Here’s the S-1.
Is this company really worth the $100 billion or so implied by the IPO pricing? A few points of comparison: the market capitalization of Duke Energy is $29 billion. Target stores is $36B. Yahoo is $19B while Amazon is $101B and Cisco Systems is $89B. CSX railroad is $22B, Ford is $38B, and General Electric is $194B.
Do you think a $100B valuation for Facebook is realistic? What strategies and future environments could lead to this number being sustainable or even understated?
(I don’t have any direct financial interest in Facebook currently, but may do something with the stock at some point, more likely in the short than in the long direction. This post is for sharing of general information and discussion and does not represent financial advice.)
Markets and Trading
Wall Street and its Clients
Ann Althouse has a good post today. I can’t get through her Captcha system so I thought I would post a few comments here. This NY Times op-ed piece is the source for her observations. It is behind the Times’ idiotic payment wall so go to her blog for the link.
TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.
To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.
That certainly states the issue clearly. What does he complain about ?
I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.
But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.
I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.
What specifically is the problem ?
A Multipolar World
India’s crude oil imports from Iran is facing a risk of potential disruption as increasing US and EU sanctions make it impossible for Indian ships to obtain insurance.
Greg Scoblete, The Compass Blog (Real Clear World):
I imagine if I were an Indian official, I’d be a bit peeved to learn that acting “responsibly” means privileging the interests of the United States over my own country. Nevertheless, Burns has a point. After all, India may rely on Iran for 12 percent of its oil imports, but look at what the United States has been willing to do for India:
Presidents Obama and Bush have met India more than halfway in offering concrete and highly visible commitments on issues India cares about. On his state visit to India in November 2010, for example, President Obama committed the U.S. for the very first time to support India’s candidacy for permanent membership on the U.N. Security Council.
I don’t know about you, but if the U.S. was asked to forgo 12 percent of its oil imports in exchange for another country’s endorsement for a seat on a multilateral forum, I’d make the trade. I mean, c’mon, 12 percent? The U.S. gets about that much from the Persian Gulf – and we barely pay that area any attention at all…
“The EU-India free trade agreement will be the single biggest trade agreement in the world, benefiting 1.7 billion people,” said president Barroso. “It would mean new opportunities for both Indian and European companies. It would mean a key driver for sustainable growth, job creation and innovation in India and Europe.”
The EU is India’s largest trading partner, accounting for about €86bn of trade in goods and services in 2010. Bilateral trade in goods rose by 20% between 2010 and 2011.”
Last year Israel supplied India with $1.6 billion worth of military equipment and is India’s second-largest defense supplier after Russia. Sales are only going to rise. Indian defense procurements from Israel in the period 2002-07 have touched the $5 billion mark.
And this doesn’t even get into the China-EU-US-Israel-Saudi Arabia wheels-within-wheels complications when it comes to arms deals, hoped for arms deals, trade deals, hoped for trade deals, energy politics, and the rest of it….
It’s not 1985, now is it? The past is a different country, a Russian (Soviet)-oriented Cold War country used to thinking in terms of “Kissengerian” alliances and blocs. An intellectual adjustment may be needed. It’s like 3-D chess out there….
Speaking of energy:
“Was Saudi Arabia involved?” (Asia Times Online.) If it makes you feel better, let me point out that Saudi petrodollars continue to fund all sorts of interesting educational activities on the subcontinent, in Africa, and elsewhere, along with Iranian monies. So that’s nice.
Knowledge, Stability, and Black Swans
The sense of security more frequently springs from habit than from conviction, and for this reason it often subsists after such a change in the conditions as might have been expected to suggest alarm. The lapse of time during which a given event has not happened is, in this logic of habit, constantly alleged as a reason why the event should never happen, even when the lapse of time is precisely the added condition which makes the event imminent.
–George Eliot in Silas Marner
I was reminded of the above passage by a couple of recent posts:
Claire Berlinski excerpts some thoughts by Hernando De Soto, asking “Is the knowledge system broken?” Some good discussion in the thread at Claire’s post; see especially the concept of a “knowledge bubble” in the comment by Late Boomer. Although I’d say that it’s more a matter of an assumed-knowledge bubble.
