Friday, January 31, 2014

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Ackman Pours Out Some Whiskey Profits

Bill Ackman’s hedge fund Pershing Square sold 7.3 million shares of Beam this week for $608 million. A Japanese beverage conglomerate announced it was buying Beam on January 13.



Brendan Mcdermid / Reuters / Reuters


Hedge fund manager Bill Ackman has started taking his profits from his massively successful investment in Beam, the liquor company that has agreed to be acquired by the Japanese beverage conglomerate Suntory. Beam is the second largest whiskey seller in the U.S. and owns the Jim Beam, Maker's Mark, and Knob Creek brands.


According to regulatory filings, Ackman's hedge fund Pershing Square sold 7.3 million shares of Beam for $608 million. Pershing now owns 13.5 million shares of Beam, or 8.3% of the company, before this week, its stake was 12.8% of Beam with 20.8 million shares. Pershing sold the shares this week in six batches at $83.28 and $83.36. Beam closed this week at $83.30.


Suntory announced its plan to acquire Beam and create a trans-Pacific liquor conglomerate in a $13.6 billion all-cash deal, acquiring Beam for $83.50 a share on January 13. Since then, the price has bounced around the sale price. Beam's stock jumped up 24% from about $67 when the deal was announced giving Pershing about $370 million in profits on paper.


Ackman bought into Fortune, a brand conglomerate that owned the whiskey brands in 2010 and encouraged it to break up into three separate companies: one for its home goods and security business which included Moen faucets and Master Lock, one for its golf business including the Titelist brand of clubs, and then the whiskey business in Beam.


Fortune would sell off the golf business to Fila and a South Korean firm for $1.2 billion and spun off the home and security business in 2011. The entire Fortune brand business had a $7 billion market capitalization before the split up three and a half years ago. Beam agreed to be sold for more than twice that.


If the Beam acquisition goes through at the announced price of $83.50 a share, Ackman would be leaving about $1.6 million on the table by selling now. Ackman tends to only own stakes in 10 or so companies at a time and is typical for him to take gains and move them into a new deal.


Ackman's success in Beam stands in contrast to his recent large losses — maybe up to $700 million — he's taken in his massive $1 billion short bet against the nutritional company Herbalife. According to his most recent investor letter in October, Ackman's $10.8 billion fund is up slightly on the year.




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The Top Hedge Funds Of 2013 Had Some CRAZY Returns

Though it was a year of tepid returns for the average hedge fund, these three had absolutely mind-blowing performance in 2013, according to Morningstar data. 600%+ anyone?


Alternative Investment Group's Alternative Investment Institutional Ltd. Fund: 663%


Alternative Investment Group's Alternative Investment Institutional Ltd. Fund: 663%


That's right, if you invested in this three-year-old fund of hedge funds managed by David Storrs, you'd have grown your money sixfold in just twelve months. The fund has a total of $134 million in assets.


Via leslie-etcetera.tumblr.com


Stratton Street Japan Synthetic Warrant Fund: 307%


Stratton Street Japan Synthetic Warrant Fund: 307%


Managed by Matthew Lonergan and Trevor Silwerski, this $3.5 million long-only (more traditional) hedge fund tripled investors' money in 2013.


Via leslie-etcetera.tumblr.com


Northwest Investment Management's Northwest Warrant Fund Ltd USA: 224%


Northwest Investment Management's Northwest Warrant Fund Ltd USA: 224%


This emerging markets-focused hedge fund managed by George Phillips and David Rogers had a great 2013, more than doubling investors' assets, which totaled $34.8 million at the end of the year.


Via leslie-etcetera.tumblr.com




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Thursday, January 30, 2014

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Is Zynga Breaking Its Facebook Addiction?

The once-mighty social game company bought a mobile game developer for half a billion bucks . Here’s what it means.



Zynga, more than any other company, is synonymous with the kind of social, browser based gaming that flourished in the early part of this decade. Their data-driven, time-sucking Facebook hits FarmVille and CityVille drove the company to huge success, but as gaming went mobile Zynga has been unable to find a smash hit follow up. Last year, they finally replaced founder and CEO Mark Pincus with former Microsoft executive Don Mattrick.


Today, Mattrick made the first major splash of his tenure by acquiring the mobile gaming and animation tech studio Natural Motion for half a billion dollars, a purchase that may signal the beginning of the end for Zynga's floundering browser-based business. The announcement came as part of the company's fourth quarter earnings report, which also included the disclosure that it would lay off 314 employees, or approximately 15% of its current workforce.


To start, it's an admission about the state of the casual game industry in 2014, in which the money is all in mobile — whether it's connected to Facebook or not. (In its earnings call this week, Facebook pointed to mobile app install ads as a massive area of growth. That's app install ads for often non-Facebook-related apps.) Companies like King.com, the maker of Candy Crush Saga, have generated enormous revenue based on their ubiquity on mobile devices. NaturalMotion is not a browser-based gaming company; that fact alone is enough to signal Zynga's intention to double down on device-based gaming. The games are social — and even collect money via in-app purchases — but are somewhat insulated from Facebook's unpredictable app ecosystem.


And Mattrick's background as a game executive at a technology company suggests he knows the value of the graphics and animation technologies that drive console gaming. That's for two reasons: The first is in making attractive games that people are likely to buy. The second is that owning this tech may provide potentially lucrative licensing opportunities down the road.


And that could ultimately be the future for Zynga, even if they can never develop another hit on the level of FarmVille: farming out their tech to big game companies across the spectrum from mobile to console. It may not bring them the headlines of building their own zeitgeisty games, but it could prove a far steadier source of income. Call it a $500 million backup plan.




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Even Amazon Had A Bad Holiday Season, Missing Earnings And Revenue Expectations

The stock is down more than 8% in after-hours trading.



Michaela Rehle / Reuters


If the world's biggest, most aggressive, and lowest-cost online retailer had a bad quarter, then it really was one of the worst holiday seasons in years. Amazon reported earnings today that missed expectations on both sales and profit.


The company had sales of $25.59 billion, a 20% increase from the year before but below analysts expectations of $26.06 billion. The earnings miss was bigger, 51 cents per share versus the 66 cents analysts expected, for a net income of $239 million.


