Facebook IPO

[Bob Cook]

You can argue that is part of their underwriting fee. But it then becomes my problem if I am dumb enough to trade in a newly-issued stock, because they not only are getting insurance on the stock that I don't get--and I don't want to be trying to compete on that kind of playing field--there is too much slack in the line left out there for others to be manipulating the price -- in ways I won't be aware of.

I personally don't want any part of that. Add in the fact that this particular stock was priced at a valuation I could never justify on a future earnings basis based on what I know about the company today, and I can't understand why anybody would have touched it. But if you chose to? There was a prospectus. The greenshoe option is certainly disclosed, even if it is buried in fine print. It's on you to know what you're getting into. Same as when you buy anything.

The idea that mom and pop got screwed over here's a stretch to me, because Facebook's a company that's nothing but promise ... as in, it really hasn't been established how they're going to take what it is they do and turn it into profits. So if short-term revenues aren't what they were thought to be, who gives a rip? Nobody's going long on (or not going long on) Facebook because of next year's projected revenues (or earnings). The individual investors clamoring to get in last Friday were itching for that first-day flip. That their dreams didn't materialize is NOT because revenue estimates were reported selectively (assuming they were).

Well, this gets back to half (or more) of the problem being that Facebook didn't act like a hot Internet IPO, pricing at an absurdly low valuation given demand so that while the company didn't reap the full benefits of the IPO, the investors and flippers did. Presumably, as a company, especially at an IPO, you WANT to maximize the value of your share price because that gives the companies, its insiders and venture investors maximum return.

But if Morgan Stanley and others selectively reported certain information to certain clients, then there's trouble. Who knows, that may have been a matter of course in a lot of these so-called hot IPOs, but nobody cared because everybody was making money.

 

[The Big Ragu]

I dunno. I just liked this.

 

[SoCalScribe]

I don't believe any investor should say "never" about any market segment. There is a season for everything. That was true of MBS and REMICs at one time. Hell, it was true of tulips at one time.

The point being, whether or not FB is long-term garbage is immaterial to whether or not attentive investors should have bought the IPO.

 

[The Big Ragu]

Shares are down another 7 to 8 percent so far today. Now sitting below $30 a share. Down more than 22 percent since the IPO.

 

[SoCalScribe]

I'm curious what bonds you're investing in. TIPS did extremely well over the last 9-3 months past; anything else you would like to claim?

I'd love to know what fixed-income products I should've been in over the last several decades instead of the stock market.

 

[The Big Ragu]

SoCal, Who was that addressed to?

I think you know. ... Over decades you are never going to garner as great a return in a fixed-income product as you are in equities. At least historically that has been the case. But your risk in fixed-income products is much lower than it is in equities.

If you have decades and you want to grow your money without actively managing it -- for example, saving for retirement when you are 20 years away -- yeah, a viable strategy is buying a basket of stocks or index funds and hoping for the 10 percent annualized returns you have gotten from say the S&P 500 since the 1920s.

But if you don't have a long time horizon to weather what can be very severe swings and protracted bear markets, and you want to generate enough income to at least offset inflation, fixed-income investments (which offer varying degrees of risk) aren't usually going to be as volatile as stocks. For example, if you had put your wad into an S&P Index fund in 2006 or 2007 with only a couple of year time horizon, you took a blood bath in 2008 when you lost more than 37 percent of your money. If you needed that money right then, you were screwed.

TIPS are doing relatively well right now, because there is inflation -- even if the treasury and the Federal Reserve are doing everything possible to ignore it and lie about it in their reporting, since they have caused it and have embarked on things that are going to continue to cause it. People are smart enough to know that in terms of the inflation-adjusted return, they are actually losing money by investing in treasuries or AAA-rated corporate bonds -- which are very safe, but aren't even offering enough return to keep track of the actual inflation we are being hit with. That leaves junkier bonds, which are paying a higher return, but in a shaky economy offer considerably more risk. And it leaves TIPS, which are trading at a premium to other bonds, not because people are worried about the potential of inflation, but because they know they are already suffering from the effects of it and they are looking for the safest way to keep their fiat money growing in line with how much value the currency is losing thanks to monetary policy.

 

[SoCalScribe]

I still have a significant part of of my 401k in the TIPS fund that is offered, not because TIPS are doing anything currently, but because like you I know that QE has to pay the piper sometime.

I am still a strong believer in the market, but I feel like inflation is something that isn't even TALKED about nowadays, despite all the QE. So there has to be a related opportunity.

 

[The Big Ragu]

I can't say anything bad about what you are doing.

