Dr. Dre may be "first billionaire in hip-hop"

The in-studio video posted Thursday on actor Tyrese Gibson's Facebook page is raucous and choppy, a party scene with a mix of explicit language, big laughs and nimble dance moves.

But its message is unmistakable, delivered by Dr. Dre himself: "The first billionaire in hip-hop, right here from the (expletive deleted) West Coast."

With that line, spoken just over camera-wielding Gibson's right shoulder, Dr. Dre appeared to both confirm rumors of Apple's imminent acquisition of Beats Electronics and announce a landmark moment in hip-hop history.

Will Dre, who rose to prominence in the 1980s as a fierce Los Angeles-based rapper with the controversial group N.W.A, indeed become the street-bred genre's first billionaire? Odds are yes.

Although his stake in the company that bears his name has never been made public, "most feel he's got between 20% and 25% of it," says Chuck Creekmur, CEO AllHipHip.com. "That would mean he'd get there first, before Diddy and Jay-Z."

Dre ranked second in Forbes magazine's most recent list of top-earning rappers, at $550 million. P. Diddy was first with $700 million and Jay-Z third at $520. If the Apple purchase price of $3.2 billion for Beats' suite of headphones and electronics goods as well as its recently launched streaming music service proves accurate, that could put Dre's stake of Beats at around $800 million.

To see a guy many of us grew up with make it this big is really going to inspire others.

Chuck Creekmur, CEO AllHipHop.com

Dre breaking that billion-dollar barrier will have a huge impact on the hip-hop community, says Creekmur.

"Hip-hop is a very aspirational culture, and many of the people in it certainly aspire to become as affluent as the American dream says you can be, even though it's eluded most of us," he says. "Most of the people in hip-hop are first generation business people, so to see a guy many of us grew up with make it this big is really going to inspire others to push to do the same."

Making the mome! nt even more powerful is the fact that, when compared to Diddy and Jay-Z, Dre has long preferred to stay in the background, cultivating not so much a celebrity vibe as a reputation for being among one of the best producers in the music business with a set of ears second to none.

In fact, Creekmur says the video with Gibson, which was soon pulled off the actor's Facebook page, represents "a real exception to his normal reclusive M.O.," perhaps attributable, per Gibson's crack on the 80-second clip, to the group having consumed a few beers.

For many in the hip-hop community, Dre will first and foremost be synonymous with crushing beats and not business deals.

"Regardless of the success of this deal, the legacy Dre has built as a musician and producer will never be undercut," says Jermaine Hall, editor of Vibe magazine. "It's like Magic Johnson. He may have gone on to be a great businessman, but he'll always be the face of the Lakers franchise."

Hall says Dre's magic lies in having "ears that tell him exactly where the bass and treble should be at" for a given song, ears that have also been used to tune the Beats line of headphones with a decidedly bass-heavy bent.

"You combine that with the savvy and marketing of (Beats' other founding force, producer) Jimmy Iovine and you were bound to get a winner," says Hall, who adds that Apple would be making a mistake if it rebranded its Beats purchase. Beats accounts for around two-thirds of the premium headphone market, where products sell for anywhere from $200 to $400 a pair.

In the end, the deal may have cultural repercussions that equal its fiscal ones.

"When you step back, for someone from the hip-hop culture to reach the billion-dollar mark is pretty incredible," says Hall. "And in many ways, Dre getting there first before those other two guys is the better story. He's the common man behind the scenes, and he won."

Blackstone Discusses Fannie and Freddie Stake

NEW YORK (TheStreet) -- Blackstone Group  (BX) President and COO Hamilton "Tony" James confirmed the company's preferred equity stake in Fannie Mae  (FNMA) and Freddie Mac  (FMCC) but said he does not believe the asset management giant will drive the debate over the future of the government sponsored enterprises (GSEs).

"I honestly don't think we are going to be the mover and shaker on this," James told TheStreet during a press conference following the company's first quarter earnings release Wednesday. He added the firm does not have so large a position it will be a make or break player in the debate.

