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Wall Street collapse ... an "Inside Job"?
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isobars



Joined: 12 Dec 1999
Posts: 13798

PostPosted: Fri Nov 12, 2010 12:58 pm    Post subject: Wall Street collapse ... an "Inside Job"? Reply with quote

This documentary movie of the financial collapse gets must-see reviews, and I spent some time w/Google to see whether it's just more ideological, uberbiased BS a la Oliver Stone and Michael Moore, or maybe an unbiased analysis. As best as I can determine it's relatively honest and quite hard-hitting. This quote from one discussion of the movie and interview with the filmmaker, Ferguson
(see http://tinyurl.com/2aonvzy )
seems representative of what I saw in many such discussions:

Interviewer: "You make very clear in the film that this is not a partisan divide, in the sense that one party has been for the bankers and one party has been against them. Both parties are up to their eyeballs in Wall Street money and have made no effort to separate themselves, isn't that fair?"

Filmmaker: "Yes, that is completely fair."

I will see the movie this week, but from that interview we already know whodunit and whytheydidit, at least in this filmmaker's studied opinion: It was from the get-go an organized, institutional, criminal theft of the public's cumulative wealth in a zero-sum game of You've Got It We Wannit. Furthermore, it's not going to stop until and unless industry, the public, and the courts put a stop to it. His closing quote in that interview goes like this:

"We now have a situation where the way that you can make the most money is by doing criminal things. And you get away with it. ... In some cases, destroying your company is the way that you make the most money. ... Personally, from the experience of researching and making this film, I think that legal controls on the structure of executive compensation are a very important part of fixing this.

From the experience of starting my software company, I can tell you that people in high technology are extremely aware of this. I dealt with the venture capital firm that invested in my company and they were extremely clear. They said: You're going to get a salary. It's going to be $100,000 a year. It's never going to go up. You will never get a bonus. You will have no outside activities of any kind. You will not make a dime doing anything else. Your stock will vest over five years. And if you want to make money, you make that stock worth something. Period. It's really simple."

My 2 cents: If most corporations/venture capitalists/investors operated like the one who financed Ferguson, the government wouldn't have to mandate salaries. The game should include, "If you want my money, you'll have to play by my rules." It may not always attract Jack Welches or Bernie Marcuses, but neither will it attract many criminals.
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jpbassking



Joined: 19 May 1998
Posts: 2352
Location: Leo

PostPosted: Sat Nov 13, 2010 11:28 am    Post subject: Reply with quote

I plan to see that movie. The only way to prevent this situation from happening again is to turn it inside out and figure out what went on then establish regulation and oversight (yes more gummit) to prosecute the violators.
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isobars



Joined: 12 Dec 1999
Posts: 13798

PostPosted: Sat Nov 13, 2010 8:05 pm    Post subject: Reply with quote

I just saw it. Many of the interviews in it have laugh-out-loud moments ... except that they concern literally criminal stupidity, arrogance, and intent. Everybody should see it. Even if you've followed it for scores of hours on cable news, even if you've read the books about it, even if your job and savings are immune (they are not!), it's worth seeing even if just to witness the jaw-dropping attitudes of these people. Every one of them deserves at LEAST as much prison time as Bernie Madoff, some much more -- including the death penalty, IMO -- for the tens of millions of lives they very deliberately and systematically destroyed. We can only hope that this kind of global criminal activity will be outlawed and prosecuted, or at the very least frowned upon, by a new administration in 2013.

As I was buying my tickets, a group of well-dressed (for a Saturday afternoon) 25-35-yo people were standing nearby trying to decide what movie they wanted so see. They asked Ticket Guy, "What's "Inside Job"?
"It's a documentary about the economic crash."
"Ewwww ... that sounds boring. What else is on?"

People that deliberately uninformed do not deserve one damned cent of mortgage bailout, unemployment benefit, welfare, or any other form of unearned remuneration taken by force of law from anyone else.
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jpbassking



Joined: 19 May 1998
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Location: Leo

PostPosted: Sun Nov 14, 2010 11:16 am    Post subject: Reply with quote

Let the 25-35 somethings enjoy life. Politics seems to only be of interest those of us in our 50's and above. By the time we get to our 80's our only concern is waking up the next morning and making it to the bathroom in time.
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DanWeiss



Joined: 24 Jun 2008
Posts: 1926
Location: Connecticut, USA

PostPosted: Sun Nov 14, 2010 8:06 pm    Post subject: Reply with quote

isobars wrote:
SNIP
People that deliberately uninformed do not deserve one damned cent of mortgage bailout, unemployment benefit, welfare, or any other form of unearned remuneration taken by force of law from anyone else.


