On Fracking - FOR PROFIT, and FOR a Hellish Explotation of America

The maps shows 'Fraccidents' - accidents, often catastrophic, resulting from the practice of Fracking - the extraction of Natural Gas entrapped in deep shale rock pockets, by hydraulically fracturing the rocks. Fracking agents used to fracture such rocks include water mixed with both known and undisclosed chemicals (read Carcinogens, and Radioactive Isotopes).

In addition to the risks of assured water table contamination - fracking fluids ultimately find their way into natural water bodies (regardless of what the Oil & Gas companies say) fracking also releases huge volumes of Methane gas - deadly, and silent - that ultimately spreads out and up, and into unsuspecting communities.  Containing such toxic residuals is very expensive, and fracking site operators are simply looking the other way.  That is morally repugnant, but highly profitable thing to do.  All of the fraccidents on the map are listed at http://bit.ly/KMqLgG

This video, on YouTube, delves a bit into the real lives of those impacted:

As of now, there are NO safe ways to frack (again, regardless of what one may have seen on TV and print ads).  For obvious reasons, the Oil & Gas companies will not spend the monies to develop "safe for humans" technology - costs too much and reduces profit. The moral dysfunction of an Oil and Gas operators, and the Republican (and Democratic) politicians that support fracking, in lieu of campaign contributions, is a staggering shame.

Fracking is not the first time USA Inc. has profited by literally killing Americans, and it won't be the last.

When they are caught violating statures, regulations or citizens' rights, as usual, the fracking operators will either pay a fine, or settle a lawsuit, and continue fracking until all the viable Natural gas is extracted. Life goes on.  Such is life.  But, such fines and penalties pale in comparison to the profits to be extracted. Oil and Gas companies are investing more in political donations to block legislation, and in PR advertising - of the "Fracking is safe" kind.  It is absurd, for that money that can otherwise help develop the technology needed to frack alongside human safety is being spent on spreading falsehood to bend public opinion.

The human, and environmental costs of fracking, and resulting toll on our communites is too much.  If such "Human Safe" technology cannot truly be developed, the United States should ban fracking forever. I have a hard time believing we cannot develop such technology.  That is simply bull.

The costs of unregulated, unsafe fracking are too high. America belongs to its people, and not to Oil & Gas corporate interests, or dysfunctional politicians.

On Europe, EU and the Financial Meltdown of Greece and Spain


The European Union (EU) came together, in 1999, after years of political, economic and ideological negotiations, as a somewhat of a monetary and fiscal governance union - a group of European (11 countries, originally) countries, led by Germany, France, Spain, and Italy, pushed for and got their wishes: 


The EURO: 
The EUR was adopted as the new currency for the entire Euro zone.   Parity rates were fixed for currencies of individual members of the EU club (remember the Italian Liras, Spanish Pesetas, German Marks, and French Franks?) for conversion into the new currency, the EURO.  In a carefully managed transition, the EURO replaced EU local currencies for all commerce (legal tender) across the EU zone on Jan 1, 2002.  It had become the accounting currency of the EU a few years earlier.  10 years later, the EURO is the world's second largest reserve currency (EUR 850 billion), behind the US$.  A 17 member EU zone (5 countries have been added since 1999), with a combined population of 330 million (slightly higher than US population, 2010 census) now use the EURO for all commerce.  In addition, the EURO is also used, around the world, as a "Peg" currency for countries still on a fixed exchange rate regime.  Most of these countries are in Africa.


European Central Bank
A European Central Bank (ECB) was also established in 1999.  The ECB little real monetary powers over the region's individual Central Banks (CB).  It was more of a coordination and governance unit, over each member country's CB.  The ECB's sole mandate was targeting EU zone interest rates, and not the EURO exchange rate.  So the BundesBank (German Central Bank), for example, continued to manage inflation (its sole mandate) in Germany on a day to day basis, but with a goal to remain compliant with EU’s agreed upon economic core measure limits. 


On a practical level, ECB's real purpose, and authority, to control and direct member states' monetary policy indiscretions was questionable right from the start.  The ECB is, in many ways fairly impotent.  But the ECB does have a public, quasi-political bully pulpit for exercises in financial rhetoric.  Oh, it does mint EURO coins, and prints the currency notes, though even that is effectively sub-contracted to member Central Banks.


Rules of Engagement
In addition to the EURO and the ECB, all member states agreed to be bound by a set of fiscal and economic criteria, for admitting new members.  Continued membership also required compliance with such criteria: fiscal deficit no greater that 3% of GDP, Inflation target rates, etc.
The EU zone today: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.  Greece joined in 2001, Slovenia (2004), Cyprus and Malta (2008), Slovakia (2009), and Estonia (2011).  Additions to EU membership are called “Enlargements” (readers are exhorted not to get any wrong ideas!).  10 countries in Europe are yet to join the Enlargement movement, with the UK, Denmark, and Sweden (de facto exemption) being exempt from the “mandatory” enlargement clause.


To be candid, I could not place several of the newer EU member countries, without the help of Google Maps (using an Atlas is so passé).  No shame there, I am fully Americanized.  I also accept the economic benefits rationale for the EU, without any reservations on the underlying economic theories, primarily those of Robert Mundell (Stationary Expectations Model, and International Risk Sharing Model).  Mundell, of course, won the Nobel Prize in Economics (1999) and is a celebrity Canadian economist (them Looneys!).  


