Man, I was going to post lots of links about IBM, but all the info is here!
Loral got a pretty large contract today. A large number of new commsats to be delivered in orbit, and to an exclusive market, the 2 gigaHertz band. LOR bumped up a little, price and volume.
New York, July 17 (Bloomberg) -- Capital One Financial Corp. shares plunged, leading other credit-card stocks lower, after the fifth-largest U.S. issuer of Visa and MasterCard said regulators required it to set aside additional reserves for loan losses.
Capital One shares fell $14.60, or 29 percent, to $36.50, the most since the company went public in 1994.
Shares of rivals Providian Financial Corp. fell 80 cents, or 20 percent, to $3.25; MBNA Corp. slid 78 cents, or 3.8 percent, to $19.57, and Household International Inc. declined $1.37, or 3 percent, to $44.73.
``I have a feeling that if it happens to Cap One, we've got a lot of others coming,'' said Donald Coxe, who manages the Harris Insight Equity Fund, which owns Capital One shares.
Federal regulators are scrutinizing lenders to people with poor credit histories after a surge in unpaid bills at Providian last year lowered profit 94 percent. Providian abandoned high-risk customers and regulators demanded the company maintain certain capital levels, a cushion against unexpected losses.
The bears are awfully numerous and awfully sure of themselves lately. That, IMHO, is a sign that we're near the bottom.
----> We won't know the bottom for a few years. My predict/ is 5 or 6,000 Dow low but not right way. Will be whip sawed up and down like the Japanese are. Why should market lows be quick and easy and pre-packaged in a sanitary way? Think more like a serial killer who will prey time and time again upon the DOW (major markets)
Corzine tied to stock scheme By Dave Boyer THE WASHINGTON TIMES Sen. Jon Corzine, whose Wall Street expertise plays a key role in Democrats' strategy on corporate responsibility, led an investment banking firm that is being accused of inflating stock prices in the 1990s and contributing to the market crash. Senate Majority Leader Tom Daschle lately has kept Mr. Corzine at his side frequently as Democrats call on President Bush to get tougher with corporate executives who fraudulently inflate company earnings to boost stock prices. "I think he's made a stellar contribution," said Sen. Paul S. Sarbanes, Maryland Democrat and author of a bill approved Monday by the Senate that would increase the penalties for corporate wrongdoers. But Goldman Sachs, the firm that Mr. Corzine left as chairman in May 1999, has been a target of class-action lawsuits and accusations by a former broker who complained to the Securities and Exchange Commission that the investment house engaged in a scheme to force unwitting investors to pay artificially high prices for certain stocks. Mr. Corzine, New Jersey Democrat, said he knew nothing about such schemes when he ran the firm from 1994 to 1999. "I don't believe there is ever going to be anything that sticks about us at Goldman Sachs forcing anybody to buy anything," Mr. Corzine said in an interview. "Goldman Sachs never forced anyone to buy anything when I was chairman, I can tell you that." But Nicholas Maier, who was syndicate manager of the Wall Street firm Cramer & Co. from 1996 to 1998, told SEC investigators in the spring that Goldman Sachs routinely forced him to buy stocks at inflated prices if he wanted to purchase shares of an initial public offering (IPO). "Goldman, from what I witnessed, they were the worst perpetrator," Mr. Maier said. "They totally fueled the [market] bubble. And it's specifically that kind of behavior that has caused the market crash. They built these stocks upon an illegal foundation — manipulated up, and ultimately, it really was the small person who ended up buying in." For example, Mr. Maier told the SEC that Goldman Sachs would offer him shares of a new company's IPO at the initial, low price of $20 per share only if he agreed to purchase "aftermarket" shares of the same company at $100 each. In turn, he would sell the shares of the higher-priced stock to small investors. "None of these aftermarket orders had anything to do with what I honestly valued a company to be worth," Mr. Maier said. "Goldman created the convincing appearance of a winner, and the trick worked so well that they seduced further interest from other speculators hoping to participate in the gold rush. The general public had no idea that these stocks were actually brought into the world at unnaturally high levels through illegal manipulation." Mr. Bush on Monday said Wall Street went on a "binge" in the 1990s and now has a "hangover," a characterization that Mr. Corzine called "a diversion away from reality." "What we had was a breakdown in corporate ethics and corporate responsibility that I don't think has anything to do with anything other than excessive focus on share price and managed earnings," he said. Mr. Corzine retired from Goldman Sachs in 1999 after taking the firm public and receiving $320 million worth of its stock. He ran for the Senate in New Jersey in 2000, spending more than $60 million of his fortune to win the seat. The bubble of high-priced technology stocks began to burst in March 