(Fred Weinberg/The Penny Press) – So, Facebook is worth more, in the opinion of the “market” than, among many others, Mastercard, Visa, Caterpillar Tractor Company, Boeing and 3M?
The late John D. Rockefeller once said that when the shoeshine boys start giving stock tips, it’s time to get out of the market.
When Mark Zuckerberg can become a billionaire for founding a company which “connects people” in the ether, we’re coming dangerously close to another economic bubble and the same people we bailed out in 2008 and 2009 are suckling up to the teat of hype instead of financing the strength of America which is in many of the companies I just listed above. And, of course, in the small businesses which represent 82 per cent of America’s employers.
This is not to say that Facebook has no real worth. Only time will make that decision.
But the fact is that Wall Street managed to use its economic heft to make a bunch of people rich for, essentially, taking their chips off the table where Facebook is concerned.
That’s right. Immediately before the Initial Public Offering, the number of shares to be sold was increased by 25% so that the venture capital firms with major Wall Street ties could cash out up front as much as 50% of their stakes. Or, put another way, whatever happens next, they no longer have any real skin in the game.
Don’t forget, the buyers of that stock are mostly little guys.
Now, none of that is illegal.
If people want to pay $38 a share for a company which has no real business model, that should be their right. But let’s not confuse this with the kind of economic activity which creates the kind of recovery Barack Obama thinks we’re silly enough to actually believe is happening.
Most of the same Wall Street bankers we had to bail out when they made losing bets they couldn’t cover in 2008 are involved in some way with this deal and what that means is that there’s another bubble being inflated.
Last time, they made bad mortgage loans and sold them to investors. Then, they bet against the loans. This time, at least, Facebook is a real company.
But, rest assured, it is not worth more than Caterpillar and Boeing put together. The action on May 18 is what is known as financial engineering and the winners are, for the most part, the same institutions and individuals who we bailed out with tax money over the last several years.
And those are also the same institutions whose executives make enormous campaign contributions to both parties in order to maintain “access” at both the Capitol and the White House.
First of all, we don’t need new laws or regulations. Except one. If you are going to play this game, you need to play it with your own money and there will be NO chance of a taxpayer bailout if you stub your toe.
Second, this isn’t the kind of capitalism which should bring a patriotic lump to your throat.
It’s the kind of excess which, like it or not, comes along with a free market. Frankly, the odds of a success for the little guy here are only slightly better in this kind of a deal than on the floor at the MGM Grand in Las Vegas.
And, third, allowing individuals to be this dumb is what makes us a great nation. Really.
Because while everybody is busy fawning over a 20something billionaire and his company which may or may not exist in five years, someone is in a garage somewhere inventing something which could revolutionize communications or transportation or construction and this nation is one of the few where you can do that and see your invention come successfully to market.
We can only hope that invention won’t be built in China.