Archive for May 21st, 2012
The Facebook IPO is kind of like a graduation party – everybody comes together for one huge blowout to celebrate the end of an era before going their separate ways. Unfortunately, most people on Wall Street do not understand how bittersweet this moment really is. A tremendous amount of pain is ahead for Wall Street in the next few years, and we will probably never see anything like the Facebook IPO ever again. But the Facebook IPO sure has been fun to watch. Facebook is one of the largest companies to ever go public in the United States. According to CNN, 247 million shares of Facebook exchanged hands in the first 45 minutes of trading. The Facebook IPO was nearly ten times larger than any other Internet IPO in history, and the amount of money being made by some people on this deal is absolutely amazing. For example, it is being reported that Bono will make more money on the Facebook IPO than he has from being part of the band U2 for the past 30 years. Sadly, this euphoria is not going to last for long. The next wave of the global financial collapse is rapidly approaching, and once it strikes there will not be much for anyone on Wall Street to be smiling about at all.
During the IPO process, Facebook sold more than 420 million shares and raised about 16 billion dollars.
Those are incredible numbers.
At 38 dollars per share, Facebook would have a market cap of about 81 billion dollars.
So is Facebook worth 81 billion dollars?
Of course not.
But most stocks are tremendously overvalued at this point.
Yes, Facebook has 900 million users and it made about a profit ofabout a billion dollars last year.
But that does not add up to an 81 billion dollar company.
Not even close.
A recent article by Jay Yarow explained this in more detail….
As good a business as that is, it’s not Google good. It’s not Apple good. And at the current IPO pricing, Facebook has to be a much better business in the near future.
In fact, Yarow says that Facebook is going to have to dramatically improve in order to justify the current valuation….
So, what’s the bull’s case for Facebook? Unfortunately, it comes down to faith. You have to have faith that Mark Zuckerberg, Sheryl Sandberg, and the rest of the executives at Facebook will discover a magical money making product that will justify its valuation.
Unfortunately, there are already signs that the growth of Facebook is slowing down.
Advertising revenue during the first quarter of 2012 was only $872 million. That was a decline of 7.5 percent from the previous quarter.
And eventually someone will come along and topple Facebook just like Facebook toppled MySpace.
Facebook did not even exist a decade ago. Right now there are young kids tinkering around in their college dorm rooms trying to figure out how to create something that will be even better than Facebook.
The truth is that Facebook is operating on borrowed time. It is not going to remain “hot” and “trendy” forever.
But for the moment, there are a whole lot of people out there that want a piece of Facebook.
Hey, I am not in the stock market at all, but even I am half-tempted to buy a few shares so that I can introduce myself as a “part-owner of Facebook”.
After all, who doesn’t like Facebook?
But there is an incredible upside to social networking websites such as Facebook and Twitter as well.
They have given average people the ability to communicate directly with each other on a massive scale.
In the past, the big corporations pretty much had a monopoly on mass communication.
If you wanted to get your message out independently of the big corporations, you could hand out fliers, you could send out mass mailings (very expensive) or you could try to get a book printed.
But today something that you post on Facebook or Twitter could be seen by thousands (or even millions) of people within a few days.
The Internet is filled with a whole lot of garbage, but it can also be used as an incredible tool for good.
Sitting at home behind your desk, you have the potential to touch the lives of people on the other side of the globe through the Internet that you would probably never have a chance of influencing any other way.
So I am very thankful for Facebook.
We should use tools like Facebook to wake people up while there is still time. Our world is becoming increasingly unstable and we might not always have the opportunity to freely share our thoughts with the entire globe like this.
Just try to imagine a world without Facebook, Twitter, YouTube, blogs and Internet forums.
All of those things have only existed for a relatively short period of time, and there is no guarantee that we will always have them.
Instead of wasting our lives away in front of our televisions, we should be taking advantage of these tools to help change the world.
Every single day, hundreds of people are directed to my websitefrom Facebook. I am hoping to eventually increase that to thousands of people per day.
A great economic collapse is coming to this world. People need to keep their eyes on the financial crisis in Europe and on thederivatives market. The coming financial tsunami will likely be even worse than the crash of 2008.