2000. In August 2000, the SEC issued a warning against aftermarket sales, also known as "laddering." "I've never even heard the term 'laddering' before," Mr. Corzine said yesterday. "We may have recommended on the analysis that we had that [a stock] was a 'good buy,' but you can't force anyone to buy anything. Investors make their choices about where people invest, unless they've asked somebody to manage their money." Mr. Corzine was highly respected in his tenure at Goldman, and no one has accused him of encouraging "laddering" or even knowing about the practice. But Mr. Maier said it happened on Mr. Corzine's watch. "For Corzine not to know of a common practice being utilized to generate and manipulate stock prices would be surprising," Mr. Maier said. "He was obviously there during this time. I definitively saw his company engaged in illegal activity." The SEC would not comment yesterday on whether Goldman is under investigation. Mr. Maier said he has not spoken to the investigators in several months. "They expressed to me that laddering is a trickier thing [to prove]," Mr. Maier said. "I will say it. They did it. They laddered. Whether the SEC can construct a case is a different story." Asked whether he knew about an SEC investigation, Mr. Corzine said, "That could very possibly be; I'm not aware of it. I'm divorced from [Goldman] since 1999." A class-action lawsuit filed in April 2001 accused Goldman Sachs and others of engaging in "laddering" on the initial sale of stock of NetZero, driving up the company's share price to artificially high levels. In another class-action suit, shareholders of Buy.com have accused the firm and its underwriters, including Goldman Sachs, of engaging in a laddering scheme in its IPO in February 2000, after Mr. Corzine left Goldman. And investors of defunct online grocer Webvan.com have filed a similar suit in federal court concerning that firm's initial public offering in November 1999. Another class-action suit filed last year says that underwriters, including Goldman Sachs, manipulated several IPOs since 1997, including at least six when Mr. Corzine was still at the helm of Goldman.
Yeah, right, he never heard of the term "laddering." I've known about laddering for 4 or 5 years and I am a simple 401-k investor...
But Nicholas Maier, who was syndicate manager of the Wall Street firm Cramer & Co. from 1996 to 1998, told SEC investigators in the spring that Goldman Sachs routinely forced him to buy stocks at inflated prices if he wanted to purchase shares of an initial public offering (IPO). "Goldman, from what I witnessed, they were the worst perpetrator," Mr. Maier said. "They totally fueled the [market] bubble. And it's specifically that kind of behavior that has caused the market crash. They built these stocks upon an illegal foundation — manipulated up, and ultimately, it really was the small person who ended up buying in." For example, Mr. Maier told the SEC that Goldman Sachs would offer him shares of a new company's IPO at the initial, low price of $20 per share only if he agreed to purchase "aftermarket" shares of the same company at $100 each. In turn, he would sell the shares of the higher-priced stock to small investors. "None of these aftermarket orders had anything to do with what I honestly valued a company to be worth," Mr. Maier said. "Goldman created the convincing appearance of a winner, and the trick worked so well that they seduced further interest from other speculators hoping to participate in the gold rush. The general public had no idea that these stocks were actually brought into the world at unnaturally high levels through illegal manipulation."
----->>>>>Monday May 13, 2002
ORIGINAL SIN
How prices of initial public offerings were manipulated by Goldman Sachs through the illegal practice of "Laddering"
By Nicholas W Maier
Special to Dotcom Scoop
For five years I worked on the front lines of Wall Street for one of the most well known professional money managers in the business, James Cramer. During my time at his firm, I witnessed more than a few manipulative tactics that served to perpetuate and ultimately destroy the bubble of the nineties. One in particular, known to insiders as "laddering," was especially potent and egregious, serving to ravage the small, uninformed investor.
Fresh out of college, I earned my way up at Cramer & Company from office gopher to trader, analyst, and from January 1996 through 1998, to "syndicate manager." A syndicate, or a group of underwriting investment banks, brings a private company into the publicly traded world through the process of an initial public offering. As syndicate manager, I was responsible for overseeing all of our firm’s activity into IPOs.
Cramer himself explained to me the day I was given the position that the task of syndicate manger was deathly important. During the mid-nineties, the investment banks were essentially printing money by bringing any company with a pulse public. We obtained shares of an IPO for a bargain price, and by the time that stock started to trade and the small investor joined the party the stock would have spiked a few hundred percent. I calculated the contributions and we made millions of dollars a year being given these stocks.