"We think we have a plan that makes a lot of sense in terms of getting the GSEs out of being a liability for the government," James said.

James did not elaborate on the plan, though in a follow up email exchange a Blackstone spokesman said the company's plan is distinct from a proposal floated by Fairholme Capital in November that Blackstone was reported to be behind.

"We have our own plan but do not want to comment on details," wrote spokesman Peter Rose.

It seems unlikely government officials would be receptive to any plan backed by private investors, something James, who is friendly with many at the highest levels of government in both major parties, knows better than anyone.

"Clearly this is going to be a highly political process," he said.

GSE reform legislation proposed by Sens. Tim Johnson (D, SD) and Mike Crapo (R., ID) effectively ignores current shareholders, which in addition to Blackstone include high profile investors such as Perry Capital, Fairholme Funds and Pershing Square Capital among many others, as well as consumer advocate Ralph Nader.

It also codifies the Treasury Department's controversial 2012 amendment to the 2008 conservatorship of Fannie and Freddie. The amendment changed the terms of Fannie and Freddie's debt to the government. Instead of owing the Treasury an annual 10% dividend, the GSEs suddenly owed the Treasury all of their profits for an indefinite period, aside from minimal capital buffers. That amendment -- also known as the "net worth sweep" -- is at the crux of many of the roughly 20 lawsuits brought against the government by GSE shareholders. The lawsuits taking issue with the sweep contend it violates the Fifth Amendment of the U.S. constitution's prohibition of the taking of private property for public use without just compensation. Blackstone is not a party to any of the lawsuits, though it will benefit if they succeed. GSO Capital Partners, a unit of Blackstone, commissioned a liquidation analysis of Fannie and Freddie by restructuring firm Alvarez & Marsal. The report, published last month, projected the mortgage giants would be worth about $170 billion combined if they were wound down.

Follow @dan_freed

Stock quotes in this article: FNMA, FMCC, BX 

Google spreading Fiber fingers to more cities

SAN FRANCISCO - Google unveiled big expansion plans for its fast Fiber Internet service on Wednesday, stepping up pressure on incumbent cable and Internet providers such as Comcast, Verizon and AT&T.

Google, the world's largest Internet search engine, identified nine urban areas encompassing up to 34 cities across the U.S. as possible sites for deployment.

"We aim to provide updates by the end of the year about which cities will be getting Google Fiber," Google said on its blog. "Between now and then, we'll work closely with each city's leaders on a joint planning process that will not only map out a Google Fiber network in detail, but also assess what unique local challenges we might face."

Google Fiber is about 100 times faster than what most Internet users live with today, according to the company.

When the service started in 2011 in Kansas City, Mo., it was considered by some to be an experiment, rather than a serious new business for the web giant. But Wednesday's announcement may put such theories to rest, while also sending a message to existing cable, telecom and Internet providers that a new, cash-rich rival has arrived.

"Google Fiber is an attempt by Google to build a profitable, stand-alone business," Carlos Kirjner, an Internet analyst at Bernstein Research, wrote in a note to investors on Wednesday. "It may not make a huge difference for Google or for the incumbents in the next one, two or three years, but Google is taking the long view and we think in 5 or more years, it could turn out to be a significant, profitable business for Google and headwind for incumbents."

The 34 cities being considered are: Phoenix, Scottsdale, and Tempe in Arizona; San Jose, Santa Clara, Sunnyvale, Mountain View and Palo Alto in California; Atlanta, Avondale Estates, Brookhaven, College Park, Decatur, East Point, Hapeville, Sandy Springs and Smyrna in Georgia; Nashville-Davidson in Tennessee; Charlotte, Carrboro, Cary, Chapel Hill, Durham, Garner, Morrisville and Raleigh i! n North Carolina; Portland, Beaverton, Hillsboro, Gresham, Lake Oswego and Tigard in Oregon; San Antonio in Texas; and Salt Lake City in Utah.

