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Wed May 23, 2012, 04:14 PM

I wish no ill will on those who lost money in the Facebook IPO but I...

...thought it was interesting in reading about how the majority of folks took a bath on the deal and came out of the tub with substantially less money than they went in with.

Just a day or two before the IPO, I was reading articles which didn't mince any words and basically said "Hey, only the top customers (at whatever the selling firms/banks were) are going to get a chance to buy this stock, so if you're not already sinking money into the market, you're low on the totem pole."

Now, while that's paraphrasing it's definitely not paraphrasing much. It had been a while since I'd seen this sort of naked taunting between one economic group and another in articles in what would otherwise be well-respected business publications.

I didn't think so much about it at the time but it was a curiosity to me.

And then of course, all the tumbling-down stuff happened. And I read about the better-informed groups of potential investors, who were given information which was more accurate and which would cause a person to think twice about investing at that price. From everything I've read, that more-protected group were the high rollers. What casinos call "whales". Big, big money investors.

I guess my point is a lot of people grossly misunderstand what the 1% is, who the 1% is. Maybe you have $50k in the bank. Maybe you have $200k in the bank- or maybe a million. Maybe you see something like the Facebook IPO as a way to quickly parlay a good chunk of that cash into something more, make ya even richer!

I live in a town where $50k in the bank is pretty damned rich. A million in the bank? Oh, you'd be financially teabagging on most of America if you wanted to.

But you're still not in the 1%. You're still a sucker on the boardwalk and Morgan Stanley and Goldman Sachs are carnies handing you the baseball, for a price, and showing you how you can win big if you just knock over the milk bottles. Oh, it's not the same boardwalk that you and I walk down. Much glitzier, much more exclusive.

It's the same fleecing machine, though. Just a nicer version of it for people who might fancy themselves as movers and shakers. Being in the 1%, IMO, is not just about how much money you have in the bank. It's about the connections you have, how much pressure you exert to get your way, bend the rules, subjugate others. Everyone else is just fruit the Morgan Stanleys of the world pick and eat at their leisure.

This is why people who have $5 million in the bank should still work hard for banking regulation. Chances are, they're still on someone's menu, just like the rest of us.

PB

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Arrow 32 replies Author Time Post
Reply I wish no ill will on those who lost money in the Facebook IPO but I... (Original post)
Poll_Blind May 2012 OP
woolldog May 2012 #1
Poll_Blind May 2012 #5
A HERETIC I AM May 2012 #23
KurtNYC May 2012 #25
Whisp May 2012 #2
Laurian May 2012 #4
JDPriestly May 2012 #22
The Velveteen Ocelot May 2012 #3
Poll_Blind May 2012 #6
The Velveteen Ocelot May 2012 #10
FiveGoodMen May 2012 #20
chervilant May 2012 #21
panader0 May 2012 #7
Chan790 May 2012 #15
ikri May 2012 #32
yortsed snacilbuper May 2012 #8
The Magistrate May 2012 #9
pnwmom May 2012 #11
rhett o rick May 2012 #12
gratuitous May 2012 #19
AtheistCrusader May 2012 #13
Poll_Blind May 2012 #17
Spazito May 2012 #14
Robb May 2012 #16
aquart May 2012 #18
sendero May 2012 #24
KurtNYC May 2012 #26
CrispyQ May 2012 #27
WilliamPitt May 2012 #28
HCE SuiGeneris May 2012 #29
KharmaTrain May 2012 #30
raouldukelives May 2012 #31

Response to Poll_Blind (Original post)

Wed May 23, 2012, 04:17 PM

1. were a lot of retail investors in on this?

The conventional wisdom was "stay away, FB is way overvalued"

It's not like we're in the 90s again. Fool me once shame on you, fool me twice ....

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Response to woolldog (Reply #1)

Wed May 23, 2012, 04:34 PM

5. I really don't know but from what I gather there were two camps...

...and one of them, the one which really didn't get all that much attention, was the group which basically said as you did. Mostly, it was the price to earning ratio they were flipping about, and rightfully so.

From Wall Street Journal Blog:
Three Facebook investors have filed a civil lawsuit in Manhattan federal court, alleging the company and its underwriters failed to properly disclose changes to analysts’ forecasts made at the underwriting banks.

The suit follows news Tuesday that analysts at Morgan Stanley and Goldman Sachs Group cut their revenue forecasts on Facebook in the midst of the investor roadshow, a change that wasn’t widely disseminated.

