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On Awful Deals and France

Bruce Krasting's picture




 

 

I wrote about the Groupon IPO the day before the company listed the stock LINK. I play in most IPOs and Secondaries. I got the prospective for the GRPN deal, looked it over and concluded it was a junk deal. I got an allotment of shares in the IPO and sold them 15 seconds after the shares opened for trading. I'm one of the very few who has made a buck on the long side of this dog.

Morgan Stanley brought this deal to the street. I think MS did a terrible job of due diligence. If a guy like me who is sitting on the outside of the deal could figure that GRPN was a loser, then you can be damn sure the folks wearing the white spats at MS new it was crap as well.

 

The article I wrote back in November likened the GRPN IPO to a deal that I had worked on years before. I was tasked with arranging the funding for a fat rendering plant in Mexico. My description:

 

The plan called for trainloads of cow guts to arrive at the new factory every day. The trains would come from all over Mexico and suffer delays. The thought of train cars filled with guts sitting on some side rail for a week or two put a taint on the deal.

 

The lawyers tried to dress up the documents. The words “Cow guts” were deleted and the word “Offal was” inserted.

 

The deal quickly got nicknamed the Offal Deal. From there, some smart guy renamed it again as the Awful Deal. That name stuck.

 

MS has brought us another Awful Deal, basically MS sold Offal to the public. My closing thoughts on the night before the GRPN deal:

 

For the folks at MS this was their awful deal. It might prove to be the same for investors.

 

Awful Offal

rendering-plant-pile-600x450

++

 

Worried about Italy? Worry about France!

The Euro is in the crapper again this morning. The Italian elections are hanging over the FX markets. Italy is a looming problem, but the real issue is what is going on in France. It seems that the French citizens have turned against their new leader, Francois Hollande, in a rather spectacular way.

 

hollande

 

Italy is a critical part of the EU pie, but France is make-or-break.

What will happen in France when the weather turns warm and and young people faced with 25% youth unemployment and no prospects for a job hit the streets? Trouble.

 

rioting110505_france_rioting4

article-1322441-0BB56B19000005DC-288_634x374

 

 

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Sat, 03/02/2013 - 09:20 | 3293157 Moe Howard
Moe Howard's picture

Bruce, you posit yourself as some sort of genius for seeing Gropeon was a fail.

 

I was in Europe the day of the IPO, the European financial media openly said the company was technically bankrupt, they were living on the money they owed business that they were holding too long. Only a moron didn't know they are and were a bad business to get into.

Fri, 03/01/2013 - 16:43 | 3291508 Blano
Blano's picture

Really have enjoyed your posts Bruce.  Keep 'em coming.

Fri, 03/01/2013 - 14:37 | 3291073 t0mmyBerg
t0mmyBerg's picture

Buce.  There is an opportunity here for the enterprising entrepreneur (a great frenchy word).  Someone merely has to offer hundreds of thousands of xboxes and wii's and playstations to be distributed to the youth of france and this will keep them indoors, just like here.  (One of the modern circuses part of bread and circuses) Probably can be financed through one of the Treasury controlled banks about which you are fond of writing so well.  Yep, I know what I am doing this summer...oh shit i do not have the crony political connections to close the deal.  GDI!

Fri, 03/01/2013 - 14:20 | 3290995 q99x2
q99x2's picture

Morgan Stanley and Goldman Sachs won't last long once the EU falls. They'll have to hire more than police.

Fri, 03/01/2013 - 14:14 | 3290987 NoWayJose
NoWayJose's picture

Can't turn offal into pink slime? Or can you? Must be running out of horse meat... Or else they are looking for 'filler and by products' that will not be detected by those horse DNA tests.

Fri, 03/01/2013 - 14:38 | 3290926 Charles Wilson
Charles Wilson's picture

About the Burning Car thing...

Remember Detroit 1968?  The Street Commentary was:

"They're burning their own houses...THEY'RE BURNING THEIR OWN HOMES!..."

Of course, Daddy Sugar stepped in to provide New! Better! Bribes to protected constituences who lived far away from the Detroitus.

Ain't no Daddy Sugar left in France.

 

THEY'RE BURNING THEIR OWN CARS!!!

Let 'em.

Dark Ages II.  "Now fortified with Atomic Weapons!"