Amazon's persistent low profits come from its low prices and a huge amount of investment in the business. The company spent $880 million on property and equipment in the fourth quarter and the Wall Street Journal reported yesterday that Amazon "plans to offer brick-and-mortar retailers a checkout system that uses Kindle tablets as soon as this summer," which could mean giving merchants tablets and card-readers, another large upfront investment for the company in a competitive, low-margin business.


Amazon also said that they expected sales to be between $18.2 and $19.9 billion in the first quarter of 2014, meaning only 13% to 24% growth over the year. The company also said operating income could come in between a loss of $200 million and a gain of $200 million, compared to $181 million in operating income in the first quarter of 2013.


Amazon isn't the only online retailer to report weak results: eBay revenue and sales for the fourth quarter also missed expectations. More confirmation of what many analysts and companies have already described as a weak holiday shopping season is expected to come when retailers report their financial results in February.


"It's a good time to be an Amazon customer," CEO Jeff Bezos said in a statement.


But not so much to be a shareholder, at least today: the stock is down more than 8% in after-hours trading.




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Google's Reasoning For Cutting Motorola Loose Is Starting To Make A Lot More Sense

Now we know why the company is trying to get rid of its mobile phone maker. Google missed analyst estimates on earnings, but beat on revenue.



Eduardo Munoz / Reuters


Some reasoning behind Google's sale of Motorola Mobility yesterday came out today as the Motorola division weighed on Google's earnings, which missed analyst expectations.


Google said that it would sell Motorola Mobility, the company that it bought for $12.5 billion, to Chinese smartphone and computer manufacturer Lenovo yesterday for $2.91 billion. Granted, the company's loss wasn't the entire difference in that acquisition — it's keeping some patents, and it also profited off the sale of Motorola's set-top division — but it was still at a fraction of the original price, which shocked industry watchers across the web.


While the Google segment operating income was $5.32 billion, the Motorola segment lost $384 million. Google's Motorola revenue also declined year-over-year, representing only 7% of Google's revenue compared to 11% in the year before.


While owning Motorola, Google released a number of new phones, including the Moto X and significantly cheaper Moto G. Both phones were well-accepted by critics, but it seems that it wasn't enough to justify keeping the phone manufacturer when the competition continued to capture a significant share of the Android ecosystem.


"But the smartphone market is super competitive, and to thrive it helps to be all-in when it comes to making mobile devices," Google CEO Larry Page said in a blog post announcing the sale. "It's why we believe that Motorola will be better served by Lenovo—which has a rapidly growing smartphone business and is the largest (and fastest-growing) PC manufacturer in the world. This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere."


Google isn't shy about going after hardware, having bought Nest — which builds a smart thermostat and smoke detector — earlier this year, but Motorola seems to have not been the right fit for Google.


Google still beat analyst expectations on revenue, bringing in $16.86 billion compared to analyst estimates of $16.75 billion. The stock rose slightly by 1% in extended trading following the company's earnings announcement.




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Abercrombie Buyout Possibility Grows With Even More Management Changes

The teen retailer today promoted its chief financial officer, Jonathan Ramsden, to the role of chief operating officer. Abercrombie may be getting its house in order to court buyout offers.



Via facebook.com


Abercrombie & Fitch, which just this week added three people to its tight-knit board of directors and stripped Chief Executive Officer Mike Jeffries of his chairman role, announced another management change on Thursday, adding to evidence the micro-managing CEO is finally loosening his grip on the teen retailer, perhaps with his eye to a buyout.


Jonathan Ramsden, 49, will be promoted to chief operating officer from chief financial officer, and the company will seek a new CFO, Abercrombie said in a statement today. Prior to today's announcement, the role of Chief Operating Officer did not exists at Abercrombie. BuzzFeed reported two weeks ago that Ramsden has gained more influence and decision-making authority at the teen retailer in the past 18 months as Jeffries' leadership has been called into serious question.


When the retailer terminated a shareholder rights plan earlier this week, Stifel analyst Richard Jaffe said it made "a buyout of the company easier and possibly more likely." The board and executive management changes, less than two months after an activist investor wrote a nine-page open letter calling for the 69-year-old Jeffries's ouster, make that an even bigger possibility.


Jeffries, who has led Abercrombie since 1992 and is considered its modern-day founder, has been a subject of controversy in the past two years, amid revelations of corporate misconduct, including inappropriate behavior on the company jet and the executive-level involvement of his partner, who is actually not an Abercrombie employee. Off-trend fashions have resulted in declining same-store sales, which in turn have sent shares plummeting by so much the retailer was removed from the S&P 500 last year.


In October 2012, it was reported that at least one private-equity firm considered the idea of a takeover before walking away over concerns about Jeffries's leadership. The same report said that private-equity firms might be willing to invest if they could move Jeffries aside after a leveraged buyout.


To that end, while Abercrombie renewed Jeffries' employment contract for another 12 months in December, it also announced that it would hire presidents for its namesake and Hollister brands, positioning the two as potential successors to Jeffries in the future. Ramsden's new title proves his status as an indispensable second-in-command at the teen retailer, with the added benefit of being a favorite on Wall Street, as BuzzFeed reported earlier this month.


The board additions, which include a new independent chairman, show Jeffries is getting much more oversight. All three have backgrounds in retail, compared with the nine existing directors, who are largely prominent Columbus, Ohio, locals. (Among them: two-time Heisman Trophy winner Archie Griffin and Elizabeth Lee, the headmistress of a local uniforms-required private school.)


"Along with the new brand president positions, the creation of the new COO role will ensure we are organized for renewed growth and success going forward," Jeffries said in today's statement.


Private-equity firms have been checking out U.S. retailers recently. Last year's buyouts included Hot Topic and Neiman Marcus, and in the past few months, rumors have swirled about possible a possible leverage buyout of Aeropostale. And, of course, there is the ongoing merger saga between Men's Wearhouse and JoS A. Bank.


Ramsden said in today's statement he looks forward to "working closely with Mike to on-board the new brand presidents and to fulfill the potential of our iconic brands and maximize shareholder value."


Glenn Welling, the activist investor who founded Engaged Capital, which has been pushing Abercrombie for change, urged the retailer's board to consider a sale in his nine-page letter last month.


"A sale of the company to a private equity buyer may represent the best option for shareholders," he wrote. "However, as we have learned through discussions with industry insiders and private equity firms, Mr. Jeffries' presence represents a major stumbling block to a transaction."


It's possible that after the past month, Jeffries may not be quite as big a stumbling block as he has been in the past.




