Goldman Invests $450m In Facebook 228
An anonymous reader writes "The news that Goldman has taken a stake in Facebook, the white-hot social networking giant, has tongues wagging from Wall Street to Silicon Valley. As first reported by DealBook, Goldman has invested $450 million in a deal that values Facebook at $50 billion. As part of the deal, Goldman is looking to raise as much as $1.5 billion from its wealthy clients to invest in Facebook alongside the firm."
Can't resist ... (Score:5, Insightful)
Did evil just become even more evil while I was sleeping over New Years ?
Goldman Sachs aren't exactly known for their "good values".
Why the hell does an investment bank, who normally act as a "service provider" want to take a direct stake in a Social networking company ?
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Re:Demographic Data (Score:5, Insightful)
One mans poison is another mans profit.
Re:Demographic Data (Score:5, Interesting)
If FB can figure out how properly utilize the data it has to properly send target advertisements in an unobtrusive way, they will be able to do what nobody has to date -- compete with Google on the advertising front.
This makes them supremely poised to be the ultimate competitor to Google for advertising dollars (which last I heard is the bulk of Google's profits). Note this doesn't make them a direct competitor to Google per se, but certainly it makes them capable of putting one heck of a dent in Google's bottom line.
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I think it makes great logical sense that heavily targeted advertising would be more successful than generalized advertising.
Have you ever been on a heavily populated beach resort area and seen one of the planes go by pulling an advertisement? Which do you think would be more effective for one of those planes in the dead of summer in a hot place -- an advertisement for tanning lotion or one for heavy winter coats?
I see targeted advertisement based on demographic data as an attempt to be smart in similar way
Blowing big bubble before (future) Facebook IPO (Score:3)
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I don't believe that Facebook is worth the valuation financial media (and institutions) are touting today (>$50B). And I'm not sure Goldman intends to keep its investment in Facebook for a long time. I suppose they are trying to find as many suckers as they can, push Facebook through IPO with share price inflated several times, then sell their investment with profit to unsuspecting public, pension funds etc. (a.k.a. suckers), collect fees/profits on it and leave everyone with the bag.
This. "Social networking" websites are not long-term investments. There was once a time when everybody thought that no one would ever catch up to the market share of AOL instant messenger. It wasn't two years ago that all the kids were using Myspace. How is Facebook different?
Re:Demographic Data (Score:5, Informative)
Re:Demographic Data (Score:5, Interesting)
People still don't get it. That massive global derivatives trade that is larger than world GDP? Guess what's backing it. It's not just your savings. It's not your retirement account. It's not your mortgage. Not even your tax dollars.
It's you.
And anyone who can know all about you, can gain an incredible edge in the new order of global trade. In the new reality, that the world is a closed system. That the economy operates on knowable variables. And that it can be solved. They are building the Google of global finance.
And, to do that, they've put a bullseye on your most intimate details. They want to know your business contacts. They want to know your friends. They want to know who influences your decisions. They are building a map. Forming connections. They want to know what you eat. They want to know how often you exercise. They want to know what drugs you take. What television shows you watch. They want to know how the dominos fit together. They want to know how a random person can say something to a secretary who says it to her boss which influences his perspective and brings down a major corporation, like a house of cards.
Then they can make it happen. Bet against it. And profit. Checkmate.
So there's quite a bit of money on the line. And somehow insurance companies aren't as useful as they once were. Somehow, the entire concept of random, evenly distributed risk probability curves has been replaced with a much more insidious, and manipulable, model. And you're right at the center. So, now, reliably modeling the global economy hinges upon controlling it's most unpredictable part: you.
Well then, Goldman's screwed (Score:2)
Any political and/or economic ideology is perfect and will work as planned... until humans get involved.
Goldman is welcome to that data, and everything that comes with it.
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It's not just marketing data. Both Google and Facebook are a massively huge platform on which you can present your products. If you're not on Facebook with your company, and if your product does not show up on the first page of a Google search, you have a problem as a big business.
