By Pam Martens and Russ Martens: February 4, 2022 ~
From 401(k) plans to mutual funds to the federal government workers’ pension plan to foreign central bank stock portfolios – everyone is feeling Facebook’s pain today. The parent company’s stock (Meta Platforms, Inc.) lost 26.39 percent of its value yesterday – in one trading session.
That’s what happens when the Fed is allowed, with no restraints from Congress, to fuel a bubble market that allows one company — that pays no dividend and has no barriers for upstarts like TikTok to steal its user base — to gain a market cap of over $1 trillion.
On June 28 of last year, Facebook’s stock closed above a $1 trillion market cap for the first time. It has been on a price decline since last September and when the stock market’s closing bell rang yesterday, it was a $647 billion stock. Its market cap decline yesterday was the largest decline for any one stock in one day in the history of the stock market.
The pain is going to be widely felt. According to Yahoo! Finance, large mutual fund and ETF families are the largest owners of Facebook shares with Vanguard Group holding $62 billion as of September 29, 2021. The next top three holders, as of the same date, were Blackrock with $52.9 billion; FMR (parent of Fidelity) with $43.2 billion and T. Rowe Price with $32.9 billion. (The funds may have lightened their positions since their last reporting date.)
We checked two foreign central banks that file their stock holdings with the SEC. As of September 30, 2021, Norway’s central bank, Norges Bank, reported owning 27.7 million shares of Facebook with a market value of $7.27 billion. The Swiss National Bank reported owning $3.2 billion of Facebook.
Facebook trades on Nasdaq, the wonderful folks who gave us the dot.com crash of 2000. Between 2000 to 2002, Nasdaq lost 78 percent of its value. In the midst of the crash, New York Times reporter Ron Chernow correctly described what was happening like this:
“Let us be clear about the magnitude of the Nasdaq collapse. The tumble has been so steep and so bloody — close to $4 trillion in market value erased in one year — that it amounts to nearly four times the carnage recorded in the October 1987 crash.”
Chernow called the Nasdaq stock market a “lunatic control tower that directed most incoming planes to a bustling, congested airport known as the New Economy while another, depressed airport, the Old Economy, stagnated with empty runways. The market functioned as a vast, erratic mechanism for misallocating capital across America,” Chernow wrote.
The lunatic control tower today has directed Americans’ life savings into Chinese companies that won’t comply with U.S. auditing standards; blank-check companies called SPACs that don’t have to comply with IPO listing standards; and endless social media companies cannibalizing one another. To rational minds, none of this sounds like the way to sustain America’s competitive position in the world.
On May 11 of last year we looked at past ratios of stock market value to U.S. GDP. We reported the following:
“The data shows that just prior to the dot.com bust on December 31, 1999 that resulted in the Nasdaq stock market losing a stunning 78 percent of its value from peak to trough, the total stock market value was 1.77 times GDP.
“At year-end 2007, prior to the greatest Wall Street collapse since the Great Depression, the total stock market value was 1.34 times GDP.
“As of December 31, 2020, total stock market value represented 2.10 times U.S. GDP. Siblis Research further shows that as of March 31 of this year , total stock market value in the U.S. stands at a breathtaking $49.1 trillion. (That includes U.S. based public companies listed on the New York Stock Exchange, Nasdaq Stock Market or OTCQX U.S. Market.)
“A $49.1 trillion stock market is larger than the combined GDP of the four largest industrialized nations (U.S., China, Japan and Germany) according to International Monetary Fund data.
“The absurdity of the valuations in the U.S. market are captured in this statistic: just five companies (Apple, Microsoft, Amazon, Google’s parent Alphabet, and Facebook) account for a total of $7.85 trillion of the $49.1 trillion total stock market value. That’s five companies out of thousands and yet they represent 16 percent of the total stock market value. And here’s another deeply troubling thought: each of those five stocks are being traded in the Wall Street banks’ secretive Dark Pools.”
After the dot.com bust, we learned that crooked analysts at major Wall Street firms had been actively moving the levers in the “lunatic control tower.” They knew many of the companies they were bringing to market and promoting to the public were dogs with no hope of survival. We found that out because their internal emails were released by the SEC. The Wall Street analysts were calling the companies they were bringing to public markets “dogs” and “crap.”
On April 28, 2003, the SEC, which conveniently has no criminal powers, settled the rigged research practices with 10 Wall Street banks for $875 million. Nasdaq investors lost trillions of dollars but Wall Street got off with a payment of $875 million. No one went to jail. Just two individual analysts were charged: Jack Grubman of Citigroup’s former Salomon Smith Barney unit and Merrill Lynch’s Henry Blodget. Both men were barred from future affiliation with a broker-dealer and paid fines that were just a fraction of the bonuses they had collected.
Egregiously corrupt practices on Wall Street also brought the crash of 2008, which was summed up by the Financial Crisis Inquiry Commission (FCIC) report as follows:
“The profound events of 2007 and 2008 were neither bumps in the road nor an accentuated dip in the financial and business cycles we have come to expect in a free market economic system. This was a fundamental disruption—a financial upheaval, if you will—that wreaked havoc in communities and neighborhoods across this country. As this report goes to print, there are more than 26 million Americans who are out of work, cannot find full-time work, or have given up looking for work. About four million families have lost their homes to foreclosure and another four and a half million have slipped into the foreclosure process or are seriously behind on their mortgage payments. Nearly $11 trillion in household wealth has vanished, with retirement accounts and life savings swept away. Businesses, large and small, have felt the sting of a deep recession. There is much anger about what has transpired, and justifiably so. Many people who abided by all the rules now find themselves out of work and uncertain about their future prospects. The collateral damage of this crisis has been real people and real communities. The impacts of this crisis are likely to be felt for a generation. And the nation faces no easy path to renewed economic strength.”
The Fed has now permanently become Wall Street’s enabler and the details of that enablement are being intentionally withheld from the American people by mainstream media. See our report: There’s a News Blackout on the Fed’s Naming of the Banks that Got Its Emergency Repo Loans; Some Journalists Appear to Be Under Gag Orders.
Americans need to pick up their phones today and call their Senators and House Rep in Congress and demand a restructuring of Wall Street and the Fed. The very future of the country hangs in the balance.