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How To Prosecute And Defend The Real Wolf Of Wall Street

“They were so drugged up I’m not sure they understood anything,” said the lawyer who defend Belfort.



Via Paramount Pictures


"Was the movie accurate? It played down the sex and drugs," said Ira Sorkin, a partner at Lowenstein Sandler who defended Jordan Belfort, the real "Wolf of Wall Street," as well as Bernie Madoff.


Sorkin was speaking on a panel at the Benjamin N. Cardozo School of Law in New York with the lawyer and FBI agent he was working against when he defended the infamous Long Island brokerage founder, whose massive riches, prodigious drug and alcohol abuse, and eventual fall has been immortalized by Martin Scorsesse and Leonardo DiCaprio in the Wolf of Wall Street.


The three, who were sitting on a panel with Robert Khuzami, the former federal prosecutor and SEC enforcement chief who is now a partner at Kirkland & Ellis, all agreed they were dealing with someone who was intelligent, persuasive, and ultimately deluded about his ability to defeat the law.


"Jordan was a very smart individual," Sorkin said. "He was a tremendous salesman and was able to influence all these young and inexperienced and naive people."


Greg Coleman, the FBI agent who investigated the case, said he saw Stratton Oakmont, Belfort's firm, as encased in a suit of armor and himself "as a parasite trying to get into that suit of armor."


"It was all about blatant fraud, pushing stock to unsuspecting investors to get people to buy stuff that wasn't suitable for them and didn't have any value," said Joel Cohen, who prosecuted Belfort as a assistant U.S. Attorney in Brooklyn and is now a partner Gibson, Dunn & Crutcher.


Although Stratton and Belfort made their riches through fraud, the criminal investigation that brought them down was over money laundering.


Sorkin said that Belfort came to him 1991, two days after the Wall Street Journal reported that the Securities and Exchange Commission was investigating Stratton Oakmont. "My first reaction was that we had to keep this from going criminal," Sorkin said. They ended up reaching a deal with SEC that left Belfort with "tens of millions of dollars." He could have "disappeared into the sunset," Sorkin said.


That didn't happen.


Instead, Stratton tried to pay Belfort $180 million for a non-compete agreement despite him being banned from the industry. Then Belfort and his partner Danny Porush (played by Jonah Hill), started laundering money out of the country with their friends and family, including Jordan's wife's aunt. "They were so drugged up I'm not sure they understood anything at this point," Sorkin said.


"The big break for me is when Jordan went offshore," said Coleman. "What Belfort was ultimately charged and prosecuted for had nothing to do with five years of pump and dumps."


Once they were able to indict Belfort and Porush, prosecutors threatened to indict Belfort's wife Nadine the next day to try to get him to cooperate. "I think that's outrageous behavior that no prosecutor should engage in," Cohen explained, speaking this time from his role as a securities lawyer, "but it did tend to lubricate his decision to cooperate rather quickly."


Even arresting someone as gaudily wealthy as Belfort presented its own unique challenges. Belfort's bail was set at $10 million, which he paid with $7 million of his wife's jewels and $3 million of cash that had to be hauled over to a Brooklyn courthouse in a Brink's truck.


Belfort would ultimately serve only 22 months because he cooperated with prosecutors in taking down other corrupt brokers. And he and Porush agreed quickly — "Both of their lawyers conveyed a few days after they were arrested that they were quite eager to cooperate," Cohen said.


And they needed both of them to cooperate, but to do so separately without each other's knowledge. "You can't call guys like Belfort or Porush to the stand without being absolutely certain they're telling the truth," Cohen said. "They woke up every day and told lies. That's what they did for a living."


Preet Bharara, the U.S. Attorney in the Southern District of New York, ended the evening with a speech where he concluded, "Is there any hope? Do the bad guys always win or did they get a movie deal and be played by Leonardo DiCaprio?"




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Wednesday, January 29, 2014

Saving the Constitution from Lawyers : How Legal Training and Law Reviews…

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How Adidas Seeks To Make Teens Feel Famous And Cool

The brand’s marketing incorporates the ideas that most American high schoolers believe they will be famous someday and that they use brands to build their identity.



Michael Dalder / Reuters / Reuters


Not only do most American teens want to be famous — but most of them believe that someday, Adidas U.S.'s director of brand communications and digital marketing, Chris Murphy, said Wednesday.


That insight, from youth researcher the Cassandra Report, helps inform the retailer's marketing to American high schoolers, who view brands as means to fame among their peers, Murphy said today at Women's Wear Daily's digital forum in Los Angeles. Brands are a major component of high schoolers' identity, right up there with family, religion and the kind of phone they use, he said.


Here's one way Adidas taps into that: in 2012, the brand invited a high schooler to Orlando to review its Adizero Rose 2.5 basketball shoes, named for basketball player Derrick Rose. Halfway through the video, Rose surprises the teen, who's stunned by the appearance.


Adidas frequently conducts these kinds of visits and surprises, which reach a smaller audience than say, buying ads in a print magazine, but it makes for a stickier consumer who "grows through life loving you," Murphy said. Not only that, but high schoolers are way more inclined to tell their friends about such experiences, which is by far the most powerful advertising vehicle for the age group.


So it's worth it for Adidas focus on the less measurable "return on relationship" versus the more traditional "return on investment," Murphy said.


In another instance, Adidas's creative team will make a graphic for a specific high school football team, like California's Pac-5, along with a good-luck note, he said. It's worth it if it goes to just 60 kids, with 300 to 400 Twitter followers each, and gets retweeted 30 to 40 times, he said.


"We do a lot of this high-maintenance marketing, and it's expensive and we only talk to a small amount of kids in the broad spectrum by doing that," he said. "But they stick with us and we keep them year after year and that group grows."


"It's rewarding people who are more likely to be our advocate because they're already in our systems or we know they're prone to be advocates," Murphy said. And, importantly, "you can watch the social flow into commerce."




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Facebook Is Now A Very Profitable Mobile Advertising Company

More than half of Facebook’s advertising revenue comes from mobile advertising. And it’s a big reason the company beat earnings expectations today.



Jonathan Ernst / Reuters


When Facebook went public in May 2012, its mobile advertising business didn't even exist — but as of today, it now accounts for more than half of the company's advertising revenue.


