Bonus Bananas April 4, 2014

1) Energy Future Plan Said to Almost Wipe Out Owners KKR to TPG (Bloomberg) - It's not often you see titans like KKR and Goldman Sachs take one in the seat, so I imagine there are some pretty uncomfortable conversations happening right now over this boondoggle. But you can't make an omelet without breaking a few eggs, amirite?

2) Eich resignation as Mozilla CEO as messy as his appointment (C/NET) - The tech world has basically been ablaze for the past week over the appointment and almost-immediate resignation of Brendan Eich as CEO of Mozilla. Three prominent board members resigned in protest to his appointment, and it eventually led to his demise. What's the beef? He donated $1,000 to support Proposition 8 back in 2008.

3) 9 Behaviors Cultivated by the Ultra-Charismatic (Inc.) - Unless you're already Swaggy McSwaggerton, it might be a good idea to check these out. A little charisma can carry you a long way, I'm living proof of it.

Where Do GOOG & GOOGL Finish Today?

Well, today is the big day for Google shareholders. I just got the new shares dropped into my account. I'm showing a pre-market on GOOG at $565.16 a share. GOOGL looks set to open at $571 at the moment. The most ironic thing I'm seeing so far is that GOOG is reading down 49.79% from yesterday's close. I wonder if it's going to print like that all day? It almost stands to reason that it would, being that it's a new class of shares backed into an existing symbol.

I thought it might be fun to see what the consensus on WSO was about today's close. It seems clear so far that each class of shares is going to open around $570, but where are they going to close? As an owner, I'd love to see the stock cross $600 today, but that might be wishful thinking. It's hard to imagine that it would sell off today, though (reason being: if you were going to sell you probably would have done it yesterday and not put yourself through the rigamarole of a complicated stock split).

Here's the deal: Tell me where you think each class of shares will close today and why, and the monkey closest to the pin gets a Silver Banana and a special shout-out next week on Monday @Mentions. I'll go first: GOOG (the new Class C non-voting shares) closes at $587.50, and GOOGL (the high-octane voting stock) closes at $596, both due to the emotional post-split pop.

Your turn.

I'm Out of Bitcoin

If you've been reading my stuff for a while you know that in the interest of full disclosure (and to avoid being accused of talking my book) I tell you guys about the moves I make in the market and what positions I buy and sell. What I don't always mention is my current trading philosophy, mostly because I feel like it's an opinion and opinions are like...well, you get where I'm going with that. In this case, however, I think it's important to note that I don't have much faith in this protracted bull market and to that end I've been trading with very tight trailing stops. There was even a time back on March 21 where I was completely flat for the first time since 2009, after my trailing stops on GOOG got hit just above $1,200.

I mention this in the hopes that you'll understand the reasoning behind my liquidating the entirety of my Bitcoin holdings last Thursday at $531.24. It's not that I no longer believe in the viability of Bitcoin. It's just that I think Bitcoin is going to cool off a bit following the recent IRS ruling and the fact that it was pretty overheated for the better part of the past year. I still believe in the technology and what it represents, and I fully plan to reinstate my position when the price drops off to a level I think is a little more reasonable (probably back in the $100-200 range).

Now, I realize I'm probably going to take some shit for this. Bitcoin was among the most successful investments of my life; I bought my very first Bitcoin for EU50 cash at a Paris tech Meet Up a couple years ago (represent, nerds). I've paid as much as $812 for a Bitcoin, and I've owned them everywhere in between. Yes, I've even used them to purchase things. In a nutshell, I made good money with it.

Monday @Mentions March 31, 2014

Thread of the Week:

Thread of the Week this week goes to @"SouthernAlpha" for the excellent thread What Everyone Ought To Know About Failure. A lot of thought went into this first blog post, and it earned 21 Silver Bananas, 171 Facebook Likes, 14 LinkedIn Shares, and 4 Tweets. Unbelievable job!

Comment of the Week:

There was no contest for Comment of the Week this week, as @"broadstbully" ran away with it with his hilarious advice on how to handle an asshole boss. While his advice would likely result in termination, I'd sure like to see someone do it. His comment brought in 13 Silver Bananas.

Guidance Counselor:

@"Marcus_Halberstram" is no stranger to the Guidance Counselor category, and this week is no exception. His well considered comment on @"paidoff"'s Mea Culpa thread earned him 7 Silver Bananas. Keep up the great work, man!

What You Need to Know About Google's Upcoming Stock Split

(Disclosure: I'm currently long GOOG)

As some of you may know, Google is about to go through its first-ever stock split next week. But nothing Google does is normal, so why should their stock split be any different? I wanted to write this up for those of you who might be confused (as I was) about what exactly is going to happen to shareholders of record on March 27.

In a nutshell, Google is going through a 2:1 forward split on April 2nd. In other words, for every share of GOOG you own on March 27, you will own two shares on April 3. But here's where it gets a little hinky. You won't actually own two shares of GOOG for every one share you previously owned, you'll own that same one share of GOOG and you'll own another share of a new kind of Google stock known as Class C shares. (You might not have realized it, but the shares you own now are Class A shares - Class B shares are reserved for Google founders). The difference between the Class A shares you now own and the Class C shares you're going to be issued on the 2nd of April is that the new Class C shares won't have any voting rights. Theoretically this makes them less valuable than the existing Class A shares.

