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Kevin Feldman
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Kevin Feldman, CFP® is an investment professional with 20 years experience in asset management. He was most recently Managing Director in the iShares® unit of BlackRock, the world's largest asset manager where he had responsibility for iShares marketing, analytics and education efforts. Prior... More
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  • Weekend Reading Roundup, 6/3/11: The economy, taxes, LinkedIn & Groupon
    Taken from the iShares Blog

    This week, economists have been busy. Chicago economist Robert Lucas explained the recession with slides, while Nobel-winning economist Michael Spence explains how Asia can grow differently—and maybe better—than some of its Western predecessors. (Spence was also interviewed by CNN about his new book, The Next Convergence.)

    In the Wall Street Journal, Stephen Moore warned that if Democrats’ tax plans take effect, the top income tax rate could rise to 62%—but in the Columbia Journalism review, Ryan Chittum warns that Mr. Moore’s math is fuzzy at best.

    Speaking of politics, in the Times, David Leonhardt reported on the work of economists Brian Knight and Nathan Schiff, who examined presidential primaries in early voting states affected presidential elections and federal economic policy.  But The Economist quickly rushed to the defense of Iowa and New Hampshire, pointing to research showing that citizens of those states tend to be smarter than those of others and that smart people tend to support economic policies that economists like. (Got that?)

    Following LinkedIn’s path, Groupon announced plans for an IPO. But unlike with LinkedIn—or maybe because of that stock’s rapid rise—some commentators are looking skeptically at Groupon’s numbers. Is it really worth $20 billion? And what the heck is adjusted CSOI?

    Finally, there’s been a lot of buzz about this New York Times story on the SEC’s case against Goldman’s Fabrice Tourre—some about the import of the story, and some about the strange tale of the missing laptop.

    Jun 03 5:37 PM | Link | Comment!
  • Rethinking LinkedIn
    Taken from the iShares Blog

    Is LinkedIn a social media rock star or a glorified telephone directory?

    It’s been a couple weeks now since LinkedIn (NYSE:LNKD) held its wildly successful IPO—priced at $45, the stock passed $100 before closing at $94, down to $81 as of May 31—and people are still trying to figure out what it all means. New York Times columnist Joe Nocera argued that the company had been “scammed” by the investment bank that handled its IPO by under-pricing the shares. (Plenty of others, including Nocera’s colleague Andrew Ross Sorkin, disagreed.) Larry Summers wondered if the IPO wasn’t proof of a tech bubble. And the Journal reminded us of the last era when we saw rapid creation of a “new class of billionaires.”

    Though all the excitement about the potential of social media is understandable, I think there’s a fundamental question that’s getting a little lost in all the shouting: Does LNKD merit its roughly $8 billion valuation? Forget all the debate about whether LinkedIn has sufficient revenue streams. Put more simply: Is LinkedIn a compelling website?

    I was an early adopter.  I can remember that original first invitation I got in email six or so years ago to connect (I ignored the first one, but then others followed), so I’ve had the opportunity to watch LinkedIn develop and have a few thoughts on its utility. 

    LinkedIn is a perfectly fine place for staying in touch with professional contacts—its highest utility, in my opinion.  Like other social address books, there’s a built-in incentive for you to keep your information current if you value staying in touch with colleagues.  I also think there’s a bit of pride in one’s accomplishments that motivates updates from time to time.  All of this is good for LinkedIn’s ability to attract and maintain a broad network of users.

    But this is also where one begins to see some limitations as a website.  How often does one switch jobs or need to update her accomplishments?  And when you’re not looking for a new job or trying to help someone else network professionally, how often are you interested in reading about everyone else’s updates?  I find my highest level of engagement on Linkedin occurs when I have a specific task in mind—say, trying to track down a past colleague or help a friend find a contact in a company she’s interested in learning more about.  But this is not a frequent activity.  

    Another question I wonder about is the appearance and “energy” of the Linkedin site.  Each time I return to Facebook, it’s abuzz with updates, causes, sub-groups—all presented in a visually engaging fashion.  In short, Facebook has a pulse, alive with content that draws you in. I don’t mind lingering a while longer than I had planned.  But with Linkedin, I’m happy to complete my task and exit.

    How do these observations relate to assessing the market value of LNKD?  Maybe not at all, at least in the short-term.  There are many companies buying digital advertising that will be increasingly drawn to the unusually rich targeting LinkedIn can provide, given what it knows about its registered users.

    Over the long-term, however, it seems to me that Facebook could integrate LinkedIn’s functionality to accommodate professional contacts and content (though personally, I like to keep my FB friends separate from most of my professional colleagues) and that shift could be a big threat to LinkedIn. 

    Is LinkedIn worth the $8 billion to $10 billion investors have assigned it in recent weeks?  Here’s one way to think about the question:  If that’s what LinkedIn is worth, what would a publicly traded Facebook be worth today—$100 billion? $150 billion? This is ascending into pretty rare air; Google’s market cap is about $170 billion. 

    Tags: LNKD
    Jun 03 5:26 PM | Link | Comment!
  • What’s Gold Really Worth?
    taken from

    Determining an exact value for gold isn’t easy—but the pressure to do so is diminished by the fact that, for most investors, gold shouldn’t be a short-term investment.