Late Tuesday, Massachusetts sent a subpoena to Morgan Stanley following the reports.
Several other plaintiffs’ lawyers have said they filed suits over the offering in other courts throughout the country, seeking class-action status.

Wednesday’s investor suit, which is seeking class-action status, alleges the changes made to Facebook’s offering document, which said that mobile user growth could slow revenue growth, didn’t accurately portray the impact on Facebook’s revenue growth.


I'm thinking while there were voices out there, advising hesitance, there may have been a great deal of cuddling between banks selling these shares and big money (but still not 1%-ish) investors. Think about all those commissions!

I can see it now- an invitation to lunch from your broker, the "I can't say this over the phone, but I'm tellin' ya, this Facebook IPO, man you want to get on it. And like Noah, I'm saving you a place on the ark! Stop looking at the prices, I'm treating here. Get whatever you want!"

It's like Jack Lemmon selling Rio Rancho land in the movie Glengarry Glen Ross.

PB

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Response to woolldog (Reply #1)

Wed May 23, 2012, 09:16 PM

23. It is an extremely rare situation where the average...

Small investor has a shot at buying shares of an IPO at the outset.


That's just not how it works.

The actual trading has to get under way before you and I can call a broker and put in a buy order.

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Response to woolldog (Reply #1)

Wed May 23, 2012, 09:36 PM

25. I know people who short sold it on Friday

You can make money up or down.

This thing never looked good on paper -- 100x earnings + the company has been in business for years = way over valued, revenue falling in the first quarter this year and GM made the unprecedented move of warning the public that Facebook was over valued.

This thing was worse than Crispy Creme and that was a fleecing.

Zuck and his buddies are out on spending sprees right now. They could give a shit if it all tanks next week -- they are dancing in the end zone. Game over.

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Response to Poll_Blind (Original post)

Wed May 23, 2012, 04:17 PM

2. very well said.

 

I'm not up on the FB story but what you say is true true of haute money. It's a big Casino for the super rich. Schmucks like us can't compete with insider info and all that jazz they have on their side.

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Response to Whisp (Reply #2)

Wed May 23, 2012, 04:28 PM

4. Not only can we not compete in the market, we can't earn anything with money on deposit in a bank.

We're just left behind on all counts. As a retired couple, we can only hope to hold on to what we have now, with no chance of improving our situation......

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Response to Laurian (Reply #4)

Wed May 23, 2012, 09:01 PM

22. Precisely. I bet we could get a lot of retired Republicans who would agree

that what you have described is the real crisis -- not a shortfall in the Social Security Trust Fund.

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Response to Poll_Blind (Original post)

Wed May 23, 2012, 04:25 PM

3. Most of us peons have no concept of what it means to be *really* rich.

I mean Mitt Romney rich. We think somebody with a net worth of a few million bucks or so is rich - but he's not; not really. Yes, that is certainly an enviable bank balance that most of us have no chance to acquire, but that guy isn't a real 1%-er because he almost certainly has a job that he needs in order to keep that bank balance. It is most likely a very good job that pays very well - maybe he or she is a partner in a successful law firm, or a surgeon, or a business executive. But if he loses it, well, there goes the summer cabin, the BMW, the kids' college fund and the nice house with the granite countertops and stainless steel appliances and the media room and the swimming pool in the gated community.

You aren't really rich rich as long as you have to depend on an employer for your income. Really rich people don't have jobs at all (or, if they do, they don't need them). They live on their investments. And sometimes, as with the Facebook IPO, that's just like a casino. But the truly rich have so much money that losing a few mil on an IPO isn't a big deal. They'll take the tax loss and go on to the next big thing.

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Response to The Velveteen Ocelot (Reply #3)

Wed May 23, 2012, 04:46 PM

6. +1

That about sums it up perfectly, based on my experience. At least as jumping off point. It's not that that kind of money changes people, necessarily, it's that they don't even breath the same air, usually, that we do. I always thought the documentary "Born Rich" did a great job of showing what a different world the really mega-rich live in. How different it is from the world we live in. Some of the differences are not just related to money- it goes beyond that- and into an entire world view which typically lacks some of the urgencies the rest of us live with, and cause us to strive for change.

