HurricaneZoo.com

It has been awhile since I have pondered the goings-on of Wall Street and the capital markets.  Two IPO’s of recognition that I have been watching are General Motors (GM), and lesser know but much touted Pandora (P). Both companies came to market with a lot of noise a couple of months ago. Pandora is an online radio station, and General Motors  manufactures automobiles. They are very different companies but the process for going public is similar.

 There is much research to be done before bringing a company public, any company. The analyst and bankers that bring a company public, if it gets that far, start with a road show. The road show is a Wall Street phenomenon reminiscent of a high-class carnival.  This occurs prior to the company stock trading on the NYSE. The road show creates a lot of excitement for retail brokers  in banquet rooms all across America. The lead banker will have the event catered. Lavish buffets, with an endless supply of African lobster tail, jumbo shrimp, and filet mignon, are served.  The only meatballs are the attendees. The booze flows freely, as there is an open bar with plenty of top shelf liquor, all free. In the front of the room there is a small group of people sitting in chairs listening to the presentation. These are the compliance officers, the straight ones; the ones responsible if anything goes wrong.  In the back of the room, half crazed brokers full of gin and the latest designer drug are getting wound up, there is a party erupting. Brokers are guzzling free booze and stuffing their pocket with lobster tail and filet mignon, many still living at home with Mom and Dad.

 There are skeptics and disbelievers of the venerable IPO market, there always will be, but the majority are pom-pom waving cheerleaders with a good story to tell a prospective client. Setting the price for a new stock issue is a complicated process.  Involving advanced mathematical formulas that nobody really understands; it is more like a best effort. The offering price on both companies had been raised, several times, above the expected asking price. Finally and after much fanfare, the IPO price was set at $16.00 a share for Pandora, and for GM it was set at $32.00.   Professional money managers were saying, “buy” with the caveat of long-term value and great brand recognition, at least one of those may be true. 

 On the first day of trading both stocks were up, Pandora was up substantially. I remember CNBC called the opening bell that morning from the floor “And here on Wall Street trading begins on the opening bell,” they say that every morning. Really makes you feel like the casino is open for business, it is the best. The CNBC  reporters are running around the floor of the stock exchange, getting all of the latest gossip – I mean news – from the specialist and traders on the floor about today’s trading activity. 

 The CEO of Pandora, Mr. Kennedy, was walking on the floor of the NYSE  the day the stock  opened for trading; he was like a kid in Candyland. A female reporter for CNBC did a quick interview with him. She asked him about the company’s three billion dollar valuation, a high price for a company not making money. The question, to the heart of the matter, set him back on his heals. It was as if he were punched in the stomach, a shot that buckled him. He started to mumble something, sounding uninformed and misguided.  His knees started to buckle and I thought he was going down for the count.  Before he said something foolish on national television one of the bankers, who brought the company public, quickly stepped in to answer all questions. Talking about perceived value and other non-descript terms that evade an honest answer. “The value of Pandora… as a brand is HUGE…HUGE” he said. It is hard to argue with such well-dressed optimism.

 CNBC tried to talk with Mr. Kennedy again but the earlier question of how can a company be worth 3,000,000,000 and not have any revenue was too direct and straightforward. A normal person does not have the skill set to answer such a question; there is no logical answer. When Mr. Kennedy found himself in the crosshairs to answer more questions, a bunch of financial gobble-de goop, he did what anyone would have done, defer it to the bankers and walk away, exclaiming it is all very complicated.

 June 15, 2011, the first day of trading, you could have sold a share of Pandora stock for nearly$27.00, a quick 70% gain. GM’s  first day of trading, Nov 17, 2010, didn’t have the same pop that Pandora did, up only 12% to $35.90, but had the stock been held for 60 days it would have risen twenty two percent to nearly $40.00. Not a bad return on your investment, sounds good to me… how do I get in,  where do I sign up!

