10 Thoughts on the Facebook IPO. (The Tragedy that Wasn't)

By now, everyone has chimed in on the Facebook IPO.  Most of what I read has been (in my opinion) crap.

Here are 10 thoughts of my own.

#1) I told you so...(So did a lot of people)

#2) Congrates to the Zuckerberg's. I hope you continue to be the nice people you seem like.

#3) I read an article that I cannot find that shows the real current value of Facebook around $13.60.
      This was based on current revenue and future growth aligned with investor expectations.

#4) $38.00 was the right price for the IPO. Why not? The moment the stock started to trade, it was the market that determined the price. The drop in FB share price could be related to Greece or any other reason that stocks raise and lower without news. You cannot fault Morgan Stanley for getting the best price for their client (FB) and as for their retail clients, I am certain that the caveat sheet for investing in FB IPO was at least a page long. After trading started, the price hit a $45.00 target. Somebody bought a 45. Somebody either placed a market order or a limit order. Now the market owns the stock and it is up to them to determine the price.

#5) FB did not owe it to the investing public to leave value on the table. I read that someone said it should have been priced at $28.00 so the retail investors could make a profit.  Why?

#6) Back to #1. If I told you so and lots of people told you so, what did we tell you? That FB was overpriced and to stay the hell away from it.  The most amazing thing is, (and I do not have stat to back this up) I would guess that the #1 place most people read about staying away from investing in FB was....their Facebook page.
Social Media is huge and there is a lot of money to be made in it.  It is only going to get bigger too. I just do not think that FB will be the vehicle at any price above a valuation that is in the teens.

The last 4 are coming....

June Option updates

May Options have expired.
None of our holdings were called.
We bought KKR and LUK and both are down from their purchase price.

For June, We sold CC options for 6 of our 11 holdings for a total value of $31,634.
We still have $4.5 million in cash.
We have banked $663,244 cash from the sale of options and stocks being called.
Our CC portfolio is down $159,000 in value.
Our account is at 5.04% combined.

The S and P 500 is as 2.99%
our main buy list is at 2.23%.

May is a portfolio killer.  I do not see the general market improving until after the election in November.

What do Facebook and Jamie Dimon have in common

Today is the IPO for Facebook. Jamie Dimon is the CEO of JP Morgan Chase. It is my prediction that in 6 month, both will be worth a lot less than at the close of today.

I just do not see how Facebook can build itself without adding huge amounts of ads.  This will drive users away. They could go on a buying spree and buy themselves a conglomerate of tech companies, but valuation and integration have proven to be historical failures on these accounts. I see the price in the low 20s or teens.

Jamie Dimon will get kicked out of JPM.  I think the trading losses will spread to $5B. Everyone knows the trade now and anyone who can move a position against JPM has/is. Do not feel sorry for Mr. Dimon. He is a legend and a great mind.  He has been around huge money for a long time. He will not be unemployed long.
Maybe he will start a hedge fund and start making bets against large banks that are too big to fail. He will bet against institutions that combine government insured deposits and investments that rake in billions if successful and billions of loses (Govt insured) if failed.

Buy list update

Our Buy list is down to 5% while the S&P 500 is down to 5.81%. Notice that we have not been as volatile as the index.

For the Covered call list KKR and LUK are buys. This means that they are below the 1/1/12 purchase price and had been sold on February option expiration. I have bought them back..
KKR @12.39
LUK @21.99
LUK almost hit 30$ when it was sold as a covered call.

This Saturday is option expiration day so we will sell June options on them then.

Stop Whining.....just Drink

Interesting article on the world of fake wine...

How would you fake wine, anyway? You could blend two vintages, say a bottle of ’81 Pétrus (average auction price: $1,194) and a bottle of ’83 Pétrus ($1,288), to make two bottles of ’82 Pétrus ($4,763 each). It would be the right wine and taste the right age; even if it didn’t taste exactly like ’82, it wouldn’t taste exactly like ’81 or ’83 either.


http://nymag.com/news/features/rudy-kurniawan-wine-fraud-2012-5/

HP is still tied to the Whipping Post

http://tech.fortune.cnn.com/2012/05/08/500-hp-apotheker/

This is a very interesting article on HP and the clowns that run it.
BTW...I do not mean to be disrespectful.

They Keep Doing IT.

Wall Street has hired the best minds in the world to develop investment models.  Most of these models use some degree (large) of historical data to back test the models and check performance. These models for a variety of reason implode leaving huge losses for the participants.

Chase Morgan designed a model and it had a $2 Billion implosion.

http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2012/05/10/financial/f142109D20.DTL&tsp=1

"The loss came in a portfolio of the complex financial instruments known as derivatives, and in a division of JPMorgan designed to help control its exposure to risk in the financial markets and invest excess money in its corporate treasury."



By the way,  our buy list is down to 6.49%, S & P 500 is at 7.98%.