The Real Deal on Wall Street: 5 Market Problems Facebook IPO Won't Solve
Facebook (NASDAQ: FB) frenzy has swept the land.
I obviously was not born when gold fever hit the California coast, but Facebook frenzy has to be very close in resemblance. Just look at the creepy similarities:
- Gold and Facebook are two objects we as people could relate to in real life.
- We think because of that real life relationship getting rich is only seconds away.
- We think that once we get rich quick, we could sell our asset to the next sucker who only now smells an opportunity.
In case we have lost sight, there are zillions of other stocks not remotely related to Facebook that will be bid up or down today. If the month-plus trend in the market is any harbinger of things to come, the zillions of stocks not remotely related to Facebook will be worth less by 4:00pm than 9:30am.
As an attempt to start extracting oneself from the modern day gold fever, allow me to put forth “5 Market Problems the Facebook IPO Won’t Solve.” Use them during a television interview. Use them in a videotaping. Use them at a bar this weekend to sound wickedly smart and to change the discussion from Facebook. Point is, use them.
- Facebook is raising money. Greek banks are losing money (deposits), perhaps Spain as well.
- Facebook could raise debt from XYZ bank today if it was so inclined, and likely at attractive rates. Portugal, Greece, Spain, and Italy are being forced by Bond Grim Reapers to pay penalizing rates on newly issued debt, on top of having trouble satisfying pre-existing debts.
- Facebook management is unlikely to depart anytime soon. We have no clue who is running Greece, and that’s a problem for a country relying on assistance from its neighbors who demanded austerity to balance the fiscal mess.
- Facebook’s valuation is known (at least for today). Broader equity market valuations continue to search for a bottom, that junction where the risk reward is favorable.
- Facebook could cut prices for its ad space to spur growth. If the Federal Reserve were to come out today and announce more quantitative easing it would address nothing that is ailing the market (it may improve near-term sentiment) from EU and U.S. fiscal cliff perspectives.
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