PB

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Response to Poll_Blind (Reply #6)

Wed May 23, 2012, 04:59 PM

10. Yes. It's a whole different way of thinking

that most of us can barely imagine. If, for example, I won the Powerball lottery and wound up with some millions of dollars, what I'd be thinking is, "Yay! I don't have to worry about whether I'm going to outlive my pension funds and I know my retirement is secure even if Social Security goes away, plus, I can buy some cool stuff and go on a nice vacation!" I would not be thinking about IPOs or how to buy a Congressman or whether I should contribute to ALEC because power isn't part of my analysis at all. When I think about having a lot of money I think about how it would mean always being sure I can pay all my bills and have plenty left over to live on comfortably and buy some nice stuff. The really rich think about how they can use their money to obtain power so they can get even more money.

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Response to The Velveteen Ocelot (Reply #10)

Wed May 23, 2012, 06:54 PM

20. Yes, the really rich want the rest of us to be their slaves.

That's why they never have enough.

More money buys more politicians, tilts more laws in their favor, eventually allows them to do anything they want to anyone without fear that some court will uphold some pesky nobody's long-rescinded constitutional rights.

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Response to Poll_Blind (Reply #6)

Wed May 23, 2012, 07:21 PM

21. You nailed it...

The members of the Global Oligarchy are few in number (less the 370), yet they own and control more than 45% of the world's resources, including human resources.

The top 400 richest people are from Australia, Austria, Bahama, Belgium, Bermuda, Brazil, Chile, China, Colombia, Czech Republic, Denmark, England, Egypt, France, Germany, Hong Kong, India, Israel, Japan, Kazakhstan, Korea (South), Kuwait, Lebanon, Malaysia, Mexico, Monaco, Norway, Portugal, Russia, Saudi Arabia, Singapore, Sweden, Spain, Switzerland, Taiwan, Thailand, Turkey, Ukraine, United Arab Emirates, and Venezuela.

Despite the geographic diversity of the uber wealthy, their common socioeconomic status renders each a member of Richistan, whose citizenry enjoy the rarest of comestibles, the finest accommodations, the most expensive trinkets, and richly appointed, exclusive residences. Denizens of Richistan travel in private jets, yachts, and limos; and they NEVER discuss their wealth.

Fully one-third of the wealthiest 400 are from the United States. Almost half of the 50 wealthiest people are from the United States. (Bill Gates was toppled from his rarefied status as the richest person on the planet in March of last year; replaced by Mexican mogul Carlos Slim Helu.)

When you contemplate this radical income inequity, please understand viscerally, that you are NOT a member of this exclusive club, nor are you likely to EVER be. You are an insignificant member of the vast hoi polloi. The denizens of Richistan comprise a mere 5.28 X 10^(-6)% of our planet's population. For those of you who are math challenged, that number is 0.00000528%. You are as likely to win the lottery as to join the ranks of the uber wealthy.

If anyone thinks that the decline of the US as the premier Global Bully will have any real impact on the wealth and power of the obscenely wealthy, I have to offer you exclusive beach front property in Las Vegas.

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Response to Poll_Blind (Original post)

Wed May 23, 2012, 04:55 PM

7. I know I'm a bit old fashioned and ignorant about these matters

but I can't understand the value of a product I can't hold or see. Facebook is like a lot of paper shuffling. I know there are many people who sit in cubicles and make phone calls or buy and sell on line, but Where's the product?
Manufacturing is disappearing in this country. Now it's communication for communication's sake.
Facebook---I don't go there.

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Response to panader0 (Reply #7)

Wed May 23, 2012, 05:52 PM

15. The product is information.

Not the kind of information that anybody can have, such information is worthless; when you're on Facebook, Facebook can track what you look at, they can data-base every word you say, they know what you like...all of that is a product that is sell-able, it's a product that is scarce. (It's a commodity that can be overvalued like any other as the Facebook IPO shows.) There is a lot of money in that actually though. It's the secret that the credit-card companies have known for years: your buying habits and their records of such are worth more to them than their finance business. The information economy was always going to be the next major economic move though we didn't always know it...the "service economy" is/was a scam and some people knew it from the outset, the same people that knew the manufacturing economy was terminal, the end-throes of the Industrial Revolution. Something had to come along to be the next "age"...we didn't know it was going to be the vast commodization of information made possible by mobile-comm, internet and social-media; we knew it was going to be something...or else we were going to be in a world of shit. That something is the information economy.

