Bookmaking 101

Order shares in a hot initial public offering (IPO), and you won’t know if you’re getting any or how many, until it’s all over.  Way over too, often enough.  Some times there’ll be a bunch in your account.  Others, not so many.  Maybe you won’t take down any at all.  Crime Families say they’re rewarding “good customers” this way.  Somehow.  They’re not all that clear on the somehow part.


Interest in the recent Facebook IPO gives us a chance to pull back that cover story, and show our readers who’s really getting rewarded here and precisely how that goes down.  Lets take a look at the worst-case IPO swindle.  It’s infuriatingly unethical to pull off.


First of all, the lead underwriter has to book the new shares.  Who owns them now, and how many, gets officially written down.  Then the Street’s market makers can start trading in the issue, and – wait a minute - here’s where the fun begins.  In fact, it’s already begun.  Right at the giddy-up.  In the worst of IPO cases, that timeline isn’t what happens at all.  What you’ve got with this one is the old switcheroo.  You book the shares after trading begins.  Some of them anyway.  Yours, specifically.  And long after, if you play it smart.


As we pointed out in the last blog, the mob can take down shares for themselves in an IPO, adding on as much as 15% to what’s issued and sell their allotment to the public, and that 15% is conveniently flexible, as is when the shares really get sold.  Particularly convenient for the old switcheroo.


If the Crime Lords wait until their new listing hits the open market, and then a bit longer to see how things actually went, they’ll know for sure whether the price headed up or down, and by how much.  That’s when a heartless swindler wants to complete his book.  If the mob’s cut is, just to throw in a number, 63 million shares, every one-point move in the aftermarket pulls in a $63 million profit.  After ten points, that would come to $630 million (of our money, don’t forget).  The incentive to screw with this IPO thing is enormous.


And so, when the stock's price goes up in the aftermarket, the Crime Families would buy those 63 million shares at an offering price of, to throw in another number, $38, and write a check to the issuing company for something around $2.4 billion (63 million x $38).  If the aftermarket price soars, the money-sucking thieves can just take the whole allotment for themselves, which, of course, means friends and relatives too as well as offshore bank accounts and the like, as they’re sticking blocks and blocks into their firm’s proprietary trading position.  Quid pro quo is big in the financial rackets.  You give me $100 million from your IPO and I’ll deal you in for $100 million with mine.  It looks like they’ve got a legitimate business going on down there if the goons are stealing from everybody’s customers and not just their own.  In the instant case, we’ll say the mob finally sells their position to the public after a ten point pop to 48, garnering that $630 million trading bonanza we just told you about, of course.  A bonanza, it bears repeating, that would’ve belonged to their customers if we suckers weren’t dealing with crooks.


On the other hand, when the aftermarket price heads south in the worst-case IPO swindle, the Crime Lords would place what would’ve been that 15% allotment into public hands anyway, only 63 million shares aren’t issued; they’re just sold.  Short.  This time these are just play shares, and whenever the price is right, the phony-baloney stock, existing only at the crime scene - on the trading ledgers of the mob, disappears into thin air when it gets bought out and the short position closed.  We’ll say this happens at 28, at which time the scoreboard reads $630 million SCAMMERS - ($630 million) PUBLIC.  Again.  (You will note that the only purpose served by the mob’s shares here was to loot our savings.  This stock played no part in providing capital to American business.  None whatsoever.  Mob didn’t buy those 63 million shares from the company this time and the company didn’t get any $2.4 billion.  Company got zilch because the racketeers simply made those shares up to rip off their customers.)


It’s all win-win for the money-sucking reprobate (investment banker) inside the worst-case IPO swindle model.  As long as this purse-snatcher knows where the aftermarket price has landed before he completes the book.


How close actual practice comes to worst-case, we’ll probably never know, and unbelievably, the Feds say there’s no need for oversight here.  Crime Lords stuff Washington pockets big time to keep regulatory hotshots away from a topic like this.


