Can’t let the month end without another Sunday Sermon.
This time a little bit of an update on the political and financial scene as I see it.
So far the Obama administration is doing great! (That was a little sarcasm in case anyone didn’t get it.)
Troops are being sent to Syria and soon we’ll get bogged down in another mess that’s none of our business and will probably take many years and many lives to get us disentangled from – leaving behind chaos and confusion and a worse situation than the one we tried to fix.
Meanwhile the economic crisis continues. Not that you’d notice. The sham recovery has meant that stocks have been on an upward trend, bonds have been doing well, and confidence is high.
And all because….
….well all because the Fed continues to print money and pour it into these markets.
Or at least it has been.
Then Bernanke made a statement a few days ago to “clarify” the government’s position.
Oh dear me!
He said that the government would… he thought… he hoped anyway…. assuming nothing unforeseen happened…. at least nothing major that they didn’t see coming… that they would ease off their money printing and bond buying… or at least they might… soon or maybe later… but sometime at least… well, it was being discussed…
Needless to say with that dithering statement confidence immediately melted away from the market and the DOW headed down by more than 500 points. In fact investors and brokers seemed to be selling everything, not just stocks and bonds but gold and other commodities too. Not quite panic but definite unease was clear to be seen.
The only reason it didn’t all collapse is that while the underlying message is clear, the Fed’s delay in implementing their tap turn off gives investors a little more time to make a little more money – they hope.
The problem with that is knowing when to sell. And that is the trick that has eluded investors from individuals to hedge fund managers since the markets began.
What Obama and Bernanke want is crystal clear. They see the folly in printing money and buying bonds at near $100 billion a month and they know they have to stop it eventually otherwise an even bigger financial catastrophe will result.
Their problem is they want to stop it without causing a massive market correction.
And that, as Samuel Goldwin used to say, can be summed up in two words – im possible!
It will be interesting and perhaps a bit painful to watch what happens next.
As well as being the biggest F’ing title ever seen on a WordPress blog, it drew attention to the debacle that was the much heralded launch of Facebook shares on the stock market.
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Well, the fallout from what is now being called the IPOcalypse continues.
The head honcho at Nasdaq has had his CEO’s bonus slashed because of it, and rightly so.
But don’t start feeling sorry him just yet. Even with a slash he will still be taking home a $1.3m bonus, slightly north of half a million dollars lighter than it would have been, but still enough to get by on.
Oh yes, and that’s bonus on top of his $1 million salary!
Others at Nasdaq have also been penalized, including Anna Ewing, VP in charge of “technical glitches” that messed up the first day of trading. Her bonus was cut by over a quarter of a million dollars. But keep those hankies where they are, she is still left with a $574,125 bonus for the year.
Losses for angry brokers and traders from the botched IPO, on the other hand, have been estimated at around $500m. Nasdaq has approved just $62m in compensation, I suppose they needed the rest of their money to pay out the bonuses?
Like the banksters, it all begs the question of just how incompetent do you have to be in the financial industry to not just lose your bonus, but lose your job as well?
You couldn’t exactly call yesterday “Black Friday” the way financial pundits like to do, but that traditional “safe haven”, gold, certainly lost a lot of its shine.
In fact the price of gold went into freefall, plunging the best part of $100 an ounce in a massive selling spree and ending up below the magic $1500 mark for the first time in a while.
I don’t think anyone is sure yet just what triggered the almost panic sell off on the Comex, but my gut feeling is that, once started, the computer generated trading gizmos used by the big hedge funds etc., kicked in big time and made matters go from bad to worse.
These automatic trading monsters trigger sales when a pre-chosen stop loss figure is reached, one stop loss sell off triggers the next and so on until there is a massive market plunge, as happened yesterday. The same could just as easily happen on the stock market.
What most ordinary folks don’t realize is that the majority of traders in the financial markets are idiots. They just hang around looking at their screens and then follow whatever they see happening. It’s the herd mentality syndrome. When the big boys start to sell then the little boys follow suit and the whole thing goes from bad to worse, often without anyone really knowing who started it or why it is happening.
That seems to have been the case yesterday as there were no catastrophic economic indicators, like major inflation fears, currency collapses, etc., to trigger a significant movement one way or the other.