The specifics of my job were relatively simple - determine which upcoming deals would be hottest, or open at the most inflated premium to the issue price, and do whatever it took to secure an allocation. The most important measure the investment banks used in determining allocations was commissions, which is why institutional money managers such as Cramer & Company are the only people who ever get in on these deals. Based on our active trading style and high commission bracket, I could expect at least some participation just by asking, while the little guy at home could expect only to get hooked.
What helped me most was that my firm had an especially lucrative relationship with the premier investment bank, Goldman Sachs. Besides them being our ‘prime broker,’ or the clearinghouse that handled all of our trades with any other Wall Street broker (and thus they received added fees), there were three Goldman alumni, including Cramer himself, at our shop. Needless to say, our Goldman salesman liked us, and took me into his confidence. This individual guided me through the specifics of the other factors involved in winning points with the investment bankers that were responsible for handing out the free money.
Our broker did not mince words. To increase my allocation, I should always agree to buy more stock after the IPO opened for trading. The proposal was that Goldman would give me extra shares at the initial, low price, if I bought in the "aftermarket," that is once mom and pop were allowed on board, usually at a significantly higher price. The math was not tricky and the rewards far outweighed the risks: any money lost from my aftermarket buy would be more than compensated for by receiving extra shares at the initial, low price.
The way our broker put it, this was not an idle suggestion on his part. There would be a direct correlation both on an existing deal and all future deals. The more I promised to buy in the aftermarket, the more shares I could expect to get at the initial, low price. Most importantly, he asserted that scores were kept. If I reneged on my aftermarket order, I could expect to feel the consequences, or to be docked on future allocations. All of this was kept track of in an investment banking "book," as he often called it.
The "book," as he put it, was the insider’s look into an IPO. From one peek within it, he could tell me exactly how high the deal would go and where to place my aftermarket order. If he told me to place my order at fifty, I would place it at fifty. If he told me to place it at a hundred, I would place it at a hundred, knowing it to be worth my while in that the deal would trade at least that high. This "book," as I was told, also made its way with an investment banker to the brokerage house’s trading desk on the day the IPO opened. It was, above all else, a written record to hold me to my word.
“ This simple "tie-in" agreement, or the forcing of a client to buy more stock of an IPO with the understanding that they would receive a larger allocation on current and future IPOs, eventually had a profound impact upon the marketplace. ”
This game was a perpetual cycle for the duration of my time at Cramer & Company. I would get my five thousand shares of an IPO at twenty, agree to buy more at a hundred, and over the next day or two sell it all with another broker. Remember, none of these aftermarket orders had anything to do with what I honestly valued a company to be worth. I only bought more because of the direct kickback, or increased allocation. Honestly, we at Cramer & Company all knew these IPOs were trading at, to say the least, ridiculously inflated prices. Still, the deals kept coming, and many of them even continued to go up.
Goldman wasn’t the only investment bank soliciting these after market orders. Most of the major brokerage houses that had investment banking divisions did the exact same thing. Overall, the solicitation of aftermarket orders by investment banks became so commonplace that I never suspected any of it might have actually been blatantly illegal. Then the bubble began to burst. Starting in March of 2000, the stock markets, and especially the heavily IPO laden NASDAQ, began to plunge. Finally, on August 25, 2000, the Securities and Exchange Commission, or the industry’s police, issued the following warning:
Summary: This staff legal bulletin sets forth the views of the Division of Market Regulation, reminding underwriters, broker-dealers, and any other person who is participating in a distribution of securities, that they are prohibited from soliciting or requiring their customers to make aftermarket purchases until the distribution is completed.
The rule, as stated, means that investment banks are not, in fact, allowed to make any customer commit to buy additional shares in an IPO until after it has already started trading. This simple "tie-in" agreement, or the forcing of a client to buy more stock of an IPO with the understanding that they would receive a larger allocation on current and future IPOs, eventually had a profound impact upon the marketplace.
Solicitations for aftermarket purchases give (other) purchasers in the offering the impression that there is a scarcity of the offered securities. This can stimulate demand and support the pricing of the offering. Moreover, traders in the aftermarket will not know that the aftermarket demand, which may appear to validate the offering price, has been stimulated by the distribution participants.
Simply put, it is the SEC’s opinion that through the process now known as "laddering" orders, or the insertion of forced demand by investment bankers for an IPO stock at progressively higher levels, a "hot" offering was almost guaranteed to fly. By specifically requiring a customer to buy more shares of an IPO, Goldman had placed an artificial catalyst into the marketplace. Obviously, as I stated, none of my orders were based on any traditional methods of valuation, but solely to secure more of an initial allocation, or a sizable kickback. Goldman Sachs had essentially, through their complete monopolistic control of an initial public offering, manipulated the share price higher.
