Top investor not so bullish on Twitter

Twitter will soon go public. But will the stock actually do well? That's up for debate.

SAN DIEGO (CNNMoney)

Cohen, founder and CEO of leading startup accelerator TechStars, said he's a fan of Twitter. He'll probably even own a stake of it through one of the many funds he is invested in. But he suggested that Twitter's stock price may not rise too dramatically over the long-term.

The comments came during a conversation at the Stocktoberfest investing conference in San Diego Friday hosted by StockTwits. The social investing site's chairman Howard Lindzon asked Cohen whether he would take a long or short position on a certain companies.

Cohen said he would go long on Google (GOOG, Fortune 500), Nike (NKE, Fortune 500), Apple (AAPL, Fortune 500) and Facebook (FB, Fortune 500), but that he would hold, or go "not as long" on Twitter.

Related: Who'll be getting rich off Twitter

"Twitter needs to become more of a platform on the web," said Cohen in a follow-up conversation with CNNMoney. "If Twitter went away today, people would just turn to Facebook. If Facebook went away, people would start screaming -- it's so universal."

Cohen said Twitter has the potential to become a more essential web platform, but it's not there yet.

Though Twitter is not yet profitable, the company's user base and mobile business is growing. In fact, Twitter's monthly active users grew nearly 40% during the third quarter, and mobile ads brought in 70% of the company's total advertising revenue. But the key going forward will be whether Twitter can secure a steady revenue source without pushing users away.

Still, Cohen said he believes it's the right time for Twitter to go public. Twitter is slated to sell $1 billion in stock through an initial public offering next month.

First Published: October 18, 2013: 4:26 PM ET

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JPMorgan, U.S. in tentative $13 billion settlement

JPMorgan Chase has reached tentative deal to settle Justice Department investigations into its mortgage business.

NEW YORK (CNNMoney)

Mortgage-backed securities and related derivatives were a key cause of the financial crisis, saddling financial institutions with losses as the housing market cratered. If completed, the settlement would be substantially larger than any law enforcement officials have secured from a single institution in connection with the crisis.

The settlement includes $9 billion in fines and penalties and $4 billion in 'consumer relief,' including home loan modifications, the official said.

A federal criminal investigation based in Sacramento continues, and the deal does not include a non-prosecution agreement that JPMorgan Chase (JPM, Fortune 500) had originally insisted be part of the deal, the official said.

As the criminal case develops, JPMorgan Chase has agreed to assist in an investigation that is pursuing possible charges against individuals, the official told CNN.

JP Morgan Chase declined to comment to CNN.

The tentative deal includes a $4 billion settlement regarding allegations by the Federal Housing Finance Agency that JP Morgan Chase misled Fannie Mae and Freddie Mac when it sold them home loans, many of which soured.

Related: JPMorgan fined $920 million in 'London Whale' trading loss

Fannie and Freddie sustained massive losses on mortgage-backed securities as the housing market imploded, and required a bailout of over $187 billion. The firms, which have been overseen by the FHFA since their 2008 rescue, have since returned to profitability, paying $136 billion in dividends to the Treasury Department.

The settlement also would resolve a smaller separate case brought by New York Attorney General Eric Schneiderman. Schneiderman sued JP Morgan Chase in October over alleged deceptive practices in sales of mortgage bonds by Bear Stearns, which was acquired by JP Morgan Chase.

The $13 billion deal is $2 billion higher than the most recent offer by JPM, and came at the end of talks that included personal negotiations between Attorney General Eric Holder and JPM Chief Jamie Dimon, CNN is told.

Related: JPMorgan's Dimon meets Holder for settlement talks

Dimon visited the Justice Dept in late September for a meeting in Holder's conference room, the official said, and last week the two men spoke by phone to discuss the final sticking point: Dimon's insistence that the deal include a non-prosecution agreement.

Holder told Dimon it was a "non-starter" according to the official. In a call Friday at around 6pm, Holder and Dimon made the final deal after Dimon dropped the non-prosecution condition.

