"There are two sorts of wealth-getting, as I have said; one is a part of household management, the other is retail trade: the former necessary and honorable, while that which consists in exchange is justly censured; for it is unnatural, and a mode by which men gain from one another. The most hated sort, and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural object of it. For money was intended to be used in exchange, but not to increase at interest. And this term interest, which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent. Wherefore of modes of getting wealth this is the most unnatural."
- Politics, Aristotle, 350 B.C.
"The Jew alone regards his race as superior to humanity, and looks forward not to its ultimate union with other races, but to its triumph over them all and to its final ascendancy under the leadership of a tribal Messiah."
- Goldwin Smith, The Jewish Question, October 1881
“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world. No longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.”
- President Woodrow Wilson 1916
“We are grateful to the Washington Post, The New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected their promises of discretion for almost forty years. It would have been impossible for us to develop our plan for the world if we had been subjected to the lights of publicity during those years. But, the world is now more sophisticated and prepared to march towards a world government. The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the national auto-determination practiced in past centuries.”
- David Rockefeller, Baden-Baden, Germany 1991
“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
- Henry Ford
“The real truth of the matter is, as you and I know, that a financial element in the larger centers has owned the Government ever since the days of Andrew Jackson.”
- Franklin D. Roosevelt, letter to Col. House, November 21, l933
“One of the least understood strategies of the world revolution now moving rapidly toward its goal is the use of mind control as a major means of obtaining the consent of the people who will be subjects of the New World Order.”
- The National Educator, K.M. Heaton
"We Jews, we, the destroyers, will remain the destroyers for ever. Nothing that you will do will meet our needs and demands. We will for ever destroy because we need a world of our own, a God-world, which it is not in your nature to build."
- Maurice Samuels, You Gentiles, 1924
“We are on the verge of a global transformation. All we need is the right major crisis and the nations will accept the New World Order.”
- David Rockefeller
“Today, America would be outraged if U.N. troops entered Los Angeles to restore order. Tomorrow they will be grateful! This is especially true if they were told that there were an outside threat from beyond, whether real or promulgated, that threatened our very existence. It is then that all peoples of the world will plead to deliver them from this evil. The one thing every man fears is the unknown. When presented with this scenario, individual rights will be willingly relinquished for the guarantee of their well-being granted to them by the World Government.”
- Dr. Henry Kissinger, Bilderberger Conference, Evians, France, 1991
"Never argue with stupid people. They will drag you down to their level and then beat you with experience." –Mark Twain
If you want to begin to understand and appreciate the work of Mike Stathis, from his market forecasts and securities analysis to his political and economic analysis, you will first need to learn how to think clearly. For many, this will be a cleansing process that could take quite a long time to complete depending on each individual.
The best way to begin to clear your mind is to first move forward with this series of steps:
1. GET RID OF YOUR TV SET (at least cancel your cable)
2. REFUSE TO USE YOUR PHONE TO TEXT
3. DO NOT USE A "SMART PHONE" (or at least do not use your phone to access the internet)
4. STAY AWAY FROM SOCIAL MEDIA
The cleansing process will take time but you can hasten the process by being proactive in exercising your mind.
You should also be aware of a very common behavior exhibited by humans who have been exposed to the various aspects of modern society. This behavior occurs when an individual overestimates his abilities and knowledge, while underestimating his weaknesses and lack of understanding. This behavior has been coined the "Dunning-Kruger Effect" after to sociologists who described it in a research publication. See here.
Many people today think they are virtual experts on every topic they regard with relevance. The reason for this illusory behavior is because these individuals typically allow themselves to become brainwashed by various media outlets. The more information these individuals obtain on these topics from the media, the more qualified they feel they are in these subjects, without realizing that the media is not a valid source with which to use for understanding something. The media always has bias and can never be relied on to represent the full truth.
A perfect example of the Dunning-Kruger Effect can be seen with many individuals who listen to talk radio shows. These shows are politically biased and consist of individuals who resemble used car salesmen more than intellectuals. These talking heads brainwash their audience with cherry-picked facts, misstatements and lies regarding relevant issues such as healthcare, immigration, Social Security, Medicaid, economics, science, and so forth. They also select guests for interview based on the agendas they wish to fulfill with their advertisers.
