November 30, 2015
What we’re reading this week
I have often stated, to anyone who will listen, that JP Morgan has a lot to loose with the adoption of a uniform suitibility standard. This is because the bank offers proprietay investment funds to it’s clients over other, potentially more suitible investments. This is very hard to prove. However, way back in 2013, a former JP Morgan broker, Nathaniel Popper “blew the wistle” on the firm and stated that he was pressured to sell JP Morgan’s proprietary investments. This is already a juicy story but it recently became more interesting. A few weeks after the New York Times published Nathan’s story his former clients began to file complaints agaisnt him. It turns out, the clients didn’t write the complaints, JP Morgan wrote them. “The client complaints made it hard for Mr. Burris to get another job and helped scuttle his case against JPMorgan for wrongful termination. But when Mr. Burris recently reached two of the clients whose names had been on the complaints, they told him they had not, in fact, written the complaints — a JPMorgan employee had.” The details of the story, and some comments from said clients can be found here. This is interesting to me on two counts: One, this broker’s concerns over JP Morgan’s business practices reflect a sea change in financial services and a shift towards working for a client’s best interest. Two, the actions of JP Morgan during and following the broker’s complaints illustrate how aggressively firms are willing to fight to protect their own interests.
Lately lots of people have been asking “should Yahoo sell Yahoo?” Yahoo owns both shares of Alibaba and Yahoo Japan, publicly traded firms. This Bloomberg article does a good job of explaining why Yahoo’s core business looks like it has a negative valuation. They go on to explain that the negative value is mostly an implication of tax law. The Yahoo Japan and Alibaba shares are highly appreciated so they can’t be valued at their full pretax price. However, as the article points out, after you deduct the taxes from the stock, the firm valuation is pretty low. Jeff Bonforte,
Yahoo’s senior vice president for communications products explains this by saying “I just try to ship products that I’m not ashamed of.” This isn’t the sort of comment that inspires potential buyers but does seem to be right in line with that valuation…
Recently the Securities and Exchange Commission published a case against two bitcoin mining companies. These companies sold some kind of derivative of bitcoins as an investment. According to the SEC document it was really just a Ponzi scheme. The firms began their fraud in August 2014 and shut down at the end of January 2015. Interestingly, during that same period, bitcoin lost about 60 percent of its value. The SEC docs state ”Most…investors never recovered the full amount of their investments, and few made a profits.” Few made a profit?!?! This may be the first time in history when you would have been better off in the Ponzi scheme.
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