Fiber in Kansas City, Mo., costs $70 each month for an Internet connect that has data-transfer speeds of 1 gigabit per second. For $120 a month, users can get Internet, TV and a Nexus 7 tablet. A 5 Mbps service is offered at no monthly charge but costs $300 for a one-time construction fee.

In Provo, Utah, monthly prices are the same but require a one-time construction fee of $30.

Latest Economic Data On Brazil Points To Slower Growth

Oh, poor Brazil. President Dilma Rouseff has turned this economy into the Rodney Dangerfield of the BRICs.

Tuesday industrial production (IP) data showed a manufacturing sector confused over inflation and expecting weaker growth. December IP fell 3.5% month over month, on a seasonally adjusted basis. Consensus was -1.7%. This was the biggest monthly contraction since December 2008, when the global financial crisis was at its peak. In yearly terms, industrial production dropped 2.3%, well below expectations of a 0.1% drop.

A closer look at the data shows poor performance across the board, says George Lei, an analyst for Nomura Securities in New York. On a monthly basis, intermediate goods were down 3.9%, consumer goods 2.5% lower and capital goods fell 11.6%. Although the reading for capital goods was somewhat affected by one-off factors in several truck-producing companies, the magnitude of the plunge is still concerning, particularly after an already hefty 3.5% drop in November.  For the emerging markets Americas team at Nomura, the disappointing capital goods number heralds weaker investment momentum ahead.

President Dilma Rousseff of Brazil. Investors blame changes in macro-economic policy for much of the problems facing the economy these days. Weak industrial production figures show a sector unclear on inflation and worried about growth.

November IP was also revised lower to -0.6% from -0.2%.

The data picture for 2013 is looking clearer, says Lei. After a relatively robust performance in the first half of last year, IP deteriorated sharply in the second half. On a quarterly basis, having expanded 1.7% in the first and 0.3% in the second, IP fell 1.3% in the third and declined 0.8% in the fourth.

Last year "proved to be another lost year for Brazilian industry, despite a short-lived recovery early in the year," Lei wrote in a note to clients today.

Tightening of financial conditions in Brazil, caused by domestic and global factors, should come to affect growth over the next 3-6 months, primarily through channels of investments. Lei said he expects investments to expand around 1.5% in 2014, versus over 6% in 2013.

Moreover, December data was not affected by the currency devaluation in Argentina.

"The ongoing situation in Argentina may have a substantial impact on Brazilian industry, as over three-quarters of Brazilian exports to Argentina are manufactured goods, and the majority of manufactured goods are vehicles and auto-parts," he wrote.

Last week, Nomura said that it expected the turmoil in Argentina to shave at least 0.2 percentage points off Brazilian growth in 2014. As IP data for the first quarter comes in, investment banks like Nomura will likely start lowering their outlook for Brazil in 2014.

The 10 Most Powerful Businesswomen In Brazil

What Qualities Matter Most When You're Hiring a Lawyer?

Getty Images Few people enjoy hiring lawyers. That's just a fact. If it takes a serious automobile accident, a divorce, or a death in the family to get you into a lawyer's office, then pretty much by definition, you're visiting under duress. But when trouble strikes and you actually need a lawyer, how do you pick one? According to Lawyers.com, the cost of legal services varies widely, from as little as $50 an hour to as much as $1,000 "or more." With such a wide range of prices to choose from, you'd think that the first factor people would look for in a lawyer is price -- specifically, a low price. Something closer to that $50 mark than to the $1,000, and as far away as possible from that ominous "or more." That turns out to not be the case. Earlier this month, online "legal Q&A forum, directory and marketplace" Avvo.com asked its users what they look for in a lawyer. While cost certainly was a factor (65 percent of respondents called it "very important"), it wasn't as important as "respect in the legal community," which 67 percent of those surveyed think is more important, or "track record" (80 percent). So it would appear that hiring a lawyer is actually a bit like buying a car. Price plays a role, of course, but more important is buying the right product, and getting good value for your money. Further bolstering the point, it appears that people who have more experience with lawyers are even more inclined to choose perceived quality over price. As Avvo's results reveal, the people most likely (72 percent) to pick a cheap lawyer over a good lawyer are those who've never used a lawyer before. Let's Get Personal All other things being equal, though, what specific qualities should you look for when choosing between two lawyers charging equivalent prices for their services? According to consumers polled by Avvo, the top three personal qualities that most customers look for when choosing a lawyer are confidence, realism, and aggressiveness. These beat out qualities such as friendliness, ability to reassure a client, or compassion. As Avvo explains, the feedback it got from its respondents is that when seeking a lawyer, they're looking for someone who's "a realistic go-getter" rather than "a hand-holder." And again, this makes sense. After all, the law is a complex thing. Most of us would much rather leave it alone, and not have to deal with it if at all possible -- which is one reason we avoid lawyers in the first place. It makes sense then that if you do run into some bad luck and find yourself with a legal dilemma that absolutely, positively, must be dealt with by a lawyer, you'd prefer to hand it over lock, stock, and barrel to a confident, realistic, and aggressive professional and let them deal with it. And really, for $1,000 an hour "or more," that's the least they could do.

