Facebook debuts, social-networking stocks fall

[Betonov]

Originally Posted by jimbuna

Don't believe everything you read in comics

It was my dogs idea

[Skybird]

Originally Posted by mookiemookie

Sky, with all due respect, you're way off the mark here.

It absolutely creates a service and has produced a social media platform. In your world, only companies that manufacture tangible items would have any value. What about accounting firms? They don't produce anything. Advertising, financial services, insurance, travel? None of them produce anything at the end of the day. Are you going to argue that companies such as Norwegian Cruise lines and Deloitte and Touche are worthless? That's absolutely absurd.

What about the value of the eyes of the 800 million users that it has? You can argue about what exactly the value of that is, but you have to admit it does have value. Advertisers can't advertise without an audience to advertise to. Facebook has that audience.

I make it easy and short: As long as you trade real value for real value (no matter whether you use the valued items themselves or their calculation representation: money), you are on the safe side. When you start to trade debts, trade real value for non-real values, you sooner or latter mess things up.

When money, which is just a calculation unit so that you must not carry a truckload of furs and sacks of grain when you make a deal, no longer is just a tool, but becomes the traded item itself, then all devils from hell are cooking in your kitchen, and debts start to rank as "products". And the cooking party starts once you allow that more money is in circulation than there is real assets it represents. Because then money starts to multiply by itself, and real values get devalued by that.

That's it in a nutshell, simplified a bit, but in principle that is the basic mechnaism. Any monetarian system allowing trades with interests included, or trades for m oney that somebody doe snot have, biut expects to gain due to the trade, are essentially a delayed doomsday machine. Always. May take its time, but in the end it explodes, always. Because money multiplies faster than real value, so the moment the first such trade is beign done, the spreading of real value and faster increasing money in the whole system has been launched, and it never stops again. real economy may increase real values, but the ammount of money always increases faster, so the gap between both is widening.

It's a very basic and principle argument against financial capitalism that involves any form of interests, and nobody wants to believe it. Overcioming this inherent design implication would mean a cultural revolution that is hard to be overestimated, I would rate it of same ranks like inventing the farming of grain, discovering fire, inventing the wheel. I am realist, and expect it not to happen. We will prefer to go to hell, even more so since our established elites of profiteers are too powerful as if they need to allow the waning of their control power and welath without massive and crushing resistence. A first taste of that we just have gotten when the repairing of the messed up stockmarkets and bank non-controls have failed both in the US and Europe. Others may fail for ideologic reasons like socialism, or bribing voters with fincial gifts that the system/nation/community cannot afford.

We will decide by reasonable arguments - yes, I mean that serious and not one bit sarcastic! - to prefer fall over survival, like Jared Diamond has so stunningly and convincingly demonstrated for so many societies before us, in his book "Collapse. I summarised his basic arguments in a separate long thread two years ago. These reasons also are valid for how our financial systems are working, and our globalised economy.

---

And the "product" that Facebook sells - is the user. That'S what makes it different from a telephone company or a travel agent.

---

I posted this before, last month, but I love that tale.

Originally Posted by Skybird

In a book from 2011 ("Geld - Der vertrackte Kern des Kapitalismus"), financial journalist Lucas Zeise gave this nice anecdote:

There was a village, that lived by tourism until the financial breakdown 2008. Suddenly, tourists stayed away, and the people living in that vilage had to lend money from each other to survive. But then, one foreigner entered the localo hotel, and demanded a room. He payed in advance with a 100 Euro note. The hotel owner took the note to the butcher because he owed him 100 Euros. The butcher took the 100 Euro to the farmer whose cattle he still needed to pay. The farmer took the money to the whore in the village, whom he still did owe 100 Euros. The whore took the 100 Euros to the hotel owner, because she occassionally rented a room in his hotel, and still owed him 100 Euros. When she put the note on the table, the tourist came down the stairs, fetched the 100 Euros off the table, said he had changed his mind, and left. - Well, nobody in the village had won money, nobody had lost money, there were no gains and no losses for anyone. But for some reason everybody was suddenly free of debts.