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who actually make popular, profitable and tangible products
A lot of people seem to have hang ups about FB not producing anything tangible but traditional media corporations such as Viacom don't produce anything tangible either and their business model has done just fine. Think of FB as a media corporation that has a global audience and the ability to display targeted ads. If Viacom is worth 25 billion then I don't find it so unreasonable to value FB twice as much.
Re:Demographic Data (Score:5, Interesting)
The main point almost everyone is missing is that all data put in the *cloud* is there until the end of time, never to be reclaimed. That is a freaking long time peeps; and just as people could not comprehend the ability to land on the moon at the turn of the 20th century; we can not begin to comprehend the future uses, good or bad, for all the data people are currently freely giving up without a second thought. Goldman is obviously betting the payoff will be substantial; far more than mere marketing alone.
In my lifetime we've gone from being upset when a person stood to close to the phone booth (with a closed door) while we were having a conversation, to loudly conversing and putting personal facts out there for anyone to use however they choose.
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Rev 13:16 KJV - And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads:
Rev 13:17 KJV - And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name.
Just sayin'
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Zuckerberg may be evil but outside of delusions of grandeur he's not that Evil.
And "just sayin'" has got to right up there with smilies and "with all due respect".
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Why the hell does an investment bank, who normally act as a "service provider" want to take a direct stake in a Social networking company ?
um... not to state the obvious... but because they're an investment bank and see a lot of money potential?
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Because they're one of the (supposedly) hottest companies around, and don't have public stock.
Remember, Goldman isn't just providing a service to let other people invest. That's just a way to get a larger stockpile of money that they can use to leverage themselves deep into the stock market on their own positions. They could care less about the $20 commission on your
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Aha,
so more like a "we put our own money in there, so it has to be a good thing".
reading the article properly helped a little bit ! :)
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Erh... that's pretty much the point in investment, at least these days.
The value of a company is no longer what it produces and the value of their products. "Value" has become something completely artificial. Today, the "value" is what some people think it would be worth. Whether that has any reflection in reality is secondary.
Just think for a moment. Facebook has been "valued" at 50 billions. I can't properly picture that amount of money to be honest, and I'm no friend of cheesy comparisons ("you could get
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The value of a company is no longer what it produces and the value of their products.
net present value calculations are fairly meaningless in an unstable environment. Also I think you're confusing the revenue line on the profit and loss statement with the net worth on the balance sheet. Play some more "railroad tycoon".
"Value" has become something completely artificial.
What exactly is a "non-artificial" "value"? The only answer I can even think of is some sort of revealed religious answer, like turning one dude in for crucifixion has a value of X pieces of silver, and I don't think that defined "value" is too helpful in figuring out how
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The only answer I can even think of is some sort of revealed religious answer, like turning one dude in for crucifixion has a value of X pieces of silver, and I don't think that defined "value" is too helpful in figuring out how much Facebook is worth.
Really? I can think of plenty of ways that using facebook is like getting nails pounded into your body.
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Their brand alone is a valuable real asset. The data mined from their users' profiles is for the most part very real, as well. Most of the value lies therein.
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Re:Can't resist ... (Score:4, Funny)
Maybe they decided it was about time to invest in something successful
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Reports were in 2008 that Zuckerberg had a 3 year plan. Looks like this is the ending.
Incidentally, Facebook is not stock I would buy, except perhaps for the initial jump after the IPO. I have trouble seeing it as a good long term growth investment. But then I've been wrong before.
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They were right. It turns out that throwing the worlds economy into chaos and recession is fantastically profitable. Especially so when you can convince the government to cover your losses with the tax money that you avoided paying thanks to low capital gains taxes and loopholes engineered by high priced tax attorneys.
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And the last two White House occupants (Bush/Obama).
And people still love the (D)s and (R)s
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GS didn't actually take very many losses because all the MBSs they had were hedged or insured. Funny that AIG hasn't had to pay back that $150B yet but Goldman made good in only a few months. Goldman is sitting on an absolute PILE of cash--the pile is so big they haven't even counted it yet.
But another poster said it best--Goldman will simply run it like a private equity trade; they can't sell Facebook stock but they can own it and then sell the right to gamble on it. Seems like it it should be illegal a
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Why the hell does an investment bank, who normally act as a "service provider" want to take a direct stake in a Social networking company ?