The problem, instead is managing member countries’ vast differences in culture, politics, aspirations, laws and regulations.  In theory, the EU zone is about the size of the United States.  But the US has – one single government, Federal Laws, Central Bank (Federal Reserve Board), and despite regional cultural differences, the US is united as a republic.  Realities of how the US actually works are far from ideal.  Congress and the Administration (Executive Branch) somehow manage to differ on every issue – social, economic, etc. – but we Americans manage compromises allowing the country to remain solvent and the government functioning.  For how much longer, I cannot tell.  The key to the US economy functioning (albeit fiscal policies and performance is quite dysfunctional) is the political independence of our Central Bank.  The Fed has a dual mandate of managing inflation (stable prices) and growth (economic output, or GDP).


Across Europe, on the other hand, nationalistic fervor takes precedence over any constraints set by EU rules.  Every member country, since inception, has cheated – to advance its own agenda: prosperity, economic and political clout, etc.  


Furthermore, European financial institutions – Banks – were able to leverage to ridiculously dangerous levels.  Very high leverage (borrowings) creates opportunities for very high returns on Capital.  American Banks were doing essentially the same, in the pre-financial-meltdown era.  Lehman Brothers, for example, had a 37:1 leverage, or assets to equity ratio.  In other words, Lehman borrowed 36 dollars (to lend, or to invest) for every dollar of equity capital Lehman had.  Think about this – every % of profit for Lehman, at 37:1 leverage, is a 37% return on equity.  The converse, unfortunately, is also true – every % of loss is a 37% loss on equity.  So, a mere 3% loss (24 billion) in its balance sheet (800 billion) wiped out 21 billion in total equity (37:1 leverage).  That was the reason for the Lehman bankruptcy filing, the largest ever in US history.  Theoretically, the same is true for countries, but nation states do no file for bankruptcy.  They simply default on their external debt obligations – as in Russia (1997), and Argentina (multiple, repeat offender).


Europe was not immune from the US financial crisis of 2008-2009.  As US banks failed, and US Investment Banks were being sold for pennies on the dollar, banks across Europe received their own margin calls.  Ireland was first to step in, along with the UK, to organize state sponsored bailouts of banks, with equity infusions and outright nationalization (Royal Bank of Scotland).  The US bought preferred shares in a gross amount of 780 billion $, to try to stabilize the US banking system.  In addition, US banking regulators shutdown hundreds of regional and community banks (Washington Mutual’s sale to JPMorgan, Wachovia Bank’s sale to Wells Fargo were impending failures, forced into sale to their suitors).  While a government sponsored rescue and bailout of privately owned banks is a flagrant violation of “Free Market Capitalist Principles”, the markets have never truly been free, so why pretend otherwise, during America’s darkest financial hour?  Too-Big-to-Fail (TBTF) rhetoric was used to justify bailing out Citibank, Goldman Sachs, Morgan Stanley, et. al.  I am not sure anyone of them was truly TBTF.  If ever there was a single institution that was TBTF, we should all be very scared, and the Feds must not allow one to become a TBTF.  Hank Paulson, as Sec. of Treasury, and x-CEO of GS pumped the fear of biblical financial and economic calamity in to Congress; Wall Street obliged by dragging the DOW Jones Index down over 700 points in a day, as Maria Bartiromo, and other cohorts at CNBC (a CNBC only post is coming, someday) projected the end of the world was neigh.  Nice lips for screaming so, BTW.


In the mass hysteria that followed, public opinion was manipulated, overnight, into the corner of sympathy, and of self-preservation.  Congress passed TARP immediately.  And, let me tell you, lest you forget – NOTHING happens in Congress immediately!


But, and again, I digress.  Financial Markets are more connected that ever before.  You may have heard that before.  What that really means, is that almost every bank is taking the same risks, around the world.  European banks bought (or, were sold?) the same securitized mortgage crap that the US banks held on balance sheet in raw loan form, as yet to be securitized inventory.  US banks got caught sleeping at the wheel, not realizing in time, that a tsunami of homeowners were about to default on their loan payments.  Available for sale (AFS) is the accounting category for such loans on bank balance sheets.  AFS account is subject to mark-to-market regime.  Ergo, kaput went Wachovia, Citibank, Merrill Lynch, etc – but not without some shenanigans and machinations, as in not coming clean at the first opportunity.  US regulators clamped down on disclosures (it is a felony crime for CEO, CFO and BOD to not disclose what they know, when they know).  An insurance company, called AIG was also ensnared in this fiasco, and bailed out with a $180 billion infusion from the Feds.  AIG owed a large amount, by way of margin calls, to Goldman Sachs.  Way to go, Hank!  AIG, however, went down because of slightly different reasons – AIG wrote insurance contracts in the defaulted loans and Mortgage Backed Securities born off of such “Liar” Loans.


Easy money, as in lax credit checks, had fueled the US housing boom.  It was not different in Europe.  As European banks began to unravel their countries jumped to the rescue.  Unfortunately, a large number of EU members (the ones I cannot place on a map, with the exception of Greece and Spain, which I can!) are tiny economic powers.  Their banking institutions had become larger than their national GDP! How in the hell is a national government supposed to orchestrate a bailout of such relative proportions is beyond me.  So, Greece, and Spain, and other countries shoved their banking troubles under the rug.  Not unlike Japan’s denial of its own banking crisis, originating again in housing prices in Japan, in the late 1980s.  Many say Japanese people, and its economy experience the lost decades (2, actually).  Even now Japan has not come fully clean.  It’s a cultural thing, I suppose.


