May 18, 2012

Facebook Saves California!

Well, today is finally the day when Facebook (FB)  goes public.  The company is raising $18 billion and will be the biggest tech IPO ever, and the second biggest US IPO behind Visa.  Mark Zuckerberg will personally have more than enough money to buy Yahoo (YHOO), with a few billion left over, which is ironic since he agreed in 2006 to sell the company to YHOO for $1 billion.  The deal was scuttled when a decline in YHOO’s stock price resulted in them lowering their bid to $850 million, a valuation Zuckerberg ultimately rejected.  I’m thinking the YHOO board is really regretting that decision.

Facebook going public isn’t just good for the employees and investors in the company, but also the State of California.  The Governor has suggested that this IPO could help narrow the budget gap of $16 billion, although the Legislature has reportedly planned more permanent uses for the one time bump in taxes expected from the deal. 

A recent CFA Institute survey had slightly more than half of respondents saying the commodity bull market isn’t over yet.  Respondents also concluded that any future increase in prices would be driven by the devaluation of ALL currencies versus hard goods as opposed to the past five years, which was driven by a huge jump in debt and China as the incremental buyer. 

Bank of England governor Mervyn King said the Eurozone is “tearing itself apart” and the damage will extend to the UK.  Growth in the UK has been revised down for 2012 to 0.8% from 1.2%.  The BofE also guided for inflation running above expectations.

For an example of what happens to old tech companies, look no further than Hewlett-Packard (HPQ).  HPQ, the largest technology company by revenues and employees, is considering cutting back 8% of its workforce, or 25K workers.  The company employs 324K people.  The company is struggling to find growth after a multitude of missteps and management changes. 

The JP Morgan saga continues as the FBI is now investigating their trading losses and the Senate Banking Committee has asked Jamie Dimon to testify next week. 

The Shanghai Securities News is reporting that loan demand in China has waned in recent months.  The weakness is expected to force the central bank to cut interest rates to counter weak corporate demand for credit. 

G-8 leaders have been meeting this week in the US.  German Finance Minister Wolfgang Schaeuble says that Europe’s crisis is “practically normal.  In 12 to 24 months we’ll see a calming of financial markets.”  Oh. 

I mentioned the other day the drop in oil prices, but the stubbornness of gasoline prices to follow, especially in California.  One issue exacerbating the gasoline problem is the inability to move oil from Cushing, OK to refineries.  The US pipeline network is insufficient to handle the volumes required, and the result has been soaring inventories in OK (as seen in the chart below). 

The Kings are close to moving to the Stanley Cup Finals while the Lakers and Clippers are trying to regroup after falling behind 2-0 in their series with Oklahoma City and San Antonio, respectively.

Have a great weekend


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