So here's what we can probably expect to see. Let's say (to keep things in round numbers) that the stock is trading for $1,200 a share at the close on April 2. At the open on April 3rd, you'll have twice the number of shares you had the day before and the two classes will be priced at $600 apiece. So the actual value of your Google holdings won't change. Here's where things get extra confusing. The new Class C shares will take over the existing GOOG stock symbol, and the Class A shares you now own will become GOOGL.

Scam Science: The Pump and Dump

Mod (Andy) note: "Blast from the past - Best of Eddie" - This one is originally from September 2010 . If there's an old post from Eddie you'd like to see up again shoot me a message.

I'm changing things up a little today. I was going to make today's post about net-net deals, but I've decided to take tomorrow's post about predatory trading techniques and break it into two posts. Today's post is about the Pump and Dump - predatory trading to the long side. Tomorrow's post will be about the Short and Distort - predatory trading to the short side. Just so you don't feel cheated, I'll break a net-net deal down into a couple sentences, and if you want me to expand I can do so in the comments.

A net-net deal happened when a C-level exec at a public company (usually the CEO) decided the company was going under and wanted to sell off his shares without anyone knowing. Through an intermediary (usually a promoter of some kind) brokers would be paid cash under the table (hence, net-net) for each share of the stock they sold to their customers which in turn enabled the errant CEO to unload the same number of his shares. Payments were always in cash, always in a brown paper bag, and always delivered in a nudie bar (don't ask me why; but I've never heard of a net-net deal being handled in any other way. Seriously.)

Bonus Bananas March 28, 2014

1) Bankers' Deaths Shine Light on Stress in Industry, Tunnel Vision (Bloomberg) - I realize this is a pretty morbid way to open Bonus Bananas, but it's an important discussion that could lead to some positive changes in the business. Some would argue that it already has.

2) Sad quotes from ex-bankers working themselves to death in new industries (eFinancial Careers) - The grass ain't always greener on the other side. It's ironic that your reputation from working in banking precedes you into your next field.

3) 'Minecraft' creator cancels Oculus Rift version following Facebook acquisition (The Verge) - So Facebook bought Oculus VR this week, and the geek world collectively lost their shit. Here's the head of the company that created arguably the most successful app-based video game in the last few years canceling the development of an Oculus version because he refuses to work with Facebook.

4) Oculus Kickstarter Backers Are Demanding Refunds (Kotaku) - More to the point, the folks who invested $2.5 million through Kickstarter to get Oculus going only to see them sell out to Facebook for 1,000 times that amount a few months later are seriously pissed. The comment section on the original Kickstarter campaign is pretty hilarious these days.

Somebody Just Went Hella Short the S&P...or Did They?

This is interesting. Yesterday around 11:57 am a series of options trades began to execute which culminated in a sphincter-puckering notional $2.8 Billion short on the S&P 500. It is widely believed that this is the reason the S&P went negative yesterday after opening in positive territory. So let's break the trade down and see if we can figure out what's actually going on here.

The Facts: Somebody bought 15,450 May 1995 S&P puts for $~132 apiece, or about $200 million total. In order for this bet to pay off, the S&P 500 has to be below 1,862 on May 16, 2014. So far he's looking pretty good. There are a couple of potential scenarios here.

Scenario 1: This guy thinks the S&P is about to tank. He bought deep-in-the-money puts, which means he's looking for a 1:1 (or very close to it) correlation between his options and the underlying futures. I'm not going to tell anyone their business, but there are more efficient (or at least less costly) ways to achieve the same bet. Which is what makes Scenario 2 the more likely to me.

IRS: Bitcoin Is Property, Not Currency

US holders of Bitcoin have something to celebrate today as the IRS has made a ruling on the tax handling of Bitcoin, classifying it as an asset subject to capital gains tax instead of a currency subject to income taxation. This means everyone who has been buying it on the way up (for more than a year) will be taxed at the lower long-term gain rate, and those who got in more recently and are down can sell for a capital loss and take the writeoff if they so choose. The ruling makes sense as Bitcoin is clearly an asset class, but it also highlights the coming confusion (over the next decade or two, in my estimation) about what actually constitutes a currency, because I think that will be a very different thing from what we recognize as currency today. Check it out and let me know if you think the IRS got it right:

Monday @Mentions March 24, 2014

Thread of the Week:

@"WallStreetPlayboys" had the Thread of the Week this week with Landed Your First Job? EXTREMELY Important Thread: Office Politics. This quick and dirty instruction manual on navigating the shark infested waters of Wall Street office politics brought in 11 Silver Bananas and a Facebook Like.

Comment of the Week:

Comment of the Week this week goes to @"GoldenCinderblock" on the thread LinkedIn is the new Facebook. His pithy observation that, "I just look at it as another way to let my classmates know I'm better than them." earned him 13 Silver Bananas, so it's clearly a common sentiment among you primates.

Guidance Counselor:

The Guidance Counselor this week is new WSO blogger @"ValueBanker14" with his informative thread 15 Steps To Mastering The GMAT. His guide to preparing for the test brought in 7 Silver Bananas, 4 Tweets, and 3 Facebook Likes. Welcome to the team, @"ValueBanker14"!


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