Eventually Facebook will do an IPO. This will result in huge fees and favors for the underwriter. This deal makes it very likely that underwriter will be Goldman Sachs.
Also, Goldman Sachs is not just a "service provider". They make most of their money trading on their own account. Of course, this is a huge conflict of interest, but if their clients are willing to accept that, why should I care?
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OT a bit, but I still can't believe people help push up the valuation of Facebook by keeping their content there with all of the security fiascos and Zuckerberg quoted as having said "they trust me, dumb f**ks." That was, of course, back at Harvard when he was snooping in emails based on account login information, but I believe once a douchebag, always a douchebag.
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Yes, Goldman is evil !!! (Score:2)
If being smarter than your competition is evil, then I welcome evil.
Re:Can't resist ... (Score:5, Insightful)
Why the hell does an investment bank, who normally act as a "service provider" want to take a direct stake in a Social networking company ?
Two words: regulatory arbitrage [thinkprogress.org].
US law currently prevents Facebook from taking on more than 499 investors unless it discloses its financial results to the public. Facebook does not want to do this, but it certainly wants investment money. Plus there's a lot of dumb money out there that would love to invest in Facebook. How to get around this?
The answer is, apparently, to take on a single investor --- Goldman Sachs. G-S will then sell "shares" of their stake to their own investors, collecting a handsome commission along the way. Most likely the investment house won't even wind up with too much exposure of its own, so when Facebook inevitably dot-bombs they'll just be sitting on a pile of cash. Plus there are opportunities here to make and return profits to their preferred clients (as the stock goes up), making sure that only the fools get stuck when it plummets.
Normally it wouldn't bother me too much to see rich people getting fleeced, but how much do you want to bet that somehow your money will wind up in that pool, even if it's indirectly through mutual funds and third-party companies?
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2) Goldman is now a front runner for any IPO that facebook does. IPO fees are something like 2-4% of the value of the company. On a 50 Bn valuation, Goldman can make about a billion in IPO fees alone.
3) Most likely this stake will also be used as a compensation
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Fools and their money.. (Score:3)
Goes hand-in-hand with the modern-day Farcebook version:
Fools and their privacy..
Re:Fools and their money.. (Score:5, Insightful)
Only the American tax-payer is the fool, here. This is a can't-lose wager, for everyone else. You invest and get rich or you invest and get re-imbursed by the American tax-payer next time the government decides to save the speculators by handing them a few trillion.
Remember, the current president and last president decided that speculation should no longer have any risk and backed that up with seven or eight trillion dollars in handouts. Hurrah!
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Only the American tax-payer is the fool, here. This is a can't-lose wager, for everyone else. You invest and get rich or you invest and get re-imbursed by the American tax-payer next time the government decides to save the speculators by handing them a few trillion.
Remember, the current president and last president decided that speculation should no longer have any risk and backed that up with seven or eight trillion dollars in handouts. Hurrah!
I was going to say the same, so I have nothing to add except: mod parent up!
OK, well, there's one thing I would like to add as a commentary: this transaction is emblematic of the current US economy: speculation, criminal institutions that are too big to fail, and a social network valued at billions$.
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> Only the American tax-payer is the fool, here.
Not sure what you mean.
Are we fools for paying taxes? The alternative is big men with guns confiscating our possessions and imprisoning us.
Are we fools for bailing out bankers? That choice wasn't a checkbox on our tax forms.
Are we fools for approving the Goldman/Facebook deal? Again, not a tax form checkbox.
Are we fools for not arming ourselves and shooting somebody? Who would you want us to shoot?
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Fire those that pass the taxes, and make it known why.
Again, fire those that bail out the bankers, and make it known why.
Goldman/Facebook is a private deal, but if they get bailed out then see point #2 above.
Yes, but that's a much deeper issue.
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Whom, you ignoramus!
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> If enough people vote against corruption
Everybody votes against corruption. Everybody also votes against terrorists, pedophiles, and puppy mills. But they all happen anyway.