 

CW

Fri, 03/01/2013 - 13:56 | 3290914 WTFUD
WTFUD's picture

I don't mind disagreement with my posts regarding certain issues like Spray Paper Gold v Touchy Feely Stuffy or Is HFT really in my best interests? or Should we immediately prevent untrustworthy Supermarkets from selling Any Meat Product without FSA test or just allow tainted products trickle down exposure ( over time as and when just like the dodgy exotic financial products sold to unexpected muppets by the banks )?
However i take exception to any fruitcake supporting blind murder anywhere but particularly against those unable to defend themselves.
You sir are a coward and if i could stand in a room would challenge you to a fist fight.
More likely though shit like you would pay a couple of goons to shoot me in the back. Wanker

Fri, 03/01/2013 - 13:41 | 3290853 Joebloinvestor
Joebloinvestor's picture

The solution for a failing socialist state is not to elect a bigger socialist.

Fri, 03/01/2013 - 12:50 | 3290563 WTFUD
WTFUD's picture

Hollande is the worst kind of establishment elitist phoney fake murdering son a french bitch just like his predesessors. When the time comes he should stand in the dock alongside the other murdering sons of bitches like blair/brown bush obama & the too many to mention evil killers. When these bastards are on trial then and only then will i start taking anything that anyone has to say seriously.

Fri, 03/01/2013 - 13:39 | 3290848 shovelhead
shovelhead's picture

So,

you're not enrolled in the Adopt-A-Drone Program?

Fri, 03/01/2013 - 12:50 | 3290560 Cpl Hicks
Cpl Hicks's picture

I don't understand why the French trusted a guy with the name of Hollande in the first place.

They should look for somebody with a name like Deutschherren or Schlagmeister.

Fri, 03/01/2013 - 14:08 | 3290959 SAT 800
SAT 800's picture

Schlagmeister is good; it has a kind of a ring to it. What about Scheissmeister? Yeah, that's it. Scheissmeister for the Leader of the French "economy". Which is starting to smell like cheese that's a little past it's sell-by date.

Fri, 03/01/2013 - 12:47 | 3290535 lamont cranston
lamont cranston's picture

Pissing in the wind

Betting on a losing friend

These are the things we're gonna tell our grandchildren

-JJW, circa 1973

Fri, 03/01/2013 - 12:04 | 3290247 Orly
Orly's picture

Hey, Bruce, did you happen to catch this front-page article of an interview with Druckenmiller?

He's speaking your language about seniors and entitlements.  You're starting to make some headway!

:D

http://www.zerohedge.com/news/2013-03-01/druckenmiller-currently-i-see-s...

Fri, 03/01/2013 - 12:32 | 3290434 Bruce Krasting
Bruce Krasting's picture

Actually I've been pissing in the wind for the past four years. Stan the Man goes on TV and accomplishes more than I have in 200 articles, in ten-minutes.

 

I ain't got no star-power.

Fri, 03/01/2013 - 14:14 | 3290985 SAT 800
SAT 800's picture

You're going in my book on trading; because of the day you pointed out to us, to me, who was not paying the slightest attention to the CHF; that the CHF had rallied expontentially to 1.41; since I knew this was due to the "public mind" "seeking safety" from the Euro, and I knew that the Swiss are perfectly capable of managing their currency; I immediately checked the chart on the CME website; picked up  the phone and sold a half a million swiss Franks. I read every word you write. I've been looking at statistics for the French Economy; whooa, is that a big problem. As Mrs. Tratcher said; "Socialism is fine, except that you run out of other peoples money to spend". Amen.

Fri, 03/01/2013 - 14:51 | 3291108 Orly
Orly's picture

Then, on a lark, put five bucks on Swissie long @ 0.935 to 1.03.  It's only a bologna sandwich but might buy you a steak one day.  The reversal higher should come on or about Thursday, when Draghi announces lower Euro rates.

:D

Fri, 03/01/2013 - 12:38 | 3290461 Orly
Orly's picture

You were the Prompt, the Pioneer, the Pusher.

The new definition of PPP.

:D

Fri, 03/01/2013 - 12:15 | 3290322 SAT 800
SAT 800's picture

The selling in the EUR/USD Mar. started at 2'15am. and it's been basically no bid all morning; came in for a kind of a crash landing around 1.2980. Vol. 243,000+. Important day; maybe they'll finally break down out of this big trading range they been in.

Fri, 03/01/2013 - 12:23 | 3290374 Orly
Orly's picture

It is possible.  If so, that sends the USDCHF higher.