Facebook reported a blowout fourth quarter, bringing in $2.6 billion in revenue, along with earnings of 31 cents per share. Analysts were expecting revenue of about $2.4 billion and earnings of 27 cents a share. Not surprisingly, Facebook's shares are up more than 6% in extended trading.


Much of this comes on the strength of Facebook's new mobile advertising products — particularly News Feed advertising, as well as the surprising success of Facebook's mobile app install advertising business. In less than two years, Facebook has transitioned to becoming predominantly a mobile advertising company — and that share continues to grow.


Last quarter, Facebook CFO David Ebersman said the company did not plan on dramatically increasing the number of ads in Facebook's News Feed, a statement that sent Facebook's shares tanking on concerns that it wouldn't find ways to grow its advertising revenue. Despite that, Facebook's advertising revenue continues to grow and beat expectations, and Facebook still has a number of other keys to turn in terms of its advertising business — including the potential behind advertising in Instagram.


Facebook's user base also continues to grow, as the company now has 1.23 billion monthly active users — 757 million of whom check the site in some form each day. Of those daily active users, 556 million are checking every day on a mobile device.




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Tuesday, January 28, 2014

San Francisco Drug Lawyer.com Legal Website Law Bail Jail Help Criminal Defense

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Yahoo Burned Through $1 Billion In Cash Last Year

The company spent a lot of money buying companies and issuing a dividend to Yahoo shareholders. But its advertising business is still struggling, sending its stock down 5% today on its fourth-quarter earnings report.



Denis Balibouse / Reuters


Yahoo's fourth-quarter and full-year results are in — and the company still hasn't turned around its display advertising business.


That's despite the fact that Yahoo's cash, cash equivalents, and investments in marketable securities dropped by $1 billion between the end of 2012 and the end of 2013. While Yahoo is still making money — it beat expectations on earnings — and also raising another $1 billion, it is spending a lot of money on buying startups like Tumblr and on its share buyback program, which was just raised to $5 billion.


Despite spending a small fortune on acquiring companies last year, Yahoo's display advertising business fell 6% year-over-year, excluding traffic acquisition costs. That's a core business for Yahoo that it is going to have to turn around once its post-Alibaba life begins.


Yahoo still has time to turn around its business, which it will likely continue to do by purchasing startups and finding an identity that will continue to exist once its share of Alibaba — one of the most hotly-anticipated IPOs — dries up. Its share of Alibaba is still demonstrating basically continuing to grow very quickly.



But while Yahoo's stock has continued to perform well on the strength of its Alibaba stake, the company's shares are still down more than 3% today after the earnings report.




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Will Kleiner Perkins Drop The "Perkins" From Its Name?

So far the firm isn’t saying.



Via Bloomberg TV


Kleiner Perkins Caufield & Byers is staying silent about whether or not it plans to remove the name Tom Perkins, one of his founding partners, from the firm's after the fallout from his controversial letter to the editor in The Wall Street Journal comparing criticism of the rich to Nazi Germany and a subsequent even more bizarre interview with Bloomberg TV yesterday.


When asked directly whether Kleiner Perkins Caufield & Byers would be removing or is considering removing Perkins' name, a representative said the firm had no comment. Perkins co-founded the iconic Silicon Valley venture capital firm in 1972 but is no longer actively involved with the firm, retaining only a symbolic "Partner Emeritus" title. Kleiner Perkins invested at early stages in Amazon, Google, Genentech, and many other technology companies.


In a tweet sent over the weekend, the firm seemed to distance itself from Perkins, tweeting that they "were shocked by his views" and that he "has not been involved in KPCB in years."


Perkins responded to KPCB during his Bloomberg TV interview yesterday, saying: "They made quite a point of my not being involved for some years. As I've distanced myself from the firm, there's been a corresponding decline in the firm." He also said he wouldn't be surprised if the firm formally removed his name. "They didn't need to say anything, but they chose, I guess, to throw me under the bus," Perkins said. "I was presenting a warning, and I don't think they got that."


In the Bloomberg TV interview, Perkins apologized for his reference to the Kristallnacht, the Nazi-organized program against German Jews in 1938 that foreshadowed the Holocaust. But beyond that, he didn't apologize for his position that he was concerned about the increasing demonization of the rich in the United States.




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Winklevoss Twins Warn Of Restrictive Regulation One Day After Bitcoin Startup Founder's Arrest

“Overregulation could cripple Bitcoin’s development,” Cameron Winklevoss said Tuesday. New York’s financial regulator said there needs to be “guardrails for this industry to help root out money laundering and other misconduct.”



Lucas Jackson / Reuters


Cameron Winklevoss today told New York state financial regulators that "overregulation could cripple Bitcoin's development" and that "existing federal regulations are sufficient" for the fast-growing virtual currency's commercial ecosystem.


His comments come just one day after the founder of a Bitcoin startup in which Cameron and his brother Tyler invested was arrested for allegedly facilitating money laundering on the now-defunct online marketplace Silk Road. Charlie Shrem, the founder of BitInstant, a service that allowed customers to convert dollars to Bitcoin was arrested by the FBI on money laundering charges yesterday at JFK airport in New York. Prosecutors allege that Shrem worked with Robert Faiella, who was known as BTCKing. The 24 year old was one of the most prominent and fervent Bitcoin entrepreneurs.


Winklevoss Capital Management, the investment firm founded by Cameron and Tyler, quickly put out a statement distancing themselves from Shrem, saying "We were passive investors in BitInstant and will do everything we can to help law enforcement officials." The Winklevoss twins, who own tens of millions worth of Bitcoin and invest in Bitcoin startups, invested $1.5 million in BitInstant in 2012.


Today, the brothers appeared alongside Fred Wilson, a partner at Union Square Capital, Jeremy Liew, a partner at Lightspeed Venture Partners, and SecondMarket founder and Bitcoin investor Jeremy Siebert in a hearing convened by the New York State Department of Financial Services, New York's financial and insurance regulator.


At the hearing, Tyler characterized Shrem's arrest as a "speed bump" for the Bitcoin industry and said that "Bitcoin is a terrible place for criminals" because all transactions are logged in the Bitcoin network. For his part, Cameron added that heavy regulations could scare off investors, "the culture of investors is not to put tens of millions into startups just to see if they are compliant."