Once their audience has been indoctrinated by these propagandists, they feel qualified to discuss these topics on the same level as a real authority, without realizing that they obtained their understanding from individuals who are employed as professional liars and manipulators by the media. Another good example of the Dunning-Kruger Effect can be seen upon examination of political pundits, stock market and economic analysts on TV. They talk a good game because they are professional speakers. But once you examine their track record, it is clear that these individuals are largely wrong, but they have developed an inflated sense of expertise and knowledge on topics for which they continuously demonstrate their incompetence.
We highly recommend that you study this masterpiece in great detail so that you are better able to use logic and reason.Although we recommend you read and study The Allegory of the Cave, you can get a flavor for its meaning by watching the following video.
If you can learn how to think like a philosopher, specifically one of the great ancient Greek philosophers, it is highly unlikely that you will ever be fooled by con artists like those who make ridiculous and unfounded claims in order to pump gold and silver, the typical get-rich-quick or multi-level marketing (MLM) crowd.
“Beware of false prophets, which come to you in sheep's clothing, but inwardly they are ravening wolves.”
King James Bible - Matthew 7:15
"It's easier to fool people than to convince them that they have been fooled." –Mark Twain
All Viewpoints Are Not Created Equal Just because something is published in print, online or aired in the broadcast media does not make it accurate. In fact, more often than not the larger the audience, the more likely the content is either inaccurate or slanted. The next time you read something about economics or investments, you should ask two main questions in order to assess the credibility of the source. Is the source biased in any way? That is, do they have any agendas which would provide any type of benefit accounting for their views? Most individuals either sell ads on their site or are dealers of precious metals or securities. That means their views are biased and cannot be relied upon.
Is your source is credible?
Most people associate credibility with name-recognition. But more often than not, name-recognition serves as a predictor of bias if not lack of credibility because the more a name is recognized, the more the individual has been plastered in the media. And every intelligent person knows that individuals who have been provided with media exposure because they are either naive or clueless. The media positions these types of individuals as “credible experts” in order to please its financial sponsors; Wall Street.
Instead of name-recognition or media celebrity status, you must determine whether your source has relevant experience on Wall Street as opposed to being self-taught. But this is just a basic hurdle that in itself by no means ensures the source is competent or credible. More important, always examine the track record of your source in depth, looking for accuracy and specific forecasts rather than open-ended statements. You must also look for timing since a broken clock is always right once a day. Finally, make sure they do not cherry-pick their best calls. Always examine their entire track record.
“Beware of false prophets, which come to you in sheep's clothing, but inwardly they are ravening wolves.”
King James Bible - Matthew 7:15
The above questions require only slight modification for use in determining the credibility of sources that discuss other topics, such as politics, healthcare, etc.We have compiled the most extensive publication exposing hundreds of con men pertaining to the financial publishing and securities industry, although we also cover numerous con men in the media and other front groups since they are all associated in some way with each other.
There is perhaps no one else in the world capable of shedding the full light on these con men other than Mike Stathis. Mike has been studying the indistry for well over a decade. Alhough he has published numerous articles and videos addressing this dark side of the industry, the entire collection can be found in our ENCYCLOPEDIA of Bozos, Hacks, Snake Oil Salesmen and Faux Heroes.
At AVA Investment Analytics, we don't try to pump gold, silver or equities like many others you see because we are not promoters or marketers. And we do not receive any compensation whatsoever (including from ads) from our content. We provide individual investors, financial advisers, analysts and fund managers with world-class research, education and unique insight.
If you listen to the media, most likely it is costing you hundreds of thousands of dollars in lost money at minimum over the course of your lifetime. The deceit, lies and useless guidance from the financial media certainly is a large contributor of these losses to the sheep you pay attention.
But a good deal of lost wealth comes in the form of excessive consumerism which the media seeks to impose on its audience. You aren’t going to know that you’re being brainwashed or that you have lost $1 million or $2 million over your life time due to the media, but I can guarantee you that with rare exception this is the reality for those who are naïve enough to waste time on the media.
It gets worse. By listening to the media, you are likely to also suffer ill health effects through the lack of timely coverage of toxic prescription drugs or through the ridiculous medical shows, all of which are supportive of the medical-industrial complex.
