Tuesday, May 22, 2012

Is Facebook A Bigger Ponzi Scheme Than Madoff?

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.


  1. Speaking of Ponzi Dave

    Greek banks to receive 18-billion-euro bailout: source | Investing | Financial Post


    The process of recapitalizing Greece’s banks is set to end in September.

    Un-fuk'en believable. And gold drops $20...comical.

    1. The cartel is trying to slam gold/silver ahead of the imminent LTRO_3 in Europe and QE3 here. That's all this is. Buy all hits

  2. Had to post this, caught my eye while watching this movie over the weekend. I figure others must have picked up on it, too and wouldn't you know it, somebody did.


  3. A paltry 20 billion doesn't get the blood pumping in the gold bugs veins anymore. Wait for a three digit infusion.

  4. Shill, miss seeing your updates and analysis on TFMetals. Good to see you're still around.
    Stop by SilverDoctors and share your thoughts anytime.

    Dave, I agree that this is merely preparation for the next round of QE which will be massive.


  5. OK in some ways you are right but the fact is if you believe in freedom then all the people who were stupid enough to invest in Facebook deserve what they got.

    People must learn to do their OWN due diligence rather than rely on "investment" experts, and media "personalities".

    1. I agree. But my contention is that Morgan Stanley materially misrepresnted the deal and used its media relationships to fraudulently promote the deal. This is what the SEC and FINRA would be investigating if we had a Government that was by and for the people.

  6. Sorry but most people that live in the real World must by now know that the whole political system is corrupt from top to bottom. Relying on organisations that are set up to protect the public has never really worked for the benefit of the people. They are set up to protect their industries. It's about time people started to be responsible for their own actions rather than letting some "nanny" organisation do it for them.
    If it looks like "merde" and smells like "merde" then don't pick it up. As for Governments they have never been "by and for the people." Governments are by and for themselves. All Governments are Mafia with nice window-dressing.

    1. Hmmmm...not consistent with my observation. Explain why most people who voted for Obama still defend him rigorously and have "faith" in him?

      Denial is one of the strongest human "defense" mechanisms. Most people still WANT to believe that someone will come along and lead us out of this. Not only that, while many understand that the system is corrupt, they have absolutely no clue just how corrupt it is.

      The perfect proof of this is the fact that people are still buying houses on the assumption that the system is at bottom and will improve...


    2. As I say. "Most people that live in the real World". Most people do not live in the real World. They live in the la la land of TV personality and never ending TV "sport".
      The main problem with people is they have been taught to believe in a "saviour" religious or otherwise rather than being taught to be self reliant. You should only buy a house to live in rather than for it's investment potential. The only things to rely on are yourself: people with like minds and real Gold and Silver. The least things to believe in are Governments and Financial Markets.
      Long live anarchy.

  7. The financial media, specifically CNBC, has been the worst actor in this FB debacle. I haven't seen such misbehavior by this network is its Bubblevision days during the dotcom bubble. Anyone who watched know how the Facebook coverage last week was wall-to-wall, mainly consisting of promotional "fluff" stories about Zuck and Gang, along with talking-heads extolling the virtues of this American success story. They were PROMOTING the IPO non-stop, running ads promoting "The SOCIAL offering", and generally just trying to work the public into a frenzy.

    Why would CNBC take part in this sell-job? Their advertisers are on the sell-side. CNBC sees itself as a part of the sell-side, and has even said on-air recently that they are trying to get retail investors interested in stocks again. More involved retail investors means more viewers for CNBC, happier advertisers, and more ad revenues. So CNBC gladly does Morgan Stanley's and all other underwriters' work by hyping this thing to death.

    Then, this week, they have the gall to ask the question of whether the FB IPO was "overhyped". Yes, I've heard Maria and other airheads of the network ask this question. Umm, Maria, CNBC was the #1 hype machine for this offering!!

    Shame on CNBC and the rest of the "financial media". But especially CNBC.

  8. Glad I'm not one of the 900 million mindless idiot Farcebook participants, posting ad nauseum, endlessly worthless crap. Boy, the military's PsyOps is making a killing, huh?

    1. While FB IPO was $38, i also thought to invest in this stock. But, somebody recommend me not to invest this time. So i wait, and today the FB share is $31, so i think he was right, he saves lot of money. Thanks

      MCX Commodity Tips

  9. The topics of your blog is very modern and interesting issues, I really like your blog.

  10. Some methods you are right but the truth is if you believe in independence then all the individuals who were ridiculous enough to purchase Facebook or myspace are entitled to what they got.