Since I have started tracking the debate between Herman Cain and those who support his views that the Occupy Wall Street movement is being orchestrated by the Obama Administration as a means of distracting the public’s attention from the President’s failed policies, and the movement’s assertions that there is something amiss within the heart of the American capitalist system (or at least its financial institutions), I was ultimately reminded of a movie starring Kevin Costner, Sean Young and Gene Hackman titled No Way Out.
The film’s premise is pretty straight forward in that once cast into a frenzy by a seamy affair and murder, the opposing capitalist and socialist factions were so occupied with pursuing their own self-serving agenda’s, that they invariably overlooked the real underlying threat to both sides. As I don’t want to spoil the the ending, I will leave it to you to watch the picture. However when you do, the parallels if not in story at least in principle will become readily apparent.
Now you may ask yourself how I arrived at the point of comparing a very serious, current day drama with the fanciful imaginations of a 1987 Hollywood movie? I have just one word . . . Groupon.
That’s right, what eventually caused the collective wheels of my heavily concussed head to tumble into a harmonious revelation was an article in yesterday’s New York Times in which a trio of what are purportedly the top underwriting firms on Wall Street . . . Goldman Sachs, Morgan Stanley and Credit Suisse, missed the unmissable red flags associated with the Groupon IPO.
As the controversy surrounding the over valuation of a firm in which the Chairman Eric Lefkofsky had, in a pre-IPO round earlier this year, distributed $810 million of the $950 million that was raised to fellow investors and employees (keeping of course $319 million for himself . . . hey I guy has to eat), it is clear that Wall Street underwriters failed to protect the interests of investors relative to their championing of this latest offering.
Now before those who adhere to the Cain edict that the Occupy Wall Street movement is made up of “get-rich-stupid-lazy-ass-hippy-protesting-whatever-the-hell-you-are people!!” cry out that I am an anti-capitalist sentimentalist with left leanings, I happen to agree to a certain extent that perhaps there is a fair representation of bite the hand that feeds you free-loaders amongst the movement’s denizens. Remind me to tell you the story about Josh from New Jersey who relocated to Canada as his welfare benefits south of the border were due to run out only to turn around a write in his blog a scathing indictment of the capitalist system.
But here’s the thing, besides the fact that Lefkofsky as the Times article pointed out, has a checkered entrepreneurial past involving what appears to be slight of hand dealings coupled with the apparent blind eye of the firms involved with the underwriting process, it is becoming abundantly clear that Groupon is about as golden as Bre-X.
According to the company’s own financials, what the underwriters were heralding as a $30 billion bonanza was in reality a bust, losing $102.7 million in the last quarter on revenue of $878 million. The icing on the cake or pièce de résistance is that the balance sheet indicates the the company has $681 million in current liabilities (more than half of that total owed to its vendors), with only $376 million in assets.
Hmmmm, I wonder if this is a company into which Mr. Cain would invest his hard earned money?
Deadbeat, left leaning whiners aside, there is something terribly wrong with Wall Street and the markets that Cain like Greenspan before him, fails to grasp in the rush to forward his quaint, but overly simplistic views and agenda. For those unfamiliar with the reasons why I compare Cain with Greenspan, check out this clip from the PI Inquisitive Eye in which I talk about an upcoming interview with 5 time bestselling author Larry Winget and The Young Turks’ Cenk Uygur (Take The Financial Bull By The Horns).
In the end, and going back to our movie example, in their eagerness to defend their respective sides of the long-standing rifts that have and continue to divide the greatest country on earth, both combatants are missing the real issues that are threatening to ruin the country from the inside out.
Enjoy our own little Hollywood production that is certain to offend everyone on both sides . . . you supply the popcorn.
NOTE: Here is the link to the April 16th broadcast referenced in the video; The Failings of Institutional Advisers and How You Can Grab The Bull by the Horns!