It Might Be the Time for Beer

After a couple of capital increases and what looks like a weak strategy for its growth in different South American countries, Chile's beer king Compania Cervecerias Unidas (CCU) – most commonly knows as CCU - is selling at a steep discount to its peers. In other words, being down by 23% year to date, I think it might be the time to start thinking of buying CCU's shares.  

A Weak Growth Strategy

CCU recently issued more than 50 million shares and plans to use the proceeds for organic growth as well as M&A in South America. Possible targets could be related to soft drinks in Colombia, dairy in Chile, or a multi-category approach in Argentina and Uruguay (where the company recently acquired a mineral water company). That being said, I agree with most analysts. CCU should focus on its wonderful beer business in Chile (where the company is an effective monopoly) and on returning capital to its shareholders through dividends and buybacks.  

Results Are Still Wonderful

Despite having lost some ground in terms of market share in its main market against its rival, the Brazilian giant AmBev (ABEV), CCU's results are still ameliorating fast. Revenues were up by 13% year over year, EBITDA increased 6% year over year and their net income grew by 21% year over year. Better yet, consolidated organic volumes (the most important figure for beverage companies) increased by 7% year over year while pricing was also up by 5% year over year. That said, cost increases in Chile, Argentina and Uruguay (where the company is still losing money) were behind the 1.2% EBITDA margin contraction. Even when CCU's figures look very compelling, the company needs to work a lot on its cost structure and on focusing on its main market. After all, CCU's 18.4% EBITDA margin is well below AmBev's 50% margins.  

Valuation Contraction Looks Overdone

Despite the unnecessary capital increase, I believe it's time to take a deep look at the shares. Price is! what you pay and value is what you get, and at the current market price, I think you will get more than you pay for if you buy CCU's shares. The Chilean beverage leader sells for 7.7 times 2014 EV/EBITDA and 15 times earnings. Meanwhile, AmBev, which is down by 16% year to date, currently trades at 13 times 2014 EV/EBITDA and 20 times earnings. Even when the Brazilian beverages leader pays a much higher cash dividend yield than CCU (2.95% versus 1.95%), I believe the valuation gap is too wide. Moreover, with CCU you always have the M&A free call attached to the asset. The Chilean beer leader would be a wonderful target for the much bigger AmBev, which has been (unsuccessfully) trying to enter the Chilean market for more than a decade now. The Brazilian company could buy CCU and put into practice its wonderful famous cost-cutting strategies in order to boost margins.

Investors such as Carl Icahn and Richard Perry have held CCU for long periods of time. Maybe they should be buying once more. Always remember: “Price is what you pay and value is what you get.”

Also check out: Carl Icahn Undervalued Stocks Carl Icahn Top Growth Companies Carl Icahn High Yield stocks, and Stocks that Carl Icahn keeps buying

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Apple (AAPL) Unveils Free OS at iPad Event, Microsoft (MSFT) Drops

NEW YORK (TheStreet) -- Though much of what Apple (AAPL) revealed at Tuesday's event was as expected, one surprise takeaway was the tech giant revealing that its updated operating system OS X Mavericks and productivity suite iWork will be available free of charge.