The $13 billion civil settlement covers conduct from 2005-2007 and includes investigations of the mortgage businesses of Washington Mutual and Bear Stearns, which were both acquired by JPM.

Related: 5 years after Lehman: Where are key players now?

Lawyers for both sides, led by Tony West, associate attorney general, and Stephen Cutler, JPM's general counsel, are expected to work through the weekend to finalize details of the agreement, which will be announced in the coming days.

The settlement is the latest in a series of legal headaches for JPMorgan, America's largest bank by assets.

The firm has paid over $1 billion in fines in connection with last year's "London Whale" trading debacle, and $80 million more over allegedly unfair credit card billing practices.

In July, the bank agreed to pay $410 million to settle charges that it manipulated electricity prices in California and the Midwest. It is also facing scrutiny over its hiring practices in China and its alleged involvement in the Libor rate-fixing scandal.

Related: JPMorgan posts loss on big legal costs, but ...

JPMorgan posted a loss for the third quarter based on its massive legal expenses. Dimon called the loss "painful" and warned that litigation costs could continue to be a drag on earnings for several quarters.

The bank said at the time that it was holding $23 billion in reserves for potential litigation expenses, but that its legal costs could be nearly $6 billion above that figure in a worst-case scenario.

One point of contention during settlement negotiations has been whether JPMorgan ought to be responsible for misconduct at Bear Stearns and WaMu that occurred before it absorbed them.

Commenting last year on litigation related to Bear, Dimon argued that the firm had been acquired during the turmoil of 2008 as "a favor" to the Federal Reserve.

Related: J.P. Morgan's current woes may be the least of its problems

Analysts at Oppenheimer argued in a recent research note that JPMorgan was being targeted unfairly and out of proportion with its role in the crisis.

"[O]ne reason why JPM was strong enough to absorb Bear and WAMU is precisely because its involvement in the mortgage mess was relatively small," the analysts wrote. "JPM's exposure got large because it helped the government by taking Bear and WAMU."

Others are less sympathetic, noting JPMorgan's initial enthusiasm over these deals and the revenues they've generated since.

First Published: October 19, 2013: 4:02 PM ET

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Should real estate investors incorporate?

NEW YORK (Money Magazine)

The main reason to set up an entity like a corporation is to protect your personal assets against a lawsuit -- say, if someone gets injured on your property.

Instead of incorporating, though, Richmond real estate attorney Katja Hill suggests you set up a limited liability company, or several LLCs, to hold your properties.

LLCs are easier to maintain, she says, than the "S corp" corporate structure that's also used by small businesses.

Related: Finding financial planning professionals

A lender may make it hard for you, however, to move a mortgaged property to an LLC. A transfer might also trigger a tax hit (not likely in Virginia, but rules vary by area). In both cases, the best fallback for shielding assets is umbrella insurance. In fact, even with an LLC, Hill advises getting a policy to be extra safe.

Related: Was my home a good investment?

First Published: October 18, 2013: 4:18 PM ET

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Top investor not so bullish on Twitter

Twitter will soon go public. But will the stock actually do well? That's up for debate.

SAN DIEGO (CNNMoney)

Cohen, founder and CEO of leading startup accelerator TechStars, said he's a fan of Twitter. He'll probably even own a stake of it through one of the many funds he is invested in. But he suggested that Twitter's stock price may not rise too dramatically over the long-term.

The comments came during a conversation at the Stocktoberfest investing conference in San Diego Friday hosted by StockTwits. The social investing site's chairman Howard Lindzon asked Cohen whether he would take a long or short position on a certain companies.

Cohen said he would go long on Google (GOOG, Fortune 500), Nike (NKE, Fortune 500), Apple (AAPL, Fortune 500) and Facebook (FB, Fortune 500), but that he would hold, or go "not as long" on Twitter.

Related: Who'll be getting rich off Twitter

"Twitter needs to become more of a platform on the web," said Cohen in a follow-up conversation with CNNMoney. "If Twitter went away today, people would just turn to Facebook. If Facebook went away, people would start screaming -- it's so universal."

