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Cashbook

11:00 am in Uncategorized by Daveparts

Cashbook

By David Glenn Cox

 

Question- What are the advantages and disadvantages of a company going public?

Answer- “An initial public offering (IPO) is the first sale of stock by a company. Small companies looking to further the growth of their company often use an IPO as a way to generate the capital needed to expand. Although further expansion is a benefit to the company, there are both advantages and disadvantages that arise when a company goes public.”

There are many advantages for a company going public. As said earlier, the financial the benefit in the form of raising capital is the most distinct advantage. Capital can be used to fund research and development, fund capital expenditure or even used to pay off existing debt. Another advantage is an increased public awareness of the company because IPOs often generate publicity by making their products known to a new group of potential customers.”  – From Investopedia

On Friday, Facebook will have its Initial Public Stock Offering; The Company had over a billion dollars in profits last year and sits atop $3.5 billion in cash reserves, so what could Facebook need with mega billions in new cash? Unlike the old brick and mortar companies Facebook’s product is built on bandwidth, and its revenues are electronic advertising. It cannot improve its market share because it already rules the market. Why is it then, the company is so desirous of all these new billions of dollars?

Answer- “Subsequently this may lead to an increase in market share for the company. An IPO also may be used by founding individuals as an exit strategy. Many venture capitalists have used IPOs to cash in on successful companies that they helped start-up. – From Investopedia

Facebook cannot improve its market share because it already rules the market. It would appear that the Facebook IPO nothing more than a payday for investors, not a beginning for a company, but an end. Facebook cofounder Eduardo Saverin, renounced his US citizenship the other day, in order to save $67 million dollars of potential tax liability. Founder Mark Zuckerberg, is the largest shareholder with a controlling interest of 28.4 percent of common stock. Zuckerberg’s personal fortune is currently estimated at $17.5 billion, why then does he or any of his partners need with more new money?

Could this possibly be the right time then, to cash out? Could this be the right time to pick up their check, to reinvest it, in what? Our economy is in a prolonged drizzle, a permanent funk called the “new normal.” A general consensus of the public opinion would agree the affairs of Wall Street are out of control. Could it be the IPO is more designed to buoy the market than to enrich its individual investors? Could it be a poker game, where once the winners take all the money out of the game, they must find new money to sustain the game?

There is another component to this which makes Facebook somewhat a different animal from your average, run of the mill internet corporation. Facebook’s true product is information, information culled by you, about you. This vast archive of public “likes” and “dislikes” is about to become the property of Wall Street investors. The Orwellian ideas of clicking “likes” or “dislikes,” of Coke or Pepsi, Preparation H or Depends diapers boggles the mind. Centuries of intellectual evolutionary development synthesized down to twenty first century electronic cave wall scratchings of “I like plastic underpants.”

I have my own Facebook account and it has put me in touch with people whom I haven’t spoken to since childhood. It can be a wonderful tool, what is to fear is what the historical record of inventions which have changed the world teaches us. Gunpowder once changed the world, initially; it was used to fuel beautiful Chinese fireworks before becoming the scourge of mankind. The Wright Brothers invented an airplane fulfilling the age old dream of mankind. In less than fifty years, that dream of mankind became a nightmare war machine bristling with weaponry and carrying tons of bombs. So what then, might become of an information collecting machine changing the world, manipulated by Wall Street investors running amok? Not that it will happen, mind you, only that it could happen.

Fortunately, we have the dinosaur principle that would probably save us, huge dinosaurs once roamed the Earth and regardless of their size, they all shared basically the same brain capacity. Growing larger and larger only made the dinosaur slower, a lumbering behemoth endlessly searching for tons of food to maintain a brain about the size of a walnut. More than likely though, the asteroid on the horizon which will draw a curtain to the Facebook era is what I call, the Mom principle. Most of Facebook’s primary users are young, will they continue to hang out where Mom might be listening? Do they really want their Mom to ask, “What’s a beer bong?”