Whatever caused it, it is a warning to investors to be cautious. It could be a blip or the harbinger of turbulent times ahead.
Although there are many doom-and-gloom merchants with their “the end is nigh” web sites urging their followers to dump paper money, fiat currencies they call them, and stock up on gold, the truth is that gold has not been a good investment in recent months and years.
By definition the very worst a good investment should do is hold its value in line with inflation – if it doesn’t you are losing value.
For almost two years now gold has been steadily falling in value. Anyone who bought, for example, in August or September 2011 has seen their investment fall significantly in value – down by more than twenty percent in fact. You put $10,000 in, you get less than $7,900 out, and the dealers take their cut both ways.
So will the bear market for gold continue or was Friday just a glitch? Well, if you could answer that one for certain you would be able to make a lot of money.
My feeling, for what it’s worth is that the price will probably fall further. Maybe not so dramatically as yesterday, but it could easily trickle downwards to the $1200 region.
That assumes no dramatic sell offs by bankrupt governments and banks, because that is definitely a last resort measure that they would be most reluctant to take. If or when it does happen it means BIG financial trouble for everyone.
So will gold ever be a good investment again?
Warren Buffet never thought so, but it could be. Possibly a very good investment. But probably not a long term hold. Many western economies are just hanging together at the moment. The amount of debt and insolvency has to mean that at some stage the normal investment vehicles like currencies, stocks, bonds etc., will start to suffer and people will turn back to “safe havens” like gold.
IF you buy at the right time, and remember that you need to get rid of it and fast when the cycle turns again, you could do very well. But I wouldn’t jump in and buy it just yet.
Anyone who has been following this story that I posted about a few days ago, (here if you missed it), will know that the European Union bureaucrats made an attempt to steal the savings of the Cypriot people right out of their bank accounts.
With at least one eye on their chances of being re-elected, the Cypriot parliament rejected the proposal out of hand. The proper thing to do no doubt, but there is also no doubt that this will not be the end of it. Indeed the fallout continues.
Western governments are desperate because of the financial mess that they and their bankster accomplices have created. And desperate governments are known to take desperate measures to try to patch things up.
Look out for more attempts by these governments to steal your money, whether it be in the form of savings in the bank, government bonds, stocks or in pension plans. Nothing is safe from the clutches of these thieves.
The goings on in Cyprus has already proven their intent and alarm bells have begun to sound among those who are awake and paying attention.The bureaucrats’ attempted money grab has already sparked off suspicion and panic throughout Europe and elsewhere as to the amount of trust people can have in their governments.
Even among the financially stronger nations the trend is clear. In Germany, for example, a recent opinion poll showed that the majority of Germans do not trust their leader, Merkel’s, pronouncements that their money is safe in a bank.
Throughout Europe those who can are moving their money to offshore locations away from the thieving hands of their own governments. Big corporations, including US corporations, are doing the same.It has already happened in Ireland and Spain and France and, to a lesser extent, in the UK too.
What a sad commentary on how these stupid politicians and bureaucrats have mismanaged our affairs.
Will it hit America as well?
That depends just how stupid the political administration in Washington really is – which is perhaps a kind way of saying, please err on the side of caution if you are an American citizen.
The $ as a currency will probably be okay for a while, despite the humongous debt that Obama is piling up, but eventually it will become impossible to print their way out of trouble.
All those highly paid morons and herd followers called ‘money managers’ who work for the various funds that you entrust your savings and pensions to, and who do little more than buy up T-Bills with it, may find that their strategy is going to backfire. Like the banksters, however, they will still charge you a fee for looking after your money whether they invest it wisely or lose it all.
But whilst the bureaucrats will never be able to figure out how to run an economy – their, “take more and more taxes out of less and less income” strategy will never add up – eventually the penny will drop with the good citizens and they will waken up and realize they have been completely shafted by incompetent politicians and greedy banksters.
Then the brown stuff will hit the fan – big time – and people will get real mad. And then the powers that be will have no choice but to turn on their own citizens if they are to cling to power. Preparations for this started under Bush and now Obama has added even more legislation to make this possible.
