Flopbook!

Why do we have this sense JP MO and Morgan Stanley are going to own a large book of Facebook stock at $38?   Maybe FB stock will be the Fed’s asset of choice during the next round of QE since it appears much of it is coming back to the Street.

P.S.  The Trannies and Russell broke support at their 200-day today.

We expect more selling given the payoff matrix (see below) we constructed yesterday.   Next stop 1278 on the S&P500, the 200-day moving average, and let’s hope we bounce there.   Could be, and often are, wrong.

(click here if charts are not observable)

This entry was posted in Black Swan Watch, Equities and tagged , , . Bookmark the permalink.

3 Responses to Flopbook!

  1. Toward the close the FB chart got suspiciously smooth and placid just above the IPO price.. underwriters trying to avoid breaking the offer on the first day? It seems a lot of people have invested taking a big pop for granted.

    What was your thought process behind the game matrix you made? I would think closing at the low drains liquidity as people who invested in expectation of a quick pop start to want their money back.

    I’m also thinking the reason high-profile IPOs can’t party like it’s 1999 anymore is their accessibility in secondary markets pre-IPO. There’s no premium in getting an IPO allocation if anyone can buy beforehand on SecondMarket and bid the price up *before* it opens. Is there a source for what shares were effectively trading at over the last year? From below it looks like they sold for $40 in February. If that’s true, a lot of people (other than Mark Z and the gang) may be underwater right now.

    http://www.bloomberg.com/news/2012-03-28/facebook-said-to-halt-secondary-market-share-trading-this-week.html

    But in the short term it’s anybody’s guess.

    • macromon says:

      PI, Thanks for the post. The matrix was just an exercise to discipline the thought process about various market scenarios. We thought if Facebook traded well and the market (as reflected in the S&P500 ) couldn’t muster a rally, the probability of flash crash would increase. The Facebook IPO was supposed be good for the market and went bad, thus more selling. If the market traded up even as Facebook traded down would have been a good sign of a bottom. Cheers!

  2. Pingback: Facebook As The ‘Ultimate Black Swan’ « Investment Watch Blog

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