I suppose it could be just as rightly be called the MTV principle, Facebook’s loyal customer base will eventually grow up, leaving the door wide open for a new Internet competitor appealing to a younger rising generation. A new Facebook, cooler and hipper than the old Facebook, with cooler features because “like” is so something my Mom does. A new Facebook, so cool that Mom doesn’t even know about it yet. Popular music is aimed primarily at teenagers, films and TV aimed primarily teenagers, and the one consistency about teenagers is that, whatever is considered so cool today, will be so uncool tomorrow. Look at the mass migration of youth from My Space to Facebook; clearly we have reached the age of the impermanence of permanence.

The Facebook IPO will rake in billions and billions of dollars from the eager hands of investors who can’t give their money away fast enough, at the exact same moment when the founders are filling their suitcases and cashing out. The market will rise on the day of this IPO generating money making potential from affiliated companies, filling brokers pockets with commissions and generating a new public interest, even if only temporarily in investing. All to try to catch a falling star or a ride on a comet’s tail, investment as a  gold rush rather than as a responsible business opportunity.

It is a sign of our times, illustrative of all that is wrong in our society. An IPO which is really nothing more than a glittering new Las Vegas casino, luring in the suckers with promise of instant riches most of whom will ride home on the bus when the diamonds turn to dust and the chrome turns to rust, party goers drunk on the smell of someone else’s cork. Stockholders exploited and cannibalized by a dysfunctional market, so dysfunctional that it cheerleads while denying its own basic rule – never buy at the top.

It is a stock offering of sunbeams in its air, cache and panache, the last great gasp as the adrenaline needle entering the dying mans chest. Chasing rainbows on a sunny day and digging for pirate treasure in the back yard. It promises the riches of what once were in the cold hard reality of what is now. A money making investment scheme, of getting while the getting is good, before the next bubble bursts and before the ax falls.

“Nobody ever lost a dollar by underestimating the taste of the American public.”

- P.T. Barnum

Oh the Horror

1:02 pm in Uncategorized by Daveparts

Oh the Horror
By David Glenn Cox

I read Greg Smith’s earth shaking New York Time’s Op Ed recently, “Why I am Leaving Goldman Sachs” and I must say that I for one am shocked! Mr. Smith must have been either home schooled or led an otherwise sheltered life. When I was a young boy on one of those bright and lovely spring Saturday mornings I dressed in my smart khaki Boy Scout uniform and we good scouts all gathered at the local community house. There the scout master explained to us the costs of all of our planned activities for the summer and further explained that we would be selling lawn fertilizer to raise funds.

Each scout was given a packet with order forms and assigned a part of the neighborhood to canvas for prospective customers (i.e. Muppets). Off we went ringing doorbells and selling lawn fertilizer offering the advantage of having the fertilizer delivered and in the process helping local boy scouts. I freely admit it, when one of the Muppets would ask me, “How many bags do you think I need son?” My mercenary side would kick in, and maybe four bags would have been enough, but I was twelve years old and I wanted to go to Boy Scout camp so out the window went my boy scout oath and I would answer with certainty, “Six!”

How early this lesson was taught to me in this America, if you want to get ahead in this country, you’ve got to sell a lot of fertilizer!

Later when I was around sixteen I landed a job at a gas station up on the highway. Ann Street Gulf was the old fashioned model for Service stations, full service gas pumps, three service bays and even a clock in the window to measure my speed in reaching the Muppet’s car. The owner Harold was a funny kind of a duck and I like him now in retrospect, even more than I did in those days. He had this little motto which he used to share with to us boys to help motivate us during our shift, “You can sell or you can go to hell!”

Part of my orientation working at the station was having the price structure explained to me. Oil treatments, gas treatments and other fuel additives each netted the salesman forty cents. Inside the flap of the air filter box was a number, which represented the minimum price and anything you got over and above that amount went directly into your pocket and was considered as, good for you Bubba. Fan belts, tire repair, tires, batteries or what have you, anything we sold meant more coins in our pocket.

Muppets? Our customers were rarely referred to in any such kindly terms as Muppets, they were at best suckers. The station patter would begin something like this, the Muppet would pull into the station and the attendant would ask casually, “What’s that noise?” Invariably the customer would answer, “I don’t know? I’ve been wondering about that myself?”