Along with its launch of the iPad Air and iPad Mini, the iPhone maker announced that the refreshed operating system will be available for download immediately through the App Store, free to Mac users with OS X Moutain Lion- or Snow Leopard-enabled hardware. For OS X Server (a multi-user business platform), there is a $19.99 upgrade charge.

Unlike rival Microsoft (MSFT), which sells Windows 8.1 and Pro for $120 and $200, respectively, at retail, Apple seems content with its strategy of giving the intangibles away for free to drive hardware sales. In response, Microsoft shares dropped 1.17%, with its biggest falls of the day coinciding with the Apple event.

Mavericks, modeled on the iOS 7 for the iPhone and iPad, introduces 200 new features, including iBooks (which syncs a user's books and reading activity across all iCloud devices) and Apple maps. It also improves the performance and battery life of the Mac. "We want every Mac user to experience the latest features, the most advanced technologies and the strongest security," said Craig Federighi, Apple's senior vice president of software engineering, in a statement. "We believe the best way to do this is to begin a new era of personal computing software where OS upgrades are free." Shares of the Cupertino-based company dipped 0.29% at market close, but have since gained 0.25% in after-hours trading. TheStreet Ratings team rates Apple Inc as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about its recommendation: "We rate Apple Inc (AAPL) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself." Highlights from the analysis by TheStreet Ratings Team goes as follows: AAPL's revenue growth has slightly outpaced the industry average of 0.7%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share. AAPL's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, AAPL has a quick ratio of 1.54, which demonstrates the ability of the company to cover short-term liquidity needs. 41.67% is the gross profit margin for APPLE INC which we consider to be strong. Regardless of AAPL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AAPL's net profit margin of 19.53% compares favorably to the industry average. Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Computers & Peripherals industry and the overall market, APPLE INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500. APPLE INC's earnings per share declined by 19.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, APPLE INC increased its bottom line by earning $44.16 versus $27.67 in the prior year. For the next year, the market is expecting a contraction of 10.8% in earnings ($39.38 versus $44.16). You can view the full analysis from the report here: AAPL Ratings Report

Rieder: Support crucial for non-profit journalism

Steve Waldman has a modest proposal for securing the future of non-profit news outlets.

How about if companies that have flourished in the new economy — think Apple, Google, Verizon — stepped up to the plate and subsidized some of these valuable but financially struggling upstarts, the journalist and Web entrepreneur asks.

"If the winners of the new economy put a tiny bit of their wealth into this (area), this whole space would be transformed," says Waldman, the principal author of the FCC's major 2011 study of the state of the American news media.

Waldman issued the challenge at a recent conference at the Pew Research Center in Washington, D.C., on the future of non-profit journalism. In recent years, as traditional news organizations have cut back deeply in the face of the digital tsunami, non-profits large and small, generally online operations, have arisen to help fill the gap. While their total workforce is a mere fraction of the journalism jobs that have vanished, many of the new players are doing important work, ranging from powerful investigative reporting to granular, street-level local coverage. They are an exciting addition to the media mix.

But most if not all are supported by philanthropy, and major foundations generally don't like to fund their beneficiaries forever. As my friend Ed Wasserman, now dean of the Graduate School of Journalism at the University of California-Berkeley, has pointed out, "Going to rich people periodically asking for money isn't a real business model."

So the key question is: Can non-profit journalism go the distance?

Moderator Alan Murray, president of the Pew Research Center, kicked things off on a positive note. "The fact that we're having such a forum means there is a future," he said.

And there was some tangible good news to emerge at the conclave. Michael Maness, head of the John S. and James L. Knight Foundation's Journalism & Media Innovation program, disclosed that Knight was on the verge of making "a pre! tty sizable amount of money" available to the non-profits. While the pot of gold still needs approval by the foundation's board, it sounded like the largess will soon be a done deal.