 Not so fast, Skippy.  Unless you sold quickly, and retail investors are told to buy and hold, to not even look at how there investments are doing, you are loosing money. The sun would not be shining on the owners of those particular shares of stocks today. Both companies raised a lot of money with their initial public offering, but the road show is over, and now investors are loosing money. Pandora fell to a low of $9.33 and General Motor’s low was $19.05. At the close of trading today (P) rose .85 up 6.33% to $14.28  a good day for the stock and (GM) was down .05 to $22.50.

 A wiser man than I once told me,” David, investing is like religion, it is what you believe”.

David Helmericks

Warren Buffet recently stated in a New York Times article that the bank bailout “was good for the taxpayers” and our financial system would have come to a screaching halt had the Fed and Treasury Dept not come to the aid of wall street and the banks with the TARP bailouts and Quantitative Easing.

I always thought this was untrue. It sounded bad and it felt bad. It didn’t make sense. Low and Behold An astute person, David Stockman, recently posted an explanation of Mr Buffet’s fallacious and self serving statements. The original article can be read at the link below.

http://www.minyanville.com/library/search.htm?search=1&send=1&oid=0&q=&title=&mo=&day=&year=&contrib_id=283

It’s anything but good for the taxpayers. We are being put on the hook for the bailout monies and we will pay more in the form of higher prices through inflation. (the hidden tax) to save the *sses who speculated and played roulette with the financial system and made billions of dollars. Why in the heck are we rewarding these clowns instead of throwing them in jail where they belong? The answer: they have friends in high places. The Paulson, Bernanke and Geitner team of uninformed, illiterate, academics ( who are beholden to the banks and Wall Street boys and think they know everything) who sold out the country at the expense of the taxpayers.

PS Mr Buffet profited handsomely from the bailout.

More on this later with references to Mr Stockman’s article

Paulix

In this year of our Lord, 2010, The Christmas sales have started for the season. I can’t ever remember them starting this early. It is the 7^th of November, and advertisers usually wait until after the Thanksgiving Day festivities before starting to talk about Christmas. It seems only fair to give Thanksgiving its due, before making all that Christmas noise.  I saw an ad on Yahoo yesterday. One of our local merchandisers will be selling appliances for three dollars. Personally, I will do my part as a good consumer. Where I can, provide stimulus. I will buy a washer, dryer, and a new stove. I will buy nine dollars worth. Nice.

Sounds good, a three-dollar appliance. The extended warranty however is a little pricey. The NO COST PLATENUM PLUS coverage starts at a little over seven hundred dollars. And you have to buy the extended warranty for a three-dollar appliance; it is part of the promotional deal. I am only speculating, of course. For all I know, they might be trying to sell carrot peelers for three dollars. That lies at the heart of the matter. What does a “three-dollar appliance” actually mean? It is just a screwed up sound bite, soaked in high-octane ambiguity, meant to excite: a hook.  

 I am, however, in complete agreement with the retailers. Get the consumer in the store early, when they are feeling good. The stock market has been on a tear and is at a two year high. People are looking prosperous on their monthly financial statement; and some have called this the bottom in the housing market. The experts are predicting the highest shopper turnout in years. The consumer has a right to feel good; we are in recovery?

 Be prepared to grab your sack, though, there may be rough sledding ahead. After Christmas, the dollar will fall in value, loosing purchasing power here at home. This will be good for American multinational corporations, or anyone that sell goods overseas. But for me… where I buy groceries, prices are going up. The news tells me there is no inflation, though. In fact, some say we are at risk of deflation. This may be true for items other that food and fuel which is all I can deal with at the moment. Gasoline is nearing three dollars a gallon and milk is sneaking up on six dollars a gallon, ouch.