Benjamin Lawsky, the head of the Department of Financial Services, said in prepared remarks that Shrem's arrest was a reminder for why regulators have to "put in place guardrails for this industry to help root out money laundering and other misconduct." He also spoke optimistically about Bitcoin and other virtual currencies' potential, saying that they could have a "profound impact on the future of payments technology and the financial system."


He also said that the agency was considering issuing a "BitLicense" for virtual currencies in New York state.


Wilson, whose Union Square Ventures invested in Coinbase, a company that helps businesses and individuals store and transmit bitcoins, was skeptical of applying traditional money-laundering and banking laws to Bitcoin, saying that small Bitcoin startups "should not be expected to do the exact same things JPMorgan Chase does."

Wilson was even skeptical of the type of compliance traditional banks have to do to confirm that customers are who they say they are, noting how long it took him to set up a bank account.


"I sympathize with Jamie Dimon, he runs an over-regulated company," Wilson said. To which Lawsky replied, "I may not share that sympathy."


The DFS's involvement with virtual currency started in August when it issued 22 subpoenas to digital currency companies and venture capital firms in an effort to gather more information about their businesses and see whether virtual currencies required new regulations.


Lawsky, who once threatened to revoke the license of British bank Standard Chartered over allegedly hiding transactions it had done with businesses and individuals in Iran, reiterated his commitment to enforcing money laundering laws even if the investors in front of him wouldn't be thrilled.


"Money laundering is the facilitation of all kinds of horrific crimes that everyone in this room don't want to see happen," Lawsky said. "If the choice of the regulator is to allow money laundering on one hand or to facilitate innovation on the other, we're always going to squelch money laundering."




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Herbalife's Roller Coaster Week

A series of regulatory investigations and an analyst defecting has made for quite the wild ride for Herbalife stock.



Shannon Stapleton / Reuters / Reuters


It's been quite the week for Herbalife, the controversial nutrition and supplement company that that's had the hedge fund world divided for more than a year. A series of regulatory inquiries and personnel changes have sent the stock on a roller coaster ride that started Thursday with a nosedive after Massachusetts senator Ed Markey called for Federal Trade Commission and Securities and Exchange Commission inquiries into a possible pyramid scheme at the southern California-based company.


It's been uphill and back downhill from there. On Monday, after opening at around $60 per share, Herbalife shares rallied all the way back up to nearly $66 each on the heels of an announcement that a top analyst of the company was leaving his role at D.A. Davidson to join Post Holdings, a major shareholder of Herbalife.


But the high wouldn't last long. On Tuesday, a top regulator in the Canadian government announced its own inquiry into Herbalife, likely to the delight of Bill Ackman, who has been shorting the stock for more than a year, only to have the company push back on him with its own campaign to persuade investors in his Pershing Square Capital hedge fund to pull their money.


The Canadian Competition Bureau's investigation sent Herbalife's stock in a downward spiral yet again, and it even neared the $60 mark for the second time in two days.


Who knows what tomorrow will bring?




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Abercrombie Adds Directors, Making Strides Toward Replacing CEO Mike Jeffries

The company announced that Jeffries, CEO since 1992, will no longer be the company’s chairman and that it’s adding three new directors with retail experience to its board.



Via facebook.com


Abercrombie & Fitch is adding three new people to its board of directors and stripping Chief Executive Officer Mike Jeffries of his chairman title, as the teen retailer works to quell Wall Street's cries to oust the longtime CEO.


The additions will bring much-needed retail experience to Abercrombie, which will expand its board to 12 members. The nine existing directors, with the exception of Jeffries, are largely prominent Columbus, Ohio, locals who lack retail backgrounds. Among them: two-time Heisman Trophy winner Archie Griffin and Elizabeth Lee, the headmistress of a local uniforms-required private school. Separating the chairman and CEO roles will also loosen Jeffries' grip on the company.


The retailer also terminated a "shareholder rights plan," which "should make a buyout of the company easier and possibly more likely," Richard Jaffe, an analyst at Stifel, said in a note today. Abercrombie's shares jumped 6.2% today to $36.76. The stock plummeted 31% last year, which resulted in its removal from the S&P 500.


Abercrombie's new nonexecutive chairman will be Arthur Martinez, the teen retailer said today. He is currently on the boards of American International Group, Fifth & Pacific, International Flavors & Fragrances, and HSN, though he's notified two of those companies that he will not stand for reelection at upcoming annual meetings. Martinez is a former CEO and chairman of Sears Roebuck and one-time Saks executive. The second addition, Terry Burman, is the chairman of Zale and the former CEO of Signet Jewelers. And thirdly, Charles Perrin is a director at Campbell Soup, a former chairman and CEO of Avon Products and a former director at Eastern Mountain Sports.


Abercrombie rankled shareholders last month after extending Jeffries' employment contract right after an activist investor wrote a nine-page open letter blaming the CEO for the retailer's free-falling stock price, dismal same-store sales and off-trend fashions. The 69-year-old, who has led Abercrombie since 1992 and is considered its modern-day founder, has been a subject of controversy in the past two years, amid revelations of corporate misconduct, including company jet antics and the executive-level involvement of his partner, who is actually not an Abercrombie employee.


Abercrombie, when announcing its new agreement with Jeffries, also said that it planned to commence a search for presidents for its namesake and Hollister brands, positioning the new hires as potential successors to Jeffries in the future.


The company's lead independent director, Craig Stapleton, claimed in October 2012 that "the talent pool for successors, not only of the CEO but also other key executives, is deep," a statement that is at odds with Abercrombie's plan to hire brand presidents.


Stapleton, according to today's announcement, will no longer serve as lead independent director, though he will remain the head of the company's nominating and board governance committee.


"I have strongly supported the significant corporate governance enhancements the company has made in the past few years, and I am thrilled by the announcements we are making today," Jeffries said in today's statement.


Stapleton said: "These significant changes demonstrate the company's ongoing commitment to being a leader in corporate governance best practices and responding to shareholder concerns. The company will continue to review additional corporate governance enhancements as part of this commitment."




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Former Politico Andrei Cherny Teases New Financial Company With "1984" Homage

Andrei Cherny goes from the White House to Arizona politics to a new financial and technology company.


Andrei Cherny was the youngest White House speechwriter of all time, the founder of the political journal Democracy, a Naval Reserve intelligence officer, the author of two books, a candidate for political office in Arizona, a prosecutor, and most recently the chairman of the Arizona Democratic Party. Now he's doing something new: Aspiration.