Cohen said Twitter has the potential to become a more essential web platform, but it's not there yet.

Though Twitter is not yet profitable, the company's user base and mobile business is growing. In fact, Twitter's monthly active users grew nearly 40% during the third quarter, and mobile ads brought in 70% of the company's total advertising revenue. But the key going forward will be whether Twitter can secure a steady revenue source without pushing users away.

Still, Cohen said he believes it's the right time for Twitter to go public. Twitter is slated to sell $1 billion in stock through an initial public offering next month.

First Published: October 18, 2013: 4:26 PM ET

10.20 | 0 komentar | Read More

J.C. Penney shares close at 33-year low

Click for more data on J.C. Penney

NEW YORK (CNNMoney)

Shares of J.C. Penney (JCP, Fortune 500) fell nearly 5% to end at $7.01 a share. Earlier, the stock dipped below $7, a level not seen since 1980.

The rout was sparked by a market rumor that a Canadian financing company was denying J.C. Penney credit. It was the second time this week that J.C. Penney's stock was hit by an unsubstantiated rumor. On Tuesday, the stock plunged on talk the company was consulting with a bankruptcy firm.

J.C. Penney shares are down more than 60% so far this year due to concerns about sliding sales and mounting losses at the once mighty retail chain. But the company suggested that the recent spate of rumors are a ploy by short sellers to drive the share price lower in order to make a quick profit.

In a statement issued Friday, J.C. Penney pushed back against what it called "unprecedented attacks."

"These rumors are unequivocally false and constitute nothing more than attempted market manipulation by certain types of investors for their own personal gain," said J.C. Penney spokesman Joey Thomas.

The retailer added it has made "meaningful improvements" in its turnaround plan and expects to end the year with more than $2 billion in excess liquidity.

Related: Why J.C. Penney should go private

J.C. Penney recently raised $785 million in a secondary offering of 84 million shares. It also disclosed in a regulatory filing this week that it had reached an agreement with lenders to lengthen the maturity on an existing credit facility.

Still, 2013 has been brutal for the 111-year old retailer. The company ousted CEO Ron Johnson in April after his controversial overhaul of pricing fell flat with consumers.

In August, hedge fund manager and long-time J.C. Penney investor Bill Ackman jumped ship. Once the company's largest shareholder, Ackman lashed out at the board for not listening to his suggestion to replace CEO Myron Ullman, who returned to J.C. Penney to replace Johnson. Ullman was the CEO before Johnson, who left Apple (AAPL, Fortune 500) to take the top spot at J.C. Penney.

First Published: October 18, 2013: 3:11 PM ET

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Alarm bells ring over China's debt problem

Local governments in China, like Anhui province, have been borrowing too much in recent years.

HONG KONG (CNNMoney)

The world's second-largest economy is struggling to contain growing local government debt, the result of easy credit and round after round of stimulus.

Nobody knows the exact scale of the problem, but economists surveyed by CNNMoney estimate debt levels reached 14.1 trillion yuan to 19.7 trillion yuan by the end of last year, or roughly one-third of the country's gross domestic product.

Those estimates put local debt at nearly double what it was three years ago, when China last conducted a nationwide debt audit. By the end of 2010, Beijing reported 10.72 trillion yuan ($1.7 trillion) of local and regional government debt. In June, the government sampled debt levels in 36 select governments and found their average debt had increased 13% between 2010 and the end of 2012.

Economists are awaiting the most recent results from a nationwide government debt audit launched in July, expected to be announced before a major Communist Party meeting in November.

Related story: China growth still strong but set to slow

"We expect it to show that local government debt has risen, but remained controllable," said UBS economist Wang Tao. "[We] do not expect major breakthroughs or fundamental solutions in the near term."

Economists say that, for now, China's local government debt remains lower than that of many other advanced economies, such as the U.S., U.K., France, Japan, Germany and Spain. What is scary is the startling pace at which debt has accumulated.

China's increase in local government debt is part of a larger issue -- the explosion of credit as the country sought to fuel growth.

