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Fear The Facebook: Seven And A Half Things To Know

The Huffington Post  |  By Posted: Updated: 05/17/2012 7:57 am

Facebook Ipo
There may be reason for investors to fear the Facebook IPO.

Thing One: Fear The Facebook: Dave Attell has this bit about what fear looks like: To paraphrase, fear looks like a naked man running down the street. If you see a naked man running down the street, you run with that man, Attell says, because something scary is coming from the other direction.

That sage advice is not being followed by the investors clamoring like brain-hungry zombies to buy shares of Facebook, whose IPO prices later today. They have placed so many orders that brokerage firms have already closed the window to more, writes Reuters. At the same time, Facebook insiders are running in the other direction, dumping so much of the stock that Facebook has raised the amount of shares available by about 25 percent. Insiders were already planning to sell out a big chunk of the IPO, and now they are planning to sell even more of it, writes the Wall Street Journal. Big holders like Goldman Sachs -- an underwriter of the IPO, keep in mind -- have doubled the amount they plan to sell.

"The change means that 57% of the offering will be coming from current holders, rather than from the company, an unusually high percentage for one of the most sought-after IPOs in years," the WSJ writes. This is not a good sign, writes the Financial Times. Advertisers remain skeptical of the company, too, The New York Times writes, also not a healthy sign for future revenues. Writing for the Washington Post, Barry Ritholtz suggests this IPO is for only the luckiest and most gimlet-eyed of savvy traders, who can buy it at the IPO price and sell it for a big profit, using only spare money they've got lying around: "Other than that, you are playing the 'greater fool' game — buying a very pricey stock and hoping to sell it to some other 'greater fool' when it gets even pricier."

Thing Two: Whale Harpooned: Remember that $2 billion JPMorgan Chase trading loss? Well, it's turned into a $3 billion loss in just a week, writes The New York Times, as the bloated London Whale, trapped in a bad trade for all the world to see, has been eaten alive by hedge funds. It's only going to get worse. Meanwhile, the Obama administration, apparently having forgotten about that whole financial crisis from a few years ago, is suddenly energized again by the JPMorgan loss to seek a tougher Volcker Rule, which would prevent commercial banks from gambling in the markets the way JPMorgan did, the Wall Street Journal writes.

Thing Three: Euro-Zone Breakdown: That snipping you hear is the sound of the first few strings attaching Greece to the rest of the euro zone being cut away. The Financial Times writes that the European Central Bank yesterday cut off regular funding to four Greek banks, which have been hammered by customer withdrawals in recent days. ECB chief Mario Draghi warned Greece that Europe might be better off without it, if Greece can't stick by its austerity promises. And Greece is already falling behind on some of those promises, notes Reuters, as it has been a little distracted by its political chaos. Meanwhile, Spain has slipped into recession, Reuters observes. Getting ugly again.

Thing Four: Friendly Fed: And yet, despite Europe melting down, the U.S. stock market is showing signs of life again, in part because hopes are starting to rise again that the Fed will fire up its money-printing press again. The minutes of the most recent Fed policy meeting showed central bankers were willing to pump more money into the economy in the event Europe started to really blow up again, Bloomberg writes, and that's what's happening, so more Fed money must be on the way, thinks the market, so buy stocks, preferably Facebook. QED.

Thing Five: SEC Wakes Up To Whole Subprime Mortgage Thing: The wheels of justice move swiftly in this country, at least when it comes to financial malfeasance. Let's say you are a hedge fund that helped investment banks design foul investments stuffed with subprime mortgage garbage, to be sold to unsuspecting investors and against which you placed huge bets. Let's say those investments blew up on the unsuspecting investors and you made a killing. Let's say several years went by, during which time everybody on Wall Street and Main Street was fully briefed on your bets, and ProPublica wrote a Pulitzer-winning epic story two years ago about your endeavors. Well, you'd better believe the crack Securities and Exchange Commission is going to catch wise to you and start maybe investigating you, my friend. Because that is what is happening now, writes the Wall Street Journal.

Thing Six: Private Equity Is All Up In Your Mouth, Drilling Your Teeth: Bloomberg has a terrifying, weird and terrifyingly weird story today, about horrific dental management companies doing all kinds of nasty dental work to people, including sometimes children in school without their parents' knowledge, all to make money, for private equity. "Management companies are at the center of a U.S. Senate inquiry, and audits, investigations and civil actions in six states over allegations of unnecessary procedures, low-quality treatment and the unlicensed practice of dentistry."

Thing Seven: Pharmageddon: Plavix, the blood-thinning drug that has made enough money for Bristol-Myers Squibb over the years to buy a small country, loses patent protection today,
The New York Times writes
. "It is the biggest name-brand drug to lose patent protection since Lipitor, made by Pfizer, encountered generic competition late last year," the NYT writes, quoting somebody who dubs the two events "pharmageddon."

Thing Seven And A Half: Short Shorts: SNL this weekend broadcast its 100th, and maybe final, digital short. In honor of this, Uproxx has put together what it claims are the ten best digital shorts. That's highly debatable -- there's no "Shy Ronnie," no "Jizz In My Pants," no "Like A Boss" -- but it's worth a look.

Calendar Du Jour:

Economic Data:

8:30 a.m. ET: Initial Jobless Claims for the week of May 12

10:00 a.m. ET: Philadelphia Fed Index for May

10:00 a.m. ET: Conference Board Leading Economic Indicators for April

Corporate Earnings:

Applied Materials

Gap

Wal-Mart

Heard On The Tweets:

@maureenmfarrell: First up for Einhorn $MLM problem on many levels he says

@LaMonicaBuzz: @maureenmfarrell And just like that, $MLM down nearly 11%.

@PattyEdwards: New term that's going to catch on. RT @grassosteve: $MLM got Einhorn'd

@SRuhle: First he dogs MLM now Einhorn is hating on France & using JerryLewis telethon photos to do it

@SheilaD_TV: $HLF paring gains. Up only ~6%. Worries about what else is in Einhorn's 100+ slides? #einhorn #irasohn

-- Calendar and tweets rounded up by Khadeeja Safdar.

And you can follow us on Twitter, too: @markgongloff and @byKhadeeja

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