“Pop the hood and I’ll take a look for you,” Then I would sell a can of oil treatment or maybe a fan belt. There were some boys at the station who would check the oil and wipe it down a quart and then walk into the service bay where they kept this empty can of oil with a spout already in it. When we boys would compare notes around a few beers after hours the stories would usually begin with “And this guy was so stupid that.”

Harold and Ann Street Gulf are long gone now replaced by the new corporate model of the convenience store, same story except with no commissions to pay out and no different really except employees and customers are all Muppets now. The road maps which we once gave away for free are now $4.95, free air, forget it? A drinking fountain, what’s that? We’ve got some real nice soft drinks for $1.95 same shit, different day. So as I read about poor Mr. Smith’s lament about the demise of the Goldman Sach’s culture of helping their customers it is hard, if not impossible for me not to laugh. Really, tee he, guffaw… helping the customer?

There are good and honest business people out there but they are quickly being eliminated by that same corporate culture which Mr. Smith has so recently stumbled upon. There is a national chain of repair shops which offers $99.00 brake jobs when the reality is, you’d be lucky to buy a cotter pin in there for $99.00. Mufflers, brakes, tune ups or stocks and bonds it’s all the same pitch, anything to get your car up on their rack or take your money.

The problem isn’t with rip-off gas stations or muffler shops or even Goldman Sachs the problem is with Capitalism.

When I donned my smart little Boy Scout uniform, oh so long ago, to sell fertilizer I was but a spoke in a wheel. A salesman, a grown person, had negotiated a contract to sell truck loads of fertilizer by using little boy’s cuteness and their desire to go to summer camp as a seductive motivation. My boss at the gas station, Harold, was our Fagin, he was teaching us to be automotive pick pockets and to his credit, he shared the proceeds with us.

We are daily bombarded with advertising trying to sell us all kinds of fertilizer that we really don’t need. Half of the advertisements on television are for products which will make us fat and unhealthy while the other half are…anybody? Weight loss products which promise us that we can that lose weight and body fat without changing our lifestyle! Why sure, you can eat pepperoni pizzas with cheese stuffed into the crust and wash it down with chemically laced soft drinks and still have ice cream for desert.

There’s a TV commercial now in heavy airplay for a new Italian car assembled in Mexico which compares the car to a beautiful Italian woman. Is it a good car? Does it get great gas mileage? Is it comfortable? Who knows, all they are really trying to sell here is the image that this car is somehow sexy and attractive. I saw one of these cars in traffic the other day and had to laugh out loud because to me, at least, it looked like a lump of mashed potatoes.

When you begin to dissect the sickness so readily apparent in our society you find Capitalism is at the root of it. It is Capitalism which causes the disease and it is Capitalism which wants to sell us the cure.

A society which pounds messages into your head at least a hundred times a day, that message being, you are too fat or too bald. You’re teeth aren’t white enough or you’re not pretty enough. The message that the candy bar now comes in a new giant size and is located just one aisle over from the diabetic supplies. Selling us the message that life is about having things and about buying things. If you are unhappy, take a pill or read a book, maybe a book on how to communicate with your spouse, or how to meet girls after your break up or how to keep your man satisfied or he might stray. Messages which seek to undermine our happiness and replace them with fear and self doubt so someone can make a quick buck.

“Would it not be prudent to get our civilization tools together, and see how much stock is left on hand in the way of glass beads and theology, and maxim guns and hymn books, and trade gin and torches of progress and enlightenment (patent adjustable ones, good to fire villages with, upon occasion), and balance the books, and arrive at the profit and loss, so that we may intelligently decide whether to continue the business or sellout the property and start a new civilization scheme on the proceeds.”– Mark Twain

Strange indeed, that Mr. Twain could know this truth at the beginning of the 20th century and I could have learned it as a small boy, strange indeed, that Greg Smith, a Rhodes Scholar should only now stumble upon this revelation, so recently and yet, still be so surprised by it.

Who sold those people their mortgages and who sold them on the idea of equity loans and refinancing? Who advertised these products in print, radio and television and then who sold them out? Who sells the idea of privatization and of Free Trade, why surprise, surprise it is the very people who profit from it and why do they sell it to us so vigorously?

Why it’s because if you want to get ahead in this country, you’ve got to sell a lot of fertilizer!