People are going to be looking for answers.
Now is the time to be a light shining in the darkness.
Not everyone has the time or the knowledge to be able to set up a website or make YouTube videos, but nearly everyone is capable of setting up a Facebook account or a Twitter account.
If you make even a small effort, you could end up touching the lives of thousands upon thousands of people.
Yes, there are a lot of negative things that can be said about Facebook, but at least for today let us celebrate it for what it has given us.
It has given us the opportunity to make a difference on a massive scale, and that is a wonderful thing.
Note: Facebook shares closed today at $34.04. That’s a full 10.99% lower than the IPO.
JPM: Watch The Duplicity!
Off the wires this morning, JP Morgan says it is “suspending” its share repurchase program.
Now let’s look at this chart.
If there’s nothing wrong with the company wouldn’t you rather buy your own shares back at $33 than $44? You get far more of them for the same amount of money, right?
Who doesn’t love a sale, provided, that is, nothing else is going wrong that might require you to have the money available for other purposes.
There isn’t anything going wrong, is there Jamie?
JPM: It Gets Worse
Irvin Goldman, who oversaw risks in the JPMorgan Chase & Co. (JPM) unit that suffered more than $2 billion in trading losses, was fired by another Wall Street firm in 2007 for money-losing bets that prompted a regulatory sanction at the firm, Cantor Fitzgerald LP, three people with direct knowledge of the matter said.
Oh that’s nice. But what’s better is that apparently, when Dimon made his “tempest in a teapot” comment,he hadn’t even seen the positions in question!
It’s no surprise that the head of the CIO unit has left; when you represent to your direct boss (the CEO) that you have something under control and he goes public with your representation, taking it as his own and that turns out to be BS, you are (and should be) cooked.
The bigger question as I have pointed out is what comprises the actual book, what was being protected, and what is the actual loss that’s out here at the present time? Despite the claim that the loss was “just” $2 billion reports have emerged placing it at between $3-5 billion — which is considerably higher.
What’s the real number?
The answer right now is “who knows?” and that is a problem.
All of this might be thought of as “funny” by some people. I might even agree if their CEO wasn’t on the board of the NY Fed and the company wasn’t responsible for playing financing games with government debt.
“Attempts to form a government in Greece collapsed on Tuesday, jolting financial markets at the prospect leftists opposed to the terms of an EU bailout could sweep to victory in a June election and nudge the euro zone crisis into a dangerous new phase.” – CNBC
Why should the Greek people be financially destroyed and rendered destitute by forced German and Brussels EU austerity measures and more loans designed only to pay the interest on the debt to the big banks? What if the banking and media establishment are dead wrong about nations withdrawing from the Euro like they have from the beginning of the crisis? I suggest a strong economic recovery is the likely result rather than depression as forecast by experts working for the banks that have enslaved Greece.
What Would You Do?
Let’s assume you were very unsophisticated regarding real estate and you lived off a $30,000 annual income. Then assume you purchased a home in the US during the Federal Reserve-created housing bubble for $500,000 with 2% down. Your real estate agent and mortgage broker said, “Don’t worry. We will take care of the details.” Later, you discover your signature was forged and they showed your annual income as $300,000 annually.
Now you find out the real value is only $50,000 and there are numerous liens and defects and you don’t even have clear title to the asset. The bank and credit providers are threatening to take everything you have saved in your lifetime because you are behind on your loan payments.
What would you do? Given this situation most rational people would stop making payments, withdraw from the fraudulent contract and sue those who misrepresented the entire deal for fraud. This is a very simplistic version of what has happened to most nations inside the EU. The citizens never voted on or understand the contract giving away national sovereignty. The entire deal, including the sovereign debt, was fraudulent and sold so banks and politicians could benefit.
Recovery is Only Possible Outside the Euro and After Sovereign Debt Repudiation
Many EU member states should simply withdraw from and repudiate the failed monetary and political experiment that the European Union has become. In addition, Greece should repudiate the excessive sovereign debts owed primarily to German banks and restore an independent Greek currency, the Drachma, at a lower and more favorable exchange rate to stimulate tourism and foreign investment. Yes, there will be a short-term drop in the Greek economy but this would quickly be over in contrast to the EU-created death spiral Greece has been forced to endure over the last few years and that will continue into the future.