If we were still a manufacturing economy, we'd be dead-stagnant globally (If you've never read Player Piano that's what we'd be approaching on if our economy was still manufacturing-centric...the future would be a grim one of low employment.) Don't get me wrong, we need domestic manufacturing and need to re-domesticate manufacturing (and end free-trade and re-engage in tariff-driven stabilization), but even if manufacturing had never fallen off...we'd be in shit creek if information as a commodity had not overtaken it as an economic-driver. Technology has been displacing manufacturing and manual labor for 8000 years. It's not China that stole the blue-collar factory jobs half as much as it's IBM's computers and GE's machines just as it was specialized tool-and-die and the assembly-line that displaced the guild craftsman and the stableboy and the small-farmer. It takes less people to make and repair the machines than it took to do the work the machines do now. There is less need for less manufacturing labor-force, globally and domestically.

Want a strong economy? Push manufacturing and information as the twin key economic drivers. Invest in technology that increases effectiveness of both. Accept that one is waxing and one is waning...and someday too the waxing will be the waning as something waxes anew in an increasingly post-capital world. Capitalism is the handmaiden of industrialism, industrialism is ending. Manufacturing is ending. There will ever be need for fewer makers of things.

20 years hence, the global manufacturing workforce will be halved again, the few will make the computers that run the machines that fix the machines that make the goods and the computers eliminating the need for ever more of the few. Nobody mourns the stonemason or livestock-harness maker or woodcutter.

Most future products will not be the things you can hold or see and the things you can hold and see won't be the valuable products central to the economy.

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Response to panader0 (Reply #7)

Thu May 24, 2012, 01:58 PM

32. The product is you

If you have a facebook account, their customers are advertisers, their products are you and the information that facebook gathers about you that they can sell to advertisers for a fee.

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Response to Poll_Blind (Original post)

Wed May 23, 2012, 04:57 PM

8. "A million in the bank? Oh, you'd be financially teabagging on most of America if you wanted to."

Most of the tea baggers I see look like they're poor.

I think they will vote against their own best interests because they are jealous of people that have government jobs or are college graduates, plus they don't like black people!

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Response to Poll_Blind (Original post)

Wed May 23, 2012, 04:59 PM

9. Well Said, Sir: Well Said Indeed

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Response to Poll_Blind (Original post)

Wed May 23, 2012, 05:28 PM

11. I agree. People with even $5M need bank regulation as much as the 99%.

And they should be willing to pay the higher taxes to support that and all the other government services they rely on.

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Response to pnwmom (Reply #11)

Wed May 23, 2012, 05:41 PM

12. I totally agree. But IMHO many if not most Americans are driven by greed.

I think the American Dream has changed. Instead of having a good job, strong marriage, vacations with the family, one spouse to raise the children, money for the kids college and a little for retirement, which is no longer possible, we want to win the lottery. That's happiness.

I totally agree that those with $5m in the bank need to watch out, their time will come. But their greed clouds their judgement. Where you and me mite see $5m as a very secure lifestyle, they only see that they want sooo badly to be in the 1%. And regulations might hinder that.

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Response to pnwmom (Reply #11)

Wed May 23, 2012, 06:45 PM

19. As John Reed told Bill Moyers

Reed was the last chairman of Citibank before it disappeared into Citicorp. He was on with Bill Moyers some months ago, and likened a regulatory structure to the brakes on a car. Why does a car have brakes, he queried. Not so it will stop, as you might think. No, you have brakes on a car so you can go fast. How fast would you go in a car that didn't have brakes? Would you even get in a car that had no brakes?

The same thing is true of the regulatory structure of the financial world. Without meaningful rules and their enforcement, there's nothing to stop markets when they careen out of control. You can be the best driver in the world, but without brakes on your car, you're going to crash. You can be a captain of the financial universe, a god among men, but without a sound regulatory structure, you're going to crash.

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Response to Poll_Blind (Original post)

Wed May 23, 2012, 05:45 PM

13. When the algorithms that move the financial exchanges begin to carve up the physical earth

you know the little guy has absolutely no fucking chance at all. Period, full stop. You can only guess which way the big guys will actually move, and if they make a mistake, they have hedged in ways you cannot, so you take a bath and they don't.

http://www.ted.com/talks/kevin_slavin_how_algorithms_shape_our_world.html

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Response to AtheistCrusader (Reply #13)

Wed May 23, 2012, 06:04 PM

17. +1

Excellent TED talk, just finished watching it. Thank you so much for including that link!