    The drop in silver’s price earlier this month suggested that some major market players had decided that silver had risen far above a reasonable valuation. In the aftermath, some writers argued that the price drop of about 27% for the week of May 2nd was a reasonable correction. (In fact, my colleague Russ Koesterich thinks that silver still looks expensive.)

    Since some investors still link gold and silver—not taking into account the significant differences between the two metals—some market observers and gold investors wondered if gold, down about 4 percent last week, was also due to plummet. Is gold a bubble?

    For reasons that I’ve blogged about before, particularly the purchasing of gold by central banks, I don’t think it is. But one of the challenges in assessing the value of gold is that the usual metrics don’t apply: gold doesn’t pay interest or dividends or generate earnings.  And for all practical purposes you can’t use gold, as you might, say, real estate. In fact, gold, which must be moved, stored, insured and guarded, actually comes with built-in expenses.

    So if you want to ascertain whether gold is undervalued, overvalued, or about right, how can you figure that out? It’s a problem market observers struggle with; on Seeking Alpha not long ago, contributor Richard Shaw tried to calculate what gold would be worth if you used it to replace all the currency in the world.  The Economist recently sought its value in how many barrels of oil or bushels of wheat you could buy with an ounce of gold. The magazine points out that gold has risen considerably against the dollar, which could plausibly be interpreted as the result of concern over the devaluation of the dollar. But gold has also risen substantially against the Swiss franc, not typically thought of as a weak or declining currency. And neither the United States nor Switzerland looks like they’ll have to confront increased inflation any time soon, so the threat of it doesn’t account for gold’s rise relative to those currencies. Some of the increase, perhaps, from investors who fear the long-term prospect of inflation—but not all of it, and not even a majority of it.

    How do you explain gold’s appreciation against currencies as varied as the dollar and the Swiss franc? Because people want to hold on to gold for a variety of reasons. One of them certainly is as a hedge against inflation and/or a falling dollar; another is as a portfolio diversifier which is, most of the time, negatively correlated with stocks. And then there’s just the psychological comfort that stems from the sense of gold as a safe haven.

    Which brings us back to where we began: the substantial differences between gold and silver. I consider silver a satellite bet, something one invests in for a specific play. But gold is a long-term, core portfolio holding.

    iShares Gold Trust (“Gold Trust”) has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus and other documents the Gold Trust has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting or EDGAR on the SEC website at Alternatively, the Gold Trust will arrange to send you the prospectus if you request it by calling toll-free 1-800-474-2737.

    iShares Silver Trust (the “Silver Trust”) has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus and other documents the Silver Trust has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting or EDGAR on the SEC website at Alternatively, the Silver Trust will arrange to send you the prospectus if you request it by calling toll-free 1-800-474-2737.

    Certain sectors and markets perform exceptionally well based on current market conditions and iShares Funds can benefit from that performance. Achieving such exceptional returns involves the risk of volatility and investors should not expect that such results will be repeated. Past performance does not guarantee future results. Diversification may not protect against market risk.

    Neither the iShares Gold Trust nor the iShares Silver Trust (collectively, the “Trusts”) is an investment company registered under the Investment Company Act of 1940 or a commodity pool for purposes of the Commodity Exchange Act. Shares of the Trusts are not subject to the same regulatory requirements as mutual funds. Because shares of the Trusts are expected to reflect the price of the silver and gold held by the Silver Trust and the Gold Trust, respectively, the market price of the shares will be as unpredictable as the prices of silver and gold have historically been.  Additionally, shares of the Trusts are bought and sold at market price (not NAV). Brokerage commissions will reduce returns.

    Shares of the Trusts are not deposits or other obligations of or guaranteed by BlackRock, Inc., and its affiliates, and are not insured by the Federal deposit Insurance Corporation or any other governmental agency.

    BlackRock Asset Management International Inc. (“BAMII”) is the sponsor of the Trusts. BlackRock Fund Distribution Company (“BFDC”), a subsidiary of BAMII, assists in the promotion of the Trusts. BAMII is an affiliate of BlackRock, Inc.

    When comparing commodities and the Trusts, it should be remembered that the sponsor’s fees associated with the Trusts are not borne by investors in individual commodities. Buying and selling shares of the Trusts will result in brokerage commissions. Because the expenses involved in an investment in physical gold or physical silver will be dispersed among all holders of shares of the Trusts, an investment in the Trusts may represent a cost-efficient alternative to investments in gold or silver for investors not otherwise able to participate directly in the market for physical gold or silver.

    Shares of the Gold Trust and Silver Trust are created to reflect, at any given time, the market price of gold and silver, respectively owned by the trust at that time less the trust’s expenses and liabilities. The price received upon the sale of the shares, which trade at market price, may be more or less than the value of the gold or silver represented by them. If an investor sells the shares at a time when no active market for them exists, such lack of an active market will most likely adversely affect the price received for the shares. For a more complete discussion of the risk factors relative to the Gold Trust, carefully read the prospectus.

    May 31 6:03 PM | Link | Comment!
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