And if you seek out the so-called "alternative media" you might make the mistake of relying on con men like Kevin Trudeau or Alex Jones. This could be a deadly decision. As bad as traditional media is, the so-called "alternative media" is even worse.
Why Does the Media Air Liars and Con Men?
The goal of the media is NOT to serve its audience because the audience does NOT pay the bills.
The goal of the media is to please its sponsors, or the companies that spend huge dollars buying ads, and in order for companies to justify these expenses, they need the media to represent their cause. The media does this by airing idiots and con men who mislead and confuse their audience.
By engaging in "journalistic fraud," the media steers its audience into the arms of its advertisers because the audience is now misled and confused, so in the case of the financial media, it seeks the assistance of Wall Street brokerage firms, mutual funds, insurance companies, precious metals dealers. This is why advertisers pay big money to be promoted in the financial media.
We see the same thing on a more obvious note in the so-called "alternative media," which is really a remanufactured version of the so-called "mainstream media." Do not be fooled. There is no such thing as the "alternative media."
In order to be considered "media" you must have content that has widespread channels of distribution. Thus, all "media" is widely distributed and the same powers that control the distribution of the so-called "mainstream media" also control the distribution of the so-called "alternative media."
The claim that there is an "alternative media" is merely a sales pitch designed to capture the audience that has since given up on the "mainstream media." The tactic is a very common one used by con men.
The same tactic is used by Washington to convince naive voters that there are meaningful differences between the nation's two political parties. In reality, both parties are essentially the same when it comes to issues that matter most (trade policy, healthcare and war). Anyone who tells you anything different simply isn't thinking straight.
On this site, we expose the lies and the liars in the media. We discuss and reveal the motives and track record of the media’s hand-selected charlatans with a focus on the financial media.
No one has generated a more accurate track record in the investment markets over the past several years than Mike Stathis. Yet, the financial media wants nothing to do with Stathis.
You aren't even going to hear him on the radio being interviewed.
You aren't going to see him mentioned on any websites either.
You won't read or hear of his remarkable track record unless you read about it on this website or read his books.
You should be wondering why this might be. Some of you already know the answer.
The media has banned Mike Stathis because the trick is to air clowns so that the audience will be steered into the hands of the media's financial sponsors - Wall Street and gold dealers.
And as for the radio shows and websites that either don't know about Stathis or don't care to hear what he has to say, the fact is that they are so stupid that they assume those who are plastered in the media are credible. And since they haven't seen or heard Stathis in the media, even if they come across him, they automatically assume he's a nobody in the investment world simply because he has no media exposure.
Well, if media exposure was a testament to knowledge, credibility and excellent track records, Peter Schiff's clients would be a lot happier when they looked at their account balance.
Others only care about pitching what’s deemed as the “hot” topic because this sells ads in terms of more site visits or reads. This is why you come across so many websites based on doom and conspiratorial horse shit run by con artists looking to cash in on ads.
We have donated countless hours and huge sums of money towards the pursuit of exposing the con men, lies and fraud. We continue this mission but we cannot continue it forever without your assistance.
We have been banned by virtually every media platform in the U.S and every website (mainly because we expose the truth about gold and silver).
We have been banned from use of email marketing providers.
The fact is that the Jewish Mafia has declared war on us because we have exposed the realities of the U.S. government, Wall Street and corporate America.
Note that we only began discussing the role of Jews in criminality by 2009, three years AFTER we had been black-listed by the media, so no one can say that our criticism of the Jewish Mafia has led to being black-listed, not that it would even be acceptable.
You can talk about the Italian Mafia, and Jewish Hollywood can make 100s of movies about it...
BUT YOU CANNOT TALK ABOUT THE JEWISH MAFIA.
We rely on you to help spread the word about us. Just remember this. We don’t have to do what we are doing.
We could do as everyone else and focus on making money. We are doing sacrificing everything because in this day and age, unfortunately, the truth is revolutionary. It is also critical in order to prevent the complete enslavement of world citizenry.
On Exposure: No one who has significant exposure can be trusted because those who are responsible for permitting such exposure have allowed it for a very good reason, and that reason does not serve your best interests.
On Spotting Frauds: Whenever you wish to know whether someone can be trusted, always remember this golden rule..."a man is judged by the company he keeps."