The root problem isn't corruption, it's power. Voters have decided that government should be responsible for all our problems, and have gradually allowed government commensurate power over our lives.
Now our votes change nothing. And, naturally, the power we've ceded often corrupts the empowered.
Re:Fools and their money.. (Score:4, Insightful)
It's a good thing tax payers have made all that money back with interest then, isn't it?
I think you forgot to mention that part.
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First, bullshit. In total, the government handed out more than seven trillion dollars in emergency spending/bailouts (and in some estimates, as much as 9, 11, or even 15 trillion). TARP, which was repaid, was only a very small portion of it. And with that, the amount repaid wouldn't even cover inflation.
Second, you're missing the point that speculation is supposed to be just that. Speculation. If we're backing investments with tax payer money, it's no longer speculation and we're even more prone to further
Hard not to make money with 0% loans (Score:4, Insightful)
They were able to use further loans from the gov to pay back the TARP funds. I know GM did this [reason.com], not sure how widespread it is among TARP recipients. So they went around and got another loan, paid back the original loan, and everyone's happy.
As to G-S, give me access to 0% loans direct from the fed and I'm sure I can make money too. Like oh, use these no interest loans to buy government bonds that return 5%. [seekingalpha.com]. That's right, we give these bastards money at no charge so they can turn around, buy government debt, that we as taxpayers pay back at a 5% charge. Sweet! No wonder so many NY Stock exchange board members jumped onto G-S when they became a bank specifically to allow them to get bailout money.
Do this scam enough and the facebook money is nothing.
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Only the American tax-payer is the fool, here. This is a can't-lose wager, for everyone else. You invest and get rich or you invest and get re-imbursed by the American tax-payer next time the government decides to save the speculators by handing them a few trillion.
Nah, I invest and the tax payer never reimbursed _me_ when I lost. Historically the American economy has outperformed all others because it embraces laissez faire capitalism that allows people to accumulate wealth so they can invest. If you have another system please run for office but consider that overly regulated markets without entrepreneurial investment have failed in the old Soviet Union, been abandoned by the Chinese, and caused stagnation throughout South America.
A lot of people seem to be agains
Book value vs. Real Value (Score:3)
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I online trade all day every day these days, and now it's software that's the hobby. One of the better pieces of advice I ever got from a broker, back when I had one (online now, all the way) was "watch Goldman". Don't buy them, and sure don't listen to what they say -- watch them. You can make money riding the moves they make when they manipulate ma
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Goldman Sachs .... Facebook .... Wall Street ... (Score:5, Funny)
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The sequel will practically write itself.
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Hey, if the Dollar crashes, we can buy lunch in Farmville Chickens. Maybe they'd be on a par with Italian Lira. $34,000 Chickens per former $.
12 billion bailout (Score:4, Insightful)
Re:12 billion bailout (Score:5, Informative)
Re:12 billion bailout (Score:4, Insightful)
People seem to leave this part out. They keep screaming about the 'bailouts' and tax payer money being 'wasted'. That money has been, for the most part, repaid, with interest. The 'taxpayers' have been making out like bandits with these 'bailouts' because they've decided they don't want the regulation that comes along with it. You take taxpayers money, you play by their rules. It's like people can't beyond the fact that these loans had some pretty heavy strings attached to them for the benefit of the taxpayers.
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As much as we got back the money with interest from some companies, the amount of money we lost on AIG completely wipes it out. The 1.1 Billion that Goldman-Sachs payed back pales in comparison to the 50 billion of the 180 billion that they got out of the AIG bailout.
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"People seem to leave this part out. They keep screaming about the 'bailouts' and tax payer money being 'wasted'. That money has been, for the most part, repaid, with interest... "
And how does that interest pay for all the damage done. These creeps aren't even being held accountable for the disaster they themselves caused. 23% interest on a few billion doesn't compare to the trillions in damages and the billions already given to the banks before tarp.
rant
Why haven't these assho
Re:12 billion bailout (Score:4, Informative)
People seem to leave this part out. They keep screaming about the 'bailouts' and tax payer money being 'wasted'. That money has been, for the most part, repaid, with interest.