It does not take a genius to recognize that the net effect of laddering was immense. There is nothing that validates an exorbitantly priced deal more than when it rises even higher. The uninformed investor, seeing the instant gains, is inevitably sucked into the fervor. Goldman created the convincing appearance of a winner, and the trick worked so well that they seduced further interest from other speculators hoping to participate in the gold rush. The general public had no idea that these stocks were actually brought into the world at unnaturally high levels through illegal manipulation.
This process of "laddering" worked so well for the investment banks that it changed all the traditional rules of the marketplace. Here we have the very genesis of the new economy stocks based on fraud. By making winners out of losers, everyone had to reassess valuation methods. For every IPO that traded at higher levels, fifty existing stocks could be revalued. Enron, with little actual assets, became the fifth largest corporation in the country. The brokerage house analysts, given a benchmark to rationalize ridiculous valuations, rolled out ever-aggressive targets that stopped just short of the moon. Meanwhile, people in the know like Kenneth Lay and Cramer & Company were getting out as fast as they could.
Obviously the SEC is aware of violations, or they never would have issued the afore mentioned warning in the first place. Recently the investment banks are feeling some ramifications. Apparently, towards the very end of the bull market, a few of them elected to simply demand a direct profit sharing agreement with their clients. There have been various cases where the brokers received exorbitant commissions in return for allocations. So far First Boston, without admitting guilt, has agreed to pay a hundred million dollar fine, and both JP Morgan and Robertson Stephens are facing similar charges.
The differences between these cases and those of laddering are many. Higher commissions, although easy to prove with written records and paper trails, are less harmful to the overall integrity of the marketplace. They do not cause a move, but are rather a product of it. In one last desperately greedy attempt to milk the end of the IPO craze for all it was worth, the investment banks simply demanded a huge check from participants.
On the other hand, there has been only limited speculation up to this point regarding any investigations regarding laddering. For my part, after being contacted, I have been voluntarily talking to the SEC regarding a current investigation, as they call it, into "Certain Initial Public Offerings." I have been asked specifically about laddering practices enacted by Morgan Stanley, Smith Barney, and most recently, regarding Goldman Sachs. After I told them what I knew, the staff attorney for the SEC handed me a document and asked me what I thought it appeared to be. It was nothing less than the investment banking "book" that my Goldman Sachs broker had told me so much about.
This specific "book" was for a deal called Marvell Technologies that was brought public by Goldman Sachs in the year 2000. Although the IPO came after I left Cramer & Company, I recognized my former fund’s name, and in the far right hand margin, directly next to the allocation we received, was a column marked for aftermarket orders. Cramer & Company had agreed to buy in the aftermarket for this deal, and received a sizable allocation. I guess this proves that scores really were kept, after all.
There is a classic fraud that many in the investment world have heard of called a "Ponzi scheme," where initial investors are given outsized returns to entice subsequent investors who are eventually robbed of everything. The parallel to laddering is easy to make. In this case, the perpetrator was the investment banks, the initial investors given outsized returns were institutions like Cramer & Company, and the victims were the small, uninformed investors who didn’t have a clue what was really happening. Maybe Goldman and the other investment banks will ultimately pay for their indiscretions. The small investor obviously already has.
Nicholas Maier is the author of a new book about his experience on Wall Street working for James Cramer entitled "Trading with the Enemy." He lives in New York City with his wife and daughter. He can be reached via email at
nwmaier@aol.com.
©2002 (Copyright 2002), Nicholas Maier, All Rights Reserved
©2002 (Copyright 2002), Dotcom Scoop, All Rights Reserved
No excerpts from this article may be reprinted without permission of the author.
Ben Silverman is the Publisher of Dotcom Scoop. He can be reached at
editor@dotcomscoop.com.
DotcomScoop.com
I don't know what happened to the formating on this. Let me do it again:
Corzine tied to stock scheme
By Dave Boyer
THE WASHINGTON TIMES
Sen. Jon Corzine, whose Wall Street expertise plays a key role in Democrats' strategy on corporate responsibility, led an investment banking firm that is being accused of inflating stock prices in the 1990s and contributing to the market crash.
Senate Majority Leader Tom Daschle lately has kept Mr. Corzine at his side frequently as Democrats call on President Bush to get tougher with corporate executives who fraudulently inflate company earnings to boost stock prices.
"I think he's made a stellar contribution," said Sen. Paul S. Sarbanes, Maryland Democrat and author of a bill approved Monday by the Senate that would increase the penalties for corporate wrongdoers.