Remember The Sting?  That movie about this betting parlor, out-of-town horse races, and those two charming lowlifes presented as grifters.  Paul Newman and Robert Redford figure out how to get race results before the betting parlor does and put a pile down on a horse that’s already won.


It’s baffling to us why these Wall Street con men never get fingered for doing the same damn thing.

How THAT Racket Works

We see that the Facebook (FB) initial public offering (IPO) raised $16 billion.  At its debut price of $38, something like 420 million shares must've been placed in the investing public’s hands.  Down at 31, a recent market quote, the public’s loss on those shares totalled $2.9 billion.


Underwriters routinely issue an additional 15% of IPO shares for themselves.  With FB, this is close to 63 million shares.  When the IPO stock drops, underwriters, who, of course, sold their FB allotment to us at $38 as well, simply wait and buy their position out at lower prices.


If this smells familiar to our loyal readers, it should.  The underwriters are SHORT, ergo raking in a bundle from our misfortune.  Again.  Their 63 million share FB short position would’ve generated a sweet trading profit of something near $450 billion at that recent quote, a financial killing for racketeering short-sellers, a.k.a. ”investment bankers” - if the mob held on and rode the entire position down.


And that’s near $450 billion and counting should the Crime Families still be riding.


Part of how the 1% get so rich throwing the rest of the country into ruin, an observation which should also come as no surprise to regular readers of these cyberspacial pages.

Wall Street Vampires Revisited

         We’ve been biting our tongue over this Facebook (FB) thing to see who was going to say what about whom.  But clearly it’s becoming the wrong outrage at the wrong moment in the Post-Financial Apocalyptic Era, so our blogger has convinced himself that only Good can come out of the investment community's reaction, and that’s “Good” with a capital “G” for the kind of Biblical reasoning that has to be applied to this money-sucking Satan spawn bedeviling downtown Manhattan and the demonic Plutocracy their nepotistic kind has us struggling to survive in.

         And lo and behold, the term “short-selling” has started cropping up in some of the more informed FB coverage.  This term never appears out in sunlight unless it’s Bloody Mary at the Securities and Excuses Commission telling us that the aforementioned “short-sellers” had nothing to do with the catastrophic global economic collapse caused by those specific short-sellers, basically getting the fraudulent practice yanked back into the cover of darkness again, and not a moment too soon either - from Bloody's point of view anyway.

         So this FB aftermarket outcry is something huge, and we want our readers to know that.  Nobody’s getting plugged yet, and nobody’s offering to explain how the rackets work either, but we’ve taken a giant step in the right direction here.  Actual dialogue.  Just keep in mind, when the politicians start popping off about controlling the Presbyterian Mafioso, until these hired Beltway hands do tell us just what it is they’ll be controlling, and with the kind of culpability-ridden insight you find all over these blogs, we’ll know they’re still getting paid off with bundles of racketeering cash and nothing useful is really going to come out of what has heretofore always been phony indignation, side-stepping rhetoric, and electioneering hullabaloo.

The Facebook IPO

         We’ve avoided comment on this one because our blogger couldn’t figure out what the geeks at Facebook (FB) did exactly.  He still can’t, but based on his own wall, or whatever they call it, a tiny proportion of users – possibly under 1% - seem to be doing 99% of the social networking, if that’s what’s going on with that, and they're mostly businesses and non-profits, or people related to businesses and non-profits, and this Zuckerberg person, or one of his minions, keeps firing off emails to you if you don’t read all that “content” by visiting the website as much as he wants you to.  We’ve already had to “unfriend” two abusers who were making it impossible to do much of anything but scroll through pages and pages of their stuff for pictures and headlines from somebody else that might actually be important to us, and well, face it, Facebook, who on Earth cares what the Facebook 1% has for dinner every night and why is that worth anything, let alone hundreds of billions of dollars of public savings in a stock offering?

         Our blogger priced Facebook stock at zero for the IPO, and thinks this Zuckerberg person needs to pay his customers money for all the d#mn trouble he causes them with this stupid thing of his.  