Often, the non-profits are launched with support from a single angel. One of the keys to staying afloat is diversifying the revenue base. And that means two different things: diversifying the lineup of donors and finding new money streams — from advertising, from staging events, from memberships.

The big daddy in the field is ProPublica, an investigative powerhouse with 41 staffers in its New York City newsroom, 23 of them reporters. But many of the start-ups are lean and mean, with one- and two-person staffs, fueled by passion and commitment.

Launched in 2008 with money from the wealthy, liberal-leaning Sandler family, ProPublica reduced the Sandler share of its budget to 38% last year and hopes to shrink it to 30% this year, according to President Dick Tofel.

Tofel stresses that it's important to distinguish between family foundations like the Sandlers' and institutional foundations, which tend to act more like venture capitalists and don't plan on doling out the dollars indefinitely.

In order to attract and retain philanthropic support, the non-profits need to show that they are having an impact. But how do you measure that? Foundations like "metrics." But what are the right ones? Simply counting how many people visit the websites doesn't really cut it.

In fact, tallying the number of unique visitors "is worth zero," says Joel Kramer, co-founder and CEO of MinnPost, a non-profit news site in the Twin Cities. That stat, he says, is irrelevant unless you're in the business of selling national advertising.

What really matters is what the journalism accomplishes. Did it sweep out corrupt politicians or lead to important reforms? The key is "what happens because of what you do," says Mark Horvit, executive director of Investigative Reporters and Editors. "You can't simply look at h! ow many e! yeballs are coming to the site."

One piece of good news: The Knight Foundation and the Bill & Melinda Gates Foundation are underwriting a study at the University of Southern California to find better ways to measure engagement and impact. "What funders really care about are outcomes," says Daniel Green, who manages media and information grants at the Gates Foundation. "It's not helpful to say you need metrics if we don't help you figure out what the right ones are."

Foundations often want to see their charges wean themselves from charity and stand on their own. But that's an unrealistic expectation for many non-profit news operations, cautions Kevin Davis, CEO and executive director of the Investigative News Network, a consortium of more than 80 non-profit newsrooms.

As in the case of symphony orchestras, "Philanthropy needs to remain in the mix," he says. "Certain content will need to be subsidized. Not all will be self-sustaining."

And it's just not good enough if only the big boys like ProPublica and the Berkeley, Calif.-based Center for Investigative Reporting survive while smaller but worthy outfits succumb. If that turns out to be the case, Davis says, "We will have failed."

It would be great if the Googles and the Apples of the world listen to the wisdom of Waldman and reach for their checkbooks. The non-profit news movement is well worth the investment.

The Future Of Cryptocurrency

A cryptocurrency is a digital currency that is created and managed through the use of advanced encryption techniques known as cryptography. Cryptocurrency made the leap from being an academic concept to (virtual) reality with the creation of Bitcoin in 2009. While Bitcoin attracted a growing following in subsequent years, it captured significant investor and media attention in April 2013 when it peaked at a record $266 per bitcoin after surging 10-fold in the preceding two months. Bitcoin sported a market value of over $2 billion at its peak, but a 50% plunge shortly thereafter sparked a raging debate about the future of cryptocurrencies in general and Bitcoin in particular. So, will these alternative currencies eventually supplant conventional currencies and become as ubiquitous as dollars and euros someday? Or are cryptocurrencies a passing fad that will flame out before long? The answer lies with Bitcoin.

Bitcoin – the Current Standard

Bitcoin is a decentralized currency that uses peer-to-peer technology, which enables all functions such as currency issuance, transaction processing and verification to be carried out collectively by the network. While this decentralization renders Bitcoin free from government manipulation or interference, the flipside is that there is no central authority to ensure that things run smoothly or to back the value of a Bitcoin. Bitcoins are created digitally through a "mining" process that requires powerful computers to solve complex algorithms and crunch numbers. They are currently created at the rate of 25 Bitcoins every 10 minutes and will be capped at 21 million, a level that is expected to be reached in 2140.