Mushrooming credit is cause for concern as it has often been followed by financial crises in other emerging markets. In China, it has stoked fears that capital has been misallocated, and has further contributed to a run-up in corporate and government debt. One of the country's greatest challenges is to wean itself off credit as part of overall efforts to find sustainable growth.

Related story: China swaps pandas for uranium in trade deals

Credit expansion has spurred a rise in shadow banking, an area largely unregulated by the government. Shadow banks offer loans to small and medium-sized companies typically ignored by large state-run banks. Often, the loans are packaged and sold to investors looking for higher returns.

Easy credit has also encouraged companies to borrow at a rapid clip. That's worrisome, Citi economists Shuang Ding and Minggao Shen said, because businesses carry a greater risk of default as China's overall economy slows after decades of exponential expansion.

Economists surveyed expect some clarification on the government's financial and economic reform agenda at the November meeting, but have cautioned that detailed blueprints are unlikely to be announced.

First Published: October 17, 2013: 9:53 PM ET

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China GDP hits 7.8% amid credit concerns

HONG KONG (CNNMoney)

Gross domestic product grew 7.8% over the previous year during the third quarter, the National Bureau of Statistics reported Friday. The performance matched the 7.8% median estimate of economists surveyed by CNNMoney. Second quarter 2013 growth was 7.5%.

Initial market reaction in Asia was muted, with most indexes in positive territory following the release.

China's GDP is the most comprehensive gauge of the country's economic health -- an important number to monitor as the government works to bring about stability after decades of runaway expansion.

The country averaged growth of around 10% a year in the past three decades, propelling it up the list of biggest economies, generating wealth for its growing middle class and boosting global trade.

The third quarter result all but confirms that Beijing will meet its 7.5% annual growth target for the year. But questions remain about the quality of growth achieved.

Related story: Alarm bells ring over China's debt problem

As China seeks more sustainable growth, it is trying to shift from an export-driven model toward one led by consumption. Economists believe the path ahead could be rather bumpy.

One major headwind is the country's addiction to credit -- which shows no signs of slowing, even as debt piles up.

Mushrooming credit has also spurred a rise in shadow banking. Shadow banks offer loans to small and medium-sized companies that are ignored by large state-run banks. Often, the loans are packaged and sold to investors looking for higher returns.

Related story: China swaps pandas for uranium in trade deals

China also faces challenges in growing local government debt, rising property prices and weak demand for exports.

The government is trying to get a handle on the debt problem with a nationwide audit of local governments. The results are expected to be released before a Communist Party meeting in November, and may impact economic policy.

First Published: October 17, 2013: 10:26 PM ET

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Elon Musk to make James Bond submarine car a reality

My name is Musk ... Elon Musk.

NEW YORK (CNNMoney)

When the car-turned-submarine from the 007 classic "The Spy Who Loved Me" was sold at auction in September for nearly a million dollars, the identity of the buyer was kept secret, as it usually is in collector car auctions.

Thursday night, a Tesla Motors spokeswoman confirmed that the submarine, modeled after a Lotus sports car, had been bought by Tesla (TSLA) CEO Elon Musk.

Musk plans to take the movie prop and turn it into an actual car that transforms into a submarine, the very thing it was built to portray in the movie.

"I was disappointed to learn that it can't actually transform," Musk said in a statement provided by Tesla. "What I'm going to do is upgrade it with a Tesla electric powertrain and try to make it transform for real."

Musk's identity as the buyer was first reported by the automotive Web site Jalopnik.com.

In the film, James Bond, played by Roger Moore, is seen driving a white Lotus Esprit off a pier and into the water. Once submerged, the car sinks toward the bottom before sprouting fins and propellers. Moore is shown piloting the sub with a passenger, played by Barbara Bach, inside a dry passenger compartment.

Several cars and models -- some of just sections of the vehicle -- were used to shoot the scene. The submarine Musk bought for $920,167 at a London auction was just one of them.