PB

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Response to Poll_Blind (Original post)

Wed May 23, 2012, 05:47 PM

14. Great read!

I could not agree with you more.

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Response to Poll_Blind (Original post)

Wed May 23, 2012, 05:54 PM

16. Well, damn.

That was well done. K&R.

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Response to Poll_Blind (Original post)

Wed May 23, 2012, 06:17 PM

18. The problem with fleecing millionaires is that they are vengeful and they hire lawyers.

I seem to recall that our current NASDAQ rules are the result of some very fleeced and very angry millionaires and their chatty lawyers.

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Response to Poll_Blind (Original post)

Wed May 23, 2012, 09:27 PM

24. No matter how hard I try..

... I cannot feel sympathy for anyone who bought into the idea that Facebook is a blockbuster company. It is not, it will never be and the hype surrounding this IPO was as transparent as the buildup to the Iraq war a decade ago.

Virtually EVERYONE who bought this turkey was betting on the "greater fool" theory but guess what, the fools are tired of getting fleeced and they are just not playing any more.

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Response to Poll_Blind (Original post)

Wed May 23, 2012, 09:50 PM

26. this thing was supposed "to excite retail investors" because FB is a "feel good" company

I'm wondering if the announcement of how the IPO was exclusive and aimed at whales was just part of the hype actually aimed at novice retail investors?

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Response to Poll_Blind (Original post)

Thu May 24, 2012, 11:21 AM

27. You have a better shot in Vegas & you'll have a better time too.

High speed traders are moving as close to Wall Street as possible to shave milliseconds off the time it takes to connect & make the trade. How can the average Joe with an account at Scott Trade play in that game?

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Response to Poll_Blind (Original post)

Thu May 24, 2012, 11:30 AM

28. "Chances are, they're still on someone's menu, just like the rest of us."

Spot. On.

And very well said.

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Response to Poll_Blind (Original post)

Thu May 24, 2012, 12:18 PM

29. Just saw this on another thread... Oh, the irony!

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Response to Poll_Blind (Original post)

Thu May 24, 2012, 12:22 PM

30. IPOS Have Always Been Scams...

The brokerage houses love to reel in the suckers and play pump and dump at the expense of those who want to get rich quick.

Those who bought in on the FB IPO were asking to get shat upon financially. The price was too high to start out with and it was sure to drop the moment the daytraders got in and out. The banks ended up propping up the stock so it wouldn't turn into a bigger fiasco and disaster than it was but those hoping to get rich quick got a rude awakening. But this is how IPOs usually work. They are set up to bring in the "loose change" and make a quick hit for the brokerage house and the lucky suckers who they decide to help finance.

The only people to make money on this are those who had stock before the IPO...once the high price went public, that's where they made their big bucks. Now I expect this stock will slowly fade as investors slowing dump shares in hopes of not taking too big a bath and looking for the "next big thing".

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Response to Poll_Blind (Original post)

Thu May 24, 2012, 01:34 PM

31. Mind if I rant?

If people don't believe in climate change then keep propping up Wall St. Keep pretending that there are good stocks and bad stocks. Good corporations and bad corporations. Maybe once upon a time we lived in a world where one could dabble in stocks and have polite conversations about future returns and value. I think we have entered a new world with the evidence of human created climate change.
If you believe that climate change is real. That it is caused by or at the least exacerbated by human activity how could you continue to support and put your money and faith into the very system causing the most damage? Discounting all the crime, corruption and scams Wall St allows to perpetrated on the weakest just the single issue of CC and the hundreds of millions of people and animals that will suffer from it only because of our insatiable greed has to tweak someones empathy string just a tad.
I'm not sure it's possible to be a "green investor". The entire apparatus seems sadly to be the problem to me and supporting any part of it is supporting it as a whole. Unless and until the harshest threat to enjoyable life on this planet is addressed and considered first in every decision it would seem to be, at the least, illiberal to profit from it.
Then again, I could just be crazy. To me, being a progressive liberal in the stock market would be like John Muir working as a lumberjack or a PETA supporter bankrolling Michael Vick.
"Well, I don't personally fight the dogs. My portfolio manager makes the informed investment decision."
Yeah well, maybe. Or maybe we are the change we have been waiting for. Or, I might just be clinically insane.
End of rant.

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