This is a very important rule to remember because con men almost always belong to the same network.
You will see the same con artists referencing each other, on blog rolls and so forth.
With a good deal of help from traditional media, the social media fad has grown into a worldwide
phenomenon for millions who seem to have too much time on their hands. Many claim they use these sites to keep up with friends and relatives. But level-headed individuals use more direct means to keep up with loved ones. Many others are looking for love, or just an easy way to get sex, from whatever form it may come.
Others claim to use these sites for “networking.” To those of you who insist these sites help advance your business or job prospects, I say this. Get up off of your ass and make something happen yourself instead of looking for easy ways to succeed, because success has no shortcuts.
The social media fad is not much different than its trash TV counterpart, which features episodes from the lives of dysfunctional individuals. Some are faced with the challenges of losing weight. Others are plain idiots who provide you with a look into their superficial, often pathetic and always trivial lives. Either way, many people have become fixated on the lives of others because they are unable to recognize the value in their own lives. I suppose for some, seeing how miserable others are makes one feel better about themselves.
When people aren’t glued to their TV sets watching the endless trash and censored media, many are engaged with their electronic devices. For many, a good part of that time is wasted on social media sites.
For a couple of years now, many have speculated about the timing of Facebook’s public offering. Over this
relatively short time span, the amount of press the company has received has been reminiscent of the dotcom days. As a part of this speculation, a couple of years ago Facebook was valued at around $5 billion. Back then, a few chumps even claimed it was worth $15 billion, despite the fact that they had no experience or training in valuation analysis. Last year Facebook was valued at anywhere from $12 to $20 billion, depending on which paid clown you asked. Today, the valuations typically exceed $20 billion.
There have been all kinds of metrics used to value Facebook; number of subscribers, subscriber growth, time spent on the site per subscriber per unit time, page views, average revenue per subscriber, and so on. Let’s have a look at one of the more commonly used valuation metrics; average revenue per subscriber. In 2010 Facebook generated an estimated $490 million in profits from total revenues of $1.5 billion (unofficial numbers). Based on these numbers, I can only see how a fool or crook might argue the company is worth $20 billion. What I would like see are the business risk and growth rate estimations.
You see, there are two types of valuations to consider. First, there’s the valuation based on what an individual would pay for a business. Let’s call this the buyer’s valuation. This valuation is usually much more credible because the buyer actually uses his own money, or else he must obtain financing from a bank. If the buyer is a savvy business man he is going to account for all risks involved before forking over this kind of money (if he intends on keeping the business long-term). If a commercial bank is involved in financing the deal, you can bet the bankers are going to go over every detail with a fine-toothed comb, looking for signs of risk.
Next, there’s the valuation based on how much the business owner can inflate the sales price. I will call this the seller’s valuation. Usually, when the buyer plans on keeping the business there is a back and forth struggle for final valuation between buyer and seller. But when the buyer is an investment bank the valuation is based largely on how much they think they can flip it to others for in a public offering. So in this later case the company only receives seller’s valuation because the buyers aren’t involved in the valuation process.
Thus, as you can imagine when Wall Street gets involved in the IPO game, many stocks collapse within a couple of years of their IPO price. Most venture capital firms play the same game, especially if their investment occurs towards the later stages because this means an IPO (which represents a means of exit) is more likely. In short, venture firms involved in late-stage financing deals act no different than Wall Street investment banking firms when it comes to inflated valuations.
In the past, I stated that Facebook was worth maybe a few hundred million dollars. However, this was a rough estimate not based on specific revenue and income data. Based on these latest estimates, I would value Facebook at no more than $1.5 billion, assuming I would even buy this questionable business.
Some of you might be thinking at that price Facebook would be a steal, right? After all, assuming things go reasonably well, the profits should be able to pay for the sales price plus financing costs within three years, or maybe four or five at if the company hits a few road bumps, right?
The problem is that this estimated return on investment has not accounted for some of the more critical types of risk involved, nor has it accounted for other important considerations, such as the value of Facebook’s assets, or rather lack thereof.
For instance, if I decided to buy a small chemical company, say a mini-Dow Chemical for $1.5 billion (forget that it is likely to have net debt) it wouldn’t face the risk of business failure anytime soon unless a catastrophic event occurred (like a Union Carbide-like disaster). While earnings would plummet after such an unlikely event, the fact is that the company would still retain a net worth due to its valuable asset base and intellectual property portfolio.