It is a rather bleak scenario, particularly for those who choose to ignore what is happening around them. But whether it happens in one year or another five, if the politicians and bureaucrats do not wise up – and their is little sign of them doing that especially when they have yet to realize how incompetent they are – it will happen.
So start to think seriously about your own circumstances and what you can do to protect what you have from thieving governments. Or just settle down and get another 40 winks assured in the knowledge that those in Washington, Brussels, London and Berlin know what they’re doing.
They’ve been ‘beautiful’, they’ve been ‘big’ and they’ve been ‘unusual’. Today we have another ‘significant’ number, fifty-two, so-called because of its use and the beliefs surrounding it.
Enjoy.
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52 Fifty-Two
Fifty-two first came to mind because it is the number of weeks in a year. Simple enough. But, as usual, with these significant numbers there is more to fifty-two than you might at first imagine.
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In Religion
The 52nd word of the King James Version of the Bible’s Old Testament Genesis is ‘God’
Saint Thomas, one of the twelve disciples of Jesus, is believed to have landed in Kodungallur, India to preach the Gospel.
Nag Hammadi is a set of 52 religious & philosophical texts, hidden in an earthenware jar for 1,600 years, and accidentally unearthed in the village of Nag Hammadi in Upper Egypt in December 1945. Written in Coptic, this corpus of 1200 pages include the Gospel of Thomas recording the secret sayings of Christ.
Nag Hammadi
The ancient Mexicans divided the time in periods of 52 years, waiting the end of the world to the term of each of they. It is the number of the Aztec century, 13 x 4, called the small cycle. We find it in the ligature of the years for the duration of the suns, in particular the first and the fourth sun, which have a duration of 676 years, are considered as being the most perfect since they contain only the two numbers 13 and 52 whose product gives 676.
The Mayan Calendar moves through a complete cycle every 52 years. (until near the end of December this year GULP!)
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In Mathematics
Fifty-two is the 6th Bell number and a decagonal number.
It is an untouchable number, since it is never the sum of proper divisors of any number, and it is a noncototient since it is never the answer to the equation x – f(x).
The number of different ways a complete pack of playing cards may be rearranged is 52! or 52 factorial which is 52 x 51 x 50 x 49 x…
This number is very large; For example it would take light approximately 14 billion billion billion billion billion billion years to travel 52! miles.
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In Science
The Atomic Number of Tellurium (semi-metallic with silvery lustrous grey color) is 52
Atomic Weight of Chromium (Cr) is 52
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In Space
Messier object M52, a magnitude 8.0 open cluster in the constellation Cassiopeia
Messier object M52
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In Sport
For over twenty years, 52 was the best-known car number of retired NASCAR driver Jimmy Means.
Jimmy Means Racing
Ray Lewis, is possibly the most famous sportsman to currently wear the number 52 jersey. He plays for the Baltimore Ravens, is a dominant linebacker and force on the premier defense in the NFL. He also has a really unique (and entertaining,) dance he does when entering the stadium field.
But perhaps the most interesting story is that of Michael Lewis “Iron Mike” Webster who was an American football player who played center in the National Football League from 1974 to 1990 with the Pittsburgh Steelers and Kansas City Chiefs. He is a member of the Pro Football Hall of Fame. “Iron Mike” anchored the Steelers’ offensive line during much of their run of four Super Bowl victories from 1974 to 1979 and is considered by some as the best center in NFL history.
His career ended after the 1990 season, with a total of 245 games played at center. At the time of his retirement, he was the last active player in the NFL to have played on all four Super Bowl winning teams of the 1970s Steelers. He played more seasons as a Steeler than anyone in franchise history (15 seasons), one season ahead of Hines Ward.
While the Steelers no longer officially retire jerseys, Webster’s #52 has not been reissued by the team since he retired and it is generally understood that no Steeler will wear that number again.
Webster was proven to have been disabled before retiring from the NFL. After retirement, he suffered from amnesia, dementia, depression, and acute bone and muscle pain. He lived out of his pickup truck or in train stations between Wisconsin and Pittsburgh, even though his friends and former teammates were willing to rent apartments for him. In his last years Webster lived with his youngest son, Garrett, who though only a teenager at the time, had to act as the parent to his father. Webster’s wife divorced him six months before his death in 2002. He was only 50 years old.
