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The Raelian Movement
for those who are not afraid of the future : http://www.rael.org
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http://www.dailymail.co.uk/debate/article-2148816/Facebook-IPO-proves-trust-bank.html
Read more: http://www.dailymail.co.uk/debate/article-2148816/Facebook-IPO-proves-trust-bank.html#ixzz1vrNvbfOq
Has nothing changed? Why the Facebook IPO proves you can never trust a bank
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About four weeks ago, I wrote on my blog that Facebook was heading for a ridiculous valuation when it was launched on the stockmarket. That wasn’t because I think it’s a bad company – pretty clearly a company that makes a billion dollars in profits after only a few years of life is a remarkable creation. I have only respect for Mark Zuckerberg, its creator.
But it’s not Zuckerberg who gets to choose the company’s valuation. It’s the banks he retains to manage the transaction. I wrote that the firm was being ‘vastly and obviously overvalued at the levels currently being discussed.’
Unfortunately, I’m being proved right at sickening speed. The firm had its IPO (Initial Public Offering) on 18 May – that is, the date when its shares first began to trade on the market. Since last Friday, the firm has lost 31% of its value, in comparison with the intraday high of $45 per share. Yesterday’s close was $31.
Disappointing: Facebook shares have lost 31pc of their value since the company's IPO last Friday
But let’s not talk about the firm. Let’s talk about you. If you invested £1000 in the company’s shares, that money is now worth around £700. Realistically, given various costs and fees, you might well find that money worth just £600. And you’ll lose more before things stabilise.
So what happened? Well, quite simply, the banks did what banks do: they looked after their interests and didn’t give a damn about yours. Here’s how the whole ugly operation proceeded.
Step one: they pumped up Facebook’s valuation as high as they could. Since a bank’s fees are in general a percentage of total money raised, the more highly they valued the firm, the greater the fees they got to rake off the top. They were assisted in this by irresponsible cheerleading from across the mainstream financial media.
Allegations: It has been claimed that Morgan Stanley told institutional investors that the shares were overvalued, but left retail investors in the dark
Step two: since banks know that professional investors aren’t that easy to fool, they didn’t try too hard to do so. Facebook is a company with a huge profile amongst ordinary retail investors, so it’s pretty easy to ensure a huge retail following for the IPO. Morgan Stanley, one of the firms involved in running the whole operation, stands accused of effectively differentiating between different classes of investor.
Allegedly, one of its analysts shared negative news about Facebook with institutional investors that it did not also share with retail ones. If those allegations prove true, Morgan Stanley was effectively protecting its most valuable clients and letting the retail investors – that means people like you – go hang. Or to put it at its starkest, the suggestion is that Morgan Stanley sold a stock that they knew to be overvalued to retail investors while protecting its wealthiest clients.
Step three: they launched the IPO, took their fees, watched the share price plummet, and will now wait until a sensible price has been reached, before going back to their original rich clients in order to start the business of actually trading the stock in the normal way.
Have I left anything off? Well, yes actually, Step Four – the one step no Wall Streeter would ever forget about – the bankers involved will almost certainly pay themselves giant bonuses.
Now, I want to be clear that Morgan Stanley vigorously denies these accusations. (No surprise there: it is possible that a serious criminal offence has been committed). A spokesman for Morgan Stanley said in a statement, ‘Morgan Stanley followed the same procedures for the Facebook offering that it follows for all IPOs. These procedures are in compliance with all applicable regulations.’
OK. So one of two things is true. Either, Morgan Stanley did not follow those regulations, in which case I personally would argue that the only fair penalty would involve a significant number of Morgan Stanley bankers serving a long sentence in jail. Remember that during the London riots, we saw people jailed for breaking a couple of windows and nicking a couple of TVs. The destruction of value in the Facebook IPO has so far run to many billions of dollars and we haven’t seen the last of it yet. My own rule of thumb – call it the Feierstein rule – is that for every million dollars criminally destroyed by a bank, one banker should spend one year in jail.
That’s option one. Here’s option two: what Morgan Stanley says is correct. Let’s say it scrupulously followed every regulation, every procedure, every last detail of compliance. If so, those regulations have totally failed to protect retail investors. Who cares if the rules are followed, if they don’t do what they need to do?
