 | Facebook dipped to new lows earlier today, although buyers eventually emerged later in the trading session to drive the price higher.
With “faceplant” continuing to dominate the media landscape, the talking heads have started to wag the finger at Morgan Stanley by questioning the firm’s initial valuation.
Facebook’s IPO of $38 per share was about 88 times its earnings over the past 12 months. That means the company would need six-fold earnings growth just to support that price at a more normal valuation of around 14 or 15 times earnings.
Whether or not Morgan mispriced the IPO is just part of the story. The initial investors didn’t have to hold on to the stock and there were plenty of willing buyers waiting to be swept up by the bubble mentality. And yes, we’ve all grown too accustomed to the bubble mentality. Just look at the overall U.S. stock market.
“Our Fed induced market run up, led by head bartender Ben Bernanke, has provided enough liquidity for market drunks to party like it's 2006. And in a rather perverse way, market participants are hoping for more bad news on unemployment, wages, manufacturing, and GDP so our bartender is forced to keep the liquidity bar open, this time for QEIII, or a third round Quantitative Easing. No last call in sight…but the sun is going to rise eventually and the party will end and if the U.S. market had to stand on its own we'd be looking at Dow 6,000 today.”
This excerpt is from “Welcome to the New Normal” by Matthew Buckley where he smartly opines about the global economy http://seekingalpha.com/article/628781-welcome-to-the-new-normal
An IPO hype cocktail or a puff of broad market hopium...both are leading us down the wrong path. Trade well and follow the trend, not the so-called “experts.”
Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.
larrylevin@tradingadvantage.com
Trading Advantage
(888) 755-3846  |  Larry Levin's Trading Advantage is a leading investment education firm that empowers traders to achieve and surpass their financial goals. More than 50,000 students have used Larry Levin's proven techniques for powerful results. |
Trading Signals from the Electronic (ES) mini-SP 500 - No “Secret” signals today.
- Algorithm positions (4)
- “Reading the Tape” positions (6)…combined Secret’s, Algo, & “Reading the Tape” total… +4.00
ES 1311.75 / 1301.25
POC... 1309.25
YM 12423 / 12343
NQ 2529.75 / 2512.25
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Keep a civil tongue.