In the last few months, Greece has finally accepted and announced that the Greek financial meltdown is here.   And that they are beyond what Greece can manage.  Greece is literally on fire, and unraveling down to its core.  There is some hope of saving the cradle of civilization from civil war, but every day that goes by brings the world close to a Greece that no one would want to contemplate.  And more recently, the Spanish have finally acknowledged they need outside help.  Their banking troubles too are too big for the Spanish government to manage.  Portugal is not far away. I think.  Italy is close, but Italians are Italians.  Eat, Pray, Love was shot partly in Italy for a reason!


So, Germany and France are the only two EU countries with economies and resources large enough to put together a European Bailout package.  The Brits could help.  But the Brits are who they are.  I can see the crusty grin on many a British face, as they read of higher levels of distress across the channel, over morning tea and biscuits.  Not to mention, that the UK is still not out of the doldrums itself.  


As for the US – we could help, but we have a heap of our own problems.  And in this election year, Congress will do what Congress does – NOTHING.


Germany and France will put something together as a concerted rescue effort.  It will likely have unpalatable, perhaps even draconian conditions attached - condition that will be impossible to swallow, for the Greek people, or, for that matter, the proud citizens of any other European country.


The European Union itself is at risk.  In my mind’s eyes, that gig is up.

On Facebook Friends

I know, I am cheating a bit here - hoping a provocative headline will get folks to read what follows.  The story is actually about Facebook and why I think FB will unravel in the next 6-12 months:

Mark Zuckerberg founded Facebook from his Harvard dorm room in 2004.  Everyone is aware of the legend, and most have probably seen the flick "Social Network".

Sean Parker is the iconic, de-facto "Bad Boy" of Silicon Valley.  Yes, they do exist even among Geeks.  Success and sudden acquisition if enormous Wealth is likely the major force in a Geek's social coming out as a "Rock Star".  Not that Sean Parker ain't a Rock Star - at least in the technology world, he is.  At 20, Parker, along with then 19 year old Shawn Fanning founded Napster. Remember Napster? The file sharing network, that took off like a NASA rocket primarily because of people sharing MP3 music files?  No, not Netscape! That was Marc Andreesen's baby, and the first commercial browser based on what we now know as HTML (Hyper Text Markup Language).  Netscape was buried by Microsoft's' muscle flexing, anti-trust violating machinations that led to vigorous law suits and settlements around the world.  But, I digress.  Napster revolutionized how we buy and listed to our music.  A lot of folks got a hold of huge music libraries for FREE.  In fact, Steve Jobs, supposedly copied the Napster idea, along with some enhancements (like Steve Jobs had done all along - XEROX's computer mouse, GUI, etc.) and made it into the mega-billions earner - iTunes.  Without iTunes, Apple would probably be just another struggling computer manufacturer today!  That is an honest assessment, and it is entirely mine.  Anyway, the Recording Industry Association of America, and several bands, led by Metallica sued Napster for violating copyright laws.  Napster eventually shutdown its service because of these lawsuits.  It was a one trick pony.

A couple of years before Napster, Sean Parket had a run-in with the FBI.  Parker had managed to hack into a fortune 500 company's servers, and his IP address (roughly translated - the location of the computer at his Dad's home - Dumb Ass place to hack out of!) brought the Feds knocking on his father's home.  Parker was 16, and served community service time for this felony/misdemeanor.

A couple of years after Napster, in 2002, Parker launched "Plaxo", the first of its kind Contact Address book based in the cloud, that syncs with your MS Outlook contacts.  In 2004, Parker was ousted by the company’s financiers, led by Sequoia Capital, in what was an acrimonious exit that reportedly involved the investors hiring private detectives to follow Parker - a le "High Stakes Divorce style keeping an eye" on your partner!

Story goes like this - Parker saw a website in late 2004, in his girlfriend's dorm room.  That site was TheFacebook.com.  A few months later, jhe met with Mark Zuckerberg.  Zucky hired Parker as Facebook's founding President.  Peter Thiel, Facebook’s first investor once said, that Sean Parker was the first to see potential in Facebook to be "really big," and that "if Mark ever had any second thoughts, Sean was the one who cut that off".

As President, Parker brought on Peter Thiel as Facebook’s first investor. Within the initial round of funding, he lso helped Zuckerberg negotiate to retain control of the company, allowing Facebook the freedom to remain a private company. Parker is credited with championing Facebook’s clean user interface and in developing its photo-sharing feature.  Zuckerberg once said, that "Sean was pivotal in helping Facebook transform from a college project into a real company."

Parker however, was still Parker - during a party in 2005, police entered and searched a vacation home Parker was renting and found cocaine.  Parker was arrested on suspicion of possession but not charged (WTF??). FB's early investors eventually pushed Parker out of Facebook, largely based upon this event.  But, Parker got to walk away with 4% of FB stock.