Thus, if I bought this chemical company I would be receiving tangible assets with a sizable value, in addition to any earnings these assets generated. As a result, I could sell off some of the business units and recoup at least part of my initial investment if the business was jeopardized. Moreover, the assets are tangible, so they are less risky because the depreciation and appreciation of these assets are more easily predicted. These are just a couple of important considerations that must be taken into account during the valuation process.
Facebook is an entirely different beast. It has very little intellectual property, or the intellectual property is not particularly valuable (despite what management may claim). And it certainly doesn’t have many tangible assets. In fact, the most valuable asset Facebook has is not only intangible, but it is not owned by the company. That asset is the key driver of Facebook’s success, and it could disappear in a relatively short time span. That asset is the buzz for Facebook. It’s been responsible for adding the vast majority of users.
As a result of the buzz, Facebook’s earnings are only based on the size and strength of its user base. But that could change at any time since the company does not offer any uniquely valuable goods or services. As a result, there is a great deal of risk involved in purchasing the company for anything more than $1.5 billion if the intent is to use it as a standalone business. If acquired by a large diversified firm, I would say the valuation could be considerably higher, but nowhere near say $8 billion.
It’s crucial to consider business risk and the size of the asset base when assessing valuation of a privately-held, relatively new firm within a relatively new sector. New companies face a great deal of business risk. And new companies within new industries face an even greater deal of risk. In addition, when estimating the valuation of Facebook, it's important to keep in mind that it has no real competitive advantage. Thus, the ability of competitors to steal market share presents a huge risk.
Websites like Amazon are much different because it has developed several competitive advantages. In addition, as an e-commerce company it sells tangible goods and services that are needed by consumers and businesses. Amazon has also created and acquired a good deal of assets, both tangible and intangible. Finally, Amazon is a well-established company and has demonstrated a proven ability to overcome numerous challenges through the brilliant leadership of Jeff Bezos.
Facebook is much different. Although the site has opened its door to allow app developers and encouraged content-sharing by users, advertising is likely to become the dominant driver of revenues in the future. The problem with this is that the traditional advertising model has proven to be relatively ineffective when transposed onto the Internet.
As Facebook continues to explore new ways of incorporating ads into its platform, it has introduced new terms of service resulting in widespread protest from many users. This in itself adds a good deal of risk, for if Facebook upsets a critical mass of users, it faces the risk of a cascade effect. Thus far, users have won nearly every case that they have protested, forcing Facebook to remove new changes to the Terms of Service and other changes to functionality that address privacy concerns.
Facebook continues to struggle to strike a balance between pleasing firms that shell out money for ads, and users who don’t want their information made public. As a part of this struggle, there has even been discussion (rumor) of a monthly user fee for use of the site, although I cannot confirm whether or not this came from management (unlikely). A subscriber-based revenue model would most likely sink the business quickly.
As more investment capital floods into the company, pressure will grow to generate more revenues. Thus, in absence of value-added applications the advertising side of the business will be placed at the center of focus. This means further intrusion of user information will be inevitable.
One of the most vulnerable aspects of social media is that it is fueled exclusively by buzz. When the buzz is strong, social media platforms can generate a huge amount of traffic. But when the buzz fades, the traffic can shrink rapidly. As a result, without valuable content and in-demand and valuable applications, social media firms face an all-or-none situation. Thus, Facebook faces the challenge of pleasing its users (or deceiving them) over its ad sponsors until it is able to bring real value to the table.
For anyone who expects long-term earnings growth from a social media website that offers primitive yet very expensive games and other useless applications, I have some beach front property in Dallas, Texas I’d like to sell you. In short, Facebook has a long way to go if it plans to continue the kind of growth that can justify a multibillion dollar valuation. Anyone who does not realize that doesn’t recall the ridiculous valuations given to hundreds of useless companies during the dotcom bubble.
Until management finds new ways to add valuable content, it will need to design better ways of balancing user satisfaction and privacy of personal information with ad effectiveness. Ultimately, all media companies should focus on providing valuable content. This is something the media has failed to recognize. Instead, the industry continues to focus on the volume of content, all while pleasing its ad sponsors. In the end, the audience receives useless, deceptive content. This is specifically why the media is facing numerous bankruptcies.
