Facebook: Is it a Pump & Dump?/ Eurozone Banks/ China FXP

The hype about Facebook will rise to extraordinary levels today as the stock will start trading in NY.

Be very careful as it may be a “pump and dump” situation, where the stock is hyped and the insiders sell their positions and/or hedge their positions with selling calls or buying puts, and then they let the shares collapse.

(The Insiders got their shares at between $1- $5 so the incentive to sell and run is huge).

The company will open at $38 a share, on a PE ration of 70, which is astronomical, an average PE is about 15. Facebook is valued at $104 billion to justify that it would have to have a cash flow of about $30-40 billion a year. It’s revenue last year was $3.6 billion with a profit of just $1 billion.

People expect the stock to trade up for the first few days but it may fall apart later. CNBC’s Jim Cramer says it might make $70 on the first day, let’s see eh?

Collapse of Eurozone Banks

The banks in Europe are on their last legs. There have been bank runs in Spain and Greece this week, here’s a piece on how dangerous it is…

http://www.guardian.co.uk/business/2012/may/16/uk-banks-greek-euro-exit

China Short FXP

I suggested FXP the China short ETF at $28.00 it fell to 26.50 a few weeks ago and then yesterday it made $31.01 …..Phew!!

China’s success story is a massive lie, “Nothing Could Be Finer Than Stuff Not Made in China.”

Hold FXP for later in the year, or take profits at $33–$34.

Okay Bye for now Stuart