Back from vacation...10 days of no media communication ('cept Mexican TV and one bad Van Damme movie on Showtime ;)
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thanks to the Internet and satellite TV, the world is being wired together technologically, but not socially, politically or culturally. We are now seeing and hearing one another faster and better, but with no corresponding improvement in our ability to learn from, or understand, one another. So integration, at this stage, is producing more anger than anything else. As the writer George Packer recently noted in The Times Magazine, "In some ways, global satellite TV and Internet access have actually made the world a less understanding, less tolerant place."
Tom Friedman's newest opinion piece on the pro/con impact of the technology of communications. Neil Stephenson covers some of this in "Snow Crash" with the Babel story.
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Nicholas Meier on Goldman Sachs' indiscretions with "laddering"
Simply put, it is the SECÌs opinion that through the process now known as "laddering" orders, or the insertion of forced demand by investment bankers for an IPO stock at progressively higher levels, a "hot" offering was almost guaranteed to fly. By specifically requiring a customer to buy more shares of an IPO, Goldman had placed an artificial catalyst into the marketplace. Obviously, as I stated, none of my orders were based on any traditional methods of valuation, but solely to secure more of an initial allocation, or a sizable kickback. Goldman Sachs had essentially, through their complete monopolistic control of an initial public offering, manipulated the share price higher.
It does not take a genius to recognize that the net effect of laddering was immense. There is nothing that validates an exorbitantly priced deal more than when it rises even higher. The uninformed investor, seeing the instant gains, is inevitably sucked into the fervor. Goldman created the convincing appearance of a winner, and the trick worked so well that they seduced further interest from other speculators hoping to participate in the gold rush. The general public had no idea that these stocks were actually brought into the world at unnaturally high levels through illegal manipulation.
This process of "laddering" worked so well for the investment banks that it changed all the traditional rules of the marketplace. Here we have the very genesis of the new economy stocks based on fraud. By making winners out of losers, everyone had to reassess valuation methods. For every IPO that traded at higher levels, fifty existing stocks could be revalued. Enron, with little actual assets, became the fifth largest corporation in the country. The brokerage house analysts, given a benchmark to rationalize ridiculous valuations, rolled out ever-aggressive targets that stopped just short of the moon. Meanwhile, people in the know like Kenneth Lay and Cramer & Company were getting out as fast as they could.
NYT: Cramer Book Dispute Continues
Last week, as Mr. Cramer's own book was about to appear, Mr. Maier, 33, sought to bolster his accusations by disclosing that lawyers for the Securities and Exchange Commission sought to question him about details in his book, and that those conversations led to others with the United States attorney for the Eastern District of New York. Although the securities regulators asked him mainly about investment banks' allocations of initial public offerings, officials in the United States attorney's office were more interested in Mr. Cramer's conduct, Mr. Maier said.
Definitely the fox guarding the henhouse here...
