Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Reply to @Old_Joe: I don't think Maurice meant anything by it. If you'd rather, the "retail" investor was hurt by the FB debacle in a number of ways. The retail investor who didn't want anything to do with Facebook is increasingly finding the odds further out of their favor for a number of reasons, as well.
CNBC had a retail investor on the phone earlier (his title was, literally, "retail investor") who cancelled and adjusted some orders on Facebook on Friday when it opened - older guy, retired. Thought he'd cancelled his orders until later on that day he finds that an order actually did go through. Monday morning comes around and another chunk of shares he'd thought he'd cancelled appears.
"With investing, nothing's easy. You know that, I know that, "
Um, ok. Well, you have a financial media that presented Facebook as a lottery ticket for a month or two in advance of this. "THE SOCIAL OFFERING", blah blah blah. You know nothing comes easy, I know nothing comes easy, Mo knows. Many people here know.
However, I point you in the direction of a post I did earlier in the thread:
Reply to @Kenster1_GlobalValue: "Meanwhile Theophilus Hodges, a 36-year-old property manager, stopped into an E*Trade branch in downtown Chicago on Friday morning specifically to open an account to buy Facebook shares, he said.
"If it wasn't for Facebook I wouldn't be here," he said as he left the branch to go to his bank and transfer money into his new account. "I missed out on Groupon GRPN -6.69% when it went public, so I'm not going to miss the boat this time."
Journal Community
Mr. Hodges said he plans to invest $10,000 in Facebook shares—including $4,500 of his own money and $5,500 from his mother."
So no, not everyone knows, as the unfortunate story above illustrates - and I'm not meaning this in an insulting fashion, but there were probably many other people who did the same and had the same thought. (Additionally, I remain curious on what he believes he missed out on with Groupon.)
People believed they could make money with THE BIGGEST IPO EVEERRRRR. These people are not "ignorant or stupid", but they may have been caught up in the hype and didn't do their homework. There were rumors of people putting in limit orders of $65-70 before FB came to market because people wanted it at whatever cost.
You have a stock that was framed with EVERY SINGLE DISCUSSION as a way to "get the retail investor involved." As a "PR" move to interest the retail investor, this is nothing short of a disaster.
Morgan Stanley's actions should be investigated and the technical issues with the Nasdaq just seem worse and worse as more stories come out. The technical issues with the Nasdaq just seem insane.
Someone on CNBC was joking that Facebook was "Muppet Bait", referring to the Goldman term in the story that came out months ago. Many retail investors, whether they didn't do their research on FB or whatever anyone wants to say, feel like that's true now. Again, every single discussion of this was attracting the retail investor - and the result was an absolute mess.
Hi Scott- If I came across as picking on Maurice, I'm sorry- I really had no intention of that. No quarrel with Mo- I was simply using his post as a vehicle to examine the general concept of the so-called "small investor".
I surely agree that any issues involving losses or problems due to the technical issues needs to be thoroughly investigated, and if warranted, made right.
It was your example of Theophilus Hodges that led me to express my opinions as I did. Frankly, I think that Mr. Hodges was completely unqualified to be making the bet (and it was a bet, not an investment) that he did, and while of course he has the right to do so, it's completely his business and his problem. If he "didn't know" exactly what he was doing, maybe he learned a well-needed lesson in life.
"you have a financial media that presented Facebook as a lottery ticket for a month or two in advance of this."
Exactly. You buys your ticket, you takes your chances. If you confuse a lottery ticket with an investment, maybe you have no business buying either one.
Reply to @Old_Joe: No, I didn't think you were picking on Maurice - I do think it's interesting you mention "qualified", as that's often the term given to large/institutional investors who have enough to invest in hedge funds and other such things (although "accredited" is now often used, too, maybe to not imply that someone without enough money to get into hedge funds is "not qualified".)
I do think the average person needs to do their homework when dealing with investments, but people are looking to make a buck quickly, and I think it speaks to the increasingly short-term mentality of investing in general. People don't do their homework, go for what's hot (instead of looking at what's been tossed out), etc.