Yes, that was worth 3.6 billion at the IPO.  Not a bad payday for a Bad Boy's Bad Behavior!  Peter Thiel, meanwhile, walked away with a mere $2.5 billion.  Other FB investors and Friends of Zuck (FOZ) didn't do too shabby either:

Zuckerberg (has to be his own best friend) - $24 billion
Accel Partners - $8.5 bn
Dustin Moskowitz (co-founder and Zuck's roommate at Harvard) - 6.5 bn
Digital Sky Technologies (Russian Investor) - 4.6 bn
Eduardo Saverin (co-founder money man, outsted by Zuck(?), settled for stock) - 3.4 bn.
Note: Saverin is Brazilian by birth, studied in the US, became a US citizen long before IPO, and renounced US citizenship, settling down in Singapore, 6 months before the IPO.  Singapore? WTF!

Sheryl Sandberg (COO since 2008, hired away from Google where she was VP online sales) - 1.8 bn
Microsoft (invested 240 million in 2007) - 1.36 bn
Greylock Partners (invested 27.5 million in FB's series C funding) - 1.275 billion
Meritech Partners, Elelvation Partners (27.5 million in series C) - 1.275 bn
Jim Bryer (of Accel Partners, put 1 million of his own money in) - 510 million
Goldman Sachs (invested 450 million in Jan 2011's 1.5bn capital raise for FB) - 850 million
Chris Hughes (co-founder, left FB in 2007 to work for Obama 2008 campaign) - 850 million
La Kia Shing (the Hong Kong based invested 120 million in FB, in 2007) - 680 million
Mark Kohler (former employee, VP of Product Management) - 680 million
Jeff Rothschild (employee, former co-founder of veritas, data center guru) - 680 million
Adam D'Angelo (Zuck's childhood friend from Phillips Exeter Academy, x-CTO of FB, left in June 2009) - 680 million
Owen Van Natta (employee, joine in 2005 as COO, left in 2008) - 680 million
T. Rowe Price (invested 190 million in April 2011) - 510 million
WTI (investor fund, Parker's contact, invested loaned money to FB initially,  a few hundred thousand) - 425 million

Reid Hoffman (co founder PayPal, invested 40,000) - 375 million
Mark Piincus (co founder of Zygna, 40,000) - 375 million
Interpublic Group (placed client advertising on FB, invested 5 million) - 212 million
Marc Andreesen (angel investor, BOD member) - 225 million
Justin Rosenstein - (x-Google, software guru, x-Fb employee) 170 million
David Choe (painter, served time in Japan, created the murals in the new silicon valley office of FB, took stock as payment) - 170 million
Andreesen Horowitz (investor fund run by Marc Andreesen) - 150 million
Fidelity Investments - 150 million
David Ebersman (employee, CFO, joined in 2009) - 95 million, 400 million after vesting
Mike Schroepfer (employee, VP of Engineering) - 95 million, 370 million after vesting
Theodore Ullyot (employee, General Counsel) - 85 million, 250 million after vesting
Winklevoss Brothers - 37.4 million
Divya Narendra (connectU co-founder with Winklevoss twins) - 18.7 million

The list of insiders/at-one-time-insider is long.  But I think I have made my point.  Zuckerberg and company sold their holdings in VERY LARGE AMOUNTS - 37%+ of IPO shares were offered by insiders - taking home gazillion of dollars.  Zuckerberg and other insider still have large positions in FB, vested or otherwise.  But they are all, unequivocally super rich from the IPO (most richer than Mitt Romney! Sorry, could resist that), having collectively taken home 5.9 billion, in cash (37% of 16 billion raised in IPO).  Cash in the bank is still worth at least 5.9 billion.

Public investors, meanwhile paid $16 billion for shares from the IPO.  As of last night, FB was at $25 and change, a 33% loss from IPO price.  So in the my world of rough arithmetics, FB insiders are sitting on roughly what public investors have lost in 2 weeks of trading!

Here's the reason for this scenic route story - Yesterday, Parker launched a Video sharing service, with great fanfare in New York City, called Airtime Media (of course, Shawn Fanning is also a founding member for Airtime.  See, friends take 'care' of friends).  During the lavish party for Airtime's debut, Parker said:

“Facebook isn’t helping you make new connections, Facebook doesn’t develop new relationships, Facebook is just trying to be the most accurate model of your social graph,” Parker said at the event. “There’s a part of me that feels somewhat bored by all of this. There’s no room for serendipity.”

Sean Parker made a fortune off of his short stint at Facebook.  Notice how his opinion of FB changed between 2004, and yesterday, when he launched a "single feature" social network business model company, that will directly compete with FB for advertising dollars.  It is too early to write epitaphs for FB, regardless of Parker's ultra low present opinion.  He is talking out of self interest.

The Lesson should be obvious.  "There is something about Facebook Friends" (with apologies, to "Mary"!)  Insider selling lockout will end in mid November 2012, when insiders will be free to setup "Estate Planning" systematic sale of their leftover FB stocks.  Most, if not all the 'real talent' at FB will move on.  That is the nature of the beast.  Way too many people have earned (?) their financial freedom.

I doubt FB will survive past the next 24 months.

Good Luck Zuck!

On Corporate Profit Motives in the Social Networking Space

In its seemingly desperate search for those 'elusive' revenue growth opportunities, presumably to justify its 70 billion (albeit, fast eroding) market value, Facebook is now looking into "Allowing Children younger than 13 ways to access Facebook, with parental supervision".  Apparently Zuckerberg & Co. want to make money off of pre-teens and their desire to be 'hip', and 'connected', and their ability to make parents melt to layout cash - so kids can play games, and partake in other Facebook goodies.  Zuckerberg got married recently, and presumably does not have any minor biological children of his own.