Webster is quoted as an example of the difficulties American football players suffer when their careers are over. Other players who retired because of the effects of concussion or other head injuries include Johnny Unitas, Roger Staubach, Merril Hoge, Troy Aikman, Steve Young, Dave Pear, Wayne Chrebet, and Al Toon.
After his death, Mike Webster was diagnosed with chronic traumatic encephalopathy, a neurodegenerative disease. Bennet Omalu, a forensic neuropathologist, examined tissue from Webster and eight other NFL players and determined they all showed the kind of brain damage previously seen in people with Alzheimer’s disease or dementia, as well as in some retired boxers. Omalu’s findings were largely ignored by the NFL until Cincinnati Bengals wide receiver Chris Henry was diagnosed with CTE shortly after his death in 2009.
It has been speculated that Webster’s ailments were due to wear and tear sustained over his playing career; some doctors estimated he had been in the equivalent of “25,000 automobile crashes” in over 25 years of playing football at high school, college and professional levels.
Webster’s estate brought a lawsuit in Maryland’s U.S. District Court against the National Football League. The estate contended that Webster was disabled at the time of his retirement, and was owed $1.142 million in disability payments under the NFL’s retirement plan. On April 26, 2005, a federal judge ruled that the NFL benefits plan owed Webster’s estate $1.18 million in benefits. With the addition of interest and fees, that amount was estimated to exceed $1.60 million. The NFL appealed the ruling, but on December 13, 2006, the U.S. Court of Appeals for the Fourth Circuit in Richmond, Virginia affirmed the Baltimore federal judge’s 2005 ruling that the league’s retirement plan must pay benefits reserved for players whose disabilities began while they were still playing football.
Iron Mike Webster
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In Militaria
The B-52
By far the best know aircraft with the 52 designation is the Boeing B-52 Stratofortress. It is a long-range, subsonic, jet-powered strategic bomber, built to carry nuclear weapons for Cold War-era deterrence missions, and was a replacement for the Convair B-36.
It has been operated by the United States Air Force (USAF) since the 1955. The bomber carries up to 70,000 pounds (32,000 kg) of weapons.
Beginning with their successful contract bid in June 1946, the Boeing B-52 design evolved from a straight-wing aircraft powered by six turboprop engines to the final prototype YB-52 with eight turbojet engines and swept wings.
The B-52 took its maiden flight in April 1952. Although a veteran of several wars, the Stratofortress has dropped only conventional munitions in combat. Its Stratofortress name is rarely used outside of official contexts; it has been referred to by Air Force personnel as the BUFF (Big Ugly Fat/Flying Fucker/Fellow).
Superior performance at high subsonic speeds and relatively low operating costs have kept the B-52 in service despite the advent of later aircraft, including the cancelled Mach 3 North American XB-70 Valkyrie, the variable-geometry Rockwell B-1B Lancer, and the stealthy Northrop Grumman B-2 Spirit.
The B-52 marked its 50th anniversary of continuous service with its original operator in 2005 and after being upgraded between 2013 and 2015 it will serve into the 2040s.
B-52 in flight and on the ground with ordnance display
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The Junkers Ju 52
The Junkers Ju 52 (nicknamed Tante Ju (“Auntie Ju”) and Iron Annie) was a German trimotor transport aircraft manufactured from 1932 to 1945.
It saw both civilian and military service during the 1930s and 1940s.
In a civilian role, it flew with over 12 air carriers including Swissair and Deutsche Luft Hansa as an airliner and freight hauler.
In a military role, it flew with the Luftwaffe as a troop and cargo transport and briefly as a medium bomber.
The Ju 52 continued in postwar service with military and civilian air fleets well into the 1980s.
Junkers Ju 52
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Ka-52
Another notable air machine with the 52 designation is the multi-role all-weather combat Ka-52 “Alligator” helicopter. First revealed at 1995 Paris Air Show, this is a twin-seat derivative of the attack Ka-50. It is intended for a wide range of combat tasks in daytime and night conditions, in any time of the year with the use of all destruction means of the Ka-50.
The Ka-52 has a coaxial design with unique manoeuvrability that allows the helicopter to perform combat maneuvers within the minimum air area and the shortest time to gain an advantageous attack position.