Given the choices most people in have in their 401(K) plans, and what I see as likely over the next few years, I would guess equities are in a bubble of cheap money, and with all the fear out there they are starting to perform poorly. Treasuries and investment grade bonds won't even keep up with inflation. So I guess it leaves you with either junk bonds or TIPs, if you want to at least keep pace with inflation. My guess is that TIPs will perform relatively well moving forward, and there is nothing wrong with wealth preservation, if your investment choices are limited. Sticking the money into a your mattress or a money market fund, you are going to take a real loss.

If you are really worried about inflation, and you want to try to diversify some of that money the other places to look: 1) If the 401(k) happens to have a precious metals fund, it is the smartest thing you can do with a portion of the money. 2) You probably can't do this with a 401(K), but go short (or buy puts) on 20-year treasury bonds. I'd look at the bond fund options and see if there is something that lets you approximate that. Long-term U.S. Treasuries are NOT the place to be. It hasn't been the time to do that yet, but we may be closing in on that day. When yields rise, bond prices WILL fall. 3) Move any international stock fund holding you had into emerging markets. You'll benefit from the weak dollar, as that happens, in places that may perform a bit better than the traditional places in the world. Best place, if you could target it might be Brazil, because they produce so much in commodities. Lots of ways to go about this kind of investment. You can invest in currencies, if you have the option: I would find investing -- not trading -- in currencies too risky for myself, but if the inflation script plays out, the Australian dollar would probably do well relative to American dollars. Australia isn't an emerging markets country, but when inflation is a concern, its currency always beats the hell out of the dollar.

TIPs are the other place. If you feel comfortable actively trying to manage your 401(K) money, I could never criticize going TIPs heavy right now. You may not hit home runs, but you will protect your wealth from the forces conspiring to inflate it away to lessen the effects the fiscal and monetary messes they have created. That is smart.

 

[SoCalScribe]

I bought a gold ETF and a couple mining stocks recently; I am a believer in precious metals and always have been -- HOWEVER, I worry about all the people who are just trading in them for speculative opportunities. So we shall see how long I last before I bail -- so far, so good. It's a dicey, quick-moving game, but volatility can be a great source of income for the rational.

 

[YankeeFan]

Back to the IPO price: http://www.chicagotribune.com/news/la-fi-mo-facebook-shares-finally-passes-ipo-price-20130731,0,6315538.story

 

[Dick Whitman]

Back to the IPO price: http://www.chicagotribune.com/news/la-fi-mo-facebook-shares-finally-passes-ipo-price-20130731,0,6315538.story

Sell, sell, sell, sell, sell, sell, sell, sell!!!! Then sell again!

This is all related to their better-than-expected mobile advertising revenue. The company is still a financial house of cards in the long run. At least as presently constituted, i.e. as a glorified personal email account.

 

[TigerVols]

Any number of FB threads to choose from, but this one will do.

Should advertisers give their money to FB or to newspapers? Hmmmm....


http://moz.com/blog/1-dollar-per-day-on-facebook-ads?utm_content=bufferf4d90&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

 

[RickStain]

And my 1000 people on Facebook will be heavily targeted to be exactly who I want to reach. My 1000 people in the newspaper will be 1000 old people from a common geographic area who can't figure out how to cancel their subscriptions.

 

[YankeeFan]

Analysts say the company could be valued at up to $100 billion after Wednesday's offering:

http://www.nytimes.com/2012/02/01/t...al-data-facebook-is-going-public.html?_r=1&hp

Am I the only one who's uncomfortable with even more money being made off of what, essentially, is pimping Facebook members' personal information in order to target ads specifically to them?

Market cap up to $308 billion:

Facebook Inc (FB.O) shares surged 15.5 percent on Thursday, their biggest percentage increase since July 2013, after the social networking service posted quarterly results that blew away expectations on every key measure.

Facebook shares closed at $109.11, putting its market capitalization at about $308.6 billion. That would make it the fourth most valuable technology company, overtaking Amazon.com Inc (AMZN.O), which was valued at about $296 billion ahead of its results on Thursday.

Facebook shares jump 15.5 percent after strong results

 

[Dick Whitman]

If you guys want to puncture the Legend of **** Whitman, I shudder to think of some of the predictions I boldly made on this thread.

 

[Dick Whitman]

Sell, sell, sell, sell, sell, sell, sell, sell!!!! Then sell again!

This is all related to their better-than-expected mobile advertising revenue. The company is still a financial house of cards in the long run. At least as presently constituted, i.e. as a glorified personal email account.

 

[User 11148]

If you guys want to puncture the Legend of **** Whitman, I shudder to think of some of the predictions I boldly made on this thread.

We can't all be Starman ...

 

[BTExpress]

Don't back down, ****! Facebook's a bubble about to explode in everyone's faces, bringing down the economy.

[/Ragu]

I kid, I kid.

 

[YankeeFan]