Facebook IPO

I haven't needed to jump in and rescue him. Daniel seems to be holding his own, as usual.

This little kerfuffle is about cultural values and the broader picture of society and free enterprise. To say that there is only one reason to invest is to look at the stock market through the lens of the trader, but that is too narrow of a view. Certainly profit is the main motivator for the bulk of investors, as one would expect, but it is not the only reason.

We (my family) have money in a number of ventures for which we will never profit. I consider it a form of leveraged charity. I could just write a check, but in these situations a loan or stock purchase will go further to encourage what we want to encourage.

In some situations you get lucky and can do both. You help a good organization, and end up turning a profit. The primary motivation was to do good and further a cause; making a profit was a bonus.

There is nothing wrong with making a profit; it's at the core of free enterprise. There is also nothing illegal or immoral about short term trading, even day trading. Where Daniel and I take exception is what it does to the management of business. This "damn the torpedoes, short term profit is everything" mentality is a very poor way to run business, but that is just the management style created by short term trading.

Since this is a Prius forum, let's use a car example to illustrate: You have a Prius taxi, and the fare in the back is all about the short term. He wants you to go a fast as possible, so he pays you second by second to drive as fast as you can. Slow traffic up ahead? Turn off on a side street. Dead end? Make a fast U-turn and head back. Traffic jam? Head for another city. It doesn't matter as long as you go fast.

This might be good for speed, but not for getting anywhere in a timely fashion. And it's certainly not efficient. Your fare, being focused on the short term, is rewarding you for the wrong behavior.

Now let's say your fare is also making money out of your fast driving. Is he going to want you to slow down and optimize for the trip? Certainly not. He wants you to go fast so that he can make more money. Is that wrong? No, but it isn't helpful from a macroscopic view.

This is the issue with short term trading. It isn't illegal. It isn't immoral. It is inevitable, at least with our current system. But mostly it isn't useful or desirable, except for those making money from short term trading. By it's very nature, we end up with a sub-optimized system. It has to work that way, except in the very rare case where a business is best served by short term profit.

All of which brings me to the word "unsavory". I chose it because the behavior being described is not illegal or immoral, but still leaves a bad aftertaste in mouth of free enterprise. It's sub-optimal, but we seem to be stuck with it. We can accept it without pretending that it is the best or only way to run a market.

Tom

 

I think both Daniel and Tom should be congratulated for their continued efforts to articulate intelligence, in what has become a hostile environment.

 

By the same reasoning, the shareholders should sue if the stock had *increased* 30% in a couple of days. it must mean information was withheld

 

I think all sides are articulating intelligently. There are definitely different viewpoints, but it's been an direct, honest exchange on all sides.

 

Could someone tell me what assets does FaceBook have? When I do some investing, I like to know what assets a company or firm has in their portfolio. I like to do a review and a determination whether I commit to the investment.

DBCassidy

 

I don't know about facebook, but I know my assets in the desk chair at the computer way too much.

Tom

 

I don't actually know the answer to this, but I presume its hard assets are lots of servers with significant processing power and a lot of information about its users. Soft assets are the users themselves. Facebook's customers are advertisers. It sells its users' viewing time to its advertisers. It uses the information that users post about themselves to sell directed advertising.

The NPR program and podcast Planet Money just did a show about them. In their example, a new pizza store in New Orleans buys advertising on Facebook, the ads targeted to residents of New Orleans who have indicated that they like New York things. Their hope is to reach former New Yorkers who might miss N.Y. pizza. You can target your advertising any way you like.

But companies can benefit from having lots of Facebook "likes," so there are companies that run botnets to create fake Facebook accounts, and for a fee, they'll get you (e.g.) a thousand "likes" on FB. How many Facebook accounts are fake is unknown. FB does what it can to combat this, but it's a constant game of whack-a-mole.

The problem for investors is that if the popularity of FB declines, ad revenue can plummet, and the value of physical plant (servers) is a small part of the value of the company. Their real value is their ability to deliver ads to users, and that can change radically if people stop using the service.

I don't use FB. It just doesn't interest me. I have a fake account (i.e. an account under a fake name) just so I can view the web sites of 3 or 4 businesses. E.g. a local vegetable farm posts their hours and what's available. I go directly to their page, read what's available, and close the page. And I use AdBlockPlus, so I never see the ads. If enough people start using ABP, Facebook could be in real trouble.

 

Same here.

Let's take layoffs. They maybe necessary for the survival of a company. So a company in trouble lays off some of its workforce. The market sees the company is taking steps to turn around and the shares go up. With the quick turn around of trades, this rise happens before seeing if it actually helped. So now the company heads can have a layoff, regardless of whether it's the correct action for the company's future, to give the stock a boost.

 

I do not know, Filed pursuant to Rule 424(b)(4) on page 11 says they have $6.8 billion in assets.

FWIW, I've looked at their job postings at https://www.facebook.com/careers/ before. They seem pretty hardcore. I was surprised to read AnandTech - Facebook's "Open Compute" Server tested about servers they designed. That article also discusses https://developers.facebook.com/blog/post/2010/02/02/hiphop-for-php--move-fast/.

 

HAHAHA, that is me.

This valuation was insane. I do actually use Facebook but also in some ways hate it as a company, in great part because of the massive hype and that too many sites are now integrating with it. Zuckerberg does not give one iota of crap about anybody's privacy and so I want to share as little about me as I can.

Anyway, Facebook claims to have 900M users. Let's pretend that represents real people and not a lot of spam accounts. What's the realistic final number he could have five years from now? Much of the world doesn't, nor will have internet in five years. Of those who do have it many don't care about facebook, hate it, etc. I mean they must be realistically at least 50% of their theoretical user base until the human population keeps going up.

I am not sure I've spent a single penny on online ads in the 15+ years I've been using the internet, honestly. I cannot remember a time I've ever clicked one and bought anything. Obviously a small but wallet-weak minority of people do pay for the rest of us to get our free piece of the pie, but even today Facebook is valued at close to MCDONALD'S. I mean come on, really?

Daniel's stock trading strategy is not as bad as some of you say, especially since you're pretending you invest in individual stocks to make money. This despite the fact I KNOW you know that you cannot on average beat the market, and neither can a professional investor. Daniel's stance on investing in companies he cares something about is fiscally irrelevant, but it does somewhat sweeten the pot because if you're really in this to get money you wouldn't be playing around on scottrade anyway. Trading individual stocks is as much ego boosting as anything else; forget the stocks you lost money on, flaunt those you did well on.

 

News Headlines
Facebook Is a Buy at $20 - SmartMoney.com

I wonder how long before it hits the pink sheets. Mark is a smart man, he cashed out right at the tip of the pyramid.

 

After seeing the movie ,Zuckerberg made me want to smash his face whenever I saw his picture.
The Ahole ripped off those whom he stole the business model from.
Now the Ahole rips off multi billions from the public.
True to form.