Things are getting to the point where frolicking like Scrooge McDuck in a vault filled with certified gold coins has its appeal. Posted by James Randolph on January 13, 2011
Certified gold – a friend indeed.
January 13, 2011 – Things are getting to the point where frolicking like Scrooge McDuck in a vault filled with certified gold coins has its appeal. Of course that shouldn’t be taken literally, but “now that Washington has defriended investors, the would-be investing public should defriend the politicians who took away their markets.” That’s the advice given by E. Gordon Crovitz in the Europe edition of the Wall Street Journal.
Crovitz was writing about Facebook’s initial offering, which in the past would have had investors salivating. But this wasn’t a public offering; all $500 million went to Goldman Sachs for the exclusive benefit of their most elite clients. But don’t get mad at Facebook. If the shoe were on the other foot we would all do the same thing.
The purpose of initial offerings is to raise capital, and lots of it. That’s what it takes to kick a company up to a whole new level of operations. Thanks to a nifty piece of legislation called the Sarbanes-Oxley Act, however, such public offerings are now prohibitively expensive for new ventures. The act, which started out as corporate and auditing reform, quickly deteriorated into a massive heap of unnecessary and ineffective regulation that would drain too much of the venture’s scarce resources to become compliant. Private equity offerings are free of that burden, so a company can get the cash it needs faster and without all the bother and expense of a public offering.
Naturally, there will still be IPOs, but only by well established firms as they level off. For returns they offer only a share in profits – after Wall Street’s M & A and other insider schemes have squeezed every dime they can out of them, of course.
By comparison, investment in certified gold beats Wall Street hands down.
Senior Staff Writer – Certified Gold Exchange