? Our analysis suggests that debt levels are so high that bailouts with penalty interest rates could induce the Eurozone governments to default rather than reduce their debt. A resumption of economic growth is one of the few ways that the Eurozone crises can end.”
We could spend hours or maybe even days talking about the ins-and-outs of Berkshire Hathaway’s exotic derivative trades.
Yet somehow Dan McCrum of FT Alphaville managed to cover the waterfront in a mere 1,690 words, including something called a “worst of basket put option” that was part of a transaction between Berkshire and Lehman Brothers back in 2007. The whole thing is worth a read. Just make sure to set aside a good chunk of time to get through it. This is dense stuff. But that’s Warren Buffett’s fault, not McCrum’s.
The Florida Everglades is infested with huge Burmese pythons, and the problem has gotten out of control.
Check out this 18-footer, which could be a state record.
(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.)
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