While the 38 year old Cherny is mum on the details on what exactly Aspiration is, he told BuzzFeed that the project is "at the intersection of finance and technology, bringing the best of both those worlds together."


"What Apple did in "1984" was democratize the world of personal computers," Cherny said in explaining why Aspiration's first public message was an homage to Apple's classic Super Bowl ad.


Cherny said Aspiration will launch in the spring and is "going to be a new a approach to investing, one that combines both profit and philanthropy and is a lot more people centered than the Wall Street approach." The text in Aspiration's video is a mashup of Gordon Gekko's famous monologue from Wall Street and a 2005 memo written by Citi analysts on "Plutonomy."


Aspiration also has a website where it is described as a "revolution in the world of investing," but only includes a sign-up to learn more.




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Monday, January 27, 2014

The 10 Most Jaw-Dropping Comments From An Out-Of-Touch Millionaire's Bloomberg TV Interview

Tom Perkins is not exactly sorry for what he said.



Bloomberg West / Via bloomberg.com


Tom Perkins, a founding partner of venture capital firm Kleiner Perkins Caufield & Byers, over the weekend compared the current wave of ostracism towards the incredibly wealthy to attacks on Jewish people by the Nazis during World War II in a letter to the editor in The Wall Street Journal.


This, naturally, caused an Internet uproar. So today Perkins went on Bloomberg TV to apologize. Except he didn't apologize at all — other than saying he regretted referring to the Kristallnacht, the the Nazi-organized pogrom against German Jews in 1938 that foreshadowed the Holocaust.


Aside from that, he basically reiterated instead of apologized for his position. And things went further south when he began talking about his material position, his old firm and even one of his former partners, now deceased, who would have agreed with his views had he been alive.


Here are some choice selections from the interview, which was aired on Bloomberg West.


"Let the rich do what the rich do, which is get richer."


"Let the rich do what the rich do, which is get richer."


Via giphy.com


"My late partner Eugene Kleiner fled Hitler from Austria and fought in the US Army... I believe that he would have understood my Wall Street Journal letter and would have agreed with the warning."


"My late partner Eugene Kleiner fled Hitler from Austria and fought in the US Army... I believe that he would have understood my Wall Street Journal letter and would have agreed with the warning."


Via giphy.com




View Entire List ›




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Venture Capitalist TV Interview Over Controversial Nazi Remarks Goes Off The Rails

Tom Perkins went on Bloomberg TV to apologize for comparing criticism of the wealthy to the persecution of Jews in Nazi Germany. Things quickly headed south.



Via Bloomberg TV


In a 40-minute-long live interview with Emily Chang on Bloomberg TV, venture capitalist Tom Perkins apologized for comparing what he described as the "demonization" of the rich with Kristallnacht, the Nazi-organized pogrom against German Jews in 1938 that foreshadowed the Holocaust. He made the comparison in a letter to the Wall Street Journal published on Friday.


Perkins did not, however, back down one bit from his core message that what he saw as demonization of the rich could mean disaster for the country. "It was a terrible use of the word I chose," he said. "My point was that when you start to use hatred against a minority, it can get out of control."


"I don't feel personally threatened, but I think a very important part of America, the creative 1 percent, are threatened," he said. "I think rich as a class are threatened by higher taxes and higher regulation."


Perkins co-founded the iconic Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers in 1972 but is no longer involved with the company. Kleiner Perkins invested at early stages in Amazon, Google, Genentech, and many other technology companies.


In the letter to the Wall Street Journal , Perkins wrote about what he saw as the "parallels of fascist Nazi Germany to its war on its 'one percent,' namely its Jews, to the progressive war on the American one percent, namely the 'rich.'"


Perkins described the rise of discontent with the technology industry in the Bay Area, the Occupy movement, protests of Google's commuter buses for employees who live in San Francisco, and criticism of his ex-wife, the author Danielle Steel, as "a very dangerous drift in our American thinking." He wrote, "Kristallnacht was unthinkable in 1930; is its descendent "progressive" radicalism unthinkable now?"


Perkins' comments were widely condemned and the firm he help found, Kleiner Perkins Caufield & Byers, distanced itself from him, tweeting, "Tom Perkins has not been involved in KPCB in years. We were shocked by his views expressed today in the WSJ and do not agree."


Perkins responded to KPCB in today's interview: "They made quite a point of my not being involved for some years. As I've distanced myself from the firm, there's been a corresponding decline in the firm." He also said he wouldn't be surprised if the firm formally removed his name. "They didn't need to say anything, but they chose, I guess, to throw me under the bus," Perkins said. "I was presenting a warning, and I don't think they got that."


Perkins also said that his partner in founding Kleiner Perkins, Eugene Kleiner, who fled Austria before World War II and died in 2003 would have agreed with the core message of his letter. "I think he would have throughly understood my message and approved of it," Perkins told Emily Chang.


Venture capitalist Marc Andreeson, partner at Andreeson Horowitz, tweeted in response to Perkins letter, "I wish to express my extreme displeasure with Tom Perkins. His positions just go to prove that he is the leading asshole in the state." He also said that Perkins was "irrelevant" and "has not been VC for over 20 years, mostly uninvolved in tech industry for long time." Perkins said that "considering he [Andreeson] doesn't know me and I don't know him, he's not entitled to that opinion."


Marc Suster, a venture capitalist at Upfront Partners, tweeted that Perkins was "tone deaf," a "baby," and the "definition of an asshole."


Perkins defended his letter to Bloomberg over the weekend, saying, "In the Nazi era it was racial demonization, now it is class demonization."


Perkins also addressed the original impetus for writing the letter: protestors associated with the Occupy movement breaking the glass at a Wells Fargo branch and San Francisco auto dealers. He also said that the San Francisco Chronicle's criticism of best-selling author Danielle Steel, his ex-wife, for having what the newspaper described as "comically off putting hedges" in front of her San Francisco home. In his original letter, he described the Chronicle's criticism of Steel as "libelous and cruel."


In today's interview, he said Steel was "the number-one author in the world" and described himself as a "literal knight of the Kingdom of Norway" in coming to her defense.


He also discussed his own personal wealth. He said he was a multimillionaire, not a billionaire, but noted the could buy "a six pack of Rolexes" for the value of his Richard Mille watch. He said he hadn't bought the watch, but that the yacht-building company Perini gave it to him after he had purchased a boat from them. His Perini-built boat, The Maltese Falcon, is one of the largest yachts in the world. He sold it in 2009 for about $90 million. Richard Mille watches can be bought online for over $250,000.