Baloney. Of the $550B disbursed, only $230B has been returned [propublica.org] and that doesn't take into account the cost of money for the interim.
Re:12 billion bailout (Score:5, Insightful)
People seem to leave this part out. They keep screaming about the 'bailouts' and tax payer money being 'wasted'. That money has been, for the most part, repaid, with interest. The 'taxpayers' have been making out like bandits with these 'bailouts' because they've decided they don't want the regulation that comes along with it. You take taxpayers money, you play by their rules. It's like people can't beyond the fact that these loans had some pretty heavy strings attached to them for the benefit of the taxpayers.
If you count Goldman's AIG exposure, which any honest accountant must count, Goldman has not even come close to repaying the bailout money they received.
Goldman would absolutely be bankrupt today ten times over had the government not bailed out AIG. The government's bailout of AIG was in effect a proxy bailout of Goldman. Until AIG repays every cent they received with interest, Goldman is not off the hook.
It is, however, more than a little upsetting that cheerleaders like you so blindly accept Goldman's offloading of their liabilities onto AIG and then try to say with a straight face that Goldman has repaid their debt to the taxpayer.
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I'm not sure why that's really relevant. The assistance the government provided was worth far more than 23% interest. And the SEC let them off with practically no penalty for scamming their clients (maybe that's a bit harsh, but then again, the way they sold investment vehicles that they had a financial stake in seeing fail seems like a major
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Well considering how much has been paid back and how successful it has been either they've been very lucky or they knew what they were doing.
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So our 12 billion in bailout money goes to invest a company that maybe makes a few million dollars of profit on at a least half a billion dollars in revenue.
Goldman Sachs doesn't owe the government a dime:
In June 2009, Goldman Sachs repaid the U.S. Treasury's TARP investment, with 23% interest (in the form of $318 million in preferred dividend payments and $1.418 billion in warrant redemptions). Goldman Sachs [wikipedia.org]
The 23% return in interest on a loan of $10 billion is not half-bad.
In 2010 Goldman Sachs stage-ma
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Considering the conditions at the time, 23% was a steal for Goldman Sachs. Markets wouldn't have loaned to it at 50% at the time.
Re:12 billion bailout - Yes, but... (Score:2)
But...
They paid back the TARP with money they got from quietly selling illiquid MBSs to the Federal Reserve.
http://dailyreckoning.com/outing-ben-bernanke/ [dailyreckoning.com]
So, yes, the Treasury got paid back. But now there is a bunch more junk on the Fed's balance sheet that will eventually have to be written down.
But Goldman came out OK, so that's nice.
I know this isn't new... (Score:2)
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What does any of that have to do with an investment bank investing capital in a company?
It is after all the definition of what they do every day.
And yes, they are trying to make a buck and acting in their own private interest - that's how capitalism is supposed to work.
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Reasons Why This Might Be a Bad Move (Score:5, Interesting)
Regardless, it sounds like more of these privately traded shares in auctions from Sharespost will be conducted in the near future. Expect to see Facebook get a serious cash infusion if they all go as well as this one.
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We have no real idea if Facebook revenues are actually near $2 billion.
Correct. But Goldman does know. They will have had access to Facebooks' books before doing a deal like that.
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The rest of the market has a very vague idea about Facebook financial numbers, as they are not public - however, you'd bet that Goldman's lawyers and financial analysts have now spent much time looking at their numbers, and they are betting with their bonuses that some 10% of Facebook will be worth $450 million.
Man, they never listen to me (Score:5, Funny)
Tulip bulbs, I tried to tell them. Tulip bulbs! That's the future of finance, right there!
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Ah...but you seem to be forgetting that the South Seas is where the investments are at! Never mind that we don't have a business plan...it's the south. And it's the seas. It must be worth something!
The Social Network: Goldman Sachs years (Score:2)
So we will have new sequel "The Social Network: Goldman Sachs years"?
Diaspora, where are you?