Moving forward, Facebook will be in a much better position to transition away from its current status as a novelty site because of the large amount of financing it has been able to attract. However, such a transition will not be easy. Just ask Yahoo! Although Yahoo! focused early on by providing free content, much of which had some value, today the company remains in a downward spiral. The content has become almost completely useless. Yahoo! is now geared towards ad sponsors rather than users, and the results show.
But none of these concerns matter much to the financiers of Facebook because they don’t plan to take a long-term stake in the firm. Rather, they plan to pump it up and dump it off to the pigeons. Thus, they have attached a sellers’ valuation to the company.
Goldman Sachs recently got its fangs around Facebook after providing the company with a $450 million investment stake. Goldman is now floating a $1.5 billion private placement memorandum to its clients to ensure the bank gets a great exit with no further risk. The deal terms value Facebook at an astonishing $50 billion.
This incredibly ridiculous valuation means that Facebook is worth more than Eli Lilly ($38.6 billion market cap), Bristol-Myers ($44.2 billion market cap), Unitedhealth ($42.2 billion market cap), Dow Chemical ($41 billion market cap), Dell Computers ($27.5 billion market cap), Research In Motion ($32 billion market cap), Starbucks ($24 billion market cap), and so on.
Certainly one cannot make a one-for-one comparison between Facebook and companies from other industries. But this very crude comparison gives you an idea how ridiculous Goldman’s valuation is. If you examine companies from a similar space, like Yahoo!, eBay and Amazon, they too are a good deal overvalued, especially Amazon. But at least they have been around for a while, they sell goods and services consumers want and often need, and they have come down from their dotcom bubble days.
In order for Facebook to secure a long and profitable future, it must find ways to generate predictable revenue and income growth. As well, the valuation needs to come back down to earth. History tells us that Facebook’s valuation bubble is likely to burst only after it has exchanged hands from the venture industry and Wall Street, to Main Street.
A few years ago when the same buzz was being spread about Myspace, Rupert Murdoch shelled out nearly $600 million for the site. At the time, I stated this was a terrible purchase. But when you as desperate as Rupert Murdoch was, you will do many things.
At the time, Murdoch’s media empire was collapsing, not due to a bad economy, but due to the fact that more people have come to realize that the media serves the interests of corporations and Wall Street. Since Murdoch’s purchase of Myspace, things haven’t gotten much better for him, or any of the other media moguls for that matter. Meanwhile, Myspace continues to crumble, as reality sets in.
I would like to know if Murdoch would have paid out $600 million of his own money for Myspace. It’s easy to toss money around when it’s not coming from your own pocket. Yet, News Corporation shareholders sat around like fools and said nothing after the deal was announced. Many even celebrated the deal as a win.
This example illustrates why most people should never invest in securities. They don’t have an understanding of the valuation process, they don’t understand how venture firms or Wall Street banking departments work, and they aren’t able to get in when valuations are cheap. Instead they make the mistake of listening to the hype and propaganda delivered by Wall Street and its partner in crime, the financial media. This is how the game works.
Yet, after losing tremendous amounts of money when bubbles pop or other scams occur, most people keep coming back for more, hoping to strike it rich. Much of this mentality is created by the financial media and online brokerage commercials, which always deliver the message that it’s easy to make money in the stock market or that they can help you do well in the stock market by steering you to false epiphanies, like stock screening tools and research written by pinheads.
When Murdoch announced the intent of News Corporation to purchase MySpace, I was certain the buzz would wind down in a couple of years and be replaced by another social media website, and it was. As we look forward, it is likely that Facebook too will face a similar situation as MySpace with a few caveats.
When Murdoch announced the intent of News Corporation to purchase Myspace, I was certain the buzz would wind down in a couple of years and be replaced by another social media website, and it was. As we look forward, it is likely that Facebook too will face a similar situation as Myspace with a few caveats.
Due to its tremendous financing, Facebook will stick around a lot longer than Myspace. However, I can tell you this much with complete confidence. Facebook is being pumped up in order to dump it onto naïve investors. And it’s likely to lead to a disaster.