When asked if there was a bubble in Silicon Valley, he replied, "Yeah, I think there's something to that."




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3 Things That Could Negatively Impact The U.S. Economy This Year

According to the assembled financial minds who spoke with BuzzFeed on the sidelines of the World Economic Forum in Davos, Switzerland, last week.



Ruben Sprich / Reuters


DAVOS, Switzerland — Regulation, the unemployment rate, and global competition are among the major concerns that could impede the performance of the U.S. economy this year.


That's according to some of the assembled financial minds at the World Economic Forum in Davos, Switzerland, last week.


"The biggest concern is regulatory antagonism by the government that would affect the most successful economic growth in recent years," said Kenneth Hersh, Chief Executive of oil-focused private equity firm NGP Energy Capital Management. "Things like targeted tax increases would choke the economic engine of our country."


Bill Browder, Chief Executive of the hedge fund Hermitage Capital Management, expressed concern about Federal Reserve's quantitative easing policy. "Every asset price is being artificially inflated by policy makers. With interest rates around zero, the moment that stops, valuations will rise. The Federal Reserve has no idea what they're going to do. When this artificial thing gets taken away, everything will drop."


For others, such as Joe Echevarria, Chief Executive of accounting powerhouse Deloitte, the most pressing concern was having our growth outpaced by other nations, in turn, hindering our ability to compete on the world economic stage.


"Most pressing is foreign policy," Echevarria said. "It always has the ability to take things off track. We make it harder on ourselves because the rest of the world is trying to be larger. The U.S. is the most productive economy, but this hinders our ability to compete. We should recognize that we need to compete globally."


Ibrahim Abdulaziz Al-Assaf, Saudi Arabia's minister of finance, said: "The challenge is the growth and raising the employment by reshaping and retraining people. The unemployment is decreasing, but it's because people are leaving the workforce and the view from outside the U.S. is that people need to be trained in new kinds of

industries."


From a markets perspective, the U.S. government needs to get a handle on issues of national security, particularly data breaches, said Scott Cutler, head of global listings at the New York Stock Exchange. Cutler specifically cited "the Snowden event," to use his words, and its subsequent impact on U.S. companies to conduct business in overseas markets.


"For any multi-nationals doing business abroad, the idea of data safety and security is a huge issue, and that issue is coming up in purchasing decisions and investments," he said.




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Wall Street Says Apple Isn't Selling Enough iPhones

The company sold 51 million iPhones during the holiday quarter. But that still wasn’t enough, sending the stock down 5% in extended trading.



Robert Galbraith / Reuters


Two phones, it seems, is still not enough for Apple.


The company sold 51 million iPhones during the holiday quarter, compared to 47.8 million phones in the same quarter a year earlier, according to its earnings release today. However, analysts were expecting the company to sell around 55 million iPhones.


It comes at a time when Apple is said to be considering not only releasing phones with bigger screens, but also ditching the plastic backing of the cheaper iPhone 5c. The iPhone 5c is widely considered to not be selling as well as the iPhone 5S.


After the earnings report, shares of Apple were down 5%, which should give activist shareholder Carl Icahn even more ammo to pressure Apple into doing something with its large cash pile.


Apple reported revenue of $57.6 billion, up from $54.5 billion in the same quarter a year earlier. It brought in a net profit of $13.1 billion, unchanged from the same quarter a year earlier.


During the same quarter, Apple sold 26 million iPads, up from 22.9 million iPads the year earlier.


The company's guidance for the next quarter was also soft, coming in at between $42 billion and $44 billion. While Apple has been expanding rapidly in China, including signing a long-sought after deal with one of its largest providers China Mobile, it would represent the possibility of a year-over year decline in revenue. Apple reported $43.6 billion in revenue in the second quarter last year.




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One Of Financial Industry's Harshest Critics Joins Board Of Spain's Biggest Bank

Sheila Bair, the former FDIC chairman and a fierce critic of the financial industry and its regulators, has joined the board of Santander as an independent director. She said the board seat “will provide yet another avenue for continuing my commitment to reforming the global financial system.”



Sheila Bair and Santander executive chairman Emilio Botín.


Via Santander


Sheila Bair, who was FDIC chairman from 2006 and 2011 and often butted heads with other financial regulators and the Obama administration as a result of her advocacy for more strict treatment of troubled megabanks, has joined the Spain's biggest bank, Banco Santander, as an independent director.


In a statement, the bank said that Bair "will make a significant contribution, due to her international experience and her knowledge of the U.S financial market." She replaces British businessman Lord Burns on the bank's board and her appointment would have to be approved by the bank's shareholders.


Santander has a in ten other countries, including the U.S., over 14,000 branches, and assets of $1.78 trillion.


Santander is growing its footprint in the U.S. It recently took its auto-lending unit, Santander Consumer, public and made $1 billion by selling 4% of its stake to investors and still maintains 61% ownership of the unit. It's also making a big retail push. It acquired Sovereign Bank in 2009, with over 700 branches mainly in the northeast and rebranded it as Santander Bank in October and is insured and regulated by the FDIC.


Since Bair left the FDIC, she has criticized regulators for working for the companies they regulate. She even proposed a "lifetime ban on regulators working for financial institutions they have regualated." She told the The New York Times that a ban "would change the regulatory mind-set."


Bair also serves as the chair of the Systemic Risk Council, a group of former regulators and legal experts that advocates for stricter financial regulation. Even with her new appointment, she will continue to serve in this role.


In a statement, Bair said that she was "pleased to be appointed as an independent director to the board" and that her role would be to "identify risks and strengthen the group's operations."


Financial reform advocates on the whole don't seem that concerned about Bair's move. Michael Smallberg, who works at the Project on Government Oversight and authored a report on former Securities and Exchange Commission employees lobbying their former colleageues on behalf of the financial industry, told BuzzFeed, "We're generally wary of big banks deploying former regulators to weaken government regulations or enforcement actions. I don't worry as much about someone who serves as an independent director and isn't trying to shape government policies on the bank's behalf."


With Bair at Santander, former heads of four federal financial regulators, FDIC; Office of the Comptroller of the Currency with regulates national banks; the Securities and Exchange Commission, and the Commodities Future Trading Commission work for the financial industry in some respect.