What a relief! (Score:5, Funny)
So each user is worth about $100? (Score:3)
Somehow that does not seem right in any shape way or form. I know at least a handful users that have way more than a couple of accounts (pets, hiders and other stuff.)
Maybe 25 cents/user on a good day but $100?!? Completely incredulous. But then again maybe Goldman sees the US dollar tanking worse than Titanic in the near future.
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Re:So each user is worth about $100? (Score:5, Insightful)
Somehow that does not seem right in any shape way or form. I know at least a handful users that have way more than a couple of accounts (pets, hiders and other stuff.)
Maybe 25 cents/user on a good day but $100?!?
Take all your physical paper junk mail and toss it into MULTIPLE trash bags for about a year. Make an intelligent estimate on paper, printing, and postage costs and multiply by the number of envelopes / catalogs / postcards / phone books. I was easily exceeding $1000/yr a couple years ago.
Realize that my yearly junk mail is a yearly cost for an entire industry, that shows up on the P+L and cash flow statements not the balance sheet. On the other hand you're talking about ownership of a future advertising industry merely being $100 per victim. Frankly, $100 ownership cost per victim is cheap.
Compare to the cost of buying the SuperBowel in order to sell millions per minute TV commercials.
Another fun cost comparison is a realistic estimate of the sum of all local TV stations, at least a hundred million industry wide total to reach a million or so viewers, not so far out of line.
Advertising is big business.
Now that GS invested 1/2 billion into Facebook.... (Score:4, Insightful)
Now that Goldman Sachs has invested all this taxpayers' money into Facebook, is Facebook suddenly too big to fail? *shudders*
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What taxpayer money? They repaid their bailout (as have most financial institutions) a long time ago with interest.
I remember when the TARP was being discussed a lot of people would discuss what $700 billion could buy. Oh think about the number of schools, teachers, policemen firemen, or homeless people this money could go to. What those people failed to realize is that TARP was a loan, 90% of which has been repaid with interest.
And this is what's wrong with "investing" today (Score:2)
Remember the good ol' days when "investing" actually meant "putting money in one basket to build a bigger company, to produce better products cheaper, to create more jobs"?
This is investment for the sake of investment. This neither generates jobs nor does it do anything else of value to ... well, anyone but the investors and the invested.
And when (not if, as soon as this bubble pops, too, we'll be bled dry for bailouts again.
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Remember the good ol' days when "investing" actually meant "putting money in one basket to build a bigger company, to produce better products cheaper, to create more jobs"?
FB intends to use this money to hire more developers and build out their infrastructure. How does this not fall under "creating jobs" or "building a bigger company" or "building a better product"?
Based on .... (Score:2)
... Goldman's behavior during the recent mortgage-backed securities fiasco, I'd say its time to short Facebook. If that were possible with a pre-IPO company.
When someone advertises their purchase of a chunk of a companies equity and then goes looking for investors to "go in along side them", its too late. The news of their purchase has just driven the price up. If they were looking after their clients' interests, they'd have rounded up partners before going public. What they're probably looking for is sucke
Why do they need the money? (Score:3)
"Exactly" (Score:3)
"And does the Goldman-Sachs give him a good price?"
"Of course not, they are the Goldman Sachs, they make their living ripping off the American people [youtube.com]."
$450 Million = One New Facebook Data Center (Score:4, Informative)
Why raise money? (Score:2)
When GS can get the treasury to print it up for them. It's going to be interesting to see what happens when the creeping horror known as GS gets it hands on so much personal info. They could also take the LBO approach of "strip it and milk it" by forcing Facebook to ruthlessly cutting costs, which translates into worse service and security, and maximizing revenue which translates to opening the flood gates to greater sale of info and more ads.
Ask Slashdot: How can I bet against this? (Score:3)
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Can I invest £50 and then get £1.50 from it? I think I have found a way to create infinite money!
Seriously though is there anything stopping me from doing this? Facebook doesn't look like it's going to fail anytime soon...
If you already have money, it's easy to make more money. Especially if you have lots and lots of money - so much money that if you lose money, everybody else gets worried and gives you more money.
The hard part is getting a lot of money in the first place, the rest is so easy even a banker can do it.
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