From the point of view of the weapons power the “Alligator” is comparable with the “Black Shark” helicopter and is superior to all existing combat helicopters.
The multi-role all-weather combat Ka-52 ‘Alligator’ helicopter
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USS Barry (DDG 52)
The fourth ‘Barry’, the DDG 52, was launched on 10 May 1991 by Ingalls Shipbuilding Inc. and was commissioned into the U.S. Atlantic Fleet on 12 December 1992.
The USS Barry DDG 52 has taken part in Operation Support Democracy in Haiti in November 1993; the backdrop for the 50th anniversary of D-Day in the Mediterranean in 1994; the Mediterranean and Adriatic Seas served as “Red Crown” in support of the No-Fly Zone over Bosnia-Herzegovina; the Persian Gulf in 1994 in response to Iraq’s massing of troops on the Kuwaiti border; Operation Vigilant Warriors escort of both the George Washington and an amphibious assault group to anchorage off Kuwait City and as alternate Persian Gulf Anti-Air Warfare Coordinator (AAWC), and principal Tomahawk strike platform during the crisis.
The USS Barry received a Meritorious Unit Commendation, the Southwest Asia Service Medal, the Armed Forces Service Medal, and the NATO Medal for her actions
In October of 2004, Barry was again in the Persian Gulf in support of Operations Iraqi Freedom and Enduring Freedom as part of the USS Harry S. Truman (CVN 75) Carrier Strike Group and also participated in Somalia Operations in the Horn of Africa (HOA).
USS Barry DDG52
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CZ 52
The CZ 52 (also known by the Czechoslovakian military designations vz. 52, for “model of 1952”, and CZ 482) is a semi-automatic pistol designed by two brothers, Jan and Jaroslav Kratochvíl, in the early 1950s for the Czechoslovakian military.
Around 200,000 vz. 52s were made by Ceská Zbrojovka in Strakonice from 1952 to 1954.
The vz. 52 replaced the 7.65 mm Browning caliber (.32 ACP) Vz.50, which had acquired a reputation for unreliability and was underpowered for its role as a military service sidearm.
After 30 years of military service, the vz. 52 was eventually replaced by the 9x18mm Makarov caliber vz. 82. Cz-USA began exporting to the US market in January 1998 with the designation CZ 52.
The Czech CZ-52 semi-automatic pistol
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AA-52
The AA-52 (full designation in French: Arme Automatique Transformable Modèle 1952, “Transformable automatic weapon model 1952”), also known as “La Nana” is one of the first French-produced guns of the post-World War II era.
It was manufactured by the French government-owned MAS company.
The AA-52 is still used today as a vehicle-mounted weapon due to large quantities in service, but has been replaced in the helicopter role by the Belgian FN MAG, starting with the EC 725 Caracal of the Special Operations units and the Air Force Search and Rescue teams.
The AA-52 had been largely phased out for infantry use in favour of the lighter FN Minimi. The AA-52 is still in use in Afghanistan.
Arme Automatique Transformable Modèle 1952
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British Army
Part of the British Army forces is 52 Infantry Brigade which has a proud and long history as a fighting brigade.
Its reputation during both the World Wars earned it the nickname of ‘The Fighting 52nd’ and its recent deployment to Afghanistan enabled the Brigade to re-establish its fighting credentials as one of the British Army’s fully deployable Type A Brigades.
52 Infantry Brigade ‘The Fighting 52nd’
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US Army
The 52nd Infantry Regiment
The 52nd Infantry Regiment (“Ready Rifles”) is an infantry unit of the United States Army.
The coat of arms was originally approved for the 52d Infantry Regiment on June 29, 1921. It was redesignated for the 52d Armored Infantry Regiment on September 29, 1942. The insignia was redesignated for the 52d Armored Infantry Battalion on January 6, 1944.
It was redesignated for the 52d Infantry Regiment on October 31, 1958.
52d Infantry Regimental Colors with streamers
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1st Battalion, 52d Aviation Regiment
The 1st Battalion, 52d Aviation Regiment is known as the “Flying Dragons.”
The battalion headquarters is located at Fort Wainwright, Alaska.
The battalion provides aviation support to USARAK (United States Army Alaska) with UH-60A Blackhawks and CH-47 Chinooks. On order, deploy and conduct full spectrum aviation operations in support of Combatant Commanders.