[mookiemookie]

Originally Posted by Skybird
In a book from 2011 ("Geld - Der vertrackte Kern des Kapitalismus"), financial journalist Lucas Zeise gave this nice anecdote:

There was a village, that lived by tourism until the financial breakdown 2008. Suddenly, tourists stayed away, and the people living in that vilage had to lend money from each other to survive. But then, one foreigner entered the localo hotel, and demanded a room. He payed in advance with a 100 Euro note. The hotel owner took the note to the butcher because he owed him 100 Euros. The butcher took the 100 Euro to the farmer whose cattle he still needed to pay. The farmer took the money to the whore in the village, whom he still did owe 100 Euros. The whore took the 100 Euros to the hotel owner, because she occassionally rented a room in his hotel, and still owed him 100 Euros. When she put the note on the table, the tourist came down the stairs, fetched the 100 Euros off the table, said he had changed his mind, and left. - Well, nobody in the village had won money, nobody had lost money, there were no gains and no losses for anyone. But for some reason everybody was suddenly free of debts.

Your story doesn't illustrate what you think it does. All it does is describe a barter economy. There's no debt involved at all.

If the value of the hotel room was exactly equal to the value of the meat which was exactly equal to the value of the cattle which was exactly equal to the sex which was exactly equal to the value of the hotel room, money never needed to be entered into the economic system at all! Credit never had to be extended at all as the values of the goods and services were the medium of exchange, so your cute little point about the silliness of debt is completely wrong. There wasn't any real debt in the village's economy in the first place.

Look at it this way:
hotel owner - paid in lodging, received meat
butcher - paid in meat, received cattle
farmer - paid in cattle, received sex
whore - paid in sex, received lodging

No debt there, just a neat little chain of barter.

QED.

[Skybird]

Yes, that apparently was the point.

I now must wonder if YOU have gotten the point of why I quoted this again? Where are today's debt burdens come from? Certainly not from a setting like in that anecdote.

And that is the difference I was after. Becasue as I exyplained, the real world is not like in that anecdote, but is a place where real value and abstract value are in increasing spread.

That spread can only be narrowed again by boosting inflation (which is the idea behgind the Fed'S doing). Money needs to be taken out of circulation, to boost value of the remainign money which becomes the more vlauable again the more the ration between money and real value it represents, come back to a state where they match again. Where is that money taken from in a controled inflation? Private savings. What is it in the end? Enforced mass exproriation.

Who gets hit worse by it, people with giant or peopel with minimum incomes, people with huge savings or people with little savings that can merely secure their high age life? Those who hjave little, are hit worse, of course. What is a loss of comfort for richg, is a threat to the very existence of the poorer.

There is a link between debt, and money in circulation, obviously. Taking money out of the total circulation (via the central notebank destroying it), is not the same like rich people stockpiling huge ammounts of money - the money is no longer in circulation, but it still casts an effect as if it were, devaluing money representing real values/assets, and boosting inflation. which seems to be a biot paradox, but is not at all. In other words, the huge savings of the very rich are a very big problem that causes the poorer ones being forced to pay for.

And now look at variuous Wetsern cou7ntries, or the rich in Russia, China, the Araba states, how the gap between rich and poor is widening, and how more of the circulating money and real wealth is accumulated in few and fewer hands, while a bigger and still growing part of the population shares less and lesser of the overall wealth there is. The spread is growing, and does so apparently everyhwere.

That is one of the two bars of dynamites our world probably will blow up over. The other is demographics: old versus young.

There is no pleasant solution of any of the two.

[AVGWarhawk]

Originally Posted by mookiemookie

Sky, with all due respect, you're way off the mark here.

It absolutely creates a service and has produced a social media platform. In your world, only companies that manufacture tangible items would have any value. What about accounting firms? They don't produce anything. Advertising, financial services, insurance, travel? None of them produce anything at the end of the day. Are you going to argue that companies such as Norwegian Cruise lines and Deloitte and Touche are worthless? That's absolutely absurd.

What about the value of the eyes of the 800 million users that it has? You can argue about what exactly the value of that is, but you have to admit it does have value. Advertisers can't advertise without an audience to advertise to. Facebook has that audience.

Goods and services. That is what manufactures offer. That is what companies like GE, Verizon and Comcast offer. Not a virtual world of friends showing pictures of their latest sexual conquest. The only value FB has is the constant advertising. It offers nothing else. All it takes is advertisers to see diminishing returns and pull the plug.

[mookiemookie]

Originally Posted by AVGWarhawk

Goods and services. That is what manufactures offer. That is what companies like GE, Verizon and Comcast offer.

