It’s about time there was some light at the end of the tunnel.
I’m talking about the dark, “are markets safe, is it time to invest” tunnel. And I’m not talking about this next round of quantitative twisting stimulus meant to “light up” the dark hearts of short-sellers.
The illumination I’m seeing is the result of, believe it or not, a little something called bipartisanship.
No, that’s not a gay cruise line. That’s a gay, as in happy, coming together of opposing political views to get something done in Washington. So what if that something is really about getting votes? Let’s not look a gift horse in the mouth.
Finally a Republican and a Democrat are saying the unthinkable. After all the brouhaha over the botched (unless you’re an insider who sold at the top) Facebook Inc. (NasdaqGS:FB) IPO, there’s breaking news out of Washington that they smell something funny going on in the capital markets.
By shining his Bic lighter on the Facebook fiasco, Democratic Sen. Jack Reed of Rhode Island, a subcommittee chairman over at the Senate Banking Committee, told the Wall Street Journal, “The perception today, and perhaps in too many cases the reality, is that the retail investor comes in at a disadvantage.”
More to the point – and more forcefully, because he actually penned a 15-page letter to SEC Chairman Mary Shapiro – Republican Rep. Darrell Issa of California, of the powerful House Oversight and Government Reform Committee (not much need for that, huh?), demanded the SEC address how egg got on the face of our capital markets thanks to Facebook’s underwriters fleecing unsuspecting stoolies who bought the IPO.
The crux of the matter was simply laid out, in unequivocal Washingtonspeak, when the oversight committee expressed fears of a crumbling capital markets system if laws continue “to protect, over-regulate, and coddle our financial institutions.” Brilliant!
Now I get it. Financial institutions are screwing up everything because they’re being protected and coddled precisely because they’re over-regulated. Brilliant!
About that light…
It was previously directed at over-regulation by Mr. Issa when he helped pen the JOBS Act. You know, the Jumpstart Our Business Start-ups Act. You may not know about the act, because it’s so new. But believe me, you will come to know about it when it opens up a Pandora’s box of criminal activity and rip-offs beyond imagination on the public, who are going to end up buying into start-ups that aren’t going to be regulated and don’t have to post honest and transparent financials for years.
You want some REAL light on the Facebook Farce? Here it is.
The deal was hot, thanks to more than 900 million Facebook “customers” who represented a new marketing paradigm. The hype was super-hyped by all the underwriters.
After whipping up the press, the pundits, and the platitudes, while behind the scenes telling big institutional clients that Facebook’s financial metrics might be deteriorating somewhat, lead underwriter Morgan Stanley – yes, at the urging of Facebook’s CFO -priced the IPO at the top of its new higher high range and pumped out more shares to the public.
The public, also known as the little people, the stools, the mini-Muppets, and the backstops.
While typically the public is allocated maybe 15% of IPO shares (still, through their begging and preferred status at their brokerages), in the Facebook case, they amounted to 26% of the lucky lovers of Facebook. That’s a nice backstop, to say nothing of the rest of the public supposedly lining up to buy the stock once it became available to them.
Good old Morgan Stanley even points to how good a job they did (it was all the Nasdaq’s fault, you know) pricing the IPO. They point out now that after it opened at $38, it soared from to $42, or $45, or whatever it got to, no-one knows but the Nasdaq, you know.
Seriously, you want some light on the capital markets in general? Here it is: They’re broken.
I’ll prove it to you on Sunday. Hint, hint, it has something to do with “trading.”
About that light… It’s a train barreling down the tracks, coming straight at us.
Now, if you’ll pardon the interruption, I’m going to address a very good question from a very smart reader of these pages, who had this query about one of these videos we keep sending you:
Q: In response to a question that is posed by the interviewer about the problem in the [Eurozone], Shah said that the EZ needs to establish something like the Federal Reserve here in the U.S., but that it would take too much time to prevent a backdraft. In your description of “the Matrix,” one of the six forces involved in the Matrix is the Federal Reserve. Why would Gilani suggest that Europe needs something like the Fed, when that is one of the manipulative forces in the Matrix? ~ John
A: Well, John, let me say this about that. The Fed is a manipulative force to be reckoned with. It is the banks’ bank and their political heavy hand.
That said, I’m unequivocally NOT for a “federalized” type of banking institution like our Federal Reserve being set up in Europe to manipulate all those countries for the good of the banking constituents who would “own” the European Federal Preserve of wild roaming banks.
My point was that actually walking down that path would theoretically calm European markets – and they may go there. But God help us if that’s the end game.
And while that would be bad for “free markets” (as if that’s what we have now, NOT), it would be great for those of us who understand the Matrix and trade around and through the manipulation foisted on the unsuspecting public.
Hope that answers your question.