Eugene Ludwig, who was head of the OCC from 1993 to 1998, founded Promontoy Financial Group, a consulting company that works with financial institutions on regulatory issues. Mary Schapiro, who ran the SEC from 2009 to 2012, is also at Promontory, while Walter Lukken, who was acting chairman of the CFTC from 2007 to 2009, is now president and CEO of the Futures Industry Association, the trade group for the futures industry, which Lukken regulated at the CFTC. "It's unusual for someone at Bair's level not to cash in," said William Black, a former bank regulator who is now a law professor at the University of Missouri-Kansas City.


"I have to admit that when I first heard she went to Santander, I said 'Oh no, don't do it,'" Bartlett Naylor of Public Citizen, a group that advocates for stricter rules on Wall Street, told BuzzFeed.


Naylor, however, said he was reassured by her role as an indepedent director on Santander's board: "She's not the employee of management, she's the overseer of management, the revolving door is if she became a piad lobbyist, a paid ambassador in seeking permissions and exemptions, and that's not my understanding of the role."


This isn't the first time Bair has interacted with Santander or its executive chairman, Emilio Botín. In her memoir Bull by the Horns Bair wrote that in 2010 she had asked Botín to bid for a failed Puerto Rican bank. Santander was the only one of five bidders that didn't already have a banking interest in Puerto Rico, and Bair wrote that she asked Botín to bid to keep the other banks honest and "achieve better pricing" for the FDIC in resolving the bank.


Botín "personally led the charge to appoint Ms. Bair" the Wall Street Journal reported. While Santander would not disclose Bair's compensation, Burns was paid €106,000, about $145,000, in 2012 for his service on the board, according to data compiled by Bloomberg.


She also praised Santander's management structure, with operations in each country being run as separate legal entites in each country; she wrote that this structure "has not hurt their profitably and makes them much more resolvable."


"I hope that my service on the Santander board will provide yet another avenue for continuing my commitment to reforming the global financial system and contributing to a safer, more responsible, and customer oriented banking system," Bair said in a statement.




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What It's Like To Be A Woman At The Old Boys Economic Forum

Davos proves an uncomfortable place for women, who make up a scant 15% of the World Economic Forum’s attendees. “You have advantages.”



Ruben Sprich / Reuters


DAVOS, Switzerland — Hanna Aase, the Norwegian-born founder of a Silicon Valley video profile platform called Wonderloop, is dressing differently in Davos this year.


"I think about what I wear more because there are a lot of prostitutes in Davos, especially at the Piano Bar," Aase said, referencing the popular late-night hot spot during the World Economic Forum. "I don't want to be mistaken for a prostitute."


Davos is the singular gathering place of the global power elite but as the world changes — and grows more focused on women's rights and roles — the World Economic Forum and the older men who dominate it are struggling to adjust. And for the women in attendance at Davos, who make up just 15% of the more than 2,600 guests, misogyny is as much a part of the experience as politics and economics. If you're not being asked how you got here, you're constantly being stared up and down. By CEOs, by hedge fund managers, by finance ministers and embassy heads. Turn your back to exit a conversation and if you look back just quickly enough, you'll find your posterior aesthetic being carefully dissected by the man who just asked you for your business card — even if he is the CEO of a major bank.


"You see how men sometimes look at women," said one television reporter from the Middle East. "They say how pretty a woman is, or, what is she doing here? Does she deserve to be here or not? Who pushed her to come in?"


It is not uncommon for men to offer women advice about how to get the most out of Davos in a way that is tinged with implied or overt sexism.


"You have advantages," says one male guest of the chances of connecting with an important source.


"OK, I will, she's pretty," comes the reply from a hedge fund manager who was told by another he should speak to you.


The organizers of the World Economic Forum say that they aren't to blame: the makeup of the guest list — 85% male, 15% female — broadly reflects how power and wealth are distributed globally. It remains an open question as to whether it also accurately reflects, or rather uniquely sharpens, the attitude towards women in the male-dominated worlds of government and finance.


Another woman, the spouse of a conference delegate, said: "The vibe is a little like an old boys' club. There's a lot of money and booze. It's kind of like Las Vegas, it's a spectacle. It sometimes feels like a parody of itself."



Most women attending the forum are there on an official basis — the conference's organizers, in a bid to encourage female participation, developed a quota system. They told "strategic partners," a sub-group that includes some of the world's biggest companies, that if they included a woman in their four-person delegation, they would get an extra ticket. But that doesn't necessarily up the proportion of women, Adrian Monck, head of communications for the forum, acknowledged.


"It's aimed at getting women participating principally," he said.



Nor is everyone a fan of the system. "There was an implicit thing, like with any quota, a negative effect — 'Oh, you're just this token, the token woman,'" said another woman at the forum who asked not to be named.


"They always try to put a question mark and see, how did she manage to come," said the Middle East TV reporter of male skepticism about the credentials of the conference's female guests.


The forum is well aware of the gender discrepancy and does try to address it — Shinzo Abe, the Japanese prime minister, spoke on gender this year, for instance. A panel session on "gender-driven growth," featuring Facebook's Sheryl Sandberg and International Monetary Fund Chief Christine Lagarde, was filled to capacity.


"We have to move the needle on a global policy level," said Monck.


Some female guests also see their minority status as an advantage rather than a disadvantage. "Men like to be around women, period. They do, all the time. So in some ways I find it an advantage," one of them told BuzzFeed.



"Sometimes I think, for women, we have to understand we have tremendous power but it's not the same as a man's power and in some ways it's much more potent," this guest continued. "The fact of the matter is, as a general rule of thumb, men would rather sit and talk to a woman than talk to a man. You don't have to be particularly cute or sexual it's just, if he's straight, the nature of the beast is, he'd rather have a woman chat him up than some guy."


Indeed, to some, more striking than the dearth of women was the lack of non-white people.



"Because I'm a black woman, I don't know that I think about [the dearth of women] so much when I'm in a situation with a lot of men. For me it definitely hit me that I'd probably be one of very few black people," said Dana White, director of strategic communications at Renault-Nissan. "It did strike me more. The first day, Monday, oh that's two black people I've seen, oh that's four. I started counting."



"I think it's just very indicative of the fact that in the world money and power still rest mainly in the hands of men, white men, despite the fact that they're the minority in the world and that's the legacy," she said.




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