I consider what Goldman is doing to be securities fraud; another routine business deal for the firm.
Goldman’s investment in Facebook as well as its private placement to its clients also increases the likelihood that we will see a Facebook IPO over the next couple of years. The reason is simple. Goldman wants to secure a nice exit from its investment. And it’s using its own clients to secure a huge risk-free return.
The unfortunate reality is that once Facebook goes public, shareholders will be stuck with a ridiculously overvalued dotcom. While the publicly traded shares are likely to show some hysteria-like appreciation, it isn’t likely to last.
Based on my knowledge of the valuation process and understanding of how private shares are priced for public offerings, Goldman appears to be working with venture capital and Wall Street firms to pump up the valuation so they can dump shares onto naïve and greedy investors. These two characteristics almost always lead to a disastrous outcome. It’s time for the SEC to get involved before the thieves steal even more money using propaganda and their pull with the financial media to carry out this scam.
You aren’t likely to hear anyone else from Wall Street or the venture capital industry mention the Facebook bubble. You are especially unlikely to hear industry professionals discuss the intent of Goldman to dump shares onto naïve investors because most of these guys are all the same. If they are not directly involved with the scam, they certainly don’t want to expose what is going on because the pump-and-dump game is very common. And the next deal might involve them doing the same thing with another company.
The last time a large scale pump-and-dump of this nature occurred was during the late 1990s. As we know, this led to the dotcom bubble. At the height of the bubble, Yahoo! had a market cap of more than $150 billion (compared to $22 billion today). Murdoch’s deal with Myspace looked like a great buy when compared to some of the buyouts during the dotcom era, like @Home’s purchase of Excite for $8 billion, or Terra’s purchase of Lycos for $13 billion.
Thus, when viewed from the dotcom perspective, Goldman’s $50 billion valuation for Facebook might seem reasonable to those who believe that bubbles never burst. The problem is that the worst time to buy is during the peak of a bubble. It appears as if Goldman is creating a bubble in social media. And by the time it pops, you can bet they will have exited with huge gains. You should note that Excite and Lycos are worth practically nothing today. This is likely to be the fate of Myspace down the road.
We see many similarities between the dotcom bubble and the most recent real estate-credit bubble. After hundreds of dotcoms and telecoms committed accounting and securities fraud resulting in trillions of dollars in losses to shareholders, not one single individual went to prison; not one company executive, not one Wall Street analyst.
We are seeing the same thing today, as not one Wall Street executive has been indicted for securities fraud that led to the global economic collapse. Not one executive from credit rating agencies has been indicted, nor have any of the executives of Fannie Mae or Freddie Mac.
Goldman even struck a very sweet deal with the SEC to avoid criminal indictments by the Department of Justice. So if you think the SEC will stop Goldman from pumping and dumping Facebook, I wouldn’t hold my breath. The problem is that we have a fox guarding the hen house. This precisely why fraud has become synonymous with Wall Street.
Even without the assistance from the SEC and other financial regulators, Wall Street could not achieve much of its fraud without the help of others. The media is a principal partner in the game of Wall Street fraud. But individual investors are also key participants. Without the greed and ignorance of Main Street, Wall Street would have a much more difficult time carrying out its fraudulent activities. Although many investors might agree that Facebook has become extremely overvalued, they are likely to try to ride it all the way up and dump their shares before it comes tumbling down; if it were only so easy.
Once people realize social networking sites are really a new form of media disguised as free resources (i.e. social media) they just might recognize these sites are being dishonest because using them comes in exchange for something. That something generates money. And they aren’t about to tell you exactly how they plan to leverage your information and your personal habits, or what could be argued as tapping into your mind to generate revenues.
On a positive note for Facebook and all other social media, with each passing day more people are becoming naïve, lazy and stupid. So they are not likely to wake up to the fact that they are being exposed to more harm than benefit by use of these sites. Thus, another chapter is likely to be written in the book of Wall Street fraud and investor losses.
For those of you who aren’t familiar with me (due to the widespread ban I have faced by the media and virtually every website), I have been involved in both the public and private markets for a number of years, working with some of the largest and most highly regarded Wall Street and venture capital firms. You might want to familiarize yourself with my track record and understanding of the valuation process before you write off this analysis.
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