Paddy Hirsch is a Senior Editor at Marketplace. He is the author of the book Man vs Markets, Economics Explained, Pure and Simple, and he is the creator and host of Marketplace Whiteboard, a video explainer of financial and economic terms.
Hirsch joined Marketplace in 2007, just as the credit crunch that preceded the 2008 financial crisis began to take hold. As editor of the New York Bureau and the entrepreneurship desk, he spearheaded Marketplace’s financial markets coverage throughout the crisis and as the economy fell into recession. He was awarded a Knight Fellowship at Stanford University in 2010, and he returned to Marketplace in July of 2011, when he was appointed Senior Producer of Marketplace Money. He published his first book, Man vs Markets, in August 2012.
Hirsch got his start in journalism with an internship at the BBC in Glasgow, Scotland. He became a field producer for CNBC in Hong Kong and later was a consultant to the Open Broadcast Network in Bosnia. He has been an editor for Direct Capital Markets, Institutional Investor Newsletters, Standard & Poor’s, and the Vietnam Economic Times. Prior to becoming a journalist, he served as an officer in the Royal Marines.
Hirsch attended Campbell College in Belfast and received a bachelor’s degree in French and International Studies from the University of Warwick. He is a Knight Fellow and was a Webby honoree in 2009.
Features by Paddy Hirsch
JP Morgan Asset Management has released a thumping great 42-page "Guide to Retirement", which is both interesting and valuable, but reads somewhat like every other document you ever got from a bank.
That said, it does have some very colorful and useful illustrations.
Including this one, which everyone, regardless of age, should stare at until it becomes part of thier very essence. It's a chart showing the value of saving, saving early, saving for a long tme and, most importantly, not touching your savings at any point. It shows, in other words, the value of compounding. To understand how compounding works, you could read and digest the entire JPM document, or you could save yourself some time and check out this 90-second explainer.
News that the Federal Trade Commission is poking its nose into the company Herbalife probably had investor Bill Ackman jumping around on his desk, with his fists clenched and his eyes squeezed shut, going "Yesssssss!"
Ackman is a big-time investor who has made a billion-dollar bet (actually $1.2 billion) against Herbalife. He's like a gambler at a race track putting a huge chunk of money on a horse to not finish the race. Ackman's argument is that the horse (Herbalife) is such a busted up old nag that it will drop dead before it reaches the finish line. Herbalife, he says, is a pyramid scheme and a parasitic business model that simply can't sustain itself. The company, he argues, will eventually drop dead, and anyone who has invested in it will lose all their money.
Ackman's opponents say that he's more like a gambler who has made a huge bet, and is determined to make it pay by bad-mouthing the horse. Ackman, they say, has been publicly smearing the company for the last two years in order to drive the stock down.
Unfortunately, things haven't gone quite so smoothly. Instead of going down, the stock's price has risen. By more than 50 percent. Ackman is now, in trader parlance, "out of the money," which means if Ackman had to return the shares he owes today, he'd end up paying a lot more for them than he got when he sold them way back when.
And that's why the FTC decision is such a big deal for Ackman. He's hoping the regulators will drill into Herbalife and vindicate his claims that it is, in fact, a pyramid scheme. If that happens, investors will likely run for the hills, the stock will almost certainly crash, and Ackman will make out like a bandit. But if the FTC says Herbalife is fine, then Ackman could find himself very badly needing a drink.
Full disclosure: my Dad used to sell Herbalife products. He had a big sign on his car saying "Lose Weight Now - Ask Me How!" (It was super embarrassing.)
Bill Gates is "The Richest Man in the World." Again.
In its latest list, Forbes pegs his net worth at $76 billion. Net worth is just another way of saying wealth, where wealth = assets - debt.
Debt is pretty simple – it’s what you owe. Assets, meanwhile, are what you own.
Assets can be a bit confusing, though, because sometimes debt can be an asset.
Confused? Here's a short video explaining what assets are.
So what are Bill Gates' assets?
The vast majority of Gates' money is invested. Through his Cascade Investment Fund, he's put money into both private and public companies – about 17 percent is sunk into Microsoft.