But Goldman Sachs, the firm that Mr. Corzine left as chairman in May 1999, has been a target of class-action lawsuits and accusations by a former broker who complained to the Securities and Exchange Commission that the investment house engaged in a scheme to force unwitting investors to pay artificially high prices for certain stocks.
Mr. Corzine, New Jersey Democrat, said he knew nothing about such schemes when he ran the firm from 1994 to 1999.
"I don't believe there is ever going to be anything that sticks about us at Goldman Sachs forcing anybody to buy anything," Mr. Corzine said in an interview. "Goldman Sachs never forced anyone to buy anything when I was chairman, I can tell you that."
But Nicholas Maier, who was syndicate manager of the Wall Street firm Cramer & Co. from 1996 to 1998, told SEC investigators in the spring that Goldman Sachs routinely forced him to buy stocks at inflated prices if he wanted to purchase shares of an initial public offering (IPO).
"Goldman, from what I witnessed, they were the worst perpetrator," Mr. Maier said. "They totally fueled the [market] bubble. And it's specifically that kind of behavior that has caused the market crash. They built these stocks upon an illegal foundation — manipulated up, and ultimately, it really was the small person who ended up buying in."
For example, Mr. Maier told the SEC that Goldman Sachs would offer him shares of a new company's IPO at the initial, low price of $20 per share only if he agreed to purchase "aftermarket" shares of the same company at $100 each. In turn, he would sell the shares of the higher-priced stock to small investors.
"None of these aftermarket orders had anything to do with what I honestly valued a company to be worth," Mr. Maier said. "Goldman created the convincing appearance of a winner, and the trick worked so well that they seduced further interest from other speculators hoping to participate in the gold rush. The general public had no idea that these stocks were actually brought into the world at unnaturally high levels through illegal manipulation."
Mr. Bush on Monday said Wall Street went on a "binge" in the 1990s and now has a "hangover," a characterization that Mr. Corzine called "a diversion away from reality."
"What we had was a breakdown in corporate ethics and corporate responsibility that I don't think has anything to do with anything other than excessive focus on share price and managed earnings," he said.
Mr. Corzine retired from Goldman Sachs in 1999 after taking the firm public and receiving $320 million worth of its stock. He ran for the Senate in New Jersey in 2000, spending more than $60 million of his fortune to win the seat.
The bubble of high-priced technology stocks began to burst in March 2000. In August 2000, the SEC issued a warning against aftermarket sales, also known as "laddering."
"I've never even heard the term 'laddering' before," Mr. Corzine said yesterday. "We may have recommended on the analysis that we had that [a stock] was a 'good buy,' but you can't force anyone to buy anything. Investors make their choices about where people invest, unless they've asked somebody to manage their money."
Mr. Corzine was highly respected in his tenure at Goldman, and no one has accused him of encouraging "laddering" or even knowing about the practice. But Mr. Maier said it happened on Mr. Corzine's watch.
"For Corzine not to know of a common practice being utilized to generate and manipulate stock prices would be surprising," Mr. Maier said. "He was obviously there during this time. I definitively saw his company engaged in illegal activity."
The SEC would not comment yesterday on whether Goldman is under investigation. Mr. Maier said he has not spoken to the investigators in several months.
"They expressed to me that laddering is a trickier thing [to prove]," Mr. Maier said. "I will say it. They did it. They laddered. Whether the SEC can construct a case is a different story."
Asked whether he knew about an SEC investigation, Mr. Corzine said, "That could very possibly be; I'm not aware of it. I'm divorced from [Goldman] since 1999."
A class-action lawsuit filed in April 2001 accused Goldman Sachs and others of engaging in "laddering" on the initial sale of stock of NetZero, driving up the company's share price to artificially high levels.
In another class-action suit, shareholders of Buy.com have accused the firm and its underwriters, including Goldman Sachs, of engaging in a laddering scheme in its IPO in February 2000, after Mr. Corzine left Goldman. And investors of defunct online grocer Webvan.com have filed a similar suit in federal court concerning that firm's initial public offering in November 1999.
Another class-action suit filed last year says that underwriters, including Goldman Sachs, manipulated several IPOs since 1997, including at least six when Mr. Corzine was still at the helm of Goldman.
You should have seen Capital One's stock today ..... lost 39.9% of it's value in ONE day.
About your title- their profits were down but not by more than had already been anticipated. In other words, this bad news wasn't really bad news but was actually somewhat good news. IBM is up in after hours trading (or was an hour ago) and the market will likely open higher.