         Anyway, an investment issue has finally come up that we can actually address:  the Crime Families have been pounding FB stock down since the offering, and why aren’t they all going to jail for it?  Morgan Stanley sets the most absurd price it can get away with, and the pack of them know it, and everybody in the mob plays the short side and pounds the price down and down and down right out of the gate.

         It isn’t exactly the first time these goons have pulled this scam.  With them, it’s all about setting an offering price uninformed people with scandalously inadequate information are willing to pay, and then robbing them blind because you made them blind.  With the aftermarket price pounding thrown in, why doesn’t law enforcement ever call this brand of racketeering what it really is: FRAUD?

        Hotshots at the Securities and Excuses Commission belong in the clink too, or did we say that already?

Late Breaking News

           Sources tell us that officials at the Federal Bureau of investigation have offered to put Wall Street megabank JP Morgan (JPM) in the Federal Witness Protection Program in exchange for information leading to the arrest and conviction of another low level Frenchman, for whatever happened with the $2 – maybe $3 billion dollars this time.  Rumor has it the financial colossus will be renamed as some kind of credit union and relocated to a small community in western Kansas, or maybe on Block Island, R.I., where its new status as an offshore credit union could bring in some of that Facebook IPO money after the rest of those traitors figure out what the tax bill is going to be if they stay here, and the pack of them just go ahead and renounce their citizenships too.

           Don’t go away, loyal subscribers.  We’re pretty sure you haven’t heard the last on the JPM saga yet.

New Sheriff in Town

           Big financial institutions make big trades.  Buying and selling small quantities won't generate the kind of outsized numbers needed to make a difference on gargantuan financial statements.  If JP Morgan has gotten itself caught up in an ongoing adverse market swing over the last 6 weeks, and they say they have, but nobody is going to tell us anything else, we can at least have some fun guessing at which one it might be.


           And glancing at big market swings in known big markets over that period, the 12% dip in crude futures certainly stands out.  Whole oil complex fell like a piano from a window this month, and that would be straight down for those of you who're too young to have watched a whole lot of slapstick comedy on the black and white TV.


           Now whenever we think of that pit, visions of anchored tankers come to mind.  Row after row of these huge merchant vessels awash in Texas light sweet anchored in remote coves across the globe at the behest of Crime Family capos driving prices up by sucking inventory out of the supply/demand equation in this way.


           Enter the FBI.


           That's right, the Federal Bureau of Investigation just announced that the suits are jumping in.  Or swaggering in.  They don't really jump, at least not in the movies, just pull up in American-made vehicles, kind of slide out, and pretty much swagger on in.


           Anyway, that's all we've got for you now.  Possibly crude and definitely the Feds, and maybe something so awful to the American people that the FBI took over to make sure we never ever find out what's going on with this $2 - maybe $3 - billion thing, whatever it was - or still is, so that's where we have to leave you today, at a place where the Wall Street Crime Families have never been before .....


           Enter the FBI.

What Credit Default Swaps? ... What Not-for-Profit Trades?

           There are still no facts, but it’s reported that the now infamous $2 billion - maybe $3 billion - proprietary trading loss at JP Morgan Chase (JPM) comes from credit default swaps on not-for-profit trades.

           WTF?

           As we understand the term, a credit default swap (CDS) is some contractual arrangement between two huge parties, one or both of which may be sham entities set up to transfer disclosure away from the actual gargantuan financial institution that started this, often in a process designed to remove financial risk from big guy’s balance sheet as well, and whatever they’re doing involves public securities in some way that’s not going to turn out good for somebody before this thing is over.  Each CDS is different, so there can be no public market, and they’re totally unregulated because nobody but the racketeer pulling off this swindle can understand them anyway – until somebody iphones somebody's blackberry, or however that works, claiming the cell phonee lost a bundle and better pay up.  Or else, presumably.

           Then there’s that “not-for-profit trade” thing.  The expression must’ve been coined by some delusional MBA who was on crack, or one of those, at the time, especially when applied to a Wall Street bank.  Typically, in the context here anyway, one sells your traditional derivative to hedge – making dough if the hedged position goes sour – and the counter-party loses his a$$.  Or one buys the same derivative as a speculation, and said speculator loses his a$$ if the price heads the other way instead.