I was doing some targeted FB people searches yesterday, and happened to come across a bunch of profiles that were under "full lockdown" - you cannot see anything other than a name, and a profile picture (at times, no picture).  I was looking to confirm if a certain individual, a paroled inmate, convicted for child abuse, and aggravated battery against a child, had a FB page.  Turns out he might.  But everything on his FB page is locked down.  Probably for a good reason.  I could only get close to confirmation.

I have no doubt there are thousands, if not millions, of predators and sex offenders on FB.  There is also an active movement, on behalf of currently incarcerated felons, to allow prison inmates access to FB.  I will reserve opinion on this one, for now.

The internet is, intrinsically, not a safe place because people and personas can easily be manipulated from behind the confines, and privacy, of an offender's apartment or house.  The dangers, particularly for minor children, are real and imminent.

I am not sure what to make of Facebook Inc.'s latest revenue model gyrations.  Sometime back, I recall, an adult woman went out on a first date, with some one she met on match.com.  To make a long story short, the man in that case, as I recall, had a rap sheet of violence and assaults a mile long.  The woman was lucky to get out of the situation, alive, though roughed up.  She sued match.com, and accepted a settlement whereby match.com agreed to background check every match.com user, male or female.  I do not know if match.com is actually doing so, or not.

Facebook may consider background checks - but invasion of privacy, and the sheer cost of vetting 900 million plus users will likely result in a "robo-signing" type operation, if at all, not unlike what we have seen in US foreclosure proceedings - Banking Corporations, much larger than Facebook, failed to apply a reasonable level of care and diligence in enforcing foreclosure proceedings, sometimes even against borrowers who were current on their loan!

I am vehemently against any such moves by FB.  A future 'slap-on-the-wrist', or civil fines of hundreds of millions (which FB can easily afford to pay), does nothing for the individuals, and their families, if some were to become just yet another statistical data point.

Mark Zuckerberg and company have to do that which is right - for society.  After all, Facebook is a Social Network.

The Facebook IPO – Act One

Be-fitting an internet giant (?), that is, at its core, a One Act Pony.

I must confess, I get a certain chilling-rush from adding that question mark next to "internet giant".  Each time I have seen any business entity being singled out at as a giant (in any field), I start yet another one of my countdown clocks, waiting for the inevitable obituaries, and the post mortems. Yahoo is a prime example.  Planet Earth is littered with the digital graveyards of many young, and ambitious, technology start-ups, and of many old-world corporations that spurned their buttoned down old-worlds in favor of more glamorous digital pursuits (likely to have been recommended by some twenty-something-newly-minted-Ivy-League-MBA-Willy, working for the likes of McKinsey, Bain, or Booz Allan Hamilton, etc.).  Billions have been thrown down such digital drains, and thousands of jobs destroyed, all in pursuit of gravity-defying-stock-valuations that also happen to stuff CEO pockets with absurd amounts of Greenbacks.  Outsized CEO compensation, often disregarding final outcomes, and premature vesting distorts all motivations.  Vulture Attorney (yes, they exist) guard the grounds of dying or dead corporations, and serve as grave keepers, seeking to feed off of any remaining signs of financial upside. Sorrowful individual investors vicariously place flowers at the grave markers, over beers and feelings of despair, or perhaps financial ruin.

To be fair, some businesses do make it to land of giants - Google stands out in recent history.

Contemporary media experts, and talking head media Pundits, are always quick to pass judgment and pin labels,   of grandeur, or of being fatally flawed – on everything that is worth yet another Nielsen ratings point.  Such is life - nonchalant use of mighty metaphors to create headline scintillation is nothing new, but it seems to have run absurdly amok, particularly given the fierce inter-and- intra-media battles for ratings, and the advertising spend that follows from ratings (print media is pressing for survival, broadcast media is screaming at amped up decibels, from every antenna top, and digital media is desperately trying to firmly plants its network circuitry – all to catch our collective dysfunctional attention spans).

Most recently, Facebook was THE golden prodigy, and a media darling (current status of love affair is more ‘Like’ between dislike and despair).  With a global thundering herd of 900 million plus users (Zuck’s Ducks, sitting or otherwise), sending billions of ‘Like’(s), uploading a billion pictures each day, and 400 million MUA (monthly Unique Active accounts - read Facebook addicts).  Imagine this - if everyone now on Facebook became friends with all other FB users, there would be 405,450,000,000 friendships in the FB universe.  That is 405.45 billion, or roughly 62 times the human population.  Stretch that a bit, and you get to some rather amazing conclusions – friends usually do not fight, or kill each other (am I being too naïve?).  So FB creates a platform for global peace and quiet. No more wars, suffering, genocide, etc.  Mark Zuckerberg may even get one of those Nobel Peace Prize nomination nods!

Yes, Facebook has a stunning global retail reach.  At least in theory it does.  And, it will always be free for users – per the statement on facebook.com.  The average user (MUA, or not) pays nothing for having a personal social broadcast platform (the grand design is rooted in psychological theories of human condition, to massage our individual and collective egos, feed our narcissistic needs, and to combat human feelings of isolation and loneliness).  FB has also built out a very impressive technology stack, spread around the World that makes the lives of anxious users, and their friends, a bit more manageable.  Instantaneous ‘Status Updates”, and real-time feedback – ‘Likes’ or comments for every post. 

