Wall Street: Changed Forever or Business as Usual?

Can you hear the high- fiving across Washington D.C. and New York? The plan is going splendidly - create nitwit stress test (that everyone passes and the students of the test can negotiate the results) to create "confidence", allow companies to flood the market with stock at much higher prices (less dilution) [May 8: DryShops Joins the Dilution Parade], allow insiders to dump their shares on the public, and let the oligarchs profit with hundreds of millions of underwriting fees.

It almost feels normal again... Wall Street is back - business as usual. Now you see why there is good reason for that "consistent bid" under the market...

Andarko Petroleum (APC), Ford Motor (F), US Bancorp (USB), Bank of New York Mellon (BNY) are dumpees. SL Green (SLG) as well - just another weekday for the REITs. Via CNBC

• It's a good sign: corporations are taking advantage of the 35 percent gain in the S&P 500 from the March 9th bottom to sell an ocean of secondaries.
• According to TrimTabs.com, $24.5 billion in secondaries were issued in May through Friday. Add in the secondaries from Ford, US Bancorp, Bank of New York Mellon, and Anadarko in the last 24 hours, and you have another roughly $6 billion. Bottom line: about $31 billion in secondaries through May 12th.

Sounds great Mr. Pisani! So we brought breathing room, and diluted current shareholders. Certainly with the market still down 40% from its peak and the new bull market ahead of us, I am sure insiders who did little to no buying 2 months ago at the bottom, are buying now... I mean green shoots everywhere and our problems in banking were solved with $75 Billion.

• ... at the same time as many companies are selling stock to the public, corporate insiders, on the aggregate, have SOLD $1.2 billion of their stock.

Oh.

Well I am reading by multiple people on Wall Street that there is nothing to worry about here - this is healthy and great. Not that they have a conflict of interest or anything. So as the insiders are offloading their shares on the public....errr, as companies are firming up their balance sheets, who is the ultimate winner? (aside from insiders?)

Ah yes... "Wall Street is changed forever" - if by forever we meant 8 months. Change? Why change when you essentially manage the system. Oligarchs don't change - they win. Just remember, give the peasants their crumbs, speak to them about the need to "work together" as "Main Street = Wall Street" and shoot their 401k up from time to time to let them know the casino doesn't win 100% of the time.

Then bring out the lines of win/win/win and talk up "the ownership society" as you take ownership of his/her peasant assets behind the scenes through a multitude of corporate socialism programs. Also leave out the fact the $8000 win for the peasant in his Etrade account is a bit out of proportion with the multi billion wins for the oligarchs.

FT.com: Stress Test Unleashes Fee Bonanza

• The completion of US banking “stress tests” has unleashed a fee bonanza for Wall Street, with financial institutions set to earn more than $500m in just a few weeks for helping rivals raise equity to plug capital shortfalls and repay federal aid.
• The spike in underwriting fees, which touched a record low in the first quarter of 2009, will boost profits of banks’ securities units at a time when they have been hit by the slump in lucrative markets such as securitisations and mergers. (remember this when we hear of "better than expected" underwriting fees in the coming quarter's earning reports)
• Morgan Stanley, Wells Fargo and Bank of America raised, or announced plans to raise, a total of nearly $30bn in the hours after Thursday’s release of the tests. On Monday they were joined by four other banks - US Bancorp, Capital One, BB&T, and KeyCorp, which plan to sell a combined $6.3bn in stock.
• With a number of smaller banks expected to announce equity raisings in the coming weeks, the current quarter could become the biggest on record for underwriting fees from US banks.
• Morgan Stanley and Goldman Sachs - two of Wall Street’s traditional equity powerhouses - are set to gain large slice of the fees as they are underwriting several deals.

Again, momma have your son or daughter grow up to be a federal employee or upper management type at the top 8-10 "even too bigger to fail than before" financial institutions. The great corporate socialism shell game continues - there appears to be no shortage of willing participants. And it's all backstopped by the US taxpayer. Win / Win / Win indeed.

