(Bloomberg) Facebook IPO fallout deepens investors’ distrust of stock market

Posted by Kendall Harmon

Facebook Inc.’s initial public offering, plagued by trading errors and a 16 percent drop in the share price, will push more individual investors out of a stock market they already distrust after the financial crisis.

“This is clearly the latest in a long string of events that is eviscerating the confidence investors have in the market,” said Andrew Stoltmann, a Chicago attorney who represents retail investors. “The perception is Wall Street jiggered this IPO so the underwriters made money, Facebook executives made money and the small investor got left holding the bag.”

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Filed under: * Culture-WatchPsychology* Economics, PoliticsEconomyCorporations/Corporate LifeStock MarketThe Banking System/Sector* International News & CommentaryAmerica/U.S.A.* TheologyEthics / Moral Theology

Posted May 25, 2012 at 4:03 pm [Printer Friendly] [Print w/ comments]

1. Capt. Father Warren wrote:

will push more individual investors out of a stock market they already distrust after the financial crisis

I wish I had an ounce of Gold for every time that silly comment has been touted over the 50 or so years I have been investing.

Any individual investor who had the hots for this IPO deserves that they get; that is the price of stupidity.

What product does Facebook make?  What is their value stream that provides for corporate valuation in the IPO? 

Nope, this is nothing more than the consequences of the sin of greed.

And if the stupid get run out of the market, maybe that is a good thing.

May 25, 7:27 pm | [comment link]
2. Yebonoma wrote:

I second commenter #1’s observation.  The individual investor has no business buying IPO shares right when they hit the market.

As Lord Keynes said, “the market can stay irrational longer than you can stay solvent.”

May 25, 7:51 pm | [comment link]
3. paradoxymoron wrote:

C’mon, FB makes most of its money on a piece of the action when a third party sells imaginary gardening implements for imaginary farms to people who hate to go outside. Happily, profits and losses will be imaginary until they decide to sell their shares.

May 25, 9:15 pm | [comment link]
4. Ad Orientem wrote:

It is a seldom heard and even more seldom heeded maxim: In general, people should not buy individual stocks. Stick to one or two low cost broad-based index funds. Reinvest the dividends and leave them alone. Review annually and rebalance as needed. If you are spending more than 15 minutes a year on your stock and bond portfolio you are doing something wrong.

May 25, 11:42 pm | [comment link]
5. paradoxymoron wrote:

That’s excessively cautious for all people at all stages of their retirement planning. A portfolio of investments should have a variety of stocks and bonds. Stocks should be diversified among a bunch of sectors, with a degree of risk corresponding to your proximity to retirement: retiring soon = low risk.

May 26, 2:20 pm | [comment link]
6. Catholic Mom wrote:

The general rule of thumb is tht you should buy funds (preferably index funds) if you can’t afford to buy at least 15-20 individual stocks in round lots (100 shares).  My whole portfolio is in index funds (and I can afford to buy individual stocks) because who needs the hassle of constantly adjusting the diversification?

Re: IPOs—of course no one should buy them.  But that’s not the point.  Frankly, I believe that gambling is a tax on the stupid and that state sponsored gambling is immoral.  But if you *are* going to have state-sponsored gambling,  you can’t have a crooked game.  The point of this debacle is that that you can never believe a word anyone on wall street tells you.  Of course we all already know that.  But people keep learning it over and over again.

May 26, 4:05 pm | [comment link]
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