Financial News

[lostfan]

But the idea of futures/speculators is to have a middleman market so that producers can sell when there's otherwise nobody available to buy at the moment, and buyers can buy when nobody is otherwise available to produce? Correct? I thought there were regulations on how much volume there could be in speculation at any given time, compared to physical buying and selling, since it gets too volatile when the ratio is out of whack (thinking of 2008 here... There wasn't a drop/spike in supply and demand which should be the only thing affecting prices even with speculators, since you have enough activity on both sides to give you the right price).

[southsider2k5]

But the idea of futures/speculators is to have a middleman market so that producers can sell when there's otherwise nobody available to buy at the moment, and buyers can buy when nobody is otherwise available to produce? Correct? I thought there were regulations on how much volume there could be in speculation at any given time, compared to physical buying and selling, since it gets too volatile when the ratio is out of whack (thinking of 2008 here... There wasn't a drop/spike in supply and demand which should be the only thing affecting prices even with speculators, since you have enough activity on both sides to give you the right price).

 

It depends on what you are talking about. Thanks to our awesome FINREG program, there are different rules and requirements for everything. For futures there are disclosure laws that have to be met if you control a certain percentage of a market, or have specific levels or ownership for different commodities. Basically the Hunt Brothers rules. If someone out there really did control a significant portion of the marketplace, the CFTC would know about it, plus it would have been splattered all over the news.

[lostfan]

It depends on what you are talking about. Thanks to our awesome FINREG program, there are different rules and requirements for everything. For futures there are disclosure laws that have to be met if you control a certain percentage of a market, or have specific levels or ownership for different commodities. Basically the Hunt Brothers rules. If someone out there really did control a significant portion of the marketplace, the CFTC would know about it, plus it would have been splattered all over the news.

The CFTC did, and didn't know about it. (this part becomes harder to explain) the basic rules you're talking about still exist but what I'm talking about happened because of a loophole that allowed exemptions to certain investment firms that defined their speculating as hedging, which in effect loosened the marketplace. The technical details of all this is still kind of over ,y head nut I've been doing a lot of reading, it's kind of jarring to read all the ways there are to get around various regulations.

[southsider2k5]

The CFTC did, and didn't know about it. (this part becomes harder to explain) the basic rules you're talking about still exist but what I'm talking about happened because of a loophole that allowed exemptions to certain investment firms that defined their speculating as hedging, which in effect loosened the marketplace. The technical details of all this is still kind of over ,y head nut I've been doing a lot of reading, it's kind of jarring to read all the ways there are to get around various regulations.

 

If the CFTC were failing at their job, I wouldn't be the least bit surprised. In my experiences they are the absolute worst at their mission out of all of the regulatory bodies I have dealt with. I think the futures exchanges do a better job of policing than does the CFTC.

 

I would have to read the reports, but it is worth noting that because of the nature of commodities, hedging is a founding function of those markets. I have no idea how legitimate those hedges were or not.

[lostfan]

If the CFTC were failing at their job, I wouldn't be the least bit surprised. In my experiences they are the absolute worst at their mission out of all of the regulatory bodies I have dealt with. I think the futures exchanges do a better job of policing than does the CFTC.

 

I would have to read the reports, but it is worth noting that because of the nature of commodities, hedging is a founding function of those markets. I have no idea how legitimate those hedges were or not.

Thats what it comes down to. The head of the CFTC didn't even know about the exemptions. Which may or may not explain why it wasn't all over the media.

[southsider2k5]

Thats what it comes down to. The head of the CFTC didn't even know about the exemptions. Which may or may not explain why it wasn't all over the media.

 

Even so, it would still show up in open interest reports. Those are hit very hard by the pundits and writers.

[Balta1701]

If someone out there really did control a significant portion of the marketplace, the CFTC would know about it, plus it would have been splattered all over the news.

Federal regulators charged five oil speculators Tuesday with manipulating the price of crude and making a $50 million profit from the scheme.

 

The Commodity Futures Trading Commission alleges the speculators bought enormous amounts of actual crude oil for sale in Cushing, Okla, during the early months of 2008.

Link. At least in the case of oil, the CFTC has alleged that these guys were pretty easily able to knock enough production offline to seriously impact the price.

[southsider2k5]

Link. At least in the case of oil, the CFTC has alleged that these guys were pretty easily able to knock enough production offline to seriously impact the price.

 

If I have learned anything from you, only five people breaking a law doesn't matter. Heck even hundreds doesn't matter.

[Balta1701]

If I have learned anything from you, only five people breaking a law doesn't matter. Heck even hundreds doesn't matter.