Manufacturers manufacture things, not services. Verizon is not a manufacturer. They're a service provider. Same with Comcast.

Not a virtual world of friends showing pictures of their latest sexual conquest.

Verizon only offers people a virtual world means of telling their friends about their latest sexual conquest. Comcast pipes entertainment into your home. They don't manufacture anything at all. But yet these companies have value to shareholders - why? What's the difference between one service provider (Verizon, Comcast) and another (Facebook)? You can't say that Facebook's worthless because it doesn't produce anything, as you just named two other companies that don't produce anything either.

The only value FB has is the constant advertising. It offers nothing else. All it takes is advertisers to see diminishing returns and pull the plug.

Now you're getting warmer. But I think you're mixing up Facebook's business model with their product. Their product is the website, the user interface, the platform for sharing pictures, updates, etc. That's what they've created. Their business model is to use that to sell advertising and to get fees from games. It's a key distinction to make. You can have a problem with their business model - and many people do. I think it's a valid concern, and a valid reason to value the company less. But the fact that they don't manufacture widgets that get shipped out from a warehouse somewhere is not.

I think the underwriters really screwed up on valuing this deal. Apparently the market does as well.

[Onkel Neal]

Originally Posted by Skybird

No. Think it to the end. I admit, it is a very long chain, but still - try to think it to the end. Facebook produces nothing and creates nothing. No real value it creates at all, and the value (in the meaning of money) now spend for its shares -ideally - would represent the monetarian value of some other real assets: products, land, anything. Which means the money representing real values (the latter meaning) noiw suddenly is sucked up by something that represents no real values. In other words real assets get annihilated to value up unreal, non-real assets (FB). The ral value has not been increased, but to compensate the loss of money representing real assets, new money gets printed and brought into circulation, with inflation and all the rattail of unwanted follow-onb effects. So: while the buyer of FB shares may or may not make a short-termed gain when buying and selling FB shares, there still is a devaluing taking place that is absorb and compensated by the whole and complete system. It is a an intrinisc design flaw that temporary money theory and economc "theories" cannot evade, tried to solve and so far completzely have failed to solve, since centuries. And since as long it creates one cultural fall, one economic collapse after the other.

Economic theory even has a special term for it and recognises it as un unsolvable problem, but for the present moment the term just does not come to my mind.

If you think now that it is a very basic problem for any capitalistic monetarian system in general, than you are right. It is. That'S why capitalists tend to act as if it did not exist.

With the known results that hit civilisation every couple of time cycles. Provloem is that frequency and amplitude of such problems are accelerating by several factors in modern time, speeded up by the increased pace of modern industrial societies.

I grant you your monetarian win if your FB buys turn out to be profitable in the longer run. It's just that you have not formed and that FAB has not formed up additonal real value when that happens. A cost equivalent to your gain, and then plus X, has been also created, the price is higher than your gain, and even if the whole system and all the others swallow it, it nevertheless adds to the many other individual gains that come at a equivalent cost + X. Somebody has to pay for it, and it could be any part of the global system and communities.

So do not be surprised about the next econiomic-finacial crashdown. It is just a question of time. Profits like yours - drive the process of frequent collapses, since they keep the whole system running from one spike to the next in the race for "eternal growth" - instead of trying to maintain a dynamic balance that keeps things in a state of slightly fluctuating stability and size of human civilisdation tailored to what can be supported by this stable balance. That would be what "Nachhaltiugkeit" really means. We are lightyears away from that. And that is why I am pessimistic about human global civilisation.

From nothing comes nothing, lead does not turn into gold. It is so easy a fact to understand, but greed seems to blind people over it.

Ah, human global civilisation. Got it.

Originally Posted by mookiemookie

Look at it this way:
hotel owner - paid in lodging, received meat
butcher - paid in meat, received cattle
farmer - paid in cattle, received sex
whore - paid in sex, received lodging

I know how this works! have a spare room.....

[PeriscopeDepth]

The reason Facebook is valuable is the same reason Google is. They have tons of users, and these users show signs of what they want to buy. On Google, these users declare the intent by putting into the search box "digital camera". Then sellers of digital cameras advertise to this person.

On Facebook, it's less clear. They don't have a tried and true revenue model (though they do have revenue, in the billions). How the user communicates intent is different. They may put "photography" as one of their interests. They may "like" a photo studio. They may post about wanting to buy a digital camera.

