Well it seems, some of Morgan Stanley’s clients got a warning not to buy Facebook stock on the Initial public offering (IPO) since it didn’t look like Facebook would make as much money as everyone thought (Mobility Issues). You might think that this all normal, but if you are a small investor you wouldn’t normally be allowed to buy shares of a hot new stock on the IPO, yet many small investors got some Facebook stock and they felt lucky, at least until the stock dropped nearly 20%.
The problem is that when Morgan Stanley alerted their “good” clients not to buy the IPO, they, in essence, stiffed the small investors by selling them stock at the high of over $38. The next day the stock fell 10%, and the next 9% and everyone wondered how that could happen on a hot stock. Well the Morgan Stanley clients were given a private warning to stay away so the stock fell since the big clients didn’t provide the usual support for the hot new stock.
Another case is just as perplexing, but the Facebook launch has overshadowed the events at JP Morgan/Chase where they are racking up losses in the billions and they really don’t know how bad it is because the sovereign debt deals they are involved in continue to unravel. For every winner there is a loser.
Now compare this to Facebook’s loss of Billions in imaginary Zuckerbucks. In the case of Facebook, MZ is the biggest imaginary loser, his net worth dropped by billions after the company went public, but what was he worth before the company went public? Zuckerberg is the same guy, except for being married, so what does he care if he is worth 5 billion or 20 billion, he could not spend all that money if he was frat boy in Vegas attending a bachelor party for 500 years!
On the other hand the $3,000,000,000 or more lost by JP Morgan comes out of the pockets of the bank’s depositors, and if they don’t have the money to cover it Uncle Sam, aka you and I, will pay to keep them afloat. These are not imaginary bucks like Zuckerbucks, they are deposits and the public’s investment dollars entrusted to the bank.
Funny that a money manager at JP Morgan in one department of the Bank was taking the bets by another JP Morgan bank investment manager in another department, who was losing his shirt and job. The notion of a Chinese Wall is history, as referenced in A Teacher’s Pocket guide to Finance.
The bank was investing for its “good” clients in one account while all the while taking it out of the other side of the bank, from it’s not so “good” clients, I guess. One thing is for sure JP Morgan and Morgan Stanley took care of their “good” clients and the public be damned!
Stay alert my friends, there are wolves in sheep’s clothing among us.
Be aware of conflicts of interest at every turn, its your money and conflicts can take a chunk before you know it.