52d Aviation Regiment “Flying Dragons” patch
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Other Stuff
A standard piano has 52 white keys
Fifty-two is the approximate number of weeks in a year. 52 weeks is 364 days, while the tropical year is 365.24 days long. According to ISO 8601, most years have 52 weeks while some have 53.
There are 52 cards in a standard deck of playing cards, not counting Jokers or advertisement cards
There is a 52 Plus Joker Club that was formed to facilitate, the collection and trading of antique and collectible playing cards and related items; the advancement of knowledge about the history, manufacture and artistic aspect of playing cards; and the promotion of fellowship among members with similar interests.
DC Comics has a weekly comic series entitled 52 that has 52 issues, with a plot spanning one full year.
In finance one of the vital statistics always quoted in stocks/shares summaries is the 52 week High/Low trading price
Patolli is an Aztec board game utilizing 52 squares arranged in a cross form. Its name came from the Aztec word for bean— patolli, meaning fava or kidney bean. The game is played on a curious diagonal cross-shaped board with red and blue markers and five beans (or occasionally four beans) as dice. The game’s goal is to return the pieces back to the original starting position. Patolli was most likely also used in a religious and ritualistic sense for divination— the throw of the beans was thought to be able to tell the future.
Ancient Aztec game called Patolli
Cities located at 52o latitude: Berlin, Germany; Hannover, Germany; Amsterdam, Netherlands; Warsaw, Poland; and Birmingham, UK.
And finally, the Morden Blush Rose, bred in Canada, has 52 petals.
Launched at the ridiculous price of $38 a share, or about 100 times the company’s earnings, the price momentarily made it to $45, but then quickly plummeted to $34.
In my post in May I suggested that the shares were worth more like $18 a share rather than $38. As of yesterday (August 16th) the price had fallen below $20.
Facebook stock has crashed
I’m not saying this by way of blowing my trumpet, because I now think that my $18 peg may have been rather optimistic too. Investors have by and large turned against Facebook.
Apart from the odd blip, the stock has been on a downward trend pressured by disappointing earnings and by the fact that from today the so-called “lockups” that have prevented some early Facebook backers from unloading their stakes begin to expire. This simply means they will be able to sell shares into the market and with around two billion shares eligible for a sell off between now and May 2013, with a big one coming in November, the signs for a price recovery are ominous.
In fact further falls are more than likely.
Those who can are shorting the stock like crazy. (Shorting is where your broker borrows shares which you sell immediately in the hope that you can buy them back later at a lower price.)
The number of Facebook shares on loan to short sellers has risen from 63 million a month ago to more than 93 million.
So is it a good buy now at $18? I think not. Not for a while anyhow, until these locked shares find their way into the market and the price stabilizes and that will probably be well into 2013.
In the short term the status quo is probably down down deeper and down.
Forget Facebook and enjoy some music from the 70s instead.
Fasab disclaimer: this blog post does not constitute professional advice as regards investments on the stock exchange, such advice would only be given and indicated thus if an outrageous fee were being charged and this blog is being given to you for free. Also any investor should always be aware that shares can fall as well as plummet and should act accordingly by not investing any money they can not afford to lose.
I should make it clear right at the start of this blog post that the person who was being accused of being an asshole was ME!
Of course, you know from reading my blog that such a description could never be applied to me ….ahem, however, a while back I had somehow managed to get my name on an “idiot” list of people who could be called about various scams and “investments”.
I suspect that one of those companies that would never sell your details, sold my details.
Well, as an unwanted consequence, I had cold callers by the square yard for a while.
And on and on and on and on it went for several months.
getting cold called
At the start I listened politely. I’ve had to cold call people on a few occasions myself and I know what a horrible job it is, so I answered their inane questions, pretended I was vaguely interested in what they had to say, but eventually declined all their more than generous offers.
Man, if only I had done a few of those investments I would have been richer than Bill Gates by now – or broke a lot faster!
But as the weeks went on, a bit like the telemarketers I wrote about in the cunningly named “Telemarketers”, my patience ran out. I started to say up front that I wasn’t interested and couldn’t afford it and if they couldn’t take that hint, I hung up.