Corporate advertisers of all inclinations were drooling at the prospect of serving up custom advertising, based on Big Data’s insights from users’ profiles, Likes and posts, and just about everything a user does on FB.  With the right mix of media-hype, and some shrewd calculated feature releases, Mark Zuckerberg and Co. managed to fool Ad buyers into believing that “If You Put Your Product on FB Pages, You Will Sell More”.  But in the Attention Deficit Disordered Narcissistic world of the Average FB user (and, on average, we are all average), the FB community’s quest, perhaps even the need, for ‘Likes’ from fellow FB community members is far greater than the desire to visit a clickable link from some annoying advertiser.  GM pulled the plug on its $10 million annual advertising experiment from FB, saying FB does not help sell more cars, or help in upselling GM cars.  FB even tried to offer low-cost ‘sponsored’ status updates to users – for only $2 a pop, users can have a custom framed and attention grabbing bling surround your status updates.  Was this an ultimate play to our psyche, or a desperate reach for revenues? I believe the latter.

Of Crooks, Cooks and the Retarded

About a year ago, FB retained the band of “Cooks, Crooks and the Retarded” - in strict compliance with Americans with Disabilities Act - to manage its IPO.  Rumor is that Zuckerberg was initially against the IPO, but gave in, despite his staggering 59% voting control of FB (with only a 29% equity stake – how that can happen is yet another story to be told some other time), to the ‘exit strategy’ wishes of his institutional Early stage Venture Investors (read, Vulture Investors, Hedge Funds, Accel Partners, Goldman Sachs, etc.).

The CCR band (Crooks, Cooks and Retards), not to be confused with the band Credence Clearwater Revival, between them had a stunning track record for developing Cooking Recipes, and for Digging their own graves, particularly in recent times.  Getting high on your own supply (don’t, said Tony Montana) became norm, and global markets were brought to their knees, the world on the brink of disaster, paying for the misdeeds of the CCR by way of global government sponsored bailouts.  ‘Free’ Market ‘Capitalism’ at its best.  I get it.

I have no evidence for ANY unlawful behavior (really, I do not!) but somehow adding a C (Crooks) to CR makes for a much attractive moniker.  You see, even your truly is not immune from fondness for bling, and cheap thrills!

After a year of ‘Analysis’ and ‘Valuation’ models, probably running on late night coffee runs and stale pizza (NOT!), Wall Street was ready for the IPO roadshow – the one-on-one, and group meetings, with potential IPO investors. Zuckerberg is said to have attended ONE such meeting, petulant behavior, presumably to show his disdain for going public.  No one can touch Zucky, for he owns over 50% of voting rights! So, Zucky can do whatever the hell Zucky wants to.  But I digress.  After all the Analysis, Valuation Models, and fiduciary responsibility (across both sides of the fence) that was, CCR’s burden, Facebook IPO road show was pitching roughly 335 million shares at between 28 and 34 USD. IPOs are typically not directly marketed to retail investors.  A retail investor can place a buy at the IPO, but is at the sheer mercy of the Wall Street “Allocation” process.  No one really knows how allocation works.  Well, we actually do, but the dirt is too sordid to even discuss.  Getting in on a “Hot” IPO is a privilege because IPOs are usually based on conservative valuation and pricing assumptions.  As investors, who did not receive allocations to their liking, jump in with buy orders, the stock usually pops.  First day trading gains of 25-100% are not uncommon.  A direct implication of such a pop in stock price – the company issuing stock left a lot of money on the table, courtesy of its CCR.  CCRs also, usually, have an overallotment option (for some reason, it is also called the Green Shoe option), that gives CCR the option (right, but not the obligation) to purchase up to certain % of shares issued in the IPO, at the IPO price, and sell the same at market prices.  Think about it – I can but at IPO price, and sell at the IPO plus Pop price, without having to pay anything.  It is Pure Profit, but only if the stock price shoots UP.  The rhetorical argument in favor of overallotment is “market stabilization”, but it is mostly that – rhetorical.

When you invest in any company, you are also investing in management’s character.  If you think otherwise, I would recommend you re-examine your investment strategies, for misdeeds (in addition to mismanagement) of management have repeatedly wiped out stock holders.  Ask Enron, WorldCom, Tyco, etc., if you still believe I am grinding some agenda.  We know, from the short history of Facebook, of Zuckerberg’s other legacy – his legal troubles - over amounts as small as a few hundred dollars, and up to a few billion if one were to believe in Paul Ceglia’s claims(Paul Ceglia v. Mark Zuckerberg).  In addition, every early stage investor (read, Vulture Capitalist) wants to wring the most out their ‘patience’ and ‘foresight’.  A perfect storm was brewing in the Facebook teacup!

Informed Investors (read, Hedge Funds, preferred institutions) had to know, that Zuckerberg and his Vulture investors were NOT about to leave ANYTHING behind on the table.  Not a single dime.  Not just in pricing, but in selling as much of their holding as they could.  The result – IPO shares were inexplicably increased to 421 million, a 25% larger pool, and the target price was raised to 38!  In Zuckerberg’s mind, Facebook was likely worth over USD 100 billion and damn if he was not getting ALL his money. 