Fri, 03/01/2013 - 11:58 | 3290223 SAT 800
SAT 800's picture

Currently short the EUR/USD from 1.3164 basis June,'13. CME. open a futures account, Orly. Bid and Ask is for chumps. I am of course, awaiting the break out of the big swinging trading range to the downside; in the mean time, I will soon have my zero loss stop order in. Sooner or later fundamentals will assert themselves. Did you look at the Cable chart; did you see the big double top? did you sell it? why not. USD/CHF? Orly, I'm worried about you.

Fri, 03/01/2013 - 12:06 | 3290255 Orly
Orly's picture

I'll be fine.  No worries.  There are changes in the wind.  I may be wrong but...I might be right.

Stay tuned.

:D

Fri, 03/01/2013 - 12:31 | 3290422 SAT 800
SAT 800's picture

I just looked at the CHF chart; basically, what you're being attracted to is the tail end of some momentum. the odds are about 75/25 against it making it back to 1.03. Learn to pick tops and bottoms; go against the sentiment; for fundamental reasons, of course; don't try to get on the train after it already left the station.

Fri, 03/01/2013 - 12:44 | 3290500 Orly
Orly's picture

I'll keep that in mind.  But I haven't heard any "sentiment" on Swissie except don't do it.  So, which is it?  Should I listen to you and Bruce and everyone else or go with what I see?

CCI is rising on the Monthly chart with strong long candles.  The upper Bolli puts the target smack at old support, now reistance, at 1.03.  Euro starts to take a bath next week with lowering rates, which sends the pair higher.

:D

Tell you what, if I am wrong on this one, I'll never make another reco again and I'll slunk off back to my cave.  Deal?

Fri, 03/01/2013 - 14:30 | 3291041 SAT 800
SAT 800's picture

No. no. it's alright to be wrong. This might be the third time in a row that I'm wrong on my timing for the EUR short. If you want to use charts just put a ruler across the tops and across the bottoms and you have a channel. Please, please, forget about the candles. Prettty, please. the problem to my mind with this CHF idea is, it's very limited; we're going after a small fish; and they're notoriously good at controlling their own currency. Your reasoning is certainly right, but whereas the EUR/USD is under the complete control of a massive speculative volume; the Swiss can intervene effectively to "paint" this chart. Rather than trying to make stories that possibly could happen; the best thing to do is to wait and watch until some price is completely out of wack with whatever we can understand about reality. For instance, we knew the Swiss weren't going to let the Europeans use there currency as an escape hatch from the Euro because they have to Export; so this was the fundamental, in that case. Recently, we've seen an absolutely classic chart on GBP/USD; if you look at a daily chart for that pair, you'll see the beautiful double top; and this in a currency that represents a basically dead in the water economy, another broke has been, wanna be, country. (I love saying this, because I'm a Scot; and no we don't forget and forgive; ever). So, the double tops are the market itself saying, this is as high as I can go; here is where the big commercials start selling me; so just go along with the program. Look at an ordinary bar chart of  CABLE and see this. It involves waiting and watching; but then you have a trade that trends for months and makes many, many, thousand dollars. And your probability going in is like 80/20 in your favor. Someday, I'm gonna write a book, I swear. Do you know any publishers?

Fri, 03/01/2013 - 14:45 | 3291099 Orly
Orly's picture

You can easily go the self-publishing route.  I have done that before.  Then, it comes down to promotion.

But whatever you do, don't call it "Forget About the Candles."  Sorry but that's just silly.  Trendlines, Fibonacci levels and harmonics I understand well but candlestick patterns is where it's at.

If it all boiled down to one thing I would want to see, it would be the candles.  That's how I know there is a shooter on the USDCHF.  The monthly chart shows a long marubozo candle after a strong up candle.  That means that there is at least two more months of upside to this move.

Either way, we'll see.

Until then, happy trading!

:D

Fri, 03/01/2013 - 11:56 | 3290206 QQQBall
QQQBall's picture

They just elected Hollande

Fri, 03/01/2013 - 15:17 | 3291214 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

They are French...

Fri, 03/01/2013 - 11:54 | 3290198 TahoeBilly2012
TahoeBilly2012's picture

Groupon.....France..... "Grey-popoun"... I get it now Bruce thanks!

Fri, 03/01/2013 - 11:48 | 3290165 ebworthen
ebworthen's picture

Groupon = Groupthink

Just read Mason's letter; it is rife with groupthink offal.

