Tuesday, May 12, 2009

Secondary Tidal Wave Continues as Insiders Unload, and Underwriters Cheer

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 rstuls) 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 today's 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.

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 game continues - there appears to be no shortage of willing participants. And it's all backstopped by the US taxpayer. Win / Win / Win indeed.

Disclaimer: The opinions listed on this blog are for educational purpose only. You should do your own research before making any decisions.
This blog, its affiliates, partners or authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.

Copyright @2012 FundMyMutualFund.com