Tuesday, May 22, 2012


My IPad.   Tooka little vacation last Wednesday and 200 miles into the trip I realized I didn't have it.  Got back last night and there it was right on the island in the kitchen.  I'm more than embarassed.

Too bad because it was a decent week for commentaries...not as good as this week is going to be but decent.  I suppose we have to talk about the Facebook fiasco although it's painful, so I'm going to pick a somewhat different route to take but first of course we have to answer the basic questions.  Was it a disaster?  Yes.  Did incompetence abound?  Yes.  Did the underwriters push on a door so hard that they lost sight of what might be on the other side?  Yes.  Did Zuckenberg bag them?  Big Time.  Will they talk about it?  No, they're too embarassed.  Will there be an investigation of the process by the Feds?  You betcha.  Will they find anything?  Stupidity but probably nothing illegal.  Are the buyers pissed?  What a question but if you are so stupid to buy into an IPO in which 67% of the stock held by the insiders is to be unloaded, by definition you're too stupid to be pissed.  What about the performance of NASDAQ?  You shouldn't ask.  And the Tort Bar?  They haven't sobered up enough to begin to file suits.

Ok, that answers the questions, now a serious discussion.  Few have mentioned the fact but we may have witnessed the end of the stock (and bond) issuance business as we know it.  I frankly have never understood what the corporate community have allowed themselves to be ripped off in the manner in which they have over 100 years.  Think about this:  Facebook issued $18 billion dollars of stock and paid a management fee to the underwriters of "only" one percent, plus all the other fees associated with the issuance.  That's $180,000,000 spotsfans--looks bigger when you see all the zeros, doesn't it--and that was a negotiated number...not the normal fee.  Now in the good old days, you needed the "book" of the investment banker with whom the issuance was placed and you needed the lead underwriters to make a market in your issue.  It was tough work involving relationships between buyers and sellers that had been built up over a decade; phone numbers were locked up at night and top salespeople were treated as the royal jewels of the firm.  The old line, "My word is my bond," really meant something.  Relationships were cherished.

It still kinda works like that but it's way easier.  Communication has changed the world.  I really question what with the open society, instantanious world-wide communication and the impersonal nature of business today why the next issuer will not simply say, "I got it, if you want it tell me what you're prepared to pay for it and call Joe at Grabbit & Run Inc. to place a bid, who, by the by, will be the market maker."  And in a nutshell, that is what is known as a Dutch Auction and that is exactly what Google did when it went public.  I'm willing to bet that the underwritten transaction which has dominated the new issue business for so long will become a thing of the past for all but special situations within five years.  Hope I'm around to see if I'm right.

What else went on without me...oh yeah, Europe slipped further into darkness despite the cordial first meeting of Francois Hollande and Angie.  Hug-hug. kiss-kiss and Frankie says, "You thinkin' like I'm thinkin' about a Eurobond, babe?"  And she says, "Wadda you, nuts?" Which of course in translation means there's still no money to save the rest after Greece leaves (NEWS FLASH:  Papademous said tonight that "there is planning underway to abandon the Euro," tanking the stock market).  Tomorrow morning will will find out what he REALLY meant.  Boys and girls, it's still about the banks, and banks are all about confidence.  Forget Greece, stand behind the banks.

And speaking of Greeks in general, poor old Jamie just keeps getting trashed to the point that some moron (no not Lizzie ) came out today and called J.P. Morgan a threat to world peace...or  global stability...or...whatecer.  The more we hear about it the more it sounds like an old tune that has been playing forever.  "I always got it right so I am never wrong," with the band leader in the job for too long and losing the music because she just didn't care as much and took too many breaks.  A visitor in the big red building which was destroyed on 9/11 was always brought to the balcony one story above "the floor" and shown the entire trading operation.  It was impressive but most impressive were the desks at one end where sat the management of the firm out in the open, a 1 minute walk from the furthest desk.  There was a lot that went wrong with Solly but they knew what trading was and how to run it.  You can't relax.

And finally, the Chinese are to be allowed to buy our bonds direct.  Whatsupwiththat you say?  Donno, but I'm going to find out

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