Here is my two cents worth for the holiday shopping season, for that is all I have left. After listening to all the experts, I have come away with this philosophy. Spend it all, max out your credit card to the limit. Be a good American and contribute to the recovery buy… buy… buy now. Hell, you can worry about paying the bill later. Who knows, you may have a lot of time on your hands after the holidays. If you are lucky and things really get bad, you may be able to get inline for some debt forgiveness, which would cheer things up, right. That will be the day. In the end who can pass on deals like three-dollar appliances? And who in hell cares about saving for a rainy day? The country is counting on you.

David Helmericks

Our Recession officially ended in June 2009 so where is the recovery.?

We have 17 million unemployed and 8 million foreclosures coming in the next two years (Realtytrac.com)

The fed’s current policy of “Quantitative Easing” may have unintended consequences.  We are paralleling Japan’s 20 years of economic stagnation in our economy.
John Hussman and Mike Shedlock provide some insight as to what is happening and why. See “Mish’s Global Economic Trend Analysis” Oct 26, 2010

This policy is causing the next asset bubble in commodities, especially precious metals and the stock market which some are now saying is overpriced.

Mish states we should not have thrown trillions of tax dollars at the banks but should  have allowed them to go to bankruptcy.  This is actually what the law says we should have done.

So why did our Congress not follow “the law”?  In two words “Scare tactics”  They were told (by the bankers) there would be “a financial crisis of biblical proportions”  So instead we bailed them out . FYI we are preparing for another bailout of the banks, A second TARP.

In essence the investors (stock holders) would have been wiped out and the bond holders ( the wealthy) would have taken a hit BUT the banks would have reorganized with clean balance sheets and the ability to make loans overnight. The so called ”toxic assets” would have been removed from the bank’s portfolios and allowed a market readjustment of their value.

Note: Mark to Market valuation of assets is now a major contention with  Wells Fargo and other major banks, with the Accounting Board’s GAAP proposal changes. If the banks are forced to report current housing asset values (which have dropped up to 50%) their balance sheets will be in the dumpster and they will be forced to declare bankruptcy.

Yes, the economy would have gone through some rough time maybe 6 months to a year until people realized “the sky was not falling” but we would have already started a true recovery. Instead the banks are not lending to people who need the money to expand business AND can pay it back!!

Paulix

I woke today around seven. I am sleeping better now than I have in the past. I use to wake up around 4am. I said I liked getting up early, but I really wished that I could have been sleeping.  I am glad to be sleeping in a little longer. I don’t know why I just feel better.

The sleeping pills probably help. I only take a half at a time; even with a whole one I can only sleep three to four hours. So I take a half, and then the other half when I wake at 2am. I scan the TV channels and look at late night programming, while I wait for the sleeping pill to work. The only thing entertaining is reruns of Glen Beck on Fox.

Beck is a serious snake oil salesman, with his blackboards and his time-lines and his cardboard cutouts. He needs to start his show by walking on screen pulling a handcart, a gipsy-wagon with all his props in tow. Then he could break out the Ouija board and see the future. I have seen him in a red bandana and black cumber-bun, a mystic, magical look for him; add a turban and he’s done. It is hard to believe there are people out there that take him serious, Jesus that is a scary thought. I think he will eventually follow in Ron Parsleys footsteps and be a TV evangelical preacher. I am certain as I can be, sitting here in my backyard  writing this down, that he will be a success. Hell, I might even buy a sweat anointed prayer cloth from him.  Strictly as an investment to sell to one of his devoted followers on eBay.

I turn off the TV and go back to bed. Funny, late night TV use to be off beat, the strange hours, now it’s reruns of Glen Beck. Just knowing that will help me sleep nights.

David Helmericks

We are global now there can be no doubt. Capitalism is inserting its hand into the pocket of the undeveloped world and raising its ugly head. The current US economic crisis helped bring this into focus. The American dream is struggling to find a different way, a change in philosophy, a new kind of truth. A way for more of mankind to prosper and share the American dream… if it still exists?

 Prosperity isn’t a bad thing and there is no reason why more people on a global scale can’t participate. The planet certainly contains the resources for all to live a prosperous life.  The ideas will have to be reworked, maybe with a brutal hand, for a more benevolent implementation of capitalism. America exports its particular brand of capitalism to the rest of the world with little regard for the local inhabitant and their customs. America always bring the heavy equipment.

