Facebook is turning out to be the poster child for everything that is corrupt on Wall Street. From fraudulent representation of financials to the fleecing of widows and orphans.The Facebook stock offering was priced at $38 per share, giving it a $104 billion market cap. Before the stock freed up to trade, Bloomberg News' Trish Regan tweeted that the opening indication was in the $53-$55 range. No doubt she was just regurgitating the fraudulent representation of the demand for the stock from her "sources" at Morgan Stanley, the book-runner for the deal. The opening trade was $42.05 - a market cap of $113.5 billion and the high-tick trade was $43, a market cap of $116 billion. Currently the stock is trading at $31.32, down another 7.8% on the day and a market cap of $84.5 billion. Facebook stock has lost almost $32 billion in market cap since its opening day peak.
While someone at Morgan Stanley was texting Trish Regan about how strong the demand was and that the stock would open up about 40% above the IPO price, Morgan Stanley was busy raising the retail broker limit on stock allocation from 500 shares to 5,000 share. Let's examine this for a second. One thing I would like to know is how much stock was directed into Morgan Stanley's retail brokerage stock distribution network AFTER the allocation limit was raised to 5,000 shares. Trish Regan should learn to do some intelligent due diligence before she allows Wall Street to use her as a spunk receptacle again. I've always thought she was an idiot and a Wall Street harlot, but now a lot more people will realize the truth about her and about financial media in general.
Not only did Morgan Stanley enable its retail broker network to stuff retail investor accounts with this crappy deal, but Morgan Stanley's Facebook stock analyst, Scott Devitt significantly cut his revenue forecast while the stock was being marketed to investors, LINK. Did Morgan Stanley's brokerage force tell retail stock investors about this BEFORE stuffing them with more of this overvalued piece of garbage?
As to whether or not Morgan Stanley and its brokers violated SEC and FINRA laws would be very easy to investigate. All sales and trading phone lines are taped and it would be simple to subpoena all retail brokerage statements for investors who were sold Facebook stock. The question is, will Barack Obama order SEC Chaircrook Mary Shapiro and Attorney General Eric Holder to investigate this financial rape and pillage of the public? Please note that is merely a rhetorical question, as we all know the answer, based on Obama's dismal record of investigating a prosecuting financial fraud.
What does this have to with Madoff? It looks like the actual amount of losses from the Madoff Ponzi Scheme was somewhere around $15 billion. We'll probably never know the truth, but I bet the Wall Street firms who were custodians and fund conduits for Madoff's operation know. So far, Facebook has raped investors for about $18 billion based on a $38 issue price, and about $32 billion based on the high tick after trading commenced. This is a direct transfer of $18 billion from the pockets of investors to the pockets of Mark Zuckerberg, Facebook employees and Morgan Stanley (and the other underwriters). This is a de facto Ponzi scheme.
What do my insights on the Facebook Ponzi scheme have to do with gold? I'll let Ayn Rand explain, through the voice of Francisco D'Anconia in "Atlas Shrugged:"
Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims.