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The Stock Market Racket

May 23, 2012 by  

The Stock Market Racket
Facebook began trading publicly for the first time on May 18.

The stock market is a racket, and Wall Street is an organized crime syndicate. Last week’s initial public offering of Facebook demonstrates exactly how the deck is stacked against individuals for the benefit of the bankster mob.

The stock was priced at $38, which valued a company providing a free service at $104 billion. It made instant billionaires and millionaires out of Facebook’s founders and a number of employees. The stock was offered to large investors on Thursday afternoon. Before trading started on the open market mid-morning Friday, insiders were already selling their stock, and large investors were already planning how to make out like bandits based on information they had that others weren’t privy to.

There was a reason for it. The forecasts for the stock’s performance were cut in the hours before the release. But only select large investors and funds were informed of the cut by the IPO’s main underwriter, Morgan Stanley. Secondary underwriters JPMorgan Chase and Goldman Sachs also revised their estimates downward.

Investment firms that received advance notice of the lowered expectations called the last-minute change highly unusual. Scott Sweet, senior managing partner at the research firm IPO Boutique, said one of his major hedge fund clients learned of the revised forecast, still bought the issue, then flipped it and went short on the opening day.

The stock jumped to $45 before its plunge began. Yesterday, it closed at $31.12.

Large investors like Sweet’s hedge fund client can make a major difference in the path the stock takes and can make money by driving the stock price one way or the other. Meanwhile, individual investors are left holding the (empty) bag.

Editor’s note: It’s time to make your submissions for this month’s You Sound Off! feature, which will run May 30. Get your submission in by May 28. It should be no more than 750 words (if they are longer, we probably won’t read them). We will select the one or two we think are the best of the week to publish. We reserve the right to edit for grammar and style but will try not to alter the meaning.

Send your submissions to yousoundoff@personalliberty.com. Please include your name, address and telephone number (only your name will be published) so we can contact you if we need to clarify something. Anonymous submissions will not be considered.–BL

Bob Livingston

is an ultra-conservative American who has been writing a newsletter since 1969. Bob has devoted much of his life to research and the quest for truth on a variety of subjects. Bob specializes in health issues such as nutritional supplements and alternatives to drugs, as well as issues of privacy (both personal and financial), asset protection and the preservation of freedom.

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  • http://httpaol.com sean murry

    thats why i havent bought any stock for a long time i knew facbook would fizz out.

  • http://joescomre@gmail.com joe NTALIB from California

    Isn’t there Anit trust laws involved here? Insider trade regulations that seemed were committed right in the publics eyes? Where are the police when you need them? i guess we should ask Martha Stewart? She would definately know. I mean after all she went to jail for insider tradiing security trade infringments! Guess this situation is differerent?
    Just Saying!

    • D A Y

      THE STOCK MARKET IS LEGALIZED GAMBLING. 4O1K’S ARE DESIGNED TO ROB THE EVERYDAY WORKING SLOB BY ENSURING MILLIONS OF AMERICANS PUT THEIR LITTLE 50 TO 500 BUCKS A MONTH INTO THEIR RETIREMENT FUND EVERY MONTH, REGARDLESS OF THE PRICE OF STOCKS, TOLD, “IT WILL AVERAGE OUT OVER THE LIFE OF YOUR FUND”. LIE. YOUR MONEY IS NOT GOING INTO A BANK. EVERY MONTH, THE BIG INVESTORS BUY AND SELL BASED ON THE HIGH AND LOW PRICE. THEY BUY LOW AND SELL HIGH,, TO WHOM??? YOU POOR WORKING SLOBS. YOU PUT YOUR MONEY IN, AND THEY TAKE IT OUT, ALONG WITH THE STOCK BROKERS TAKING THEIR PERCENTAGE. THEY ARE GUARANTEED SOMEONE TO SELL TO EVERY MONTH, REGARDLESS OF THE PRICE. HIGH OR LOW. YOU WORKING SLOBS PUT YOUR MONEY IN, AND GET A PROMISARY NOTE, A STOCK, WORTH ONLY WHAT YOU CAN GET FOR IT WHEN YOU DECIDE TO SELL, AND WHEN MILLIONS OF BABY BOOMERS START RETIRING AND SELLING AT THE SAME TIME,,, AND MORE ARE SELLING THAN WORKING AND PUTTING INTO A 401K “INVESTMENT” SCHEME,,,, YOU GET LESS THAN YOU PUT IN. GO ON YOU POOR WORKING SLOB,,, KEEP PAYING TAXES AND PAYING THE RICH MAN YOUR RETIREMENT AT THE SAME TIME,,,,, VERY FEW WILL GET WHAT THEY PUT IN,, MOST LESS…… I GOT MINE OUT AS SOON AS I TURNED 59AND A HALF,,, YOU BETTER TOO, IF YOU WANT TO SEE ANY OF IT…..