Despite all the warnings by the establishment, I urge the Greek people, as well as the suffering populations of Spain, Italy, Ireland and other nations, to dump their politicians chained to the EU and march to a different tune on the right and left.
The world knows Greek politicians are corrupt and owned by major financial interests.
Like most politicians in the West, they will tend to choose the near-term course of action that provides them the most graft and payoffs. You can’t sue politicians but nations can stop paying fraudulent sovereign debts if the people press hard enough. History shows us that politicians can actually on occasion even become patriots if their political future is at risk and their financial gravy train is about to leave the station.
I believe the EU siren call for Greek austerity and bailout is just a political disguise for more fleecing of the populace through fears of government bankruptcy in order to steal more wealth and cut more benefits, while the real solution for most nations is to tax and steal less and reduce bloated programs and benefits. The way out for Greece and most other European nations is to withdraw from both the Euro and EU and do the above after repudiating the sovereign debt and becoming debt-free nations.
Even Germany Will Leave the Euro
In the final analysis I agree with my friend John Browne‘s forecast Friday on CNBC. He currently serves as Senior Market Strategist for Euro Pacific Capital, Inc. and also as our Chairman of the Board for Biologix Hair Inc. in Toronto.
He warned that not only would Greece and other nations withdraw from the Euro but in the end Germany is also likely to pull out and restore the D-Mark before the EU crisis has run its course.
The ultimate solution for all government debt is always pay off, repudiate or hyperinflation hence the impasse in EU Land. No nation has ever paid off their national debt, the citizens generally benefit from repudiation over hyperinflation but central banks always use inflation as the solution. Due to rather recent German history the German people will never allow any government to sanction high rates of inflation.
The EU was a vehicle designed to control all of Europe but the German people will not stand for the massive money creation and ultimate inflation necessary to preserve the failed European Union and inflate away the massive sovereign debts of nations in the EU.
Maybe History Will Repeat Itself in Reverse
Almost 100 years ago, the victorious allies and their banking elites used the Treaty of Versailles to plunder the wealth of Germany and its citizens, who were no more guilty of this terrible war than were the allies. It has not been long enough for them to have forgotten the drift towards extremism, anger at those who plundered their nation and finally, the rise of Hitler and National Socialism. The German people will surely demand withdrawal from the Euro and a return to the currency credibility of a restored D-Mark (Deutsche Mark) backed in some way by gold. The alternative is to risk a return to the 1930′s and the Germans have not forgotten that mistake.
I would suggest that at the next federal election in Germany in the fall of 2013 Chancellor Merkel will likely be repudiated at the polls because of the EU problems. She and her party alliance will be forced from power as her dream for a German-led Europe through the European Union crumbles like so many grandiose plans of earlier empires. Remember, 70 years earlier in 1933 another chancellor was swept into power because of government debts, hyperinflation and outside meddling. It did not end well for Germany.
Get Out of the EU Now While You Still Can Peacefully
I know many citizens across the European Union are wondering, “How did we get here?”
They think it can’t get any worse so maybe they should remain in the EU because the establishment experts warn of bankruptcy, currency crisis and the usual doom and gloom should the Euro be dumped.
As an American, I know from our history that the determination of a power elite to maintain control over taxpayer territory at any cost in terms of lives, economic destruction and violence is always far stronger than the public realizes. We are now celebrating the 150th anniversary of our Civil War that destroyed the Southern economy for a century and killed 600,000 Americans, North and South.
No, it wasn’t really a civil war and the media establishment never mentions the death toll of the war. Also, the major causes of the war that had more to do with the establishment of a central bank, railroad profits and government revenue have been hidden from view.
But the winners always write the history and unless individual European nations get out of the European Union modeled on the American Union quickly, your nations may never leave without a war you are likely to lose. So get out of the Euro and EU now while you still can.
Ron Holland – The Daily Bell