Expansion is needed to continue the pace of corporate growth and more importantly corporate profit. Remote locations with untapped resources are always in the cross hairs of multi-national corporations. And never let the lack of an invitation stop the advance of capitalism.  The development of new untapped markets is a must. And if anyone raised an objection, a few strategic pay-offs to malcontents and officials in high places can over-come most obstacles to development. And those that money can’t buy? A special group of negotiators will be flown in after dark to deal with these holdouts. And negotiations this sensitive take place in remote locations behind close doors were no sounds can be heard. America knows what the rest of the world needs…Capitalism.

  The Caterpillar D11T rains down unimaginable devastation to the forest, looking like a monster to the natives. With its 22ft blade the D11T clears enough land to make a two-lane road in the most remote wilderness on the planet. Development is a sign of progress to many. To others, like the native Tawahkan tribe, it is devastating to their way of life. But these are small detail and have never stopped America’s expansion. They know what is best for progress and the new frontier. For good or ill, it is dam the torpedoes and full speed ahead.

 The torpedoes will come in the form of protest and outrage from liberals and tree huggers. People who disagree with US expansionist policies, and people with too much time on their hands. Protest is fine if you have the media’s ear and the pen of the press to write your story. If not, other factors come into play. Questions arise? Who will finance the journey, what is needed to get there, and where are the accommodations? It is never easy to get into these remote locations. The most over looked factor, when considering a campaign of this nature, is the weather. Nobody wants to be in the jungle at the start of the rainy season. Mudslides and flash floods will fuck you every time. 

 The indigenous population, stripped of their land and way of life, will be guaranteed economic partnership in the new development. This partnership will come in the form of employment, entry-level low paying jobs. People who use to live in complete harmony with nature, in tune with the rhythms and mysteries of the rain forest, are reduced to bellhops, bus boys, and maids. The children of the indigenous people are given exclusive rights to rummage the trash, of course.

 It is hard for the indigenous people to understand what has happened. The destruction of the forest, their homes, and their way of life is complete. Days of living as Mother Nature’s children are gone forever. This makes them sad.  In fact, missionaries will be flown in to deal with this emotion, swiftly. Bringing with them bags of trinkets, cheap plastic widgets, and other meaningless trash. Group counseling on Christ, hygiene, and dressing in proper attire, will be mandatory. Little brown people running around half naked will make some nervous and be bad for business. It is all done in the name of progress.

 When it is all said and done, nothing displays expansion and opulence more than a 75-story Casino glistening in the sun above the jungle canopy, whatever the cost.

David Helmericks

More than 56,000 square miles of forest are lost each year.

This is the deal. Some of my loyal followers need to go someplace else and sell crazy. Quit putting up malicious viral links; what the *#%* are you thinking? I am tolerant of dammed near anything except mean spirited malicious fu*ks, got it! Good, now let’s move on.

 If you are interested in advertising something useful or other wise, as I suspect, I can make it happen. Let me know. The first thing I will need is a valid… good…accurate… email address with your post. A bad e-mail addresses is a major problem. Don’t be bashful; say what you mean, mean what you say. Now is not the time to be anonymous.  Now is the time to speak out, we are confronted with a shit-storm on all fronts.

  Me, I am clinging to the edge. Staying high and dry for now, living life as an artist. David Helmericks

My guess is it was a perfect financial storm. A financial event that rarely comes along, and some recognized it for what it was, taking advantage of the situation.  Some investors made money and some lost money. Investors need to accept that these kinds of things happen. I cant say this strongly enough… If you don’t have money to lose, stay out of the markets, preserve capital! Unless you are a long term investor and don’t care about short term volatility.