Fri, 03/01/2013 - 11:44 | 3290152 b_thunder
b_thunder's picture

GS sells offal to its "muppets",  MS - to its own.  I'm surprized that so few "social media" stocks managed to go public.  Back in the 1990s we'd have 2 dozen of them, each with $1B+ market cap.  IMHO, Wall St. was a lot more restrained this time around than than during the dot-com bust 1.0.  Perhaps still "unsure of itself" after the credit crisis.

 

Fri, 03/01/2013 - 11:27 | 3290086 DeadFred
DeadFred's picture

I thought Europe was fixed???

Fri, 03/01/2013 - 11:35 | 3290125 Bruce Krasting
Bruce Krasting's picture

It is fixed. Mario Draghi said so. Everyone believes in Mario - Right?

Fri, 03/01/2013 - 11:33 | 3290111 Winston Churchill
Winston Churchill's picture

Yes its fixed, as in neutered.

Fri, 03/01/2013 - 12:48 | 3290544 TBT or not TBT
TBT or not TBT's picture

With the demographics you'd expect from that. Except from France where .gov.fr subsidizes the replacement of Gauls by faster breeding north Africans

The "youth" in the streets predicted by Bruce when warm weather arrives are increasingly of Arab descent and values.

Fri, 03/01/2013 - 12:01 | 3290236 SAT 800
SAT 800's picture

Exactement, mon cher.

Fri, 03/01/2013 - 11:22 | 3290065 iamtheeggman wh...
iamtheeggman whooooooooooooo's picture

Fire up the CarBQues ! Peugots in a blanket for all the kids!

Fri, 03/01/2013 - 11:54 | 3290197 Dan Conway
Dan Conway's picture

A Bonfire of Stimulus!!!!!

Fri, 03/01/2013 - 11:45 | 3290160 steve from virginia
steve from virginia's picture

 

 

Seems every year the French 'youth' burn several hundred cars. Maybe this year they can up their game to the next level and burn several hundred thousand cars.

 

Burning 500,000 cars would barely make a dent in French fuel consumption/waste @ 1.5 million barrels per day of high-priced Brent crude that are bought with euros borrowed each and every day at nation-breaking cost from Wall Street and the City of London finance ... but it might send a message!

 

Then again, it probably wouldn't ...

Fri, 03/01/2013 - 12:23 | 3290370 Haus-Targaryen
Haus-Targaryen's picture

You incompetant moron, the French kids torch a ton of cars, just so these people get their insurance payouts and run to the VW dealer to load up on more Golfs and Passats.  Everytime the French riot the Germans make a ton of money. 

 

I hope the French kids toarch all the cars in France ... just so the French can go buy more with 'dat insurance check. 

Fri, 03/01/2013 - 13:06 | 3290675 TBT or not TBT
TBT or not TBT's picture

Peugeots and Renaults first and foremost. .

Fri, 03/01/2013 - 13:12 | 3290719 TBT or not TBT
TBT or not TBT's picture

Also the kids torching cars are more Arab than "French". Culturally speaking.

Fri, 03/01/2013 - 13:16 | 3290744 TBT or not TBT
TBT or not TBT's picture

And kids includes a lot of young adults. These are not adolescents. They also are almost entirely male. Arabs of French nationality from the thousands of neighborhoods where French law doesn'thold and only the welfare state extends.

Fri, 03/01/2013 - 14:47 | 3291104 kaiserhoff
kaiserhoff's picture

There's a real estate term that applies to torching French cars:  Highest and Best Use.

Fri, 03/01/2013 - 15:21 | 3291226 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

Noice!

Fri, 03/01/2013 - 10:24 | 3289816 Element
Element's picture

Wasn't everyone about 6 months ago pretty much convinced Hollande was a superhero that was going to save European life and change everything for the better ... I guess he was full of shit ... can't say I'm surprised, kinda saw that coming from several light years away.

Fri, 03/01/2013 - 12:14 | 3290317 williambanzai7
williambanzai7's picture

It would appear he is the French version of Debt Brother.

Fri, 03/01/2013 - 15:00 | 3291145 gould's fisker
gould's fisker's picture

It appears as a previous commenter has noted that electing a socialist to spew more free cash out of his ass to solve a perceived lack of "free-flow" of the past ten socialist prime ministers is not a solution to the French problem; but it sounded good to the French electorate on election day.  Next step, to the barricades to defend French Liberte!

Fri, 03/01/2013 - 10:21 | 3289809 Edward Fiatski
Edward Fiatski's picture

Bruce, I was eating lunch. :(

Fri, 03/01/2013 - 10:26 | 3289825 Element
Element's picture

Pastrami?

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