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In the 1990s tech bubble, the game was simple: The insiders -- entrepreneurs (using the term loosely in some cases), venture capitalists and investment bankers -- colluded to move all risk to the public markets. They succeeded in huge ways, and scammed the public out of countless billions.

So I'm totally unsurprised to hear that the slimeballs who run Wall Street connived against the public last week in the Facebook IPO.

Just another reminder that buying and selling in today's financial markets is for insiders only. The rest of us are the designated sucker at the high-stakes poker game: losers, by design.
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Kyle Mitchell's profile photoSalik Rafiq's profile photoPeter da Silva's profile photoAnthony DiRuggiero's profile photo
21 comments
 
I got burned in netscape and learned to never get into an IPO.
 
Accuracy In Media: the G+ parser cuts off the Reuters story with the words: "The bank's consumer Internet anal."
 
I was thinking the same thing this morning.
there are only 2 groups right now who actually lead the dance.
1- a bunch of guys who think they know play with the rules and laws for the good of the human kind (I mean... that's the definition right?)
2- a another bunch of guys who think they know play with markets (emphasis on "play") for their own good.

and the rest of us (99.9999999%), we just watch them and try to avoid the hits.
 
"Typically, the underwriter of an IPO wants to paint as positive a picture as possible for prospective investors. Investment bank analysts, on the other hand, are required to operate independently of the bankers and salesmen who are marketing stocks."

Triple underline there. The analysts 'loved' it (for the most part), but the underwriter clearly hated it, as evidenced by shooting it in the foot just before the big day.

It's just the CYA version of the .com boom.
 
It's not every day I see a post that I'd like to double +1 on. But this is a reminder that little has changed (if anything), maybe only the names of some of the players. And that the hype is for suckers, meaning everyone else not doing the hyping. And that the whole game is a bit like a Ponzi scheme, where the last one (here, the small investor) is left holding the bag (which turns out to be empty).

So long as the stock market is about quick meteoric gains and IPOs instead of long-term holdings, this story will be frequently repeated. The real way to solve this "economic" problem (short of massive social change) is to change the tax code to discourage such short-term speculation and to reward long-term slow growth. Arguably, a "Dutch Auction" where stocks are initially priced insanely high and then trickle down to real values would be fairer because it destroys the incentive to pump-and-dump (buy something and flip it to make a quick buck).
 
Sad political cartoon in Tuesday's Newark Star-Ledger showing the little guy (either an investor or a small business owner) up against the big guys. The caption: Too small to succeed.
 
The week before the IPO, there were a bunch of anti-Facebook stories in the news. Specifically, one was that half of all Americas thought Facebook was a passing fad, and another said that General Motors was cancelling all its advertising with Facebook. Hopefully some investors stayed away based on these stories, and missed out on getting ripped-off.
 
Dan, I don't know why you're surprised. Every IPO is a hype machine designed to connive the public. That's the very definition of IPO, and it has been since long before the late-90's dot-com boom. Any investment advisor worth his/her salt will immediately tell you stay far away from IPOs, as a hard and fast rule.

+Evan Brody I disagree with the Newark Star-Ledger cartoon. There is (practically) no such thing as too small to succeed. If you can open an account -- be it retirement or not -- with just a couple thousand dollars, you can succeed. What there is, however, is too uninformed, too misinformed, and too controlled by one's emotions to succeed. Those three, sadly, are as common as beach sand. The vast, vast majority of the "little guys" out there fall into one or more of those three, and that is their undoing, not their size.
 
+Carl Miler carl, I don't agree. The system is fixed, almost rigged. And its the big guys scamming each other. There is no room for the little guy anymore. real estate, stocks, bonds and next is gold.
 
If the system truly is rigged, and the outcome pre-ordained, then you should be golden. Because if you know what's going to happen next, you know where to place your chips now. You need only wait for reality to catch up to your certainty.

Next you're probably going to tell me that the system is rigged against YOU -- that no matter what you do, you'll lose. I call bull on that. Today's marketplace is more diverse and accessible than ever before. The little guy can bet with or against just about anything. The little guy has more opportunity than ever before to make it in the marketplace. There are winning moves open to you for every eventuality today. You can even make most of the same moves the big boys are making, but in microcosm if you like. If you're making the wrong moves repeatedly, or feel like that's what would inevitably happen if you played the game at all, then I have to ask, how are you deciding what moves to make? What information are you basing your decisions on? Where do you source it, and how do you corroborate it? And after all the reading and analysis is done, do you let your gut talk you out of the right move? Or into the wrong one?

I will maintain until I'm blue in the face that what you lack is solely high-quality information and self-awareness. Perhaps I should add the willingness to believe what I'm saying, and to believe in yourself to explore, learn, and execute.
 
+Carl Miller Knowing the system is rigged doesn't help you if you don't know what the pre-ordained outcome is.
 
I see this case two ways: because of the poor IPO the well is poisoned for a while, but since Facebook was bigger than the next 10 or 20 potential IPOs combined they don't care about failing to ignite a frenzy that would have buoyed all of them. The future IPO's loss was Facebook founder/VC short term gain.

Also complicating the issue is the hundreds of millions of shares not sold to the public on Friday that are now 'worth' tens of billions less than expected. Another offering isn't going to happen anytime soon, Facebook is going to scramble hard to increase profits to justify even the current stock price.
 
A total scam. A company with total revenues of $3bn being valued at $104bn...the offer price should have been $5.
 
Knowing the outcome is pre-ordained doesn't mean you know what that pre-ordained outcome is.

You know the race is rigged, but you don't know which horse has the nod, so why are you "golden"?
 
So ... what's your investment strategy then? Avoid IPOs? Avoid single stock picks? Pick stocks selectively? Equity indexes? Bonds? TBills? Mattresses? Gold? Krell Steel?
I suppose there's the "put it into an enterprise you control yourself" school. Should think more about that.
 
+Peter da Silva Why are you settling for not knowing which house has the nod, if you already know the race is fixed?

+Edward Morbius My strategy is keep abreast of what's going on in the world in general, and in one or two select markets specifically that interest you. Understand the investment implications of political, fiscal, and economic events and trends. Seek out quality information, analysis, and advice. Be willing to pay for it, but be very careful of whom you accept it from. Always ask what their ulterior motive or conflict of interest might be. Learn to recognize when your emotions are in control, and wrest control back from them. Learn who the greats are, and listen to their timeless pearls of wisdom. Be willing to hear and act on what you need to hear, not what you want to hear. Check your ego at the door - don't need to be right all the time. Be aware of risk in all its many forms, and manage that above all else. That's my strategy. What I'm invested in will change with the times. My strategy won't.
 
Well, there's one sure-fire/non-scam investment these days: Buying stock in companies that make torches and pitchforks...
 
And we will continue to be suckers until some heads really roll... SEC, DOJ that's with you!
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