In eight hours' time, the Initial Public Offering (IPO) of Facebook
shares takes place. They will be initially pitched at around $38
dollars each. In my view -- as mentioned yesterday -- they will
ultimately prove to be worthless. "Ultimately" could be the end of
today on the New York Stock Exchange, or it could be next week, or it
could be in a few months' time. On the other hand, according to some
investment analysts, Facebook shares could be a good long term bet.
What makes today's IPO so fascinating, however, is that it is being
held at a time when the three main economies of the world -- America,
China and the Eurozone -- are in a fragile condition. On the one
hand, some commentators are saying that the slightest untoward event
in any of those economies could trip off a stock market slide that
would, without doubt, bring Facebook down with it. Facebook would
then be the least of anybody's worries.
On the other hand, if Facebook shares were to crash of their own
accord today or during the following week or so, then it could trace
an ionic pathway up which a bolt of lightning could travel from any
of the three basic economies. America's feeble GDP figure would be
revealed as governmental statistical fiction. China's car showrooms,
already bursting at the seams, would stop the Chinese consumer goods
chain in its tracks. Greece would be hurled out of the Eurozone
whether it wanted to or not.
Dramatic? Over-dramatic? Perhaps. But let's remember that it was a
similar dotcom crash in the year 2000 and Alan Greenspan's response
to it that went a very long way to causing the even greater crash of
2008. Instead of dropping the Fed's basic rate to the absurd rate of
zero, had Chairman Greenspan maintained a sensible one, then the
American economy would have had a chance of purging itself of banks
and businesses which were already so indebted that they didn't
deserve to survive.
For once, I'm not forecasting as I'm wont to do. But we have to
remember that the stock market, the bond market and the whole
financial superstructure that is supposed to take us safely into the
future depends on daily rumour and sentiment. The emotionality of by
far the greatest number of professionals in the financial world who
supposedly know what they are doing vastly exceed the small, quiet
voices of rational minds thinly scattered here and there. Suffice it
to say that I'll be watching the sales (and the prices!) of Facebook
sales today in New York before I go to bed with four ginger biscuits
and BBC's Newsnight to send me to sleep.
Keith
Keith Hudson, Saltford, England http://allisstatus.wordpress.com
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