TGIF May 18, 2012

Welcome to Facebook Friday.  The biggest and most hyped IPO finally came to market today.

The buzz was high, and the BIG question was where the shares would actually begin trading.  The final IPO pricing was $38 Thursday night.  It opened at $42, hit a high of $45 and closed right back at the IPO price of $38.  Nearly 600 Million shares traded in its debut.  Unbelievable!  For perspective, at a $104 Billion Market Capitalization, the Facebook Company is instantly more valuable than Disney.  This is a moment in history to remember.

The business reporters failed to remind investors that one of the unique experiences of today’s IPO was the skinny sales commissions awarded brokers. FB’s management restricted the commission to 1.5% so the “little people” could participate in the future growth.  Also it’s the 100-share buyers who will tuck away the new shares for their grandchildren whereas the day traders would buy at 38 and flip the shares moments later to grab the quick trading buck.  The PLAN worked.  Management also authorized releasing thousands more shares than anticipated which gave even further distribution to the kind of investor who will hold the shares for long-term growth rather than a quick flip.

Unfortunately, the Social Media hype couldn’t help curb the slide for the Global Markets as the DOW has seen a decline in 12 of the 13 trading days in May.  It’s been a rough go, but not a complete surprise.  Europe remains quite sick.  Everyone knows the well chronicled debt issues on the European continent.  That’s not news. Greece has effectively already defaulted, but the major concern right now is its future with the European Union; will they leave on their own accord, or get kicked out?  Regardless, a Greek departure would set a dangerous precedent for this economic union that started in 1993.  Having one nation leave, would make it much easier for another, and then another.  The Market doesn’t like it.

We’ve been on guard all year hoarding substantial cash positions to cushion the blow of a market correction.  We will survive whatever comes our way, and play strong defense.  But we won’t abandon our ability to look out beyond the near-term mess, and seek sound growth investments in companies that continue to innovate.  The Facebook effect is real, and actionable.

Have a nice weekend.

By: Mike Frazier

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