However there was one particularly unpleasant young guy who worked for an investment brokerage in New York. He probably had never made it farther than Manhattan in his life, but he was an authority about everything, about everything, about everything. You know the type. And like most people so endowed he actually knew hardly anything at all.
So one day he phoned me up. I must have been at a bit of a lose end (before my blogging days!) so I listened to what he had to say. He had spoken to me before, but didn’t remember, so I knew his patter and what was coming and therefore was well prepared with my answers.
Was I interested in investing? Yes, absolutely.
Had I ever invested in the stock market before? Yes, indeed I had.
Had I any stocks at the moment? Well, no, not at the moment. I’ve been waiting on a “really great deal” to come along.
Of course, I knew he had a “really great deal”.
“Terrific!” he said. “Because I am about to offer you a really great deal!”
Am I psychic or what?
I have a great deal for you!
Naturally I got a little excited at this wonderful news and wanted more details, like pronto!
Ah, but first he had a bit on his cold call sheet to quality investors.
What kind of amount was I comfortable with? How much did I normally invest?
I knew this would be where the fun would really start. So I said that it depended on the deal, if it was good enough then it could be a decent amount.
That wasn’t good enough. He wanted to quantify it.
“Would you be comfortable with something in the $5000 range?” he asked.
“Not really,” I said, then hearing him deflate on the other end of the phone I followed with, “No, if I’m interested, and there’s no guarantee that I am because you haven’t told me anything about this investment, it would have to be a much bigger amount than that.”
Almost immediately I could hear the vacuum pump activating and re-inflating him.
Now he was sure he had hooked a whale, but tugging on his line was just the big bunch of crap I was giving him.
Then he told me what the investment was. Some pharmaceutical company that was about to go into orbit once a new drug they were working had been perfected and FDA approved and all that rigmarole.
If you don’t know about these things, firms like these who cold call hyping some obscure share or other are on a BIG percentage of the price they get. Could be as high as 75% in some cases. The shares are usually completely worthless and virtually unsaleable on the open market so if you are foolish enough to buy them you are stuck with them and the chances of the company coming good are millions to one. Better to buy a few lottery tickets.
So he could do me a great deal on these shares. They had been trading at up to 90 cents a few months ago (I presumed on IMDAQ, that’s the imaginary stock exchange) but his company had managed to secure some at a fraction of that price. If I were to invest say $50,000 I could get them at 30 cents.
Boy was I interested?
No, not in the slightest, but I didn’t tell him that.
What I said was something like, “Yeah that sounds okay, but for that level of investment is that really the best you could do. What if I could get a few friends interested and maybe raise $100,000? Could you sweeten the deal on your end?”
I got the feeling that this was the most exciting thing that had ever happened to this idiot. He could hardly contain himself.
He talked and he talked and he better talked.
Unsurprisingly he could sweeten the price a little for that level of investment and the price duly came down to 25 cents per share.
I wasn’t very impressed. I asked for a better deal.
This time he would have to consult his supervisor to see if he could get a better deal on the share price, so the line went dead for a couple of minutes (a well known sales ploy) and then back he came, 23 cents was the best he could do.
“So that’s 434,782 shares for the $100,000?” I asked. Our calculators agreed the number.
“It’s good,” I told him, “But for that sort of cash I would need at least half a million shares, probably more.”
“Let’s not play games,” he said, ready to make another counter offer.
“Why not?” I asked. “I like playing games.”
“Huh?”
“Yeah!”
“You like playing games?” he asked, a little confused.
The penny was very close to the edge but it hadn’t quite dropped.
“Yeah, don’t you?” I answered happily. “This has been fun.”
“What?
…..WTF?
…..You mean you’re NOT interested?”
“Well I did say up front that there were no guarantees,” I reminded him.
“But?…. Why did….? ….”
Short pause.
Silence.
Sound of penny finally dropping.
Then, in a very high pitch girly kind of voice,
angry and shrieking like a girl
“You’re a f****** asshole!”
CLICK!!!
He was great fun. But, alas, he didn’t want to play any more because he never called again ;(
First of all, well done if you were one of the people who tried out the quiz. I hope you enjoyed it.