These characteristics make Bitcoin fundamentally different from a fiat currency, which is backed by the full faith and credit of its government. Fiat currency issuance is a highly centralized activity supervised by a nation's central bank. While the bank regulates the amount of currency issued in accordance with its monetary policy objectives, there is theoretically no upper limit to the amount of such currency issuance. In addition, local currency deposits are generally insured against bank failures by a government body. Bitcoin, on the other hand, has no such support mechanisms. The value of a Bitcoin is wholly dependent on what investors are willing to pay for it at a point in time. As well, if a Bitcoin exchange folds up, clients with Bitcoin balances have no recourse to get them back.

Increasing Scrutiny

Bitcoin's main benefits of decentralization and transaction anonymity have also made it a favored currency for a host of illegal activities including money laundering, drug peddling, smuggling and weapons procurement. This has attracted the attention of powerful regulatory and other government agencies such as the Financial Crimes Enforcement Network (FinCEN), the SEC, and even the FBI and Department of Homeland Security (DHS). In March 2013, FinCEN issued rules that defined virtual currency exchanges and administrators as money service businesses, bringing them within the ambit of government regulation. In May that year, the DHS froze an account of Mt. Gox – the largest Bitcoin exchange – that was held at Wells Fargo, alleging that it broke anti-money laundering laws. And in August, New York's Department of Financial Services issued subpoenas to 22 emerging payment companies, many of which handled Bitcoin, asking about their measures to prevent money laundering and ensure consumer protection.

Alternatives to Bitcoin

Despite its recent issues, Bitcoin's success and growing visibility since its launch has resulted in a number of companies unveiling alternative cryptocurrencies, such as:

Litecoin – Litecoin is regarded as Bitcoin's leading rival at present, and it is designed for processing smaller transactions faster. It was founded in October 2011 as "a coin that is silver to Bitcoin's gold," according to founder Charles Lee. Unlike the heavy computer horsepower required for Bitcoin mining, Litecoins can be mined by a normal desktop computer. Litecoin's maximum limit is 84 million – four times Bitcoin's 21-million limit – and it has a transaction processing time of about 2.5 minutes, about one-fourth that of Bitcoin. Ripple – Ripple was launched by OpenCoin, a company founded by technology entrepreneur Chris Larsen in 2012. Like Bitcoin, Ripple is both a currency and a payment system. The currency component is XRP, which has a mathematical foundation like Bitcoin. The payment mechanism enables the transfer of funds in any currency to another user on the Ripple network within seconds, in contrast to Bitcoin transactions, which can take as long as 10 minutes to confirm. MintChip – Unlike most cryptocurrencies, MintChip is actually the creation of a government institution, specifically the Royal Canadian Mint. MintChip is a smartcard that holds electronic value and can transfer it securely from one chip to another. Like Bitcoin, MintChip does not need personal identification; unlike Bitcoin, it is backed by a physical currency, the Canadian dollar. The Future

Some of the limitations that cryptocurrencies presently face – such as the fact that one's digital fortune can be erased by a computer crash, or that a virtual vault may be ransacked by a hacker – may be overcome in time through technological advances. What will be harder to surmount is the basic paradox that bedevils cryptocurrencies – the more popular they become, the more regulation and government scrutiny they are likely to attract, which erodes the fundamental premise for their existence.

While the number of merchants who accept cryptocurrencies has steadily increased, they are still very much in the minority. For cryptocurrencies to become more widely used, they have to first gain widespread acceptance among consumers. However, their relative complexity compared to conventional currencies will likely deter most people, except for the technologically adept.

A cryptocurrency that aspires to become part of the mainstream financial system may have to satisfy widely divergent criteria. It would need to be mathematically complex (to avoid fraud and hacker attacks) but easy for consumers to understand; decentralized but with adequate consumer safeguards and protection; and preserve user anonymity without being a conduit for tax evasion, money laundering and other nefarious activities. Since these are formidable criteria to satisfy, is it possible that the most popular cryptocurrency in a few years' time could have attributes that fall in between heavily-regulated fiat currencies and today's cryptocurrencies? While that possibility looks remote, there is little doubt that as the leading cryptocurrency at present, Bitcoin's success (or lack thereof) in dealing with the challenges it faces may determine the fortunes of other cryptocurrencies in the years ahead.

