Goldman Creates a Facebook Hedge Fund for HNW Clients Historically Ripped Off By Such Vehicles,

According to the NY TImes, Goldman Invests in Facebook at $50 Billion Valuation. This investment (along with a reinvestment of $50 million by Digital Sky Technologies (the Russian investment firm that previously invested half a billion dollars) offers Facebook the financial firepower to compete with public companies in hiring, acquisitions, etc., while having the benefit of thinking long term in it investment strategy (like Google has), without suffering the short term-itis that is prevalent in the expectations of the “show me the money, now”, quarterly demands of Wall Street analysts.

That is not the most interesting part of the story though. The Facebook stock has more liquidity than some public company stocks, and the post money valuation of Facebook is now greater than much more established public companies such as eBay, Yahoo and even Time Warner. Hey, it gets a lot more interesting than that. This is where the snarky, smart ass, yet highly analytical nature of BoomBustBlog parts with the reporting of those big MSM rags. I am not going to comment on Facebook’s prospects, at least in this particular missive, although I do believe that the young Zuckenberg is a capable and visionary CEO and his company has a lot of potential, there is a waft of bubbliciousness in the air reminiscent of the year 2000. Why do I say this? Well, the capital injection that so duly empowers Facebook is basically an uncapitalized bonus pool for Goldman Sachs. You see, it is highly unlikely that Goldman is actually materially investing in Facebook, particularly at these valuations (is facebook really worth more than Time Warner and eBay, after the private market liquidity discount?). What Goldman is doing is employing its financial engineers to allow its HNW investors to sidestep and circumvent the laws of the land as feebly enforced by the SEC. Its not as if this is a secret, it was published in the NY Times!!! Basically, Goldman has created a spit in the face of the SEC, Facebook hedge fund. See below…





Now, this begs the question as to just how lucky those potentially thousands of Goldman HNW clients are who are investing in the Goldman Facebook Special Purpose Hedge Fund. After all, this wasn’t the first time that Goldman employed its financial engineers to make available certain illiquid and/or arcane investments for the benefit of their clients. Let’s reminisce, shall we as I take you back to the BoomBustBlog post, When the Patina Fades… The Rise and Fall of Goldman Sachs???

In April of 2006, a Goldman Sachs formed “Goldman Sachs Alternative Mortgage Products”, an entity that pushed residential mortgage backed securities to its victims clients through GSAMP Trust 2006-S3 in a similar fashion to the sales and marketing of the CRE CMBS that is being pushed to its victimsclients as described in the links above. The residential real estate market faced very dire fundamental and macro headwinds back then, just as the commercial real estate market does now. I don’t think that is the end of the similarities, either.

http://www.zerohedge.com/article/goldman-creates-facebook-hedge-fund-hnw-clients-historically-ripped-such-vehicles-spits-face

... anyone stupid enough to play ball with the vampire squid deserves to lose their money, and they will.

Facebook will go the way of MySpace just as soon as something a little better or different comes along (BuddyCloud?).

Insanity - doing the same thing over and over and expecting a different result.

They rip off their own clients.