Archive for the ‘The Market Ticker’ tag
When insiders sell stock, that’s usually a strong sell signal for everyone else. As I mentioned in a previous post, many of Facebook’s early investors cashed out rather than hang onto their shares, and the stock price plummeted from the IPO price of $38 (at one point the share price had risen to $45) to close at $21.94 on Friday. In after-hours trading, Facebook (ticker symbol FB) traded down another 1.33% to $21.65. Trading was closed Monday and Tuesday due to Hurricane Sandy, but trading reopens today.
After trading hours on Friday, October 26, several senior Facebook officers made required filings of 4s forms to the SEC reporting that on October 25, they converted their newly unlocked restricted shares from Class B common shares, which get ten votes, to Class A common shares which only get one vote. Unlike the Class B shares, the Class A shares can be traded in the public market. In fact, the only reason to give up the ten times voting rich Class B shares for Class A shares is to ready yourself to sell the shares, since Facebook offers no economic value when the exchange is made. In other words, as soon as their shares were unlocked, Facebook’s officers got them ready for sale in the open market.
That’s not a surprise, right? After all, when the rats start abandoning the ship, one is usually wise to look for the lifeboats and life jackets lest you find the water rising around your ankles.
The bigger problem Facebook has is the intrusion issue. Janet noted something that I’ve noticed as well on my page in the last couple of weeks — the company has ramped up it’s abuse of users in the form of “liking things.”
That is, suddenly my top-level page has all sorts of product and service “touts” that I don’t think people intentionally posted there. But it sure looks like it from a casual glance. This, incidentally, led me to update my status warning people that I’d be more than happy to prune those who are “friends” and both have and will continue to do so.
The funny thing about this is that FacePalm seems to think that they’re the “creator of value” with such stunts. They’re wrong. Like so many other allegedly “value-creating” enterprises on The Internet the mistake they make is thinking they can appropriate the actions of their users and sell them on a forward basis without eventually pissing people off.
That has never proved to work in the history of The Internet and it won’t this time either.
I maintain my view that Facebook is ultimately a zero; it’s cost of operation will exceed its revenue eventually, and when it does it will simply bleed out until the carcass is washed into the drain of history, much as happend with Myspace.
Disclosure: I own PUTs.
by Karl Denninger
There are two things every American needs to know about Bank of America.
The first is that it’s corrupt. This bank has systematically defrauded almost everyone with whom it has a significant business relationship, cheating investors, insurers, homeowners, shareholders, depositors, and the state. It is a giant, raging hurricane of theft and fraud, spinning its way through America and leaving a massive trail of wiped-out retirees and foreclosed-upon families in its wake.
The second is that all of us, as taxpayers, are keeping that hurricane raging. Bank of America is not just a private company that systematically steals from American citizens: it’s a de facto ward of the state that depends heavily upon public support to stay in business. In fact, without the continued generosity of us taxpayers, and the extraordinary indulgence of our regulators and elected officials, this company long ago would have been swallowed up by scandal, mismanagement, prosecution and litigation, and gone out of business. It would have been liquidated and its component parts sold off, perhaps into a series of smaller regional businesses that would have more respect for the law, and be more responsive to their customers.
I can easily argue all that’s true.
So why did this happen? And is it limited to one firm?
Let’s dispose of the latter first — it most-certainly is not!
Let’s refer back to Citi’s former chief risk officer who testified under oath before the FCIC that the firm knew that by 2007 80% of the loans they were writing on houses did not meet their published quality guidelines. They sold them to investors anyway, much like a meat-packing house knowingly selling tainted meat to consumers.
The outrageous behavior of these institutions is not really much of a surprise when one looks at history. Glass-Steagall’s eviscertation by Greedscam and then it’s ultimate repeal (and ex-post-facto legalization of the Traveler’s merger at the same time) made clear that if you were a large financial institution you could do literally anything and not go to prison. This has been reinforced since in that virtually every one of the large financial institutions has committed for more than instances of chargable fraud; under “three strikes” laws were you or I to do the same thing we’d be cooling our heels serving a life sentence in prison.
The fraud and deception starts with our youth. A few years ago I was a chaperone for the local school (including my kid) on a “field trip” to a number of important everyday local institutions. One was the post office where the kids saw the process that mail goes through to get from the big truck to your local carrier’s bin on its way to your mailbox.
The other was a local bank in which they proudly showed off their vault and stated that they took deposits and made loans, leaving the impression that when you deposited money it was “safe” and when loans were made it was with money the bank actually had.
Both statements were lies, of course.
In truth lending out money you never received unbacked by anything is nothing more than counterfeiting — a naked short, if you will, on the currency. Yet this is the model we have today.
