May 21, 2012

Solid Open to the Week

Something happened on the way to Facebook (FB) becoming the greatest IPO ever-the deal has been a mess.  Remember that the  size and price of the deal were both increased multiple times, and now the stock has broken deal price and is down over 10% today.  Morgan Stanley (MS) is taking the blame for mispricing the deal and allowing it to break syndicate.  NASDAQ OMX (NDAQ), which had been trumpeting grabbing the listing of FB from the NYSE, reportedly gave FB major concessions in order to garner the deal.  Software issues in NDAQ’s trading systems resulted in a myriad of errors in trade settlement and notification, creating investor angst as the stock traded nearly 700 million shares on the day.  Finally, FB itself is partially to blame as they pushed hard for large allocations to individual investors.  While allocating to individual investors is very noble, the reality is that in successful IPOs large chunks of stock are typically placed with institutions, creating a shortage of tradable stock.   So the net is that much like the Winklevoss brothers, anyone associated with this deal outside of FB’s employees is wishing they weren’t involved. 

Lowes (LOW ) is down almost 10% after missing comps this morning and cutting guidance for 2012.  The company posted strong Q1 earnings, but same store comps trailed estimates, rising 2.6% vs. the 4.2% target.  The company was cautious about both housing and the economy on their call. 

Yahoo (YHOO) and Alibaba finally appear to have settled their issues in separating Alibaba from YHOO.  The Chinese e-commerce provider agreed to repurchase a 20% stake in itself from YOOO for roughly $7 billion, primarily in cash.  YHOO is up 1% on the news. 

Equity markets are up this morning after falling for the past three weeks.  The market’s recent decline has reached 12 of 13 sessions, the worst stretch of negative performance since 1974.  

The Washington Post issued a scathing report of the Obama Administration and their hypocrisy of bashing lobbyists and other politician's exposure to them.  The Post reviewed the White House visitor logs, and the analysis showed the most frequent visitors to the most important house in the world are Democratic lobbyists.  This isn't a big surprise given this administration's double standards.  

Speaking of the President, I met a gentleman yesterday who is friends with a senior White House adviser who had some private words of disgust to share about the entire Administration.  This adviser, a very successful businessman who has worked with other Democratic Administrations, said that the biggest problem in the White House is that "none of these guys has ever held a job.  They don't know what the hell they are doing, and don't have a clue about how the economy or business works."  I know that is a very obvious statement, but I thought I'd share it anyway. 

The G-8 is recommending that Europe join the spending crowd (as if they weren’t already part of it) and increase government spending to help the region’s economies.  The statement called for a boost in infrastructure and education while also reducing sovereign debt.  I just want to be clear, they want to boost spending and cut debt, as opposed the present plan of cutting spending and cutting debt.  Remember, if you don’t know where you’re trying to go, it really doesn’t matter which direction you travel. 

China has begun testing a system which will allow brokerages to borrow stocks for clients who wish to short sell.  The brokerages will also be allowed to borrow money so that clients may engage in margin activities.   

The JP Morgan (JPM) saga will probably linger in the news for a few more weeks.  Bloomberg is reporting that JPM’s risk manager was fired by Cantor Fitzgerald in 2007 after that firm was fined for failing to adequately supervise him.  The Cantor investigation was triggered by “speculative bets triggering a loss big enough to prompt a regulatory investigation.”  JPM reportedly knew of the transgression before hiring him. 

The Dodgers, best record in baseball.  The Angels, last place.  New sports rule of thumb-invest in new owners, not free agents. 

Have a great day


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