May 18, 2012 - Facebook

I entered into a long position at the start of the slide, and then optimistically took another one during the slide, when the market was looking deceptively flat. I felt the fundamentals were sound enough, and in the case of the second, it was a low-priced stock that should have a decent upside, which a moderate market upswing could provide. Possibly more later, but anyway...

Following the failure of Greek elected parties to form a government, new elections are needed in Greece. That does not imply that future elections will have better results. Over this time the European markets were consistently down at the end of their trading sessions, leading to enough uncertainty for the American markets to decline, leading to decline in the Asian markets. Even moderately good news didn't help much, but on the other hand, an awful Philly report on May 17th would have done more damage during a market upswing. At this point I expected more of the same slide. Enter Facebook.

People seem to quickly forget details of politics, but I think that the Facebook IPO will long be remembered for multiple reasons. The level of hype was impressive. Everyone had an opinion on it. Every channel mentioned it at least once, even though it wasn't really news. [Nowadays a news item is anything titillating, especially if there is good footage.] It does not matter here, but my opinion is that Facebook is not Google. What is important is that most investors were looking for a bright spot somewhere, some news or other market shock to break this slide of European doubt. Facebook was not it.

Facebook opened at $38 peaked in early trading, and then slumped to $38, closing at $38.05 or something similar (I can't seem to get the right number off the chart I'm looking at). It was hoped by many that the high expectations might broadly enhance trading throughout this Friday session, but the effect was strangely mixed, and unsatisfactory for traders hoping for a brighter market performance. Most interesting are the rumors (has this been confirmed?) that the FB IPO underwriters were buying up FB stocks with $38 limit orders to buoy the stock price. [I have to wonder at the legality of that, if it is true.] In Monday trading FB quickly drop to below $35 and stay there through the day, but I'm getting ahead of myself.