Today’s blog, if the alliterated title full of “f” words hasn’t given it away already, is regarding financial matters. No, hang on, stick with it. It’s not that bad really.
Were you one of the “zuckers” who bought shares in Facebook? I hope the answer is no, because it is another example of the stupidity and madness that greed can provoke in people who should know better, but frequently don’t.
Zuckerberg Pre-IPO
I can’t predict the future, but I knew that the Facebook IPO would cost a lot of idiots a lot of money.
The IPO launch price was tagged at $38 per share or something like 100 times the company’s earnings. It is easy to know why they priced it so. They set the price that high because they thought they could get away with it. Because the herd, unknowing and unthinking, would swallow the crazy hype about the company and buy, buy, buy!
Does that show more than a little contempt for the people you want to invest in your company? Sadly I think that it does. Not that it is all down to the greed of Zuckerberg. The advising and underwriting banks had a lot to do with it and we know for a fact that they have nothing but contempt for ordinary mortals like ourselves. We are the marks, they are the conmen!
Usually they take the time to milk us dry before abandoning the market and leaving the ordinary investor to lick their wounds. But this time it happened fast. Within hours in fact!
Those who were not in the “loop” and couldn’t buy pre-launch, waded in on launch day and bought, bought, bought from $38 right up to $45 which the shares reached for a couple of minutes.
zucker
The poor fools got whacked almost straight away.
The market very quickly began to realize it had been conned, that this was not a LinkedIn IPO and the issue price had been set far, far too high to ever double on launch. An element of sanity crept in. Facebook promptly started to fall, by about 11%.
In other words if you’d invested $1000 in the morning you would have turned it into $868 in the space of a few hours. If you were unfortunate to buy at the peak price, your $1000 would now be worth just a little over $700. OUCH!
Zuckerberg Post-IPO
But it wasn’t just individual investors that got caught. Almost every large mutual fund etc., most of which are run by, let’s be kind and say, poorer quality managers, felt compelled to purchase Facebook shares, not because they though they were a good buy but because they saw other idiots doing the same and they were frightened about the possibility of missing out “the next Big Thing”.
Little do most investors realize, but the situation could have been even worse had the price not been artificially propped up for a while by the investment bank underwriters.
For the benefit of those who aren’t investors and/or who don’t know how the market works in things like this, here is a quick summary. IPOs are underwritten by investment banks like Morgan Stanley. The investment banks therefore have their reputations on the line. If the IPO goes really badly so does their reputation and their chances of being asked to underwrite future IPOs (and they get huge gigantic enormous fees for this work so they don’t want to lose it.)
Trust Me I’m A Banker
Thus, in the case of Facebook, when the share price stopped climbing and quickly fell back to the $38 launch price, the investment bank underwriters stepped in and bought heavily. Without their intervention Facebook could have fallen catastrophically on its first day of trading.
Facebook does generate cash, mainly from advertising revenue. It has a vast following and that advertising revenue should rise substantially over time, so the company may one day be worth the $38 and even more. Google launched at $85 and is now worth $600, but it is a proven quantity revenue-wise and the price rise took time.
But, and it’s a big BUT, Facebook would need to be a hell of a lot better managed than at its market launch.
Thumbs DOWN Facebook stock IPO crash
But for now, I’m with my other “mad” friend Jim Cramer of Mad Money fame who rightly and sensibly advised a pass on the Facebook IPO. There may be a time to buy into Facebook, but the writing on my wall says “not today thanks”. Booyah Jim!
Jim Cramer “Booyah!”
There’s an obvious question that I haven’t addressed. It is, “So what do I think Facebook is worth?” Well for what my opinion on these matters is worth (i.e. probably not much) I would peg the value at a lot closer to $18 than $38. I may be right, or I may be wrong, but I really don’t care because I haven’t bought any. I might reconsider if it the price comes a bit closer to my valuation, but it’s only a might.
The small print. (I know it’s just the same size, WordPress didn’t tell me how to change it.)
Fasab disclaimer: this blog post does not constitute professional advice as regards investments on the stock exchange, such advice would only be given and indicated thus if an outrageous fee were being charged and this blog is being given to you for free. Also any investor should always be aware that shares can fall as well as plummet and should act accordingly by not investing any money they can not afford to lose.
fasab 