“One Dollar of Capital” solves this problem but makes the bubble-blowing games impossible. It also makes asset-stripping really, really difficult. Both of those salutary changes to our economic posture for the 99% would, of course, make the 1% earn their money instead of stealing it and thus are found unacceptable.
The real question is why we, the people, tolerate this crap. The game thus far since 2007 has been to run fear — claims of “tanks in the streets” and similar, all of which were you to do it would constitute a serious felony known as “terroristic threats.” So how is it that a Treasury Secretary gets away with it?
Well, again, because we the people allow it.
In short the screwings will continue until the people rise and demand it be stopped. Unfortunately the imbalances that the “powers that be” are trying to continue in an futile attempt to fake a “recovery” are simply digging a deeper and deeper hole when it comes to federal deficits and thus the inevitable size of the contraction that must come in government as a whole.
Definitely worth watching… I’m on about half-way in.
I think you’ll find the interview enlightening — enjoy.
Here is the interview recorded with Jim Puplava of Financial Sense discussing Leverage: How Cheap Money Will Destroy The World, available at all the usual places (click the book at right to order your copy!.
It’s hard-hitting, but is it correct.
To a large degree, yes it is.
Let’s talk about what Bain, and other “private equity” firms really do. Their task — how they make money — is to find companies that are “inefficient” and turn them into more-efficient entities. Their reward for doing so is that they take some of the spoils for themselves — frequently as much as a quarter of the value in the firm or more.
Efficiency is not a bad thing, and driving out inefficiency is, on balance, good. The problem is how that efficiency comes about.
We live in a world where our government has conspired with banks to make cross-border arbitrage profitable. Very profitable. The result has been the evisceration of our working-class population — the vast majority of America. Our manufacturing has been made “more efficient” by moving it to China, where people labor under effective slave conditions — conditions so good that recently a group of employees at Foxconn threatened to commit suicide en-masse.
But it doesn’t end there. The abuse of leverage makes possible the taking of more and more debt by firms that then gets paid out to these private-equity raiders. The putative argument for this sort of structure is that the debt will help grow the company and thus everyone will benefit.
But it doesn’t always work out that way.
KB Toys is one example outlined in that video that is truthful. KB was larded up with debt and ultimately collapsed under the load. Yet Bain made a monstrous profit on what was, objectively, a failed transaction.
This sort of “strip it and steal it” model is entirely legal. But the question is not whether something is legal — it is whether it’s a model we ought to encourage and base our economy upon, and whether someone who has practiced this destruction of American jobs and the offshoring of capital should be elected President.
The answer, quite simply, is no.
Leverage outlines a whole host of lawful offenses in this regard. They are all enabled and in fact made profitable by the explicit actions of government. Government’s role is to protect the rule of law, and yet when it comes to trans-national arbitrage what’s legal in one place may not be in another. The exploitation of workers and destruction of the environment may be perfectly legal in China, but here in America we made both unlawful. This is where government has a proper role via the imposition of tariffs and imposts, which so-called “free traders” oppose. In point of fact, however, this is not “free trade” at all — it’s free and legal abuse that firms like Bain make a huge amount of money exploiting.
It is not possible for me to endorse or support a candidate that believes in and has personally profited from this sort of arbitrage. That something is legal does not make it right. It is lawful, for example, for 10 year olds to be sold into sexual slavery in some nations, and yet we recognize this as an unspeakable evil and in fact have a Federal Law on the books that states that if you travel to those nations for that purpose you will, if caught, be sentenced to prison.
Our labor and environmental laws are either just and defensible or they are not. If they are not then we should repeal them. If they are then we must defend them. Since we cannot force other nations to adhere to our model of environmental and labor law, our only means of enforcement of our standards in this regard is via tariffs.
There are those who say that it’s unfair to penalize Bain, and Romney, because they exploited a perfectly-legal means of arbitrage, or that Romney left Bain before some of these events occurred. But that something is lawful does not make it right, and the leadership of an entity defines what it is and does. .
The willful and intentional destruction of American industry and jobs may be legal but it is a fair question as to whether you want a man who was actively engaged in this, and became wealthy doing so, to be President. especially when any denouncement you make of an entity’s actions wait until after you declare your candidacy and make off with the money gained from those practices.
During my time in business I have had many opportunities to take actions that were legal but I found distasteful. It would have been easy to justify those actions by saying that there was nothing legally wrong with them, but that’s not how I live. Money is how we keep score in a capitalist society, but when money becomes the only means of keeping score then we’ve got a problem, because rich and powerful people can always bribe their way to redefinition of the law to suit their pocketbooks.
I believe we need, and should demand, a higher standard in our elected officials.
Karl Denninger On The Edge
by Karl Denninger
Look folks, it’s simple — what the IMF wants, what the banksters want, here, there, everywhere, is the same thing: Your money, as much as they can get, and they don’t care what happens to you.