The other issue is that you have issues where people get into risk because they are forced into because you have interest rates at zero. Most seniors seem to not be running into risk despite lowered interest rates, but I'm sure there are some that are. I think everyone is rushing for yield, and I think there is the risk in cases where people are looking at the yield and not looking at the fundamentals or risk. I've now seen MLPs described as "defensive" or "conservative" a few times, and that's completely wrong.
There's also the lack of fiscal education in this country which is troubling -personally, I've continued to say that Home Ec should include a significant amount of financial education in High School. You get people who really love Facebook and what it's all about, but may genuinely not be able to take valuation into account.
Also, now this:
'Nanex ~ 22-May-2012 ~ Nasdaq Radio Silence
On May 18, 2012 beginning at 11:29:52 and continuing for almost 17 seconds until 11:30:09, quotes and trades from reporting exchange Nasdaq for all NYSE, AMEX, ARCA, and Nasdaq listed stocks completely stopped. In exchange-speak, 17 seconds is 17,000,000 microseconds - an eternity by HFT standards. It's amazing no one noticed.
"Home Ec should include a significant amount of financial education in High School".
Scott, I've been hollering about this for at least fifty years. We have high-school graduates who have no idea what a checking account is, what happens if you take out a loan, nor the most basic survival facts of economic life. If schooling isn't to help prepare young folks for real life, then what exactly is it for? To pass some arbitrary set of tests designed in Washington?
5:30p BREAKING Facebook's Zuckerberg sells 30.2 mln shares 5:30p Facebook director Thiel sells 16.8 mln shares 5:45p BREAKING Nasdaq says should have nixed Facebook IPO: WSJ
marketwatch.com
Also: "MASSACHUSETTS SUBPOENAS MORGAN STANLEY OVER FACEBOOK MASSACHUSETTS SEEKS MS COMMENTS TO INSTUTIONAL INVESTORS ON FB MASSACHUSETTS SUBPOENAS MORGAN STANLEY OVER FACEBOOK COMMENTS"
And finally, California should have been maybe warned not to count on Facebook so much:
"California's budget could take a hit if Facebook's stock price keeps sliding.
Gov. Jerry Brown estimated the state will generate between $1.4 billion and $1.9 billion over the next 13 months from taxes related to sales of Facebook stock. The estimates were based on prices at $35 per share.
Facebook went public Friday at $38 per share but was trading below $32, or 15 percent below its IPO price, on Tuesday afternoon.
Deputy Legislative Analyst Jason Sisney says the "potential hit from Facebook's share price is nothing compared to the potential damage from a broader stock slump.""
Reply to @Maurice: If the quiet period is an excuse they would like to use, then the big investors should not have received this information either. They broke the regulation either way. There is no easy way out for underwriters for this. But most likely and as it always happens they will pay a small fine to settle and assume no guilt.
Reply to @Old_Joe: What happened to good old parenting to explain these stuff to your children... Oh wait, a lot of parents are financially illiterate as well. Most people have no idea on a ballpark figure required to accumulate for their retirement.
Hi Maurice- No sir, you certainly did not use or suggest those terms- that was 100% me. My observation is simply that "investors" such as Mr. Hodges most likely wouldn't recognize "relevant information" if they received a personal registered letter from Morgan Stanley two months in advance of everyone else.
Ryan Cefalu, who lives with his wife and two kids in Baton Rouge, Louisiana, saw in Facebook Inc. (FB)’s much-anticipated initial public offering a chance to buffer his retirement fund. His expectations fizzled along with the stock within the first minutes of trading.
“It’s disheartening to know that things get over-hyped,” Cefalu, a 34-year-old data-systems manager who spent about $4,000 on the stock, said in an interview. “That’s about a 12th of my annual income -- so a month’s salary. I’m trying to do an on-my-own retirement kind of thing.”