 The stock market is more a fool’s game, a rigged game, that ever before; and a lot of people are getting out of the market. This is evident by the declining volume in the stock market and the vanishing yield on bonds. Fear is beginning to take hold. And that is what the bailout money is for, to calm the fear.

 The bail out money given to the banks is not intended to help the public sector financially. It is reserve cash held in bank vaults in case the public gets nervous. The banks are preparing for the eventuality of a run on the bank.  If this was to happen, and the banks were not prepared to cash out customers, there would be panic and a complete loss of confidence in the system. This has not happened yet, and I hope that it doesn’t. We need to get back to basic philosophies like pay as you go .

 Investors have to sign all kind of documents, a customer profile. Agreeing that they understand the inherent risk in investing and that they may lose all of their investment. Obviously there have been many losses to investors – the Bernie Madoffs are front-page news, the tip of the ice-burg – and there is no end in site.

 Politics, Rob Blagojevich, what can you say? Charles Rangel, accused of misconduct seems smug and in a bit of pickle. I believe he knows more than a spoonful about the nonsense that goes on in Washington, DC. You watch, old Charlie won’t admit to anything… that amounts to more than a pat on the back. And they wont take him to trial either. He has something bigger that all of them: the entire political system hanging by a thread. Nobody wants Charlie to start spreading the sunshine. No, Charles will come out smelling like honey-suckle.

 I am outraged by the government action to finance corrupt business practice at taxpayer expense. Sarbanes-Oxley was not enforced. The banks books were cooked; it was all over looked and swept under the carpet. They made whole, the crooks that created the problem in the first place. The courts served up no justice. And the politicians talked the issue to death, calling for study groups and more regulation. 

 As to the question: did GM bondholders take a backseat to UAW in the Bailout of GM? Well, that is one hell of a question. Of course they did. 

 DH

Yesterday’s action in the stock market was intense; you needed a brass pair… to be short the market, or not watching TV. It was  explosive to the down side around 2:45.  The market dropped nearly a thousand points in a mater of minutes. There hasn’t been a move like that in the market since 1987… maybe never, depending on which matrix you use. If you are into that sort of drama, I hope you saw it; it was a sight to consider.

 If you were waiting on a pullback, you got it. You didn’t have time to think about the move, it came like a bolt of lighting. If your strategy was not clear in your mind before the pullback, chances are good that you missed the boat.  There was no time to call your broker, do any chart work, or get a cup of coffee for that matter. The action was that fast.

 The disbelief had triggered outrage, and commentators on the business channel made understated accusations of manipulation. Calling for an explanation from the traders on the floor of the NY stock exchange, which were standing stunned as if frozen in the headlights. There will be questions and comities formed to study the event. Tens of millions will be spent to find the answer to what went wrong. What happened? And who made a profit and who lost from the event. The media discussion will be historic. Still the answers will only lead to more questions about the rules of trading regarding individual investors – which should mean equal access to investing and trading the market; not more regulation for the little guy.

 There were huge losses for some and gains for others. The losers will cry foul; and those that gained will keep quiet! It will all be blamed on a computer glitch, along with human error. The early story was that a City Bank trader entered an order for a billion shares when he meant a million, but that is fodder for the masses. The real story, or at least one I can digest easily, is this: when strange trading action occurs in a particular stock, a specialist on the floor of the NY stock exchange can halt trading for thirty seconds to sort out events and find an honest bid and ask. The electronic exchange has no such time out.

 When the specialist halts trading, he notifies the electronic market that he is halting trading for thirty seconds. During the halt in trading by the specialists, the computers in the electronic exchange take over and fill market orders.  If you are selling at the market and the bid is 30, you expect to get around 30. But if the only buyer is at 15,  you only get 15 and not the thirty you expect. I believe this is what happened, but  I need time to take it apart and smell the fumes.

 The latest update, as to the cause of the sell off, is that it was the specialists trading halt that caused the melt down. I can see it. There are lessons to be learned from all of this. Always place limit orders never market orders.

 David Helmericks