Thursday, May 17, 2012

Tomorrow Facebook And Its Investment Bankers Loot The Treasury

Look, this has once again reached the level of insanity that a criminal banking system is capable of generating.  When Facebook IPO rumors starting flying about 18 months ago, I wrote that at the estimated $50 billion offer price, it was valued at 30-40 times what the average stock was valued in 1929.  Times.  Not percent. 

Now our criminal friends on Wall Street have successfully pumped the IPO value up to $100 billion.  It’s Facebook for God’s sake.  It’s not the cure for cancer.  The company generates revenues through the massive advertising bubble we have written about over the last six years.  

Once again, in today’s world companies seldom use public capital markets as they were intended.   That is, to raise capital from the public to invest in our nation.  Instead, they use capital markets to loot.  To steal from society and do so legally.   To manipulate public resources for private gain.  The vast majority of this pillage is going to be used to “cash out” Facebook executives and to enrich Wall Street criminals.   They’ll offload this massively overvalued pig to little old grandmothers, pension funds, savings in 401Ks, savings in mutual funds, people who ignorantly believe they know what they are doing, etc. 

Back in late 2010 I wrote that Facebook was riding an unsustainable wave and the Facebook phenomenon was likely peaking.  And, that not only the wave they were riding driven by unsustainable ad spending but also by dated technology that would come crashing down as new personalization technology gained traction.    We are almost certainly very close to that peak as reality sets in everywhere but Facebook, the investor class and Wall Street. 

I think I understand the ad space quite well from a macro perspective.  I spent a lot of my career in propaganda, err..  marketing, have been involved in brand management, etc.  And, I clearly understand the unsustainability of what is happening while people in the ad world are clueless to the shifting sand beneath their feet.  ie, The self-delusions and false reality they most certainly are experiencing about their own brilliance.  Henry Blodgett just penned a piece that is worth reading.  One major advertiser remarks that Facebook is “getting worse, not better” at helping advertisers.  GM, the country’s third largest advertiser, just pulled all of their Facebook ads because it said they don’t work.  That’s not a surprise.   As I wrote half a dozen years ago, the advertising bubble has created an environment where companies are literally throwing cash at the internet without any understanding of what the returns are.  Facebook and Google are benefiting from that dynamic.  Good luck with that in the new future that is unfolding.   New technology, personalization, targeted marketing around that new technology and the implosion of the ad bubble will all play a role in that unsustainability.

This is going to turn out very badly.  The public, investors in Facebook, are being looted.  They are going to be punished mercilessly as this economic crisis continues to unfold.

posted by TimingLogic at 9:55 AM

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