Replies to post #246483 on Zeev's Turnips Patch-No Politics (ZEEV)

[marketmaven]

CROOK NEWS: Brokerages use crack PIPES to manipulate stocks

Brokerages Subpoenaed in Hedge Fund Finance Probe
By Matthew Goldstein TheStreet.com Senior Writer
5/18/2004 2:18 PM EDT

Nearly 20 brokerages have been subpoenaed by federal regulators investigating hedge funds that made direct investments in publicly traded companies, a sometimes shady area of last-resort finance that has burned unsuspecting investors in the past. The subpoenas, issued over the past two months, are part of an ongoing investigation by the Securities and Exchange Commission into allegations of stock manipulation by hedge funds involved in the transactions, which are known on Wall Street by the acronym PIPE, for private investment in public equity. Regulators want information about any role the brokers may have played introducing the hedge funds to companies seeking to enter into PIPE deals. The SEC has been looking into the PIPEs market for nearly two years. The deals can be ripe for abuse since they often are negotiated in secret between savvy investors and companies with an urgent need for money. Since the deals are put together quickly, they usually don't undergo the SEC scrutiny to which most initial public offerings and bond deals are subject.

[Zeev Hed]

I think that AG was presented with very tough choices in the late 90's and did the right thing IMTO. I would have raised rates a little earlier than he planned (last Q of last year after the huge bump in GNP), but so far, I see no major damage, he has prevented the 200 recession from becoming a very deep affair and actually managed to get a relatively soft landing going. Oh, and took the quarter discount on ONXX, this one refuses to retreat the half buckers I usually try to get. It might even close above $47 at that rate.

In edit, FCX just went here at $29.65 for the bucker plus ($1.15). Cash now at 20%, leaving some room to play...

[Alex G]

Joe... i'm not into defending greenspan, but i really think it's almost an extremist type of view to heap so much blame on the shoulders of one single man... especially the disparity of wealth issue, which i agree is a huge problem, but that trend started many years before he took office... is it his fault that CEO's and other various executives and board members get to siphon off millions and billions and get stock options 'out the Wazoo' while the working class grunts get their bottom-line wages?

actually, AG has been one of those on record, for a while now, in favor of expensing stock options

if anyone wants to make their voice heard re: this issue, go here http://ga1.org/campaign/FASB RestoreTheTrust.com

of course, come to think of it, if they start to expense stock options, guess which employees are gonna get cut out of the loop first?

[Train Guy]

Hedge funds' market spoiler
Anthony Hilton, Evening Standard
11 May 2004

ASYJET'S shares plunged 30% last week when the company warned that, in common with other low-cost airlines, it was having a tough time. Nokia shares fell 30% the week before for similar reasons.

Something very serious is happening here. What these movements underline is how hedge funds* have come to dominate the activity of the London Stock Exchange and trading in the big international blue-chips. The City pressures companies to promise growth as a precondition for taking an interest in the shares. When a company fails to live up to the promises it has been pressured into giving, it is savagely punished.

The hedge funds know there is money to be made by selling the stock short at the slightest whiff of disappointment They have the money and the power through their close relationships with investment banks like Goldman Sachs and Morgan Stanley to deal in huge volume.

So 110m shares changed hands in the hours after easyJet's gloomy announcement, according to chief executive Ray Webster. That is more than 50% of the free float of the company because 42% of the 360m shares in issue are still held by founder Stelios Haji Ioannou and his family. Activity on that scale is out of all proportion to the nature of the profit warning and the change in easyJet's prospects. It shows how distortion, manipulation and the use of overwhelming force have become endemic in the market.

Some commentators have said Webster is wrong to complain about this treatment, but he is surely not alone in thinking that this is not how stock markets were meant to work. The stock market is where people with an interest in backing companies meet people who need capital to develop their businesses. That is its reason for existence. Hedge funds and the prime brokerage activities of investment banks are turning the place into a casino where genuine long-term investors and companies are overwhelmed by their superior financial resources.

If this continues, the stock market is stripped of its usefulness and becomes of as much value to society as a high-stakes poker game. Already the market is no place for an individual investor. Increasingly, however, it is no place for professional institutional fund managers* either. It is not just a question of the chaos caused by excessive volatility.

Institutional investors do not get access to the fine terms and choice deals brokers reserve for the hedge funds. They lack the technology and access to deal on the finest terms. They no longer get first sight of the choicest deals. On the contrary, they suspect every deal they do is likely to have a hedge fund or two riding on its back. Some institutions* have even started offering higher commissions to brokers in the hope of encouraging more favourable treatment. It underlines how worried they are at being treated like secondclass investment citizens.

The City spends a lot of time considering plans to reward executives with shares. The premise is that the growth in the share price will be a reflection of the medium-term success of management in growing the business. Hedge funds and prime brokers are destroying the nature of that premise, and if they continue unchecked they will destroy popular support for the stock market itself. Meanwhile they simply devastate the morale of managements who see share price movements that bear no connection to the work they are actually putting in to a business.

Poll apathy

THERE is a election in the US this November and a general election in this country, probably in the first half of next year. Stock markets are said to look between six months and a year into the future, which means Wall Street ought to be thinking hard about the Presidential election and markets here ought soon to consider who might form our next government.

Neither appears to be happening. Wall Street is said to prefer Republicans in the same way that London investors are said to prefer Conservatives, and on that basis Wall Street ought to be getting edgy. But even if Europeans believe the downward spiral in Iraq must undermine President Bush in November, there is no sign of Wall Street taking that view - or any other. It does not appear to be giving the election any thought.

It is the same here. An opinion poll at the weekend said that Labour led by Tony Blair would not get an overall majority if current voting intentions held while Labour led by Gordon Brown would have a majority of about 70 The Chancellor's politics are firmly of the Left, so that should surely have provoked a twitch in the market. But again nothing. Why the markets should be indifferent to politics is a mystery. However, it is hard to believe the complacency will last.

http://www.thisismoney.com/20040511/nm78052.html