      • Buster the Anatolian

        Akll CAPS reply, not worth the trouble to try and read.

  • Warrior

    I often wonder were the stock market would be without all the money printing? What say you Ben?

  • Scott in SC

    Most trading is insider trading.

  • eddie47d

    Nothing new about Hedge Fund managers being up to no good and tinkering with the Stock Market. Facebook has people but nothing to sell but more people. It’s a unique and workable fad but will they now start advertising to keep their investors happy. My concern with Facebook is all the useless information(chit chat) that gets put out there and how it can be used against you.Such as bosses or even the police trolling the site for information on you. Let’s face it though millions do love it.

  • Deerinwater

    Well Sir. It’s good to hear someone with your caliber share my opinion of the whole Wall Street bunch. I haven’t needed anymore proof but it’s good you point this out to others that’s living in some illusion that Wall Street is on the straight. They depend of suckers to survive while they think they are above the rest of us Americans.

    I’d like to see them all jump out the 18th floor window and make a puddle that could be shoveled up and hosed clean.

  • dan

    finally,the long awaited shovel ready jobs…
    stock-market : just more money laundering for the criminal element

  • Mary

    You can’t go short on opening day. FB being overvalued at $38 is correct. Probably worth about half that in real terms.

    • independent thinker

      “FB being overvalued at $38 is correct. Probably worth about half that in real terms.”

      When I first saw the proposed opening price for facebook I knew it was overpriced by half or more. I then read an article that said it was badly overpriced and indicated it was worth about a third of what was going to be asked.

      • dee

        When I saw this come up last week, I thought, yeah, why not? I could use a little x-tra for my old age. But then my gut and my logical side questioned it and I thought it better to wait and see how it all shakes out. I am glad I listened to my gut. Sometimes it is a better barometer for all the things that are happening out there.

    • Alan

      We couldn’t get any FB shares to short Friday because they said the stock was unmarginable. If the shares are unmarginable how could the hedge fund get shares to short? We knew it was a bubble. Usually, people who call the stock market a racket, legalized gambling or some other negative comment are people who’ve lost money in the market. Those people who’ve made money in the market usually have good things to say about it.

      • Deerinwater

        If you are so inclined to swim with sharks, swim with friends. I am not your friend.

        The problem is Sir/Madam, Your activities on Wall Street demands that the rest of us share some of your rick while we refuse to swim with sharks knowing full well someone will be bitten. The cause of death? Loss of body tissue.

        That this is popular “chance money play” the world over does not make it right, only “popular”. If you could do it without affecting me, I would not hold these views.

    • Nancy in Nebraska

      Any way you look at it, Facebook is a bad risk. They have no product. They don’t make anything. Their income is totally dependent on advertising. When the economy crashes, there will be no advertising, nothing. You end up with nothing! The people who owned Facebook know that the economy is going to crash and they’re just getting out while they can. All the suckers who bought in will end up with nothing! The 1% win again.

      • RichE

        Nancy,
        What if FaceBook bought Amazon? Now all your friends will know which hand soap Johnny Depp uses. You are friends with Captain Jack?

      • Nancy in Nebraska

        Huh?!? I have no idea what you’re talking about. I’m not on Facebook. I don’t give a fig about what kind of soap Johnny Depp uses and I don’t know who Captain Jack is. I don’t see where you are going with this. Are you saying there is some value in these things?

        • RichE

          Yes, extreme value.

      • Opal the Gem

        Let’s see, RichE is interested in which hand soap Johnny Depp uses and is impressed by Captian Jack a fictional movie character. That pretty much tells you what his posts are worth.

        • RichE

          Real adult reply there Opal. So you don’t think your purchases will be influenced by what your friends purchase?

      • Nancy in Nebraska

        RichE, the last time MY purchases were influenced by MY friends, I was in high school. I think you exaggerate the value in Facebook but I hope you bought some stock!

        • RichE

          The teenage market isn’t small. Also, would you buy your daughter or granddaughter something if their friend recommended it? Please realize this generation is connected at the cyber hip. “I wonder what Peggy Sue would like for her birthday?” and your phone says,” her friends bought…”

          No, I trade futures not stocks.

      • Opal the Gem

        “So you don’t think your purchases will be influenced by what your friends purchase?”

        NO riche my purchases are NOT influenced by what my friends purchase. Unlike you I am not interested in the latest fad or “gotta have” item.

  • Steve E

    The two driving forces of the stock market are Greed and Emotions. It looks like greed backfired on some of these investors. Greed is not all that good, Gordon Geco.

    • Scott in SC

      I believe you mean fear and greed.

  • ML

    The stock market is legalized gambling. If you can’t afford to lose, don’t play the game. Caveat emptor. Freedom is a wonderful thing, but it requires responsibility.

  • Linda

    Hopefully none of those commenting have vested retirement plans (401K, TSP, company stock, annuities etc….) because you would be very disappointed to find out how much you need the stock market.
    Personally – I try to keep my 401K and portfolio out of anything that isn’t tangible – like banks, money funds or anything internet (unless it’s infrastructure or supporting software development). I knew FB was a losing proposition, except for Zuckerburg.

    • http://www.facebook.com/Chuckerf14 John Speer

      Thanks, Linda…. a level head in the group. The only significant change to the stock market in the last 100 years is that the internet opened it up to people who are uninformed and ill-prepared to trade. The majority of today’s investors would be better off in Las Vegas. The only difference is that, in Las Vegas, no one cries “Foul!” when their money is sweeped off the table.

  • http://www.cindynel.co.za peter

    Welcome everyone to the greatest casino on the planet where the house always wins ( as usual ). When will folks ever realize that making money out of nothing is highly questionable and only when the real value of an item can be assessed, trading that for something of equal value can commence. The man who grows a few vegetables in his garden is of far greater worth than Zuck’s with his fantasy billions. These hucksters are just pure scam artists and have little value to mankind or the planet as a whole. Facebook should be called Farcebook anyway, it is just right for those idiots who watch stupid shows like Springer and Idols etc. It suits the mentality of the general crew who think that tatoos and drugs are ‘cool’. Intelligent people are quite capable of doing business without stooping to advertising to dumbed down morons who cannot spell and probably cannot read anyway. Anyone who spends almost the entire day staring at their cell phone has got to be a mental dwarf. Those are the same folks who are going to vote! We need serious help right away.

  • http:myfirstmillion.com Constance Archer

    I have a investment with INGBank online and I am individual and I have already incurred a $700 loss and I’m fixing to draw a line in the sand no more investment. I have three companys. The markets are dropping and I’m waiting to see what the markets do. I’m going to put money in the account but I will not invest. Someone went on the internet and wrote an article that the markets were going to crash. So much for the power of suggestion and the power of free speech when will people learn to keep their mouths shut. I see this happen a lot in life people running there mouths and this is creating a lot of crisis. Were does the money go, when the markets loose, in some bodies pocket because people run when will they learn to stay put and ride the tide. I’ve been running all my life now I have to plant my feet on the ground and stay put for the long haul. People and panic are causing a lot of what is going on.You can’t panic things when things go wrong if you do you are playing a loosing game the game is really not over until we die and leave this world behind. Tommorrow is another day, this is from my own experience I’m offering all of you the benifit of my own experience. Constance J. Archer –Joans Gifts Solutions LLC— I did a lot in life undercover only to protect myself and the people around me.

    • dufas magnet

      The pathetic part of this entire sham is that everybody considers it a game. Life is not a game.. Playing with the futures of others is not a game. Ask the toads, they’ll tell you it’s not a game.. They’ll tell you it’s serious b’ness, that is until after the profit and that’s when the crickets listen to them when they say, “it’s nothing but a game” and the crickets tell the forest and soon everybody see’s it as a game. GROW UP! People are killing people for wealth, for power.. It is NOT a game.

      • RichE

        If life is not a game then what is life?

  • http:myfirstmillion.com Constance Archer

    Correction edit. You can’t panic when things go wrong.

  • Polski

    If you’re going to gamble, go to Las Vegas, or Reno, or Hot Springs, etc. They are a lot more fun than Wall Street.

    • duane

      Ya got that right! Its the only way to part with your money and enjoy doing it. Vegas Baby!
      On the flip side of this stock market thing, there are ways to do relatively well in the market, through sound investment principles. The whole thing that people forget about the market is short term investments will kill you. You have to be in it for the long term. Over a long period of time the stock market will out perform most other types of investments. Day traders, hedge fund managers and short sellers are considered to be the terrorist of the stock market. That is my own humble opinion.

  • Dave S

    I agree. Now is this an argument for less regulation of the financial markets or for more?

    • independent thinker

      If there is an opinion about regulation in the article I believe it is for a better thought out set of regulations that applies equaly to all. Not more or less regulation.

      • ohoh

        And perhaps actual prosecutions under existing laws and regulations, rather than the knee-jerk call for more laws and regulations by opportunistic politicians but that will likely be disregarded as well.

      • Dave S

        Dear IT,
        I agree. Many of our regulations need to be streamlined. But to call for an end to all regulation is to turn our economy over to the greediest, least principled players. Enron, BP, the mortgage bubble, and dozens of other recent events have shown where that will lead.

  • Patty

    When 9/11 hit and I saw my portfolio start dumping month after month, I called my investment advisor. She said to me and I quote, “But we are in this for the long haul.” I replied back very angrily, “You are not talking to some wet behind the ears 23 year old bitch. I have been in it for the “long haul”; it is payback time for me.” I had done my due diligence, put as much as I could in my 401k, every year, and every paycheck. Since I have had my own company for 20 years, I made the decision to stop my company’s 401k plan. I was going to do it much earlier but my employees wanted it with its’ 3% match. I just couldn’t take the outright con and lies. Do you wonder why it is set-up with a 401k with people who make money off of you whether you make money or not? Why it is gov’t. Regulated so that you are somewhat stuck with only that option? Do you know why some made it through just fine? Here is my scenario. When 9/11 hit and the stock market took that 1st big hit, all the investors took their 1%’ers to top 10% people’s money out and put it into something safe. That made it dump even further and left all of us middle class suckers to be left holding the bag. A 401k is just another big ponzi scheme endorsed by our gov’t. To make the rich, richer. What is the saying? Use other people’s money to lose? And that is what the 401k set up is all about. How can we (the big companies) get more money into our company so we can pay these exec’s some absorbent amount? By getting it from you, through a 401k contribution.
    If possible, get out, get all of your 401k money out of the market now. I ended the 401k, gave all of my employee’s a 3% raise and started a self directed IRA. They could follow me or go it on their own. I would help guide them. This has been one of my best decisions I have ever made. I now control what, who, where I invest in and it is hands on. I am also making returns like I have never seen with my 401k’s ups and downs which only made me even when all was said and done 25 years later. I have 3 homes across the country as part of my portfolio, which I can book to stay at whenever I chose. The rentals on the other times when I am not there, more than covers the costs and then some. Now is the best time to invest in real estate. I have some other options of investment that I have also done which are making 20%. Liquid. Like I said, best thing I have ever done and if you are in the position to do it also, research it and get out of the stock market. It is just a bunch of super rich taking your money and squandering it on huge executive comp packages.

  • speedle

    Yes, the stock market is sort of a legalized gambling operation, but no one is forced to ante up. Anyone dumb enough to stand in line with other idiots slobbering over the Facebook IPO pretty much deserves to take a spanking.

    Was there inside information that the public was not privy to? Of course there was, and there always is. All the kings regulatory horses and men can never ever prevent insider trading no matter how much revenue choking regulation they foist on us.

    The stock market is like anything else in life – you pays your money and you takes your chances. You can hedge bets by hiring fund managers (who may have some insider trading knowledge) if you don’t have the stomach for the risk. Anyone shorting Facebook on day one has made out like a bandit. I don’t feel sorry for anyone who was burned by the IPO. They are probably the same people who bought into “change” four years ago.

  • David

    Once everyone finds out that the govenment, IRS CIA and everyone else is using FaceBook to syp on people the stock will crash.

  • trashman

    Anybody remember Enron? If you do, and still bought Facebook, and by the way, what are the hard assets ofFB, then I’m sorry but you got what you deserve.

  • daniel

    Yes investing in a company is a gamble of sorts. A person is able to check out the facts before they buy into it or can speculate before investing. It is up to the individual.
    Since this is about the Facebook IPO I would like to point out that people were saying not to buy the stock as it was overpriced to begin with and that current events in technology would affect the earnings of the company downward. None of this was insider information as it was on regular old TV. So on this particular instance people that did buy into Facebook did so at their own risk; which is what capitalism is about, or did not do their homework in which they did lose which is a penalty under capitalism.

  • RichE

    Daytrader

  • Doris Bailey

    Short-selling should be illegal. It’s pure gambling, but can have evil intent. A perfectly good company can be targeted and its stock price driven down artificially. Someone could short-sell stock in Wendy’s, then plant a mouse in their bowl of chili and sue for millions–thus cleaning up on the stock deal and maybe the suit? The 9-11 terrorists sold American Airlines, other airlines, insurance companies, etc. short before the attack and made millions after the attack. Why isn’t selling something one doesn’t even own, a total crime or fraud?

    • RichE

      Doris,
      Is buying PUTs ok?

  • Bert Cundle Sr.

    When Bigger Controls… The Buyers are to Blame… The Citizens of U.S. of A. That Bought Toyota, Nison, Honda, Kawasaki, Cars..to blame for the Higher GAS Prices… Their $ Went to Buy Large investments in the Oil Companies, to Raise the price of Oil, to Sell Their Compact Cars, to buy More Stock in Oil Co.’s Than they Sell their Products to us, that put our people out of work. (Wall Street Should be in Los Vages, Nevada) Causing them to defalt on their homes. . For the foreigners to buy them at a Cheeper price! ” We loose AGAIN…”

  • ToeTagTunny

    “Large investors like Sweet’s hedge fund client can make a major difference in the path the stock takes and can make money by driving the stock price one way or the other. Meanwhile, individual investors are left holding the (empty) bag.”

    We all know this yet we continue to allow it? How naive is that? When Vegas was controlled by the mob, it too enjoyed house odds but this wasn’t big enough b’ness (in other words, not large enough to include politics) so the feds created a watch squad and any and every discretion that was reported by individuals (be they citizens or officials) created a whomp on said ‘legal’ gambling that eventually created a relative operation that all could benefit.. Where are the wall street watch squad? Is it too big? Too profitable politically? Any dummy who tells you wall street needs to be eliminated is just that.. a dummy, BUT.. It definitely needs house cleaning, starting with the so-called leaders who know how to manipulate the trends and has a thumb on the red button of buy or sell. just like politics, wall street plays the same (insider) rules that creates corruption and vast wealth to the few. We need an Eliot Ness to set these boys straight.

    • Bert Cundle Sr.

      We need an Eliot Ness to set these boys straight.///////////////////////\\\\\\\\\\\\Need Jimmy Haffa & George Wallice…. To take Full Control !!!

  • http://gravatar.com/bychoosing Jay

    Who controls the stock market?

    Imagine a group of physicists looked into the global financial industry. What remarkable things could they find?

    Covariance strategies? New risk management models? The origin and prevention of asset price bubbles?

    Or, how about, who controls the global stock market?

    Josh Reviews Everything points us to this paper, titled “The backbone of complex networks and corporations: Who is controlling them?” on the physics arXiv blog. And the premise, along with those nodal charts, looks promising. Physics arXiv summarises:

    The study of complex networks has given us some remarkable insights into the nature of systems as diverse as forest fires, the internet and earthquakes. This kind of work is even beginning to give econophysicists a glimmer of much-needed insight in the nature of our economy. In a major study, econophysicists have today identified the most powerful companies in the world based on their ability to control stock markets around the globe. it makes uncomfortable reading. …

    Now James Glattfelder and Stefano Battiston at the Swiss Federal Institute of Technology in Zurich have included these factors in a study of the control and ownership of stockmarkets in 48 countries around the world…

    The “backbones” of the global economy — the 10 most powerful companies in the global financial industry, as measured by stock ownership. And they are:

    1. The Capital Group Companies
    2. Fidelity Management & Research
    3. Barclays PLC
    4. Franklin Resources
    5. AXA
    6. JPMorgan Chase & Co
    7. Dimensional Fund Advisors
    8. Merrill Lynch & Co
    9. Wellington Management Company
    10. UBS

    As Josh Reviews Everything points out — these are a bunch of enormous fund managers and massive market-maker banks.

    Not really surprising, then, that funds managers and market-maker banks own a lot of shares! What a scandal!”

    However, what is astonishing is that there is a counterintuitive trend to be observed in the data: the more local control is dispersed, the higher the global concentration of control becomes. In essence what looks like a democratic distribution of control from close up, by taking a step back, actually turns out to warp into highly concentrated control in the hands of very few shareholders.

    It has been known for over 75 years that the Anglo-Saxon countries have the highest occurrence of widely held firms. This statement, that the control of corporations is dispersed amongst many shareholders, invokes the intuition that there exists a multitude of owners that only hold a small amount of shares in a few companies.

    However, in contrast to such intuition, our main finding is that a local dispersion of control is associated with a global concentration of control and value. This means that only a small elite of shareholders continually reappears as the controlling entity of all the stocks, without ever having been previously detected or reported on.

    On the other hand, in countries with local concentration of control (mostly observed in European states), the shareholders tend to only exert control over a single corporation, resulting in the dispersion of global control and value.

    Finally we also observe that the US financial sector holds the seat of power at an international level.

    It will remain to be seen, if the continued unfolding of the current financial crisis will tip this balance of power, as the US financial land-scape faces a fundamental transformation in its wake.

  • Old Henry

    I can’t but wonder how many millions the insider trading scum in Congress made on Facebook…

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