Honestly, my instinct would have said that you're right, that it should be nearly impossible for a handful of guys to seriously impact the global price of oil, but the CFTC indictment there argued differently. Has that case moved forward at all? It has gotten no press whatsoever since last may.

[southsider2k5]

Honestly, my instinct would have said that you're right, that it should be nearly impossible for a handful of guys to seriously impact the global price of oil, but the CFTC indictment there argued differently. Has that case moved forward at all? It has gotten no press whatsoever since last may.

 

I don't get mailers from the CFTC, so I have no idea where it is. I'm guessing that means the case wasn't very strong, and it was made public to seem like they were doing something, when in reality they weren't. The SEC is really good at that too.

[Balta1701]

Link

At long last, the Holy Grail of Internet IPOs is here. Facebook filed Wednesday to raise $5 billion in an initial public offering.

 

In 2011, Facebook earned $1 billion on sales of $3.7 billion. As of December 31, Facebook had 845 million daily active users.

 

The company crossed the line into profitability in 2009, five years after it launched in founder Mark Zuckerberg's Harvard dorm room. Facebook earned $229 million that year on sales of $777 million, and has remained profitable ever since.

 

The vast majority of Facebook's revenue comes from advertising: a combination of search and display ads.

 

Facebook's other revenue stream is its payment system for purchases within apps and games: Facebook Credits. Facebook keeps 30% of the revenue from those payments, and passes the remaining 70% on to the app developer.

 

That model has paid off: Revenue from Zynga, which makes FarmVille and other games played on Facebook, represented 12% of Facebook's total revenue in 2011.

 

Another choice tidbit: In 2011, Facebook CEO Zuckerberg raked in a $500,000 base salary. But he requested -- and will receive -- only $1 per year in salary starting January 1, 2013.

 

It's not yet known on which stock exchange Facebook will trade, through it said it plans to use the ticker symbol "FB."

 

Facebook will likely re-file its paperwork several times over the coming months. Those updates will add more details and could even restate some of the financial information detailed in Wednesday's filing.

[NorthSideSox72]

Link

It will be interesting to see a final valuation number.

 

[SuperSteve]

Most of those funds aren't actually based in oil though. All of those ETFs that scream about gold or oil, don't actually own gold or oil. They are immaterial to the real price of the commodity they claim to represent.

 

And especially in oil, the futures go out for years. I can go out to 2020 in crude and 2017 in gold.

Ding ding ding! If gold starts to get called, a lot of people would find out they're just holding a piece of paper.

[southsider2k5]

Ding ding ding! If gold starts to get called, a lot of people would find out they're just holding a piece of paper.

 

This is as close to professional advice you will ever see me give here. If you are going to trade ETFs, read the f***ing prospectus. If your trading firm does not provide you with one upon your first trade in a particular ETF, call and report them to either the exchange took place on, or the SEC. Both will conduct an investigation as it is a big time fineable offense. Read the ETF, and understand what actually underlies the fund. Most of them are fiat. They are not based on any sort of reality at all. If you really want to trade the underlying commodity, trade the future or the options on the future if you don't have a lot of money. At least then you are afforded some real protections.

[StrangeSox]

Jobless claims fall again to 367,000

[southsider2k5]

http://www.forbes.com/sites/thestreet/2012...ark-zuckerberg/

 

Facebook to Future Stockholders: Bow Down to Mark Zuckerberg

 

Facebook has finally filed to go public, but investors itching for a chance to hitch their wagon to Mark Zuckerberg‘s star should give the company’s S-1 filing a close read.

 

Because rather than getting a real stake in the social networking giant, it looks like purchasing the stock will at best be the equivalent of being a peasant in Farmville.

 

This is the result of the company’s decision to opt for a dual class structure for its stock, a practice that’s not very prevalent on Wall Street these days. Facebook is selling Class A stock in its IPO, but the real power (and value) will be retained by holders of the Class B shares.

 

All S-1 filings contain plenty of caveats about how poorly the company or its stock could do in the aftermarket if certain events do or don’t come to pass. Facebook, though, is opting to tell potential investors that buying its stock will result in “substantial and immediate dilution” from the undisclosed pro forma tangible book value of the shares as of year-end.

 

“This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares of our capital stock,” the filing read. “You will experience additional dilution upon exercise of options to purchase common stock under our equity incentive plans, upon vesting of RSUs, if we issue restricted stock to our employees under our equity incentive plans, or if we otherwise issue additional shares of our common stock.”

 

Ouch. So not only are you being diluted right away, there’s plenty of opportunities to be diluted down the line as well. Also, remember, the shares will likely be priced at some multiple of tangible book value.

