The curious public reaction to Facebook IPO

You couldn't have missed the public fury over the Facebook IPO, over the last week, even if you not economically inclined !  Facebook was a darling before the IPO - great company, stratospheric valuations, etc etc, which this blogger has been heartily against. But now after the IPO , Facebook is a pariah, it botched up the IPO, lawsuits threatened, etc etc. This time this blogger is completely on the side of Facebook and totally flummoxed by the public reaction.

What is the main charge ?  Facebook's price did not shoot up 10 times after the IPO. Instead it has declined by some 16% or so, over the IPO price, in the first week. The company has committed sacrilege. Really ??

Who are the moaners and bleaters. The punters who bought in the IPO wanting to sell on the first day after listing and make a 5000% profit. Please tell me why the company has any obligations to these greedy leeches ? What economic activity have these speculators done (never mind that in this lot might be Oregon widows who didn't know what they were doing !)? Why should they make any profit at all ? Why should Facebook "ensure" that the stock rises manifold on the date of listing ? It can be argued that Facebook should actually be doing precisely the opposite. After all if the price shoots up after the IPO, the company is shortchanging the original investors who first invested in the company to the benefit of the sharks who want to make a whopping profit in one day. By that yardstick, Facebook has done precisely the right thing.

The second charge is that the IPO price was overvalued. Now do you need a MBA to tell you this ? Of course the company is overvalued like crazy. Everybody knows that. People chose to close their eyes and believe that in a stampede they would make a killing. They've now been trampled. Tough luck. 

The third charge, and a more serious one, is that Facebook let some analysts know that its latest quarter's numbers would be lower than expectations, but didn't inform everybody. This is what is triggering the threats of massive lawsuits.I don't know the facts behind this allegation, but I suspect this is a fig leaf behind which the punters are wanting to hide. As if their stampeding to buy Facebook shares had anything to do with numbers or logic or any sensible model of valuation based on earnings. Would they have behaved any differently if Facebook had said they would earn half of what they did ??

I have zero sympathy for those moaning today, I am actually delighted that they have lost their shirts and would be even more delighted if they lost their underwears too. The right course of action for them is to wait a year or two, and see if Facebook's performance doesn't lift the share price. Fat chance of that happening - this lot has the patience of an ectoplasm !

I am totally with Facebook on this one, even though I am not with them on anything else. That's why I am not updating my timeline !

Never mind Greece, there's a bigger basket case

Its the world's ninth largest economy. Its six times the size of Greece. Its actually bigger than India. And its hopelessly bust . Yet; we aren't hearing much about it. Only because ,  its not a country. Its a state. The State of California. The world's biggest basket case ! This has been a favourite topic of mine having blogged before here and here.

California has a state budget of some $90 bn. And it just projected a deficit of $15 bn. What sort of an economy runs a deficit of 18% of the budget ?? This has been going on for years . And what does that state do - simply borrow . And borrow. And borrow.  And with no hope of ever bridging that gap. If California had its own currency, I would be merrily shorting it. It would be a prime candidate for begging at IMF's door. 

For once you can't blame the political leaders for the mess, although they are the ones being vilified and quartered. The blame must squarely rest on the citizens of California. For they are the ones who have brought this mess upon themselves by indulging in direct democracy.

California is a perfect example of democracy run wild. For decades they have been passing laws through referendums without the level of serious evaluation and trade offs that are necessary for good governance. The infamous Proposition 13 of 1978 drastically limited property tax and imposed a requirement for a two third majority to raise any taxes , making it virtually impossible to do so. Then they passed scores of spending laws like Proposition 98 of 1988 which mandate 40-50% of the general revenue to be spent on education. And Propositions like 117 of 1990 that mandated a minimum spend of $30m on wildlife habitat. Proposition 49 of 2002 increased spending on before and after school programs by some $450m. There are tons of such mandated spending with barely a thought on how they would be funded. They also pass whimsical Propositions that mandate that a chicken must be able to spread its wings and turn a full circle without touching another chicken as I outlined in this post !

The problem is simple. California depends for more than 50% of its income on personal income taxes. These unfortunately fluctuate. Recessions drastically reduce tax revenues. In boom times the revenue increases are spent away and nothing is saved. In hard times, there's a massive hole in the budget. There is zero political will ( read citizen appetite) to do anything about it. Budgets are never passed on time. Fiscal irresponsibility has a new meaning in California that would make Greece blush. California is the perfect example of how not to run an economy.

The puzzling thing is that California is also home to the smartest people in the world.  It is arguably the most intelligent place on earth. And yet ..... 

Maybe intelligence is no insurance against stupidity !

A matter of grave import to the nation

The Hon'ble Supreme Court of India is a very esteemed body and is concerned with matters of grave constitutional importance, on which hinges the future of this nation of 1.2 billion people.  Therefore when this august body makes a ruling, we should take it very seriously and comply. It also goes without saying that the Supreme Court only rules on extremely weighty matters and does not lend itself to trivialisation. It is therefore very clear that the removal of sun films from car windows is one of the most important and pressing of issues that confronts India today.

The Supreme Court has ruled, after intense deliberation, and careful consideration of legal issues that pasting a sun film on your car window is illegal. That it has devoted its valuable time to this, while it is suffering from a massive backlog of cases is enough evidence that this is an extremely grave matter. A very concerned citizen of India, Mr  Avishek Goenka (it is completely untrue,  that the aforesaid gentleman is an old f@*$, of the qualities I alluded to in this post) filed a Public Interest Litigation that sun films on car windows was an important reason for rape, dacoity, murder and a host of heinous crimes . The Hon'ble Supreme Court agreed. From now on , thou shall ride a car with sun films on the windows at your peril.The implication of this judgement is obviously that as soon as sun films are removed, the incidence of dacoity, rape, etc etc shall drastically fall. Please monitor the statistics in the next few months to see this dramatic fall.

The police in each state is getting ready to diligently implement this critical matter of public policy. They shall now treat sun film violations on par with catching those driving without a license, driving on the wrong side of the road, driving without any lights at all, five people riding a two wheeler, parking in the middle of the road etc etc. These matters already receive the highest attention from the police, so much so that these problems are largely licked ; they will now have the time to tackle sun film.

The Hon'ble Supreme Court did not mention this, but we can speculate that the corollary effect on public health also influenced its opinion on the matter. We are somewhat concerned that Vitamin D deficiency is at an unacceptably high level in India. Exposure to sunlight, especially the intense summer sun that we are blessed with, is really a significant aid to the health of the nation. With no sun films on car windows, my vitamin balance will be strengthened by the absorption of more sunlight.

A byproduct of this move shall also be to enhance public morality. Activities of an amorous nature, carried out in the confines of a car will now be visible to the, umm,  naked eye and therefore act as an effective deterrent.

I shall also compliment Mr Avishek Goenka on services to the nation and exhort him to continue to strive for further reducing dacoity , rape, etc,. Considering that a significant proportion of such crimes are done indoors, its time to turn the attention to buildings. It is deplorable that building windows are tinted and the view blocked by curtains. I am exhorting Mr Avishek Goenka to move the Hon'ble Supreme Court to also deliberate upon the legality or otherwise of curtains. (Reflections, please note).  After winning this, Mr Goenka is also exhorted to move the Hon'ble Supreme Court to ban the wearing of sunglasses so that potential rapists who are ogling at women with the intention of committing rape can be more easily found out.

I am extremely happy to be living in a land where the institutions are so concerned about my welfare and safety. I shall now feel much safer on Indian roads knowing that policemen are on the look out for sun film offenders. I commend and applaud all those who have diligently framed this public policy. Jai Hind.