However, the reason Facebook is potentially valuable (and why you invest is supposed future value) is because they might figure it (a revenue model) out. They might nail it, even. And with that many users, and that much data they could nail it better than Google does now. The potential is there. There are lots of smart people working at Facebook (too many, IMO). They have enough money and time to think things through.

However, the market doesn't seem to think much of their future right now.

PD

[AVGWarhawk]

Originally Posted by mookiemookie

Manufacturers manufacture things, not services. Verizon is not a manufacturer. They're a service provider. Same with Comcast.

Verizon only offers people a virtual world means of telling their friends about their latest sexual conquest. Comcast pipes entertainment into your home. They don't manufacture anything at all. But yet these companies have value to shareholders - why? What's the difference between one service provider (Verizon, Comcast) and another (Facebook)? You can't say that Facebook's worthless because it doesn't produce anything, as you just named two other companies that don't produce anything either.

Now you're getting warmer. But I think you're mixing up Facebook's business model with their product. Their product is the website, the user interface, the platform for sharing pictures, updates, etc. That's what they've created. Their business model is to use that to sell advertising and to get fees from games. It's a key distinction to make. You can have a problem with their business model - and many people do. I think it's a valid concern, and a valid reason to value the company less. But the fact that they don't manufacture widgets that get shipped out from a warehouse somewhere is not.

I think the underwriters really screwed up on valuing this deal. Apparently the market does as well.

Yes, Verizon and Comcast provide a service. Internet, TV, phone. This is what I mean by service and as stated by "goods and services." Hotel chains provide a service. FB does not have a product. FB has a virtual product and not much of a service. It is only a form of communicating without having to get a piece of paper and pencil to write a letter. Shove some snap shot in with the letter. The only difference is the information in the letter is not broadcasted for all the world to see.

Bottom line...Wall Street has screwed the public..again.

[Gerald]

http://www.bbc.co.uk/news/business-18180861

Note: Update record 23 May 2012 Last updated at 14:57 GMT

[mookiemookie]

Originally Posted by AVGWarhawk

Yes, Verizon and Comcast provide a service. Internet, TV, phone. This is what I mean by service and as stated by "goods and services." Hotel chains provide a service. FB does not have a product. FB has a virtual product and not much of a service. It is only a form of communicating without having to get a piece of paper and pencil to write a letter. Shove some snap shot in with the letter. The only difference is the information in the letter is not broadcasted for all the world to see.

I'll blow up your argument in one word: Google.

[Skybird]

Just read that now the mud throwing season has formally been opened.

I shall find it most amusing how they all sabber and whine, squirm and weasel, wanting the gold, but fearing to be caught by the searchlight...

[mookiemookie]

I've been watching this sort of on and off. The first allegation is that Facebook fed institutional analysts inside information that caused them to lower their estimates. This would be a big no-no.

The second allegation is that the analysts lowered their estimates and the rest of the investing public didn't know that. That's a gray area, but I see it as a case of "too bad, so sad" for those who didn't know. Analyst estimates are definitely material information, but analysts are under no obligation to make their research available to the investing public at large. They're also not insiders, so they can't very well be accused of being a tipper - UNLESS they had received non-public information from Facebook insiders. If they revised their estimates based on publicly available info - well, you can't very well buy your stock through E-Trade and then cry foul because you didn't have access to Morgan Stanley institutional research.

I think this is a case of those foolish to buy into the CNBC garbage cheerleader hype and buy a stock at a price that was 150 times earnings trying to find someone else to blame for their foolishness.

[Bilge_Rat]

Originally Posted by mookiemookie

I think this is a case of those foolish to buy into the CNBC garbage cheerleader hype and buy a stock at a price that was 150 times earnings trying to find someone else to blame for their foolishness.

I would agree. It reminds me of the worst days of the internet bubble of 1999-2000 where companies were trading at 100-200+ times earnings, 95% of which then disappeared.

When you buy a company like Facebook, you are not buying present earnings, but potential future value which may or may not be there.

[kraznyi_oktjabr]

Finnish newspaper Helsingin Sanomat reports in its webpage about calculation by Thomson Reuters Starmine. Calculation which is based on 10,8% average yearly growth (said by article to be industry average) gives stock a value of $9.59 which would be 72% below IPO price. I don't have more info of that calculation.