This from a guy who admits he didn't bother to follow politics until 2000 being too wrapped up in other priorities. What might they have been, Mr. 3.5?
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windoggie



Joined: 22 Feb 2002
Posts: 2358

PostPosted: Sun Nov 14, 2010 8:35 pm    Post subject: Reply with quote

isobars wrote:


People that deliberately uninformed do not deserve one damned cent of mortgage bailout, unemployment benefit, welfare, or any other form of unearned remuneration taken by force of law from anyone else.


DanWeiss is dead on with his observation. I've said it before regarding mr. Fick...it takes one to know one.

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isobars



Joined: 12 Dec 1999
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PostPosted: Fri Nov 19, 2010 10:28 am    Post subject: Reply with quote

Speaking of bailouts ... GM’s back, thanks to Obama, right?
Let’s see how their bailout worked:
• Taxpayers gave GM $50B.
• The unions gave GM $0.00.
• Taxpayers got back $12B (for the math impaired, we lost $38B, a 76% loss.)
• The unions “got back” $4B (for the math impaired, they made $4B, an infinite profit.)

How’d that work out for us taxpayers?

So now GM issues an IPO to bring in more investor cash. Considering how far its stock dropped, good opportunity, right? But for whom? China and Saudi Arabia. They were allowed to buy up 15-18% of the IPO under the table before it was opened to American investors. The big winners? China, Saudi Arabia, and the UAW. The big losers?

GUESS! Once again, we suckers simply grabbed our ankles and took one for the Teleprompter Party.
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boggsman1



Joined: 24 Jun 2002
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PostPosted: Fri Nov 19, 2010 10:56 am    Post subject: Reply with quote

isobars wrote:
Speaking of bailouts ... GM’s back, thanks to Obama, right?
Let’s see how their bailout worked:
• Taxpayers gave GM $50B.
• The unions gave GM $0.00.
• Taxpayers got back $12B (for the math impaired, we lost $38B, a 76% loss.)
• The unions “got back” $4B (for the math impaired, they made $4B, an infinite profit.)

How’d that work out for us taxpayers?

So now GM issues an IPO to bring in more investor cash. Considering how far its stock dropped, good opportunity, right? But for whom? China and Saudi Arabia. They were allowed to buy up 15-18% of the IPO under the table before it was opened to American investors. The big winners? China, Saudi Arabia, and the UAW. The big losers?

GUESS! Once again, we suckers simply grabbed our ankles and took one for the Teleprompter Party.

MR FICK YOU ARE LYING!
The Taxpayers cost basis for the remaining stake is $50. If the stock is sold at or above that level, the taxpayer breaks even. If the company had been liquidated, the Federal loss would have been much greater, in terms of pension bailout, and job loss at suppliers like AMerican Axle, which had its bk papers ready.
Secondly, the Chinese only bought 2% AT the IPO price of $33.through SAIC, currently 33.64. Please stop lying. If you want a good analysis of the pre-packaged bankruptcy, and the other options to the GOVT, please read Barry Ritholz yesterday.
Dude, if you want to have an honest discussion about the details of the GM transaction, please pm me. We can talk about the pre-packaged bk, the ZERO'ing out of the stock, and bonds, and the cuts the Unions took. We can talk about the structure of the GOVT's investment. And we can talk about the remaining stake the GOVT owns, and how they intend on liquidating it. Please dont spout a pile of untruths.


Last edited by boggsman1 on Fri Nov 19, 2010 11:25 am; edited 1 time in total
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boggsman1



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PostPosted: Fri Nov 19, 2010 11:01 am    Post subject: Reply with quote

Ritholz Today.IMO, this was a good deal, the best option of three.
By Barry Ritholtz - November 19th, 2010, 7:57AM I have a quote in this Bloomberg article, but the more important stuff is further down in the article.