           It’s our understanding that, by definition, nobody loses anybody's a$$ on a not-for-profit transaction.  Like contributing fifty bucks to the Hug a Tree Foundation.  All right, a hundred and fifty.  Whatever.

           We know this doesn’t help Post readers understand what’s going on with the JPM news all that much, but it does go to show just how useless the media has come to be in the New Plutocracy.  Every story on this one is getting couched in words that tell us nothing.  Absolutely nothing at all.

           So where are the voices saying that ain't right?  That's what we need to know.  Anybody else want to speak out?  Anybody at all?

What Derivative(s)? ... What Position(s)?

           Stockholder's Equity at JP Morgan Chase (JPM) amounted to almost $184 billion at the end of last year, so when the CEO seemed to announce that a proprietary trading desk there dropped $2 billion over the last six weeks on something or another somewhere on the planet, with the possibility that open position(s) in whatever he was talking about could extend the loss by another $1 billion, the debacle he was either inadequately disclosing, or merely alluding to, didn't seem to threaten the colossus' existence all that much, if at all, and the CEO rushed to add that trading profits of $4 billion estimated for the current quarter will comfortably absorb that which just happened, whatever it was.  One got the impression from reported rumors elsewhere in the press that derivatives were involved, and maybe the London office.


           JPM is too big to talk straight, so we're awaiting further non-disclosures and double-talk before commenting on what appears to be a situation here, or not.

Government

           It strikes us that two recent links finding their way to World Headquarters here in Logano, Tennessee seem to belong together like ticks on a coon dog:

http://youtube.com/watch_popup?v=LO2eh6f5Go0

http://www.wthr.com/video?clipId=7054149&autostart=true

First Super-Earth Discovered

           NASA's Spitzer Space Telescope has detected light from a super-Earth outside our solar system for the first time.  Called 55 Cancri e, the planet is about twice as big and eight times as massive as our home world, and orbits its star, 55 Cancri, in a speedy 18 hours, a tad faster than our 365 days and change.


           It, too, is uninhabitable, but for reasons that have nothing to do with bought and paid-for Washington politicians.

The New Zero

           The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act added more paperwork and mandatory credit counseling/debtor education to the procedure, increasing administrative costs to the point where typically lawyers now charge $1,500 to process an individual filing, meaning at least hundreds of thousands of Americans who've needed to protect themselves from predatory creditors in this way have been financially unable to do so over the past seven years.

          This makes fifteen hundred the new zero.  Let your stash drop below that figure, and you're in for the kind of Dickensian hell formerly relegated to high school reading assignments, a chilling reminder of how far we've fallen - and how fast - at the hands of a corporate-controlled Federal Government viewing citizens as prey.

           While the spiraling National Debt pummels your sorry bank account through the eve of destruction, be forewarned: no longer can one afford the luxury of going completely broke.

           Whatever happens, keep that fifteen hundred around.

Required Reading

           Taking the view that incumbent National politicians should be tossed out of office en masse regardless of party, as we at The Post now do, some financial issues come immediately to mind:


           - massive pilfering of middle class savings through the "stock option" swindle that now funds Washington players,


           - recalculating inflation to escape facing up to the magnitude of our mounting cost of living,


           - accommodating the rigging of U.S. Treasury Bond prices, creating market disruptions that can only result in another global financial meltdown once the true cost of our National debt comes home to roost, 
             
           - refusing to quantify the scale of our un/underemployment levels, let alone find these people jobs.


           There are more, but a complete list sounds too depressing to deal with.  Whatever, that last issue is addressed in a recent NY Times piece that doesn't go far enough because it can't.  There are no numbers.  That's what not quantifying something tends to do.  The link follows:


http://www.nytimes.com/2011/07/10/business/the-unemployed-somehow-became-invisible.html?_r=1&pagewanted=all