Richard Fernandez suggests that “too big to fail” really means “wait for it,” where “it” means a failure on a very large scale. He cites Nassim Taleb:
Complex systems that have artificially suppressed volatility tend to become extremely fragile, while at the same time exhibiting no visible risks. In fact, they tend to be too calm and exhibit minimal variability as silent risks accumulate beneath the surface. Although the stated intention of political leaders and economic policymakers is to stabilize the system by inhibiting fluctuations, the result tends to be the opposite.
Both of the above are very worthwhile reading. See also my related post penny in the fusebox.
Congress is a criminal enterprise
Mark Twain once said, ” There is no true criminal class in America with the possible exception of Congress.” It’s time to withdraw the qualifier. It is now apparent that, with a few rare exceptions, Congress is a criminal enterprise and the Obama Administration is, as well. Here is the story of part of it.
“To entrench Fannie’s privileged position, Morgenson and Rosner write, Johnson and Raines channeled some of the profits to members of Congress — contributing to campaigns and handing out patronage positions to relatives and former staff members. Fannie paid academics to do research showing the benefits of its activities and playing down the risks, and shrewdly organized bankers, real estate brokers and housing advocacy groups to lobby on its behalf. Essentially, taxpayers were unknowingly handing Fannie billions of dollars a year to finance a campaign of self-promotion and self- protection. Morgenson and Rosner offer telling details, as when they describe how Lawrence Summers, then a deputy Treasury secretary, buried a department report recommending that Fannie and Freddie be privatized. A few years later, according to Morgenson and Rosner, Fannie hired Kenneth Starr, the former solicitor general and Whitewater investigator, who intimidated a member of Congress who had the temerity to ask how much the company was paying its top executives.”The latter item is just to show that the corruption was bi-partisan. The quoted text above was from a book review written by Robert Reich, the left wing former Clinton Labor Secretary.
Johnson was the man chosen by Obama to vet his possible VP choices. When his history came to the public’s attention, he quickly withdrew. He had no financial background at the time he became the chief of Fannie Mae. He was a pure political animal.
The most telling recent blow is the bankruptcy of MF Global, a commodity trading futures firm run by Jon Corzine, former governor of New Jersey. It appears that he stole $600 million of investor’s money. Another commodity trader has now closed her fund and returned her customer’s money. Here’s why: “The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets because they are not. And this goes not just for my clients, but for every futures and options account in the United States. The entire system has been utterly destroyed by the MF Global collapse. Given this sad reality, I could not in good conscience take one more step as a commodity broker, soliciting trades that I knew were unsafe or holding funds that I knew to be in jeopardy.
I do not agree with some of her theories, she appears to be a “birther,” for example, but that doesn’t matter. If Obama is a legal citizen, his corruption is just as bad.
“A firm, led by a crony of the Obama regime, stole all of the non-margined cash held by customers of his firm. Let’s not sugar-coat this or make this crime seem “complex” and “abstract” by drowning ourselves in six-dollar words and uber-technical jargon. Jon Corzine STOLE the customer cash at MF Global. Knowing Jon Corzine, and knowing the abject lawlessness and contempt for humanity of the Marxist Obama regime and its cronies, this is not really a surprise. What was a surprise was the reaction of the exchanges and regulators. Their reaction has been to take a bad situation and make it orders of magnitude worse. Specifically, they froze customers out of their accounts WHILE THE MARKETS CONTINUED TO TRADE, refusing to even allow them to liquidate. This is unfathomable. The risk exposure precedent that has been set is completely intolerable and has destroyed the entire industry paradigm. No informed person can continue to engage these markets, and no moral person can continue to broker or facilitate customer engagement in what is now a massive game of Russian Roulette.”
The bankruptcy petition may have been responsible for freezing the accounts but criminal law should deal with this. Corzine should spend years in prison. Here is a depressing comment: “If Obama doesn’t win next year, watch for a January 19, 2013 pardon.”