Should You Invest in Cryptocurrencies?

If you are considering investing in cryptocurrencies, it may be best to treat your "investment" in the same way you would treat any other highly speculative venture. In other words, recognize that you run the risk of losing most of your investment, if not all of it. As stated earlier, a cryptocurrency has no intrinsic value apart from what a buyer is willing to pay for it at a point in time. This makes it very susceptible to huge price swings, which in turn increases the risk of loss for an investor. Bitcoin, for example, plunged from $260 to about $130 within a six-hour period on April 11, 2013. If you cannot stomach that kind of volatility, look elsewhere for investments that are better suited to you. While opinion continues to be deeply divided about the merits of Bitcoin as an investment – supporters point to its limited supply and growing usage as value drivers, while detractors see it as just another speculative bubble – this is one debate that a conservative investor would do well to avoid.

Conclusion

The emergence of Bitcoin has sparked a debate about its future and that of other cryptocurrencies. Despite Bitcoin's recent issues, its success since its 2009 launch has inspired the creation of alternative cryptocurrencies such as Litecoin, Ripple and MintChip. A cryptocurrency that aspires to become part of the mainstream financial system would have to satisfy very divergent criteria. While that possibility looks remote, there is little doubt that Bitcoin's success or failure in dealing with the challenges it faces may determine the fortunes of other cryptocurrencies in the years ahead.

What’s Wrong With Twitter’s IPO?

If you want any evidence that Facebook's (ticker: FB ) botched May 2012 initial public offering was a traumatic event, just look at the following headlines regarding the most anticipated IPO since the "Facebook fiasco", which I culled from today's Yahoo! Finance homepage:

Challenges abound for Twitter heading into the IPO (Associated Press)

Success of Twitter's Business Model Questioned Ahead of IPO (Breakout/Yahoo! Finance)

As Twitter IPO prices, poll says it's not worth hype (CNBC.com)

Good News for Twitter IPO: Small Investors Are Skipping It (The Exchange/Yahoo! Finance)

But who, exactly, was traumatized? Investors or financial journalists? One headline tells a different story from those I just cited -- one of enthusiasm, rather than skepticism:

Twitter boosts IPO range amid strong investor demand (Reuters)

Although they maintained the size of the offering at 70 million shares, Twitter and its underwriters have raised the previous $17 to $20 pricing range for the stock to $20 to $25. If the underwriters exercise the overallotment option for an additional 10 million shares, Twitter will end up raising $2 billion at the top end of that range. The final pricing is expected for Wednesday, and the shares will begin trading on Thursday.

The truth is that this is a fantastic time for Twitter to go public: The stock market has had a great run this year and growth-stock IPOs have been making eye-popping debuts (witness the shares of sandwich chain Potbelly, which more than doubled on their first day of trading). Finally, the most highly visible social networking stocks -- Twitter's peer group -- have way outpaced the market, as the following performance graph of Facebook and LinkedIn (NYSE:LNKD ) illustrates:

With those precedents in mind, should investors ignore the skeptical articles regarding Twitter and plow into the stock? My answer: No.

Where Facebook and LinkedIn are solidly profitable, Twitter isn't. In that regard, it's closer to local-bus! iness review site Yelp, which has yet to turn a quarterly profit (although that hasn't stopped the stock from gaining 241% this year.) Twitter is a fascinating platform, and it has already made a massive impact on business and popular culture, but as a business model, it's still finding its feet. Several ad buyers at major advertising firms recently told the Financial Times that the funds they allocate to Twitter come out of their "experimental" budgets.

I think the odds are excellent that Twitter's stock will post muscular gains once the shares begin trading in the secondary market on Tuesday, but whether it will prove an excellent long-term investment looks much more uncertain. Investors who are interested in buying the shares should first ask themselves what they expect to achieve, over what timeframe ... and how much they are prepared to lose in an adverse scenario.

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

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