I’m sorry that it seems like rather stoogish to post about the Facebook IPO now that it has already started trading. However, it’s always a good idea to remind folks that the soundest way to “play” IPOs is to wait for them to trade for a while and form a solid base. (“Gee, thanks Brian. What the heck does that mean?”)
Facebook is trading at $39.61 this instant. For a much-hyped Wall Street IPO, that’s a dud. But by waiting for a base to form over the next few months, we keep a safer edge in our favor. We let the market sort out what the stock is really worth, what its prospects really are. (Especially after the IPO lockup expires and insiders and underwriters can start to sell their shares and after the hype has diminished.) Golly, maybe $39 is a screaming bargain. Or its all downhill from here. But if we wait for the supply and demand for shares work itself out, we’ll can be more confident that if it does burst up from a consolidation in a few weeks or months, the odds are more in our favor than blindly buying the first chance we get.
Everything looks rosy when a company IPOs. (That’s Wall Street’s job: to separate your money from you.) It’s your job to be patient and let the euphoria run off and use discernment.
(I hasten to add that, following my own advice, I’m not touching this one with a ten foot pole. Yet.)
Mish’s posting linked above is a must-read-and-understand summary of expectations for stock investors who stick, unfortunately, with ‘buy and hold’ methodologies.
It’s extraordinarily difficult to summarize the mortgage/foreclosure/note transfers/securitization mess. I point you to 4closurefraud.org and foreclosurehamlet.org blogs to get you started on the grassroots horror stories.
Karl Denninger’s Market Ticker is a good source of much of the background on the financial ramifications. It’s unknowable at this point, but I understand that nearly all of these mortgage backed securities (MBS) have the legal structure that requires the mortgage notes to be delivered by a specified closing date to receive the special tax treatment of the interest. Think of it as Noah’s Ark… if the mortgage note isn’t in the boat when the door closes, tough luck. If the special REMIC tax treatment is violated, it’s revocable to inception, and the revenuers will have a field day.
Portfolio managers might discover their mortgage backed portfolio doesn’t legally own the notes it thinks. Portfolios (mutual funds, pension funds, etc.) may very well have to chase down the Wall Street bank that sold the MBS and sue for fraud and nonperformance. Where will the investment banks get the capital to reimburse the damages, if found in judgment? Personally, if I was a portfolio manager with a pile in what are supposed to be valid mortgage notes, I’d have someone seriously sampling the collateral.
A political take-away is be sure to chuckle and shake your head at the next candidate that says they want to get rid of the office of the Secretary of State. The leading elected official to cry ‘foul’ in this mess is Ohio SecState Jennifer Brunner. With her prompting, the Ohioh AG is suing GMAC – known now as Ally Bank — for fraud to the tune of $25,000 per false notarization on foreclosures. Doing the math, of one bank, in one state …
It was humbling to leaf through the foreclosure notices posted at the town hall this week. These are my neighbors. If they pledged their property as collateral, and things didn’t work out, they get to suffer the consequences. But property rights and contract rights are inviolable, and our justice system and our legislators must not permit shortcuts.
It’s a minor victory when the general media express an interest in technical analysis (charts, graphs, and statistics) of the stock market.
Here’s a post in the Wall Street Journal with just a twinge of panic over the Hindenburg Omen.
The heroes over at ZeroHedge.com have been watching this development also. (I recommend ZeroHedge as a daily read for investors. Some of the language is a bit salty, but Wall Street isn’t well known for its good manners.)
As a simple summary, the Hindenburg Omen shows when the market is divided. The best analogy is that the Hindenburg Omen is like the funnel cloud you see in the sky. It doesn’t mean a tornado will touch down, but it does mean you should prepare for the possibility.
A far more reliable indicator of the market starting to roll over (giving investors a chance to side-step a steep correction) is the distribution day analysis in the Investors Business Daily. Searching this blog for “distribution” will give you a head start in the study.
UPDATE: Here’s a good revisitation by ZeroHedge of the Hindenburg Omen.