It's a so-called wet submarine, meaning that it fills with water when submerged, so the driver has to wear a wetsuit and breathe air from a tank. (The dry passenger compartment shown in the movie was a set.) It has no steering wheel or other automobile controls and is instead controlled with levers. The fins on the outside are not retractable, but permanent.

Tesla Motors first car, the Tesla Roadster, was also based on a later Lotus sports car, the Elise.

First Published: October 17, 2013: 11:06 PM ET

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Shutdown took $24 billion bite out of economy

Hundreds of national parks across the country closed during the government shutdown.

NEW YORK (CNNMoney)

The 16-day government shutdown took a $24 billion chunk out of the U.S. economy, according to an initial analysis from Standard & Poor's.

As a result, the rating agency projects that the U.S. economy will grow by an annual pace of around 2.4% in the fourth quarter -- as opposed to the roughly 3% growth rate predicted prior to the shutdown.

"Given the size of the economy, it's small. But because it's happening all at once, so quick, so fast, unplanned; it's going to hurt," said Beth Ann Bovino, U.S. chief economist at S&P. "We can absorb it, but it still hurts."

Related: Punting on budget likely to lead to another stalemate

Hundreds of thousands of federal workers were furloughed during the shutdown, but that was just one of the widespread effects of the first shutdown in nearly two decades.

Federal contractors also furloughed thousands of employees. Small businesses reeled from frozen government contracts and stalled business loans. Closed national parks hit the tourism industry, while military families saw childcare and other services shuttered.

Consumers, also scared by the debate over raising the debt ceiling, started to cut back.

While federal workers will ultimately receive back pay under the deal, contractors will likely not get their lost wages, Bovino said. And with the deal only guaranteeing government funding through Jan. 15, many federal workers and contractors may continue to hold back on spending into the holiday shopping season.

"That's going to keep people a little more cautious, particularly government workers and certainly contractors," she said "It certainly suggests a ho-hum holiday."

The debt fix is also only temporary, which could continue to fuel economic uncertainty, hurting consumer confidence and slowing hiring, said Mark Zandi, chief economist for Moody's Analytics.

Zandi blamed continued government brinksmanship as a major factor holding back the U.S. economic recovery.

"This is a real corrosion on the economy," Zandi said. "If we have to go down a similar road in the near future, the costs are going to continue to add up."

First Published: October 16, 2013: 10:38 PM ET

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World markets cheer debt ceiling deal

HONG KONG (CNNMoney)

Japan's Nikkei rose 1.1% in early trading, and the Australia ASX All Ordinaries gained 0.2%. South Korea's KOSPI added 0.3%.

Hong Kong's Hang Seng and the Shanghai Composite both opened in positive territory. U.S. stock futures were little changed.

The Senate passed the measure by a wide margin Wednesday evening, and the House followed suit. President Obama pledged to sign the bill into law immediately.

Senate Majority Leader Harry Reid said Wednesday that the Senate agreement will reopen the government and fund it until January 15. It will also raise the debt limit until February 7, saving the country from defaulting on its bills.

The bill also sets up budget negotiations between the House and Senate for a long-term spending plan.

Stocks rallied in the U.S. on Wednesday as the debt deal took shape. The Dow Jones industrial average jumped more than 200 points, or 1.3%, while the S&P 500 and Nasdaq both gained more than 1%.

Investors are bound to be relieved by the last-minute measure, which will remove the threat of default and avoid a shock to the global financial system.

With Democrats and Republicans at loggerheads, investors had prepared themselves in recent days for the unthinkable.

Interest rates on short-term Treasuries soared, and big money market funds run by Fidelity, JPMorgan and Charles Schwab reduced their exposure to U.S. debt maturing in late October and November.

The Chicago Mercantile Exchange, which operates the world's biggest derivatives market, asked investors to stump up more cash to trade in financial products that provide protection against rising interest rates.

Still, risks remain. Some analysts say Congress is merely kicking the can down the road -- and a default threat could reemerge in February as the Treasury Department approaches its extended borrowing limit.

First Published: October 16, 2013: 8:51 PM ET

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