Comments

[dcb:]

Why are you pointing out these things. what is your agenda, why are you attempting to spoil my prozac induced happiness that all is well. After all the market is up so all is right in the world. (lol) we all know ignorance is bliss, and you are attempting to spoil my happiness.

I hate you for that and give article two thumbs down.

May 13 08:51 AM

[plop:]

I think you might need to consider that there "should" be significant income taxes to be paid on these fees earned. So we, the taxpayer, also win to the tune of 35% to 45% of the net fees after expenses that are charged.

Other than that crtical omission, you make your point quite well.

Ed Plopa, CPA
veteran investor who has lost more than once in the biggest casino of all, but still tryin'.

May 13 09:17 AM

[Garth Pendl...:]

Seriously, one practice in investing seems to be under attack--the age old sage philosophy of finding and holding stocks for the long term--5,10,15 years. With dividends dwindling, iconic companies cratering, managements booted out, what is a constant anymore

May 13 10:05 AM

[Alan Young:]

This isn't socialism, Tyler. It's more like Feudalism.
If it were socialism, the government would control the finance system, and we would not have bankers walking off with billions of the public's money.

May 13 12:25 PM

[Hot Richard:]

I don't say it often, but I love TraderMark and most of the people who follow him.

Hate the game or hate the player...just make money because you know exactly what's going down and there ain't no stopping it.

Remember: wealth obliteration and redistribution are the only games in play by the US Gov.

"Again, momma have your son or daughter grow up to be a federal employee"
Did I say this first or you? Check DC-area housing prices if you don't believe me. They're in the money!!

Stay golden, Pony Boys!

May 13 01:37 PM

[TraderMark:]

Thanks Richard. I just call it as I see it. Just imagine I probably only observe about 25% of the shenanighans that are going on, we cannot see half of it I am sure.

It's the Wild Wild West - no need to be naive about it. The Casino will win 60% of the time. And now the Casino has Uncle Sam as the Wizard of Oz ... let's just not pretend there is an even playing field and try to make it work for us.


On May 13 01:37 PM Hot Richard wrote:

> I don't say it often, but I love TraderMark and most of the people
> who follow him.
>
> Hate the game or hate the player...just make money because you know
> exactly what's going down and there ain't no stopping it.
>
> Remember: wealth obliteration and redistribution are the only games
> in play by the US Gov.
>
> "Again, momma have your son or daughter grow up to be a federal employee"
>
> Did I say this first or you? Check DC-area housing prices if you
> don't believe me. They're in the money!!
>
> Stay golden, Pony Boys!

May 13 04:21 PM

[HardwoodFlo...:]

I heard a great interview on Bloomberg Radio last night about the whole finacial crisis: how it developed and how Jamie Dimon saved JP Morgan from the pit falls that befell Lehman and Bear Stearns. It was an interview with a woman about her book titled "fools gold".

What is facinating is the way in which he navigated the stormy waters. Without a doubt JP morgan is the best positioned to be a true bank, maybe the last one left, on Wall Street with ligitimate credability.

I think that the GS thing is terrible. There has to be an investigation into the ties that binded Treasury and GS. The idea that GS was bailing out their own execs who had borrowed money on margin to put money into bad GS deals (hedge funds/private equity) then was recieving money from TARP and AIG must be investigated. It is truly insane.

The transference of wealth from us (Tax Payers) to them (Wall Street) is too much not to be worthy of and investigation.

What ever happened to the ol' Wall Street that would raise capital for companies that wanted to go public. That would help in M & A. That would create opportunities for investors to invest in companies they believed in?

Like you say, it became a Casino where they were the house. Let's get back to the future and return Wall Street to what it was as antiquated as that sounds.

May 13 04:36 PM

[Alan Young:]

OOPS! Sorry, Mark--I forgot who I was responding to. So many articles, so little sleep...


On May 13 12:25 PM Alan Young wrote:

> This isn't socialism, Tyler. It's more like Feudalism.
> If it were socialism, the government would control the finance system,
> and we would not have bankers walking off with billions of the public's
> money.

May 13 05:11 PM