Excerpt:

“General Motors Co.’s initial public offering showed that while U.S. President Barack Obama’s administration may lose billions on the auto-industry bailout, the national budget and economy might be better off for it.

The U.S. sold almost half of its stake in the nation’s largest automaker for $33 a share — about $10 less than it needs to break even. The remaining shares will need to sell for about $20 higher to make up the difference. GM opened at $35 and stayed within $1.11 of that price all day. Selling the remaining shares at that price would produce a loss of about $9 billion.

That may go down as a bargain. The U.S. would have lost $28.6 billion in spending on social services and missing tax revenue if not for the bailout of GM, its former lending arm and Chrysler Group LLC, according to a study released Nov. 17 by the Center for Automotive Research in Ann Arbor, Michigan.

“GM ends up an economic contributor to the U.S. economy,” said Barry Ritholtz, author of “Bailout Nation” and chief executive officer of New York investment research firm FusionIQ. “It’s manufacturing products, it’s creating jobs, it’s buying wholesale parts, it’s doing what an industrial company is supposed to do.”

~~~~

Ok, that’s my quote — and please keep in mind, it was made in the context of “We should have done this to the banks, too.”

But to me, the really interesting aspect is who else gets paid back from the IPO:

“The government-sponsored bankruptcy reduced GM’s obligations and helped it become profitable in a below-average U.S. auto market. Before entering bankruptcy on June 1, 2009, GM had $54.4 billion in debt and owed an additional $20 billion to a retiree health-care trust managed by the United Auto Workers. GM had $88 billion in losses from the end of 2004 until going into bankruptcy.

GM now owes $15.6 billion in debt and preferred stock and $9.4 billion in underfunded retiree obligations. The company has made $4.77 billion in the first three quarters of this year. The old General Motors Corp. hadn’t made so much in the first nine months of a year since 1999 when it earned $5.75 billion.”

And, there is this from another Bloomie article:

“Creditors of General Motors Co.’s bankrupt predecessor, who will likely get about $5 billion from the new automaker’s $20 billion initial public offering, might be able to buy millions more new shares for as little as a third of yesterday’s price.

GM’s bankrupt estate was issued 150 million shares, or 10 percent of stock in the new company, to help pay off creditors. At yesterday’s closing price of $34.19, that stock is worth about $5.1 billion.

So-called Old GM has warrants that entitle it to buy about 273 million shares at between $10 and about $18 each, according to the company’s Nov. 17 filing with the U.S. Securities and Exchange Commission.”
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isobars



Joined: 12 Dec 1999
Posts: 13798

PostPosted: Fri Nov 19, 2010 12:57 pm    Post subject: Reply with quote

Boggsy PM’ed me (nicely!) that my claim that the taxpayer has a 76% loss on GM isn’t correct because the remaining shares the GOVT has not sold have a cost basis of $51 /share. If the remaining shares are sold at or above that number, the total investment is breakeven.

My source generally agreed with that huge “IF” (it was offered via pre-release inside trading to China, Saudi Arabia, et.al. at more like $35 or less, and is <$35 at present), saying GM’s stock must hit $50 or $60 for taxpayers to break even, in which case the UAW makes many MORE billions from an investment of ZERO). My source was Eric Bolling, a commodities trader on the New York Mercantile Exchange. He specializes in trading natural gas, crude oil, gold, and other commodities. He is a veteran trader with over 20 years experience on Wall Street trading commodities, equities and derivatives. It has been reported that Bolling accounts for up to 5% of total volume in the natural gas futures floor.[2]
After spending 5 years on the Board Of Directors at the NYMEX (now CME Group), Bolling became a strategic advisor to the Exchange’s Board of Directors. He has been included in Trader Monthly Top 100 in 2005 and 2006. Bolling was the recipient of the Maybach Man of the Year Award at the Trader Monthly Awards, January 17, 2007.[3]
Eric Bolling is a member of Chicago Mercantile Exchange (CME), New York Mercantile Exchange (NYMEX), Intercontinental Exchange (ICE), and Commodity Exchange of New York (COMEX). Here’s Bollings’ summary of the GM IPO fallout, with extra details for anyone who thinks the taxpayers won this one:

http://www.youtube.com/watch?v=WWwtyoAXyeo

Bolling reports, we decide.
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