{...}
“I thought it would be fun to get in on the initial frenzy,” said Linda Lantz, an online marketer in Granite Bay, California, who bought 100 shares. “Now it makes me think ‘Oh god, should I bail or is it going to come back?’”
{...}
Michael McClafferty, a freshman finance major at Michigan State University, saw his “first big investment” turn into a $3,000 loss when he sold the shares at $35.
“I didn’t want to lose more,” McClafferty said. “I didn’t know what to do.”
{...}
“Short term fluctuations don’t bother me,” said Charles Landry of Sacramento, California, who bought 1,000 shares on May 18. “Facebook has the potential to be, in the long term, one of the iconic companies in Silicon Valley, a la Google, a la Apple.”
Reply to @Kenster1_GlobalValue: This is what I thought was pretty remarkable in the article and there are a LOT of people - including a number of them calling into CNBC over the last few days - saying this happened: "The 19 year-old student estimates he spent $8,000 more than he wanted to while repeating orders that wouldn’t go through on the first day, and failing to cancel them because of the technical problems."
It's no wonder there were rumors of Facebook transferring their listing to the NYSE yesterday afternoon. The technical problems like the one above are horrendous - if what happened to Facebook price-wise was disappointing to retail investors, imagine how disappointing it is to guys like this (his "first big investment", no less) who thought they cancelled a bunch of times and then wound up with the shares later that day or even after the entire weekend.
Reply to @Old_Joe: Any single word or phrase generally has a number of meanings or "shades" of meaning. Also, meanings change over time. Growing up before 401ks and the like, only a fortunate few in our community would have been considered "investors" of any stripe or color. Too busy putting food on the table for growing families. (That's back before defined benefit pension became a 4-letter word to some and Social Security became a "entitlement".) I'd say that a small investor is a "do-it-yourselfer" - someone who pretty much runs his or her own show - though may rely on a commission-based advisor or insurance salesman for advice. Suspect that most who can afford fee-based and hands-on money managers probably don't fit the mold of "small investor." Also suspect 90%+ of those who post here are - almost by definition - small investors, though likely better informed than the lot. I have in the past decried the loss of private and public pensions. In a sense, the public was bought out into acquiescence by the promise of an even bigger "pot of gold" via 401Ks, IRA's, etc ... 2008 taught that what sounds too good to be true probably is ... I see Meg is laying off around 8.5% her workforce. As a small investor I should applaud. HP jumped nearly 10% after hours. My small stake at Dodge & Cox will surely benefit. Per Rono & Billy Pilgrim - "So it goes."
"1. Say goodbye to the individual investor on Wall Street. Whatever positive impression they had of the IPO market and the stock market in general was just torched to the ground. When everyone you know associated with the stock market is telling you and the media is confirming that this could be a huge IPO that will make money for those lucky enough to get shares and the opposite happens, goodnight. All confidence in the stock is destroyed. Put your money in the bank or if you want to gamble, at least slot machines in Vegas pay out 98pct."
"4. Mobile is going to crush Facebook. The logic for Facebook’s price decline is that they have a problem in mobile. They can’t offer all the games they can in a browser. They can’t offer the same ads or branding opportunities. All true. Bottom line, if you think mobile will displace online usage from PCs then you should immediately short Google and other ad plays and buy TV stations and networks. If you can’t buy an ad effectively on mobile and no one is using a PC to connect to the internet any more, then the only way to reach an audience is going to be via good old tv. And all that over the top video noise, forgettabout it."
Hi there Hank- I also suspect that "90%+ of those who post here are - almost by definition - small investors, though likely better informed than the lot", and that's really the main point that I was trying to make. We come here, aware of our ignorance in some areas, and try to educate ourselves before we make financial decisions. We have the benefit of being able to draw upon the immense base of collectively acquired experience which is MFO, and we know that none of this is "easy".