Austerity policies are now widely regarded as having failed, and this failure is increasingly obvious in the country elected to act as Austerity’s Child. The banking collapse, and the legacy bequeathed by the Irish state’s extraordinary September 2008 bank guarantee, has seen society in Ireland reshaped as a petri dish for IMF, European commission and ECB experimentation. Successive waves of cuts have been stipulated by the Troika in return for its loans, but implemented without resistance, and arguably, a degree of enthusiasm, by the two governments of the “post-sovereign” era.
Yep. I said originally that Ireland should give the finger to the banksters, and if the government refused then the people should give the finger to the government, ejecting and replacing it.
What is “give the finger”?
Simple; you tell them this: You made a bad loan, you’re going to eat it. Period.
Yes, I know, pension funds and others bought the paper. Guess what — they did no diligence (or insufficient diligence) and they’re going to lose money as a result. That’s what’s supposed to happen when you do something stupid!
In point of fact it is the only way by which the market works. When you do smart things you make money. When you do dumb things you lose money. When you do really stupid things you go bankrupt.
There’s still time Ireland. Tell the banksters to get stuffed. Right here, right now.
As for Europe, same deal among their governments — including Greece. Tell the banksters to go to Hell.
As for here? Same deal. Got a loan out and are you tired of the “ethics” of these firms? Consult a tax and legal advisor, find out what can be done to you (if anything) if you tell them to go to Hell, and if that’s the correct business decision then tell them to blow their alleged debt out their ass.
Note carefully folks: American Airlines — a big corporation — just did exactly that.
They filed a preemptive bankruptcy to avoid paying for things they had agreed to pay for because they determined it was no longer to their advantage to do so.
WAKE UP IRELAND. WAKE UP GREECE.
And wake up AMERICA and AMERICANS.
There is NO moral obligation to pay. There is only the ability (or not) to enforce a contract.
The Market Ticker
by Karl Denninger
The bottom line is that apparently some warehouses and bullion dealers are not a safe place to store your gold and silver, even if you hold a specific warehouse receipt. In an oligarchy, private ownership is merely a concept, subject to interpretation and confiscation.
There’s the punchline — let nobody claim that Jesse buries the lede!
If this went over your head, let me explain (and go read Jesse’s article on it) — the bankruptcy trustee is now apparently either attempting to or actually has seized customer property held in gold and silver vaults if those bars were transacted through MF Global!
A warehouse receipt is not an unallocated, nebulous claim. It contains a serial number of one or more specific bars sitting in a warehouse. You are in fact charged a storage fee for the service of maintaining security over your property and you have had to tender payment in full as well. This is a bailment in any sense of the word and under any theory of law I’ve seen — and yet now, suddenly, it is proposed that your property held under bailment by this institution can be seized and stolen to pay unallocated bankruptcy claims against the bankrupt company’s estate!
This sort of action turns the entire premises of private property and bailment on its ear! NO — and I repeat NO — property held allegedly for your benefit by any third party anywhere is safe under this “theory” of the bankruptcy trustee. Yes, this includes something so simple as the money on deposit in your bank account.
The Karl Denninger Podcast – December 12, 2011
They just don’t learn, do they? The market is unimpressed with the European shin-dig, with good reason. Well look at whats coming — both there and here — including Camerons reufsal to “play ball.” PS: Its Grinchmas. So says both Texas Instruments and Intel.
by Karl Denninger
MF Global’s burned commodity customers turned their ire from Jon Corzine to Jamie Dimon yesterday after MF’s creditor committee, led by Dimon’s JPMorgan Chase, objected to a plan to distribute $2.1 billion to customers who have seen their accounts frozen since Halloween.
In a Manhattan bankruptcy court filing, the creditors committee, which also includes Bank of America and hedge fund Elliott Management, said they want more assurances that the $2.1 billion is not their money.
Among their requests: They want customers to agree in writing that the money they receive could be clawed back.
Even if it turns out that your funds as a customer were stolen through a rank violation of the segregation that is supposed to be in place, JP Morgan and Bank of America, among others, want to be able to claw back your money should their claims against the bankrupt entity prove up.
So much for the alleged “separation” that the entire premise of brokerages rest upon — that your free cash and margin deposits are yours and are not “investments” in the underlying business of the firm you are choosing to trade with.
If you think this risk doesn’t apply to you and you’re in the market in any way, shape or form you’re quite-simply wrong.
This sort of demand by creditors, incidentally, that allegedly-segregated funds be downgraded ex-post-facto to that of a simple creditor is an outrage.
It is my considered opinion that the firms who make such arguments, and their executives, deserve to be dismantled.