Or actually, now I think about it, there’s a third option. Which is both of the above. Maybe, Morgan Stanley didn’t follow those rules and maybe, in any case, those rules are inadequate. Maybe the regulators are feeble; the banks dangerous, slipshod and unethical. Maybe the courts just can’t cope with the money and sophistication of the bandits they’re struggling to deal with. Perhaps, in fact, the entire, ugly, destructive machinery of Wall Street and the City of London is the same as it was in 2007: destroying value, threatening economies, beyond reach of the law.
Time will tell which of these options is correct. But until we see the ‘too big to fail’ firms broken up and until we see bankers in jail for ruining the lives of countless retail investors, the system is failing. The end can’t come too soon.
Mitch Feierstein is CEO of Glacier Environmental Funds and author of Planet Ponzi
Read more: http://www.dailymail.co.uk/debate/article-2148816/Facebook-IPO-proves-trust-bank.html#ixzz1vrNvbfOq
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WARNING FROM RAEL: For those who don't use their intelligence at its
full capacity, the label "selected by RAEL" on some articles does not
mean that I agree with their content or support it. "Selected by RAEL"
means that I believe it is important for the people of this planet to
know about what people think or do, even when what they think or do is
completely stupid and against our philosophy. When I selected articles
in the past about stupid Christian fundamentalists in America praying
for rain, I am sure no Rael-Science reader was stupid enough to believe
that I was supporting praying to change the weather. So, when I select
articles which are in favor of drugs, anti-Semitic, anti-Jewish, racist,
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other stupid article, it does not mean that I support them. It just
means that it is important for all human beings to know about them.
Common sense, which is usually very good among our readers, is good
enough to understand that. When, like in the recent articles on drug
decriminalization, it is necessary to make it clearer, I add a comment,
which in this case was very clear: I support decriminalizing all drugs,
as it is stupid to throw depressed and sad people (as only depressed and
sad people use drugs) in prison and ruin their life with a criminal
record. That does not mean that there is any change to the Message which
says clearly that we must not use any drug except for medical purposes.
The same applies to the freedom of expression which must be absolute.
That does not mean again of course that I agree with anti-Jews,
anti-Semites, racists of any kind or anti-Raelians. But by knowing your
enemies or the enemies of your values, you are better equipped to fight
them. With love and respect of course, and with the wonderful sentence
of the French philosopher Voltaire in mind: "I disapprove of what you
say, but I will defend to the death your right to say it".
full capacity, the label "selected by RAEL" on some articles does not
mean that I agree with their content or support it. "Selected by RAEL"
means that I believe it is important for the people of this planet to
know about what people think or do, even when what they think or do is
completely stupid and against our philosophy. When I selected articles
in the past about stupid Christian fundamentalists in America praying
for rain, I am sure no Rael-Science reader was stupid enough to believe
that I was supporting praying to change the weather. So, when I select
articles which are in favor of drugs, anti-Semitic, anti-Jewish, racist,
revisionist, or inciting hatred against any group or religion, or any
other stupid article, it does not mean that I support them. It just
means that it is important for all human beings to know about them.
Common sense, which is usually very good among our readers, is good
enough to understand that. When, like in the recent articles on drug
decriminalization, it is necessary to make it clearer, I add a comment,
which in this case was very clear: I support decriminalizing all drugs,
as it is stupid to throw depressed and sad people (as only depressed and
sad people use drugs) in prison and ruin their life with a criminal
record. That does not mean that there is any change to the Message which
says clearly that we must not use any drug except for medical purposes.
The same applies to the freedom of expression which must be absolute.
That does not mean again of course that I agree with anti-Jews,
anti-Semites, racists of any kind or anti-Raelians. But by knowing your
enemies or the enemies of your values, you are better equipped to fight
them. With love and respect of course, and with the wonderful sentence
of the French philosopher Voltaire in mind: "I disapprove of what you
say, but I will defend to the death your right to say it".
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"Ethics" is simply a last-gasp attempt by deist conservatives and
orthodox dogmatics to keep humanity in ignorance and obscurantism,
through the well tried fermentation of fear, the fear of science and
new technologies.
There is nothing glorious about what our ancestors call history,
it is simply a succession of mistakes, intolerances and violations.
On the contrary, let us embrace Science and the new technologies
unfettered, for it is these which will liberate mankind from the
myth of god, and free us from our age old fears, from disease,
death and the sweat of labour.
Rael
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