Facebook Shows There's a Sucker Born Every Minute

http://online.wsj.com/article/SB10001424052702304065704577422643666002940.html

by bond • 14 years ago

101 59 14 years ago

online.wsj.com

quadrant• 14 years ago

Somewhat revisionist it seems from the WSJ, I can't recall any point in the lead up to IPO that they published anything that alluded to problems on the near horizon.

jinushaun• 14 years ago

Facebook's mobile problem was widely published before the IPO. Do a Google News search on "Facebook mobile" and you'll find stories from two weeks ago where Facebook admitted that they don't know how to monetise mobile on their S-1 filing.

http://sec.gov/Archives/edgar/data/1326801/00011931251203451...

Risks Related to Our Business and Industry:

In 2009, 2010, and 2011, advertising accounted for 98%, 95%, and 85%, respectively, of our revenue.

...

increased user access to and engagement with Facebook through our mobile products, where we do not currently directly generate meaningful revenue, particularly to the extent that mobile engagement is substituted for engagement with Facebook on personal computers where we monetize usage by displaying ads and other commercial content;

...

Growth in use of Facebook through our mobile products, where we do not currently display ads, as a substitute for use on personal computers may negatively affect our revenue and financial results.

chrismcbride• 14 years ago

I think he means that specifically WSJ didn't publish anything about it.

mikeryan• 14 years ago

Um. The same columnist wrote on Thursday before the IPO "Here Are 10 Reasons Not to Buy Facebook Before You Buy It Anyway"

http://online.wsj.com/article/SB1000142405270230387960457740...

larrys2• 14 years ago

Right and that was his opinion. Obviously in any decision (investment or otherwise) there are going to be people on both sides of the issue.

The problem is knowing whether to believe them or not.

(Like Wanamaker said about advertising, something like "I know 50% of my ads work but I don't know which 50%")

howeyc• 14 years ago

This article is dead on!

The warning signs were there; ballooning shares offered, late uptick in IPO price, companies saying facebook advertising sucks, etc.

People got suckered and are crying foul. Welcome to the stock market. Suck it up, learn from your failures.

moron• 14 years ago

I work for a financial-services company and I still think investing in the stock market is crazy. There are people who spend their days figuring out how to separate "investors" (basically, gamblers) from their money either without getting caught or in a legal-but-underhanded manner. I know I'm stupid enough to have my money taken from me without understanding how, but I'm not stupid enough to actually subject myself to that.

tosseraccount3• 14 years ago

"Investing in the stock market is crazy" ?

http://www.mymoneyblog.com/impact-of-inflation-on-stocks-bon...

Real Returns from various asset classes: Stocks: 6.9% Bonds: 2.3% Bills 1.0% Gold 2.4% Housing 1.5%

Stocks crazy? Looks to me like the rational thing to invest in.

muyuu4• 14 years ago

Every time I've made numbers equities have underperformed gold and housing long term, esp. when considering commissions and tax. One would normally look for 20-30 years max. returns, as 100+ year periods will include one-off historical events that will change the picture completely. Case in point, the hindsight bias is strong on this one, because it's fact that these countries were chosen because they are the "winners" in recent history. What about the "losers"? you don't know where your country will stand in 110 years time.

I also work in the finance industry and I agree that Joe Doe outsider shouldn't gamble a significant chunk of his net worth in the stock market. Gambling being the key word here.

wpietri• 14 years ago

My guess is that he's talking about direct investments in particular stocks.

I'm another person who worked for financial traders. I would never buy individual stocks. All my money is in low-load funds (e.g., index funds). I'll probably buy some income property soon. But I know exactly who is on the other side of stock market trades, and I know how hard it is to beat them.

rbanffy• 14 years ago

A friend of mine prefers the word "bet" or "gamble" to "invest" when it comes to stock markets.

Sure, as much as in horse tracks, knowing more increases your odds of winning, but, overall, it's a sport better left for the professionals.

That doesn't preclude you from playing, of course. I do and it's very entertaining. I just won't bet everything on stocks.

seanalltogether2• 14 years ago

I still look back to the old old days when stocks actually meant you owned a part of the company and could expect to turn your stock back in for a payout from that company in the future. Those are stocks that make sense to me.

Nowadays you're literally buying into the opinion of a company. Sure we use things like P/E and future growth to form that opinion, but in the end it's a lot like Bitcoin, it has value because people believe it has value, many of these stocks have no hard requirements that peg their value. You as a stock holder aren't entitled to any of Facebooks profits, and voting rights are worthless.

eldude• 14 years ago

I've been having a lot of conversations around intrinsic value of stocks that echoed this a bit: dividends or voting rights. If this were the case though, I don't think you would see the levels of investment that you're seeing. Facebook's stock's intrinsic value is derived from Mark Zuckerberg's value of it. In other words, even though you cannot exercise those rights to any effect, if everyone concluded they were worthless, you'd see Zuckerberg buying them up b/c he values them or he would address the reasons people consider them worthless thus adding value.

The absurd part of this that this would imply FB stock is intrinsically worth less, which makes the current already over-valued trading price look that much more ridiculous!

crag2• 14 years ago

Actually currency is the same thing. The dollar has value because we all agree it has value. It's not based on gold any longer (though one could argue it's based on oil). It's based on a host of indices that we, as a group set. And those indices are traded and have a set value. Decided by the buyer (us) and seller (us).