Amidst all the hoopla and media hype, no one dared to question Facebook’s maneuvers.  Investors’ own greed, for that lucrative ‘pop’ in share price, blind-sighted almost all.  Last, but by no means in the least, the NASDAQ exchange screwed up the FB opening trades.  A Technical glitch was to blame, as always.  Right! Try incompetence.

Wait.  There was this issue of FB secretly guiding CCR analysts about impending downward revisions to its own earnings estimates.  Of course, those CCR analysts relayed the news to the market as was their fiduciary duty.  Only, they allegedly relayed it to a select subset of investors!  US SEC and Feds are putting on a charade (like they actually care) and threatening “investigations”.  Numerous lawsuits are already in the dockets.  This thing is set to linger for a long time.

Last night FB shares closed at $28.19, down almost $10 from the $38 IPO price.  That is a 26% wipeout for stock holders.  And it has happened in less than 2 weeks of trading.  FB is now worth just $60 billion.

From my perch, FB is not even close to being done with the downward spiral of stock price.   Sympathies if you bought into the ‘early bird special’.  It’s not too late to get out.  As Kenny Rogers said, "you got to know when to fold them".   

Congratulations if you shorted FB.  You get it.

Yours Truly

(For interested readers, a detailed analysis of the True value of FB is coming.  Soon)

On Rajat Gutpa, and the Hubris of Money, Power, and Success

Rajat Gutpa, the embattled, and indicted, former Chairman of McKinsey Inc., is now threatening to testify and take the witness stand in his own defense. You may remember that Gupta is charged with providing inside information to the now convicted felon, and former Galleon Hedge Fund chief, Raj Rajarathnam. 

The Prosecution in US v. Rajat Gupta has wire tap recordings of phone calls between Gupta and Rajarathnam, and the tapes were allowed into evidence despite the Gupta legal team's vigorous attempts to block them.

Gupta tipped off Rajarathnam of impending positive news (Warren Buffet's decision to invest $5 billion in GS, to SAVE Goldman from suffering the same fate as Lehman Brothers and Bear Stearns; and you can stop groaning Lloyd, after all, you did take the money, for whatever it was worth!) from Goldman Sachs, a few minutes prior to market close, and a couple of minutes after a Goldman Board meeting. Gupta was on Goldman's Board of Directors. The same wire tap call also helped to convict Rajarathnam.

This is USA. Anyone charged with a crime is entitled to a swift jury trial. Juries take their civic duty conscientiously. And, every defendant is protected by the 5th amendment to the US constitution - not even the US government can force a defendant to testify, if the defendant does not want to, under any circumstance. Protection against Self incrimination is a constitutional right. The accusers have the burden of proof.

Leftover hubris of the guilty (one can tell yours truly would not be a good juror), but highly successful, often makes them believe in their own invincibility, during battles for personal and professional survival. Bernie Ebbers (WorldComm & MCI), Jeffery Skilling (Enron), and Dennis Kozlowski (Tyco), are but a few in recent memory, who took a chance on their ability to beguile the jury. All three are serving long term sentences for their crimes.

Dear Rajat Gupta, the court room is not your private offices at McKinsey Inc., where you were heard, and obeyed,  without any questions or doubts. No, the information you relayed to your Wall Street pals, that you now claim was already in "Public Domain" was actually NOT.  Nice try though.  Your attorneys are obliged to fight hard on your behalf.  That is their duty to you, the client.  Preet Bharra, and Co. will fight back equally hard.  That Sir, is their duty to the Nation, and to We the People.  They will surgically disembowel your claims of innocence. 

Your bravado will fail to charm the jurors, and you run the risk of getting the maximum sentence for each count you are likely to be convicted for. Stay away from taking the stand, and cling tightly to the modicum of your dignity that may still be intact. 

You need to go to the Big House, either way.  Anil Kumar, your one time underling and friend, is eagerly awaiting your arrival.

On Republican Rock Stars that Matter in the 2012 US Presidential Election 

The song goes "Rumor Has it, Rumor Has it..." It was a recent Top 100 track. With America's fascination for rumor and nuanced innuendo, in politics, it is time to talk about some other rumors:

Rumor is that when they tried to measure John's Stewart's IQ, in 3rd grade, the "Simon-Binet" scale (aka the Stanford-Binet IQ score; note how we Americans always have the last laugh over the French) blew-up.

The rumor is puzzling, since the same scale imploded when George W. Bush was tested, as a college Senior - huh? did W'ya even graduate? That is a whole another topic of conversation, not unlike some other myths that surround W'Ya - his Air Reserve Guard Service (did he actually serve, or not?) during Vietnam, or was W'Ya guilty of DUI or not? or did Papa Bush intervene to save the Prodigal Son's proverbial rear-end? Or, are rumors of all the Global achievements from W'Ya's exhilirating 2 term rent free life at 1600 Pennsylvania Avenue, where instead of merely redecorating the West Wing, DumYa (sorry, that's a typo, I swear) focussed on redecorating the World (with a blanket permission, and a blank check, granted by our very own US Congress, with the exception of, amongst others, the current occupant of 1600, and a majority Blessing of the Truly Impotent - aka, The UN) true? Yeeeehaw!.