I'd be amazed if any of our regular MFO posters were to be found at a broker's office clamoring to "get in" on the Facebook Fiasco (FBF). I just find it very hard to feel a lot of sympathy for anyone who got burnt in the FBF, as they may in fact be "small", but in my estimation they are not "investors", but speculators of various degrees of ignorance or stupidity. (cf: housing, "bubble")
As we now know, there were a whole lot of irregularities in the FBF, and in every instance where someone was mistreated by "system malfunctions" I would hope that they can be made whole. That is an entirely separate situation, distinct from the issue of FB being a gamble vs an investment. As FundAlarm succinctly says, below: "Like anyone was buying FB shares based on their financials!"
Exactly. If you placed an order at 38 and successfully obtained your shares, then don't complain if they are now at 32. “'I thought it would be fun to get in on the initial frenzy,' said Linda Lantz". Well Linda, you didn't invest, you gambled, the wheel was rigged (surprise!), you lost (surprise!), that's that. Welcome to real life. Don't do that anymore.
Reply to @Old_Joe: Hey OJ - didn't think my rambling morning sermon deserved such a well-reasoned thoughtful response, but thank you for taking the time. Haven't followed the Facebook issue or thread too close. Summer in northern Michigan being far too brief & many things to do. Yep - you are correct about members of tne board being highly informed & learning from one another. I do believe that other factors in addition to dollar amount differentiate various types of investors. In some communities or families, 100k would be considered an enormous nest egg to have aquired. In others, a pittance. Guess that's why I submitted a somewhat different definition for "small investor". Thanks for your many constructive contributions on the board. Always a pleasure to read your posts, hank
Comments
CNBC had a retail investor on the phone earlier (his title was, literally, "retail investor") who cancelled and adjusted some orders on Facebook on Friday when it opened - older guy, retired. Thought he'd cancelled his orders until later on that day he finds that an order actually did go through. Monday morning comes around and another chunk of shares he'd thought he'd cancelled appears.
"With investing, nothing's easy. You know that, I know that, "
Um, ok. Well, you have a financial media that presented Facebook as a lottery ticket for a month or two in advance of this. "THE SOCIAL OFFERING", blah blah blah. You know nothing comes easy, I know nothing comes easy, Mo knows. Many people here know.
However, I point you in the direction of a post I did earlier in the thread:
Reply to @Kenster1_GlobalValue: "Meanwhile Theophilus Hodges, a 36-year-old property manager, stopped into an E*Trade branch in downtown Chicago on Friday morning specifically to open an account to buy Facebook shares, he said.
"If it wasn't for Facebook I wouldn't be here," he said as he left the branch to go to his bank and transfer money into his new account. "I missed out on Groupon GRPN -6.69% when it went public, so I'm not going to miss the boat this time."
Journal Community
Mr. Hodges said he plans to invest $10,000 in Facebook shares—including $4,500 of his own money and $5,500 from his mother."
http://online.wsj.com/article/SB10001424052702303448404577411903118364314.html
___________________________
So no, not everyone knows, as the unfortunate story above illustrates - and I'm not meaning this in an insulting fashion, but there were probably many other people who did the same and had the same thought. (Additionally, I remain curious on what he believes he missed out on with Groupon.)
People believed they could make money with THE BIGGEST IPO EVEERRRRR. These people are not "ignorant or stupid", but they may have been caught up in the hype and didn't do their homework. There were rumors of people putting in limit orders of $65-70 before FB came to market because people wanted it at whatever cost.
You have a stock that was framed with EVERY SINGLE DISCUSSION as a way to "get the retail investor involved." As a "PR" move to interest the retail investor, this is nothing short of a disaster.
Morgan Stanley's actions should be investigated and the technical issues with the Nasdaq just seem worse and worse as more stories come out. The technical issues with the Nasdaq just seem insane.
Someone on CNBC was joking that Facebook was "Muppet Bait", referring to the Goldman term in the story that came out months ago. Many retail investors, whether they didn't do their research on FB or whatever anyone wants to say, feel like that's true now. Again, every single discussion of this was attracting the retail investor - and the result was an absolute mess.
