WASHINGTON, May 22, 2012 – The other shoe dropped on Friday’s perfectly awful Facebook IPO yesterday. FB shares tanked roughly 11% below the IPO price, meaning that the only people who actually made money on the stock were the selling insiders, the brokerages in the IPO underwriting syndicate, and—clearly—the mass of short sellers waiting in the wings who knew Monday’s swan dive was coming.
We fully expect FB shares to plummet again today, at least initially. This is already being borne out in premarket trading where, at approximately 8:58 a.m. this morning (EDT), pre-market trading had the stock off yet another two points at circa $32 per share. What a debacle.
Ultimately, what we have here is another, complicated story of Wall Street insider manipulation and pure greed. We’ll be expounding further on this later today in our more in-depth companion column, The Prudent Man. The whys and wherefores are just too complicated to discuss here in this column, which is generally devoted to quick, heads-up comments at or near the opening of trading each morning at 9:30 a.m. EDT.
(For more cogent commentary on the general situation, see the video below.)
We’ll be hearing about the Facebook nonsense for days and weeks, as the Feds get down to investigating this debacle. But don’t expect much relief. Wall Street’s big boys bought off a quorum of politicians years ago, and no regulator is going to risk torqueing off Senator Foghorn Leghorn and his ilk anytime soon, lest he or she: A. Lose his or her high salaried, massively perk’d government job; and B. Miss out an opportunity to latch onto a big Wall Street firm at an order of magnitude higher salary later on, whilst double-dipping into that super-generous Federal pension at the same time.
MF Global, J.P. Morgan, Facebook debacle: The list of Wall Street malfeasance and just plain old poor business practices seems to go on unabated, Great Recession or no. So where in this, exactly, is the value in paying these overpaid drones with buckets of taxpayer money?
Like Jimmy Carter once said, “Life is unfair.” (And he was surely one to know about this.)
On other fronts, the usual suspects have been ganging up to give us at least a mediocre market open. The weekend’s G-8 verbiage did nothing to actually solve the ongoing Greek issue, and a quiet run is apparently continuing to occur in select Spanish banks, including—perhaps unfairly—the gigantic Santander, whose trading symbol, interestingly enough, is STD. Hey, you find dark humor where you can in this lousy market.
Yesterday’s big rally—which we predicted would eventually happen due to oversold conditions—may or may not have legs. We’ll find out in a week or two. But as long as Greece and the other PIIGS hang around to torment us, and as long as our own government kicks the can down the road again at least prior to the November elections, we’ll probably go nowhere fast, except maybe down.
The one bright side in the proceedings is that, for a variety of sometimes-disparate reasons, fuel prices continue to sink as we near the summer driving season. It’s an unusual development in the marketplace during a time of year when gas prices usually skyrocket.
But then again, this phenomenon, too, tracks pretty well with a marketplace that can no longer be managed with the traditional technical and fundamental evaluation tools. It’s harder and harder to make money in such a rigged system, one that defies logic, analysis, and rigor of any kind. It’s become less of a market of stocks, and more and more a market of, by, and for the machines and the little boys who run them.
So we have to ask: is the stock market now a playpen for spoiled, rich little boys and their toys? Looks like it. Discipline, analysis, and hard work seem now to matter far less than getting those algorithms tweaked to a fare-thee-well. This, in turn, has pretty much driven the little guy out of the market. And after Facebook, maybe for good. It’s getting uglier by the day.
So can you get a customized mattress these days with a built in safe? If anyone finds one on Amazon, drop me a line and let me know.
Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.
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