I'm not complaining. I'm just pointing out that all of our economy is based on the same principe/model; as long as the vast majority of the group (us) believe the dollar is worth something, it will be.

Anyone who invested in FB at any time (and that includes the big boys) believed that FB was a good investment. In other words, they believed the hype and didn't understand the business. Until someone who they trusted came along and told them to bail. And here we are.

I actively trade. All the time. But FB I didn't touch. I asked myself, at ANY time have I ever clicked an ad on FB? The answer: "No". That meant FB is vapor. People are betting that people (all of us - including the people making the bets) might, sometime in the future click on ads. Or that FB might come up with something. Something. (And I bet it's gonna be selling out personal data - what we browse, like, etc, etc. It's the only real value FB has).

anon808• 14 years ago

I started out my working life as a financial analyst in an investment bank, and that experience led me to the same conclusion. I really believe the only people that should own equity in a company (public or private) are the people that actually know the business of that company (like top 10 customers, top expense line items, name of the major sales people etc.). The mindset of the casual investor is the same as the casual gambler (i'm saying this from personal experience). Financial services is a zero-sum, no value-added operation, it's a wealth redistribution exercise, nothing new gets created; the only way it can grow is by feeding it outside money/assets; there's a real incentive to find suckers.

JumpCrisscross2• 14 years ago

My time on Wall Street has actually made me quite averse to the whole broad shareholding/democratised finance movement. The fact that 90% of finance related posts' comments on HackerNews, a top quartile intelligence population, make me cringe tells me we should restrict market access to institutions and accredited (read: very liquid) investors.

gouranga• 14 years ago

I write portfolio management software and decision support systems (about 25% of my time) and I have the same opinion.

It's a fool's game betting on what is effectively a publicity ranking.

If you want to do something crazy with a real return, invest in metals futures as they have real industrial uses (i.e. any catalysts/alkalis i.e. platinum, silver, lithium and copper as it's scarce).

If it's not NEEDED, don't invest in it.

lsc• 14 years ago

>I still think investing in the stock market is crazy.

this is a kinda extreme fringe position. I mean, I feel the same way, and all my money is invested in my own company, but I'm generally seen as way higher risk than just dumping your money in a index fund.

Out of curiosity, where do you invest your money?

gscott• 14 years ago

All Facebook has to do is tie the advertising platform to having a business page on Facebook to force businesses to spend something on ads. Individuals should be able to use Facebook free but not businesses. Once that happens the stock will go way up.

ryanmerket• 14 years ago

They already do this. http://allfacebook.com/promote-your-page-button_b89788

akharris2• 14 years ago

I spent three years at one of the world's largest hedge funds. I was a banker for a year before that. Most important lesson I learned: Don't play individual stocks and think you have anything more than a gambler's chance of success.

There's a public perception that stocks as an asset are simple to understand - good company=stock goes up! - that is hugely far from the truth. Equity is a complex instrument. The factors influencing the movement of equities are complex.

For the retail investor, the best move is a balanced mixed of assets designed to capture long term market beta - effectively the tendency of asset classes to gain value over time. That's not so easy either, but if you gamble, it's better to gamble on a cornerstone of capitalism as a whole rather than an individual company.

tosseraccount3• 14 years ago

Did your hedge fund outperform an S&P 500 index fund during the long run? Investing in stocks does not have to be complex.

iamgilesbowkett• 14 years ago

There's a great infographic that pits human lifespans against this old idea - that investing in the stock market is always a good idea because it goes up in the long run. There were many, many times in the last 100 years where "the long run" was longer than a normal human lifespan.

mcphilip• 14 years ago

The more I learn about markets the more comfortable I am with my decision to primarily invest in index tracking ETFs (e.g. SPY). If I want to 'gamble', i'll do something more elaborate like short volatility, but 90% of my capital is deployed following the market's movement, not trying to beat it.

TomGullen2• 14 years ago

The biggest mistake I see is "The price is plummeting! It's a frickin' bargian!" Have actively tried to stop people investing on that or a similar premise without any luck.

ams61102• 14 years ago

Glad I didn't think that when I bought AAPL at $14 in 2001.

sparknlaunch12• 14 years ago

I am all for justice but this type of behaviour happens all the time. It has just made the front page news because of retail investors discovering shares go down (as well as up). I know this message will get down voted but the financial markets are a fickle place. Sorry.

tlogan• 14 years ago

"Investing" is stock market is a gamble: the easiest way to learn that it is casino is by experience (invest and learn).

The problem is that the new generation will not listen suggestions of people which already learn things the hard-way - so there will be always fresh influx of suckers which think these 'old' people don't get it.

However, this does not mean that investment in stock market is a bad idea - but you need to consider it as 'poker': money management is very very important, learn to cut loses fast, you need to hedge (especially for unforeseeable events while market is closed), don't bet blind, etc.

Drbble4• 14 years ago

You know who made out well on the FB IPO? People who sold in secondary markets pre-IPO on the hyped pricing.

Facebook Shows There's a Sucker Born Every Minute

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