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Best Business Commentary
October 29, 2007
Bailing out the big fish
Citibank wouldn’t bail me out if I “maxed out my credit” on a bad investment, says Fortune’s Allan Sloan in CNNMoney.com. So why should Citi be bailed out? Citi is hoping to buy time for its bad investments in structured investment vehicles (SIVs) by asking “some of the world’s biggest hitters” to help it out with a $100 billion “superfund.” And there are good reasons “to avoid what we can call SIVilis”—defined as “a financially transmitted disease that could infect the world’s financial markets.” But “Citi clearly screwed up” here, and if it “needs help, its shareholders should have to pay. Bigtime.” After all, “we small fry take chances when we borrow.”
The bad bet on Facebook
“Is Microsoft Corp. nuts?” says John Dvorak in MarketWatch. Its $240 million investment in Facebook values the company at an insanely high $15 billion—100 times its revenues. Microsoft is essentially valuing each Facebook user at a “sky high” $300. And these are not high-spending corporate customers. They’re “essentially bloggers, duds, poor students, and hangers-on,” many of whom will switch to another social networking site “like fleas on a hot brick.” The most plausible explanation is that Google, acting like “a shill,” “suckered” Microsoft into a bidding war. After losing DoubleClick to Google, maybe Microsoft had to show it could win “at least once.”
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