Why aim for anything less than a series of Texas sized accomplishments when one can Shock and Awe, Grin, Holler, and then Grin some more, and, land aboard USS Abraham Lincoln (It's gonna be OK Mr. President, stop turning in the grave. Its all good. The Union is still together. As of today.), in a two seater Lockheed S-3 Viking fighter jet flown by the other guy (Lt. Ryan Phillips), in full fighter pilot regalia. Perhaps W'Ya did serve after all - he remembered how to put the gravity suit on. See, I am a reasonable man, and will always err on the side of granting the benefit of doubt, unless someone, anyone, even the Rovester, can create reasonable doubt - that is how high the bar should be, for such National Security matters, and for the human body that sits in the chair in the Oval Office, with keys to our collective Nucear arsenal (another type, I am sorry). Mission Accomplished. Indeed Mr. Texas Rangers. You succeeded in creating Jaw-Dropping Shock, and Eyebrow Raising Awe with your temerity, and Executive spending of Pentagon funds. You ended "Major Combat Operations" on May 1, 2003. Without capturing Osama Bin Laden, Dead or Alive (Its all good, Bon Jovi). I know, I know - you left detailed instructions, for your successor, on how to get Osama, and 8 years after your selfless risk taking, as Commander in Chief, with the aircraft carrier landing, HE got it done. Finally. I know right? - What took him 3 years into his first term to capture and kill America's Enemy number One and FBI's number one Most Wanted? Well that, DumYa, is the reason the Stanford-Binet scale imploded in the first place. Meanwhile, Tom Cruise is still contemplating those copyright infringement charges. How un-American. How un-Scientific.

Dick, Bless-His-New-Heart, Cheney, meanwhile, argues that even though he hauled his hind end to Canada (Canada? Really?? Fine, let's not talk of the 'Looney', it was simply closest to land-locked Casper, Wyoming, by way of Billings, Helena, and Great Falls. There is no proof though, that a Robert Bruce Cheney crossed the international line via the land border, but merely an informed guess, since Dick's father was, of all things, a not-so-highly-paid soil conservation agent for the US Department of Agriculture - talk about having a Big Government, and an EPA like Agency, even back in 1941), to beat the draft during Vietnam. We accept, without an iota of doubt, your claim, that Vancouver, BC, was not 'Hunting' Central, though there were multiple sightings of Weapons of mass Destruction, in Canada, that you had been covertly tasked by ____ (covert, you see), by an unnamed (covert, again) Federal Agency. In your defense, though, Carl Rove has been pointing out that J. Edgar Hoover was secretly a CIA operative. That's code for Agent. And that J. Edgar was Gay. That is Carl Rove just being Carl Rove.

Finally, Mitt 'the-money-man' Romney. I am not sure where to start - that he served as a missionary for his faith, in France, spreading the Mormon word, while Americans were coming home in body-bags, or with mangled bodies, if at all, during the time our French friends (why is it that France is always the party-spoiler?) was enjoying one of the finest runs of Burgundy seasons in its history. Or, should I begin with his Leveraged Buy-Out deals, as head of Bain Capital, that he is trying so hard to recast, and sell, as a 100,000+ job creation Venture Capitalist tenure. Never mind, that a paltry 2.5 million investment in Staples counts today as having created 42,000 jobs. Feel the Shock, Staples? Feel the Awe emanating from the audacity of the lie? Or, should I merely mention how many Americans were fired, and families destroyed, after Bain took control of each of those LBO target companies, leveraged those Balance Sheets to the Hilt, thereby Bankrupting viable businesses that had previously had a history of profitable operations, and that Bain, and Mitt, made their fortunes (read, hundreds of Millions of Greenbacks) in the process.

I can continue, but Zuckerberg called last night, if I remember the foggy 1AM call right, and asked if I would stop sending him not-so-nice-emails regarding his IPO, and keep my Status Updates to the mundane, like most of his 900 million plus users. But then, I digress.

There is no doubt you have some brains, Mitt. 2 degrees from Harvard, despite being burdened with a former Governor as Dad. You have money, and that is amply clear in how you like your cookies, and from your having examined your full tax-disclosures, as presumptive nominee.

But you Mitt forget one thing - the 'Other' guy can shoot 3 pointers, from downtown, and around your sun soaked celebrity looks. Yes, 'White Men Can't Jump' was a real movie. I also hear he can also drive them straight down the fairways. Nothing like Bubba Watson from Iraq, FL, can, but long enough. And always straight. Well, at least that's his intent. No fades. No Draws. No Flips and No Flops. And without even an Etch a Sketch layout of the golf course. Just straight. I hear that is the only way you like them anyways.

Incidentally though, he also has a degree from Harvard. Sponsored by his single 'parent' grandmother.

What was that Mitt? Birth Certificate? Yes, he has one, an Original from the hospital in Hawaii where he was born. You do know that Hawaii became our 50th Great State before August 4, 1961, right? Or are you simply confused about the dates? Fine, that was on August 21, 1959. Darn, missed by just shy of 2 years!

November 2012 is not about any Republican. It is about the soul of America, and its Heart. And, it is about to be ripped out, leveraged and sold in Bankruptcy courts, if the Republican Men have their way.  In the interest of full-disclosure, I am a registered independent in FL.  That is why I was unable to vote for any one of the clowns on the GOP slate.  Not that I would have.

Yours truly.

PS: Upon looking up VP biden's IQ scores from his college days, we discovered that the scale wasn't around prior to World War I. I am serious.