It's hard to value those private companies, because they're not publicly traded, so you can't say what Gates' holdings are worth until he actually sells them, or they go public. The public companies, like Microsoft, can be valued, and that's where Gates has seen the biggest gains. And there's some cash, of course. Gates gets $250,000 each year for serving as a director on Microsoft's board. And there are the dividends that he earns on many of the public company shares that he owns. Maybe he uses that money for household expenses, or maybe he plows it back into his investment fund. Or maybe he just leaves it in the bank, and takes advantage of one of the easiest money makers in the world: compounding.
King Digital Entertainment makes the popular and addictive "Candy Crush Saga" smartphone game. And Tuesday the company said it would parlay that success into an initial public offering -- of up to $500 million on the New York Stock Exchange. But if you thought "Candy Crush Saga" was the only bullet in King's revolver, think again:
- In the last decade, King has created 180 games.
- The company's most popular games, aside from "Candy Crush Saga," are "Pet Rescue Saga," "Farm Heroes Saga," "Papa Pear Saga" and, my own personal favorite, "Bubble Witch Saga."
- Together, those games account for 248 million daily game plays. ("Candy Crush Saga" accounts for 1,085 million daily game plays.)
- "Candy Crush Saga" has been the highest-grossing game app on iTunes, Facebook, and Google Play, but the company's other games have hit No. 5 on iTunes, No. 3 on Google Play, and No. 4 and No. 7 on Facebook.
- In December 2013, an average of 128 million daily active users played the company's games more than 1.2 billion times per day. That means if just 10 percent of users paid $1 a day to get to the next level of the game (or whatever), the company would have booked nearly $13 million a day.
- King made a $568 million profit in 2013, up from $8 million in 2012. That’s profit, not earnings. Peck on that, tweety bird.
Numbers out today from the New York Fed show that we're once again veering into dangerous territory when it comes to borrowing.
It's not so much that we're borrowing more – although the numbers are a bit staggering – it's that the people that are borrowing, are much more likely to fail to make their interest payments or pay the money back.
Here's the data: The New York Fed's fourth-quarter Household Debt and Credit Report says aggregate consumer debt increased by $241 billion in the quarter, the largest quarter-to-quarter increase since 2007. More importantly, between the fourth quarter of 2012 and the same period a year later, total household debt rose $180 billion, marking the first four-quarter increase in outstanding debt since 2008. And we all remember what happened that year.
Up until recently, overall debt has been falling. But it has turned around this quarter because young people and people with poor credit are borrowing more, by taking out mortgages and ramping up their credit card use. That's the first problem. The second problem is that those same kinds of borrowers are continuing a long-term trend of getting loans to buy cars and go to college. As the New York Fed puts it:
"There’s been a tremendous amount of attention to the growth of student loans in recent years, and these charts [above] indicate some of the reason why. First, student loans grew the most of any debt product in both periods (in percentage terms). Second, the growth in educational debt, like that of auto loans, is concentrated among the lower and middle credit score groups."
In other words, we're borrowing more, which is juicing the economy. But the loans are risky, which means we may be storing up troubles for the future.
Today we had a slew of numbers for December: personal spending; personal income; consumer confidence and - the Fed's favorite - the core personal consumption expenditures price index.
Spending was down. Boo.
Prices were up. Boo.
Income was flat. No change there, then.
Consumer confidence was down, although not as badly as people had expected. Yay, I guess.
These indicators provide a pretty accurate picture of the economy right now. And they hang together in a way that numbers often do not. I mean, if prices go up, and I can't get a raise, I'm probably going to spend less money and you can bet I'm going to complain about it.
So this means the economy still sucks, right?
Well, maybe not. Spending was down very little, and in fact the number was better than economists had expected. So we're still buying stuff, which is important in our ridiculously consumption-focused economy (never mind we paid for all that shopping by dipping into the piggybank: savings are down and falling).
What about those price increases? Well, they were only slightly higher, and in line with expectations. And it's not necessarily a bad thing that we're seeing some inflation. Marketplace's David Gura recently quoted David Blanchflower, the Dartmouth College economist, saying at the moment, for the economy, a little bit of inflation is our friend, not our enemy. Or, as Matt Boesler put it over at BusinessInsider, inflation reports are the new jobs reports.
So this is going to sound weird – but pray for prices to keep rising. Just a wee bit.