FB now at $30.95.
I surely agree that any issues involving losses or problems due to the technical issues needs to be thoroughly investigated, and if warranted, made right.
It was your example of Theophilus Hodges that led me to express my opinions as I did. Frankly, I think that Mr. Hodges was completely unqualified to be making the bet (and it was a bet, not an investment) that he did, and while of course he has the right to do so, it's completely his business and his problem. If he "didn't know" exactly what he was doing, maybe he learned a well-needed lesson in life.
"you have a financial media that presented Facebook as a lottery ticket for a month or two in advance of this."
Exactly. You buys your ticket, you takes your chances. If you confuse a lottery ticket with an investment, maybe you have no business buying either one.
I do think the average person needs to do their homework when dealing with investments, but people are looking to make a buck quickly, and I think it speaks to the increasingly short-term mentality of investing in general. People don't do their homework, go for what's hot (instead of looking at what's been tossed out), etc.
The other issue is that you have issues where people get into risk because they are forced into because you have interest rates at zero. Most seniors seem to not be running into risk despite lowered interest rates, but I'm sure there are some that are. I think everyone is rushing for yield, and I think there is the risk in cases where people are looking at the yield and not looking at the fundamentals or risk. I've now seen MLPs described as "defensive" or "conservative" a few times, and that's completely wrong.
There's also the lack of fiscal education in this country which is troubling -personally, I've continued to say that Home Ec should include a significant amount of financial education in High School. You get people who really love Facebook and what it's all about, but may genuinely not be able to take valuation into account.
Also, now this:
'Nanex ~ 22-May-2012 ~ Nasdaq Radio Silence
On May 18, 2012 beginning at 11:29:52 and continuing for almost 17 seconds until 11:30:09, quotes and trades from reporting exchange Nasdaq for all NYSE, AMEX, ARCA, and Nasdaq listed stocks completely stopped. In exchange-speak, 17 seconds is 17,000,000 microseconds - an eternity by HFT standards. It's amazing no one noticed.
This was immediately before Facebook began trading."
http://www.zerohedge.com/news/nasdaq-lying-about-what-it-knew-facebook-ipo-day
Scott, I've been hollering about this for at least fifty years. We have high-school graduates who have no idea what a checking account is, what happens if you take out a loan, nor the most basic survival facts of economic life. If schooling isn't to help prepare young folks for real life, then what exactly is it for? To pass some arbitrary set of tests designed in Washington?
Don't get me started on that...
BREAKING
Facebook's Zuckerberg sells 30.2 mln shares
5:30p
Facebook director Thiel sells 16.8 mln shares
5:45p
BREAKING
Nasdaq says should have nixed Facebook IPO: WSJ
marketwatch.com
Also: "MASSACHUSETTS SUBPOENAS MORGAN STANLEY OVER FACEBOOK
MASSACHUSETTS SEEKS MS COMMENTS TO INSTUTIONAL INVESTORS ON FB
MASSACHUSETTS SUBPOENAS MORGAN STANLEY OVER FACEBOOK COMMENTS"
Nasdaq sued:
http://www.reuters.com/article/2012/05/22/us-nasdaq-facebook-lawsuit-idUSBRE84L18S20120522
And finally, California should have been maybe warned not to count on Facebook so much:
"California's budget could take a hit if Facebook's stock price keeps sliding.
Gov. Jerry Brown estimated the state will generate between $1.4 billion and $1.9 billion over the next 13 months from taxes related to sales of Facebook stock. The estimates were based on prices at $35 per share.
Facebook went public Friday at $38 per share but was trading below $32, or 15 percent below its IPO price, on Tuesday afternoon.