 

The Class B shares will carry 10 votes per share, while Class A ones will have only one. The filing is short on specifics in parts (number of shares to be sold and at what price) but it does estimate Class B shareholders have 70% of the voting power prior to the offering and warned that: “This concentrated control will limit your ability to influence corporate matters for the foreseeable future.”

 

So much for getting a voice at the table along with your stock purchase. Maybe the board will have room for some independent directors charged with looking out for the little guy? Nope. Facebook is opting to go public as a “controlled company,” which essentially means there’s no room for outsiders.

 

“In light of our status as a controlled company, our board of directors has determined not to have an independent nominating function and has chosen to have the full board of directors be directly responsible for nominating members of our board, and in the future we could elect not to have a majority of our board of directors be independent or not to have a compensation committee,” the filing said. “Our status as a controlled company could cause our Class A common stock to look less attractive to certain investors or otherwise harm our trading price.”

 

As if it wasn’t clear by now who’s really running the show (and reaping the gains of this offering), the filing later spells out just how much power its CEO and founder will wield through his control of the majority of voting rights.

 

“Mr. Zuckerberg has the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets,” the filing read. “In addition, Mr. Zuckerberg has the ability to control the management and affairs of our company as a result of his position as our CEO and his ability to control the election of our directors.”

 

According to the prospectus, Zuckerberg will own 36.1% of the Class A stock and 57.1% of the Class B stock.

 

So to recap, Facebook is saying that the Class A shares that will eventually be available through its listing on an as-yet-undetermined exchange will be diluted immediately upon purchase, be subject to further dilution in the future, and offer almost no avenue for an individual shareholder to influence the company’s strategic direction.

 

That’s not even getting into the financials. The company is profitable but margins came down in 2011 as expenses more than doubled.

 

It all adds up to an offering that’s pretty difficult to like. In a letter included with the filing, Zuckerberg showed his idealistic side, saying Facebook wasn’t originally founded to be a company, it was more of a “social mission” to connect the world. He also argued rather unconvincingly that the IPO really isn’t about him at all.

 

“We’re going public for our employees and our investors. We made a commitment to them when we gave them equity that we’d work hard to make it worth a lot and make it liquid, and this IPO is fulfilling our commitment,” the letter stated. “As we become a public company, we’re making a similar commitment to our new investors and we will work just as hard to fulfill it.”

 

Unfortunately, many of the provisions inherent in the structure of this deal would seem to fly in the face of that “similar” commitment, and new investors will just have to trust Zuckerberg’s vision will remain revolutionary enough to trickle some appreciation all the way down to them at the bottom of the capital structure.

 

With 11% of its revenue coming from the aforementioned Farmville game, made by Zynga (Z), there seems to be plenty of work to do on that front. It’s tough to imagine digital cows and chickens as the foundation of long-lasting business model.

 

Ironically, Facebook opted to put a cute little collage in the S-1 filing that shows what are presumably employees holding up signs saying thanks in various languages. The pictures surround these words: “To the millions of you who made this possible: Thank you.”

 

That’s nice as far as it goes, but the reality is that Facebook doesn’t think enough of the millions that facilitated its money grab by embracing the site to give them the chance to own a real piece of the company they helped create.

 

–Written by Michael Baron at The Street.

[southsider2k5]

Despite the Fed saying otherwise, the Fed Funds have priced in a 100% chance of a 50 bps rate increase by the end of 2013.

[Balta1701]

Despite the Fed saying otherwise, the Fed Funds have priced in a 100% chance of a 50 bps rate increase by the end of 2013.

If that's the case, either they're betting the Fed is insane or they're betting on a solid improvement in the job market. The latter would be a good thing.

[southsider2k5]

If that's the case, either they're betting the Fed is insane or they're betting on a solid improvement in the job market. The latter would be a good thing.

 

Or they could be expecting inflation.

[Balta1701]

Or they could be expecting inflation.

AKA, a vastly improving job market.

[southsider2k5]

AKA, a vastly improving job market.

 

Or continued commodities inflation.

[Balta1701]

Or continued commodities inflation.

And raising rates in response to that = completely nuts.

[southsider2k5]

And raising rates in response to that = completely nuts.

 

Continued deterioration of the dollar...

[Balta1701]

Continued deterioration of the dollar...

Would be a great thing for the recovery of the American job market.

[bmags]

AKA, a vastly improving job market.

http://www.npr.org/blogs/thetwo-way/2012/0...-to-8-3-percent

 

edit: private added 257k, 243 net job gains. November revised upward to 157,000 added (previously at 100k) and december slightly upward to 203k up from 200.

Edited February 3, 2012 by bmags