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Trade deficit means, essentially, that Americans import $2.7 trillion worth of goods per year and export $2.2 trillion worth of their goods and services. Which, if you think about it, implies that “the rest of the world” ends up with $500B of excess U.S. dollars. Since the supply of U.S. dollars is very much finite, the gap has to be covered by foreigners buying $500B worth of something that is neither exportable goods nor services, and may be real property (houses in Malibu), liquid assets (stock in Apple Inc), or simply IOUs (such as U.S. treasury or corporate bonds.)The US is not the only developed country that has this problem - it’s just the largest of them. For example, the UK has an even bigger imbalance on a per capita basis (and, as a result, wide swathes of central London are by now owned by wealthy Russians and Middle Easterners.)In the ideal free-market world, the USA would be unable to maintain the trade deficit in the long run, because the exchange value of its money would fluctuate in response to its balance of trade until the two met.Why doesn’t that happen in the real world? The answer is, because some countries don’t subscribe to this notion of unrestrained free-market capitalism. Several large players prefer to hoard U.S. IOUs. For a long time, China was a major sink for treasury bonds, because they liked to keep the exchange rate of the yuan artificially low to stimulate their exports. (This is no longer the case, however.) Most oil producers (Saudi Arabia, Oman, etc) have large sovereign wealth funds, some of them so huge that they could stop their oil pumps today and live on interest generated by their SWFs in reasonable comfort for the next 50 years.In addition, the U.S. treasury bond is still considered the gold standard in value preservation (pun intended), since the only serious free-market counterpart of the U.S., the European Union, has significant internal economic problems.Looking at the balance of trade gives you a very skewed perspective. Countries the US has trade deficit with are not necessarily the same countries to blame for the situation. Nor is the US itself to blame (its approach to the economy is mostly hands-off). Labeling mainland China a currency manipulator back in 2005 might have been advantageous, but other than that, I’m not certain that anything could or should have been done back then or should be done even now.

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On February 2, 2017, Snap(chat) Inc. filed its initial public offering (IPO). The company is expected to seek a market valuation of more than $20 billion and wants to raise at least $3 billion in its initial public offering. It may even seek as much as $4 billion, which would make it one of the biggest technology offerings in American history. A lot of juicy details were in its S-1 filing. Here are some of the highlights:User Growth Stunted. Snapchat’s growth slowed 82% since Facebook launched its “Instagram Stories” in 2016. Facebook replicated one of Snapchat’s most core features. It drew user attention away from Snapchat and onto Instagram. Partly because of that, Facebook had a killer 4th Quarter and now has plans to copy many other features of Snapchat, including live video broadcasting and disappearing messages.Facebook putting up roadblocks, Snap users slow down.Litigation. Snapchat has not fared well in litigation (see my Medium article “The Lawsuits Haunting Snapchat”). It was revealed that Snapchat paid its ousted founder Reggie Brown $157.5 million in cash. The lawsuit was settled in 2014 with a background reminiscent of Facebook a la Eduardo Saverin. Reggie claimed he came up with the idea of Snapchat while at Stanford, but the other two co-founders stole his work and pushed him out after he left to work for a summer. Another cautionary tale for you young startup founders. See my Quora article about this here.Pay that man $157.5 million to go away.Money and Marriage. After launching IPO, CEO and Co-Founder Evan Spiegel is estimated to be worth $3.7 billion. He also married Victoria Secret model Miranda Kerr. But who’s keeping score?Lifestyles of the Rich and Famous.LA Investor Shade. What is most surprising to me about this IPO is that no major venture capital firm based in Los Angeles invested in Snapchat(looking at you Mark Suster, Upfront Ventures). Snapchat is raising nearly the entire amount of all VC investments in LA in 2016. Not only are the founders now billionaires, nearly every early Snapchat employee with large stock options will soon be able to cash those chips in.— Hat Tip for the above: Erin Griffith of Fortune’s Term Sheet. http://fortune.com/2017/02/01/snapchat-ipo-la-tech/Where’s the love, LA investors? Credit: FortuneMoney, Not Profitability. Snap is making some good money, it’s just not profitable. Yet. Its first public prospectus shows that it built a nearly $405 million advertising business in just over two years. But the company lost $514.6 million in 2016, although it is difficult to compare it with rivals like Facebook and Twitter as it does not own its own server farms. The company entered into a long term deal with Google which will hopefully clear up some of those expenses. It was also clear that the founders would do very well from the listing. Evan Spiegel’s regular compensation package was $2.6 million last year alone (this is on top of the $3.7 billion he’s worth). His co-founder, Bobby Murphy, also owned a $3.7 billion stake in the company.YoY growth is down. Credit: CB InsightsReal Estate Gobbler. Snapchat bought and leased over 300,000 square feet in Venice, CA — earning the status of a “US real property holding corporation” to buy and lease expensive real estate. At the end of 2016, Snap employed 1,859 employees, but there’s only so much housing and office space left on the westside of Silicon Beach. So Snap started making deals with the locals — even kicking out Nextspace / Amplify LA just to make room for its employees. Many long-time residents are feeling the pinch to handle an influx of tech workers, similar to San Francisco’s plight.Snapchat: Mine.Snap Foundation. As of February 1, 2017, Snap established the “Snap Foundation.” After the IPO is launched, the company and its co-founders have each pledged to donate up to 13,000,000 shares of Class A common stock to the “Snap Foundation” over the course of the next 15 to 20 years. It’s anticipated that the proposed programs of the Snap Foundation will support arts, education, and youth. Yay for charity!EDIT: Some other interesting facts other folks have pointed out:Snapchat was second fastest unicorn to go from first funding to IPO (Magic leap was #1)Credit: CB InsightsSnapchat’s Price-to-Sales ratio is off the charts (see article).Credit: Fortune,New stockholders cannot vote; Spiegel and Murphy control the boardSnap spent $400M last year on Google Cloud services; it will spend another $2B in the next 5 yearsSpiegel borrowed $15M from Snap last year, on top of $5M in previous years, but then paid it back before IPO.Snap paid $650k to Evan Spiegel’s dad’s law firm, Munger, Tolles & Olson over past 3 years.Evan Spiegel spent $900k last year for bodyguard protectionAnd perhaps the most interesting fact were these words in the S-1:Sexting, barf, party goat, BrexitConclusionDespite the fact that no Los Angeles venture capital firm made a dime in Snapchat, this marks a huge win for Silicon Beach. For as long as LA has been around in the VC world, it’s been under a deep shadow cast by Silicon Valley. Whether Snapchat is a good long term investment, significant capital will be (and already is) pouring into Silicon Beach. And it will likely continue to pour out into our startup ecosystem.Snapchat put LA on the map. Next time a company goes public in Silicon Beach, let’s hope it’s actually backed by LA-based investors.