Deputy Legislative Analyst Jason Sisney says the "potential hit from Facebook's share price is nothing compared to the potential damage from a broader stock slump.""
http://abcnews.go.com/Technology/wireStory/calif-worries-facebook-lead-stock-slump-16406731#.T7wgHEVAYig
Take care- OJ
http://www.bloomberg.com/news/2012-05-24/facebook-investor-spending-month-s-salary-exposes-hype.html
Facebook Investor Spending Month’s Salary Exposes Hype
=====================================
Ryan Cefalu, who lives with his wife and two kids in Baton Rouge, Louisiana, saw in Facebook Inc. (FB)’s much-anticipated initial public offering a chance to buffer his retirement fund. His expectations fizzled along with the stock within the first minutes of trading.
“It’s disheartening to know that things get over-hyped,” Cefalu, a 34-year-old data-systems manager who spent about $4,000 on the stock, said in an interview. “That’s about a 12th of my annual income -- so a month’s salary. I’m trying to do an on-my-own retirement kind of thing.”
{...}
“I thought it would be fun to get in on the initial frenzy,” said Linda Lantz, an online marketer in Granite Bay, California, who bought 100 shares. “Now it makes me think ‘Oh god, should I bail or is it going to come back?’”
{...}
Michael McClafferty, a freshman finance major at Michigan State University, saw his “first big investment” turn into a $3,000 loss when he sold the shares at $35.
“I didn’t want to lose more,” McClafferty said. “I didn’t know what to do.”
{...}
“Short term fluctuations don’t bother me,” said Charles Landry of Sacramento, California, who bought 1,000 shares on May 18. “Facebook has the potential to be, in the long term, one of the iconic companies in Silicon Valley, a la Google, a la Apple.”
It's no wonder there were rumors of Facebook transferring their listing to the NYSE yesterday afternoon. The technical problems like the one above are horrendous - if what happened to Facebook price-wise was disappointing to retail investors, imagine how disappointing it is to guys like this (his "first big investment", no less) who thought they cancelled a bunch of times and then wound up with the shares later that day or even after the entire weekend.
http://blogmaverick.com/2012/05/23/facebook-ipo-post-mortem-killer-but-not-for-the-reasons-you-think/
"1. Say goodbye to the individual investor on Wall Street. Whatever positive impression they had of the IPO market and the stock market in general was just torched to the ground. When everyone you know associated with the stock market is telling you and the media is confirming that this could be a huge IPO that will make money for those lucky enough to get shares and the opposite happens, goodnight. All confidence in the stock is destroyed. Put your money in the bank or if you want to gamble, at least slot machines in Vegas pay out 98pct."
"4. Mobile is going to crush Facebook. The logic for Facebook’s price decline is that they have a problem in mobile. They can’t offer all the games they can in a browser. They can’t offer the same ads or branding opportunities. All true. Bottom line, if you think mobile will displace online usage from PCs then you should immediately short Google and other ad plays and buy TV stations and networks. If you can’t buy an ad effectively on mobile and no one is using a PC to connect to the internet any more, then the only way to reach an audience is going to be via good old tv. And all that over the top video noise, forgettabout it."
I'd be amazed if any of our regular MFO posters were to be found at a broker's office clamoring to "get in" on the Facebook Fiasco (FBF). I just find it very hard to feel a lot of sympathy for anyone who got burnt in the FBF, as they may in fact be "small", but in my estimation they are not "investors", but speculators of various degrees of ignorance or stupidity. (cf: housing, "bubble")
As we now know, there were a whole lot of irregularities in the FBF, and in every instance where someone was mistreated by "system malfunctions" I would hope that they can be made whole. That is an entirely separate situation, distinct from the issue of FB being a gamble vs an investment. As FundAlarm succinctly says, below: "Like anyone was buying FB shares based on their financials!"
Exactly. If you placed an order at 38 and successfully obtained your shares, then don't complain if they are now at 32. “'I thought it would be fun to get in on the initial frenzy,' said Linda Lantz". Well Linda, you didn't invest, you gambled, the wheel was rigged (surprise!), you lost (surprise!), that's that. Welcome to real life. Don't do that anymore.
Take care- OJ