Garcia Media Life

I’m no financial expert which, I presume, is why I’m not a wealthy man. But I’m not an idiot either and I’m telling you right now- this Facebook IPO stuff is an unmitigated disaster that is becoming more and more of an embarrassment by the second.

Let’s start out with the basics. Facebook early this week was valued as a $100 billion company. That’s more than Disney, Visa or McDonald’s. As Washington Post financial writer, Dominic Basulto, puts it- at least McDonald’s sells burgers. What’s Facebook got? What does Facebook make? It makes ads that no one pays any attention to. Ask General Motors. They pulled their Facebook ads just a couple of days ahead of the IPO because it was like throwing money into a large black hole.

We’ve been down this road before in the late 1990’s when the Dot.Com bubble burst. Now it’s the social media bubble that’s bursting. Facebook stock was offered initially at $38 a share. It’s trading at $31 this afternoon, but the day is young- there’s plenty more room for it to fall even further. Your average Facebook employee is about $2 million richer this week. But the poor people who got suckered into buying Facebook stock on Monday have already suffered a 20% loss on their investment—an amazing achievement over just two short days.

Some analysts say in order to justify the share price at which Facebook was being offered the company would have to make more than a 40% profit over each of the next three years. That’s a tall order for any company that actually makes things, much less one that is essentially a large data collection service that can’t quite figure out what do with all its data.

I won’t even go into the speculation about the things Facebook must do to make the kind of money it has to pile up to avoid becoming a penny stock. Maybe selling our personal data? Maybe overwhelming its real estate on your computer with ad after ad after ad? Maybe breaking down and finally charging for the service?

And then there’s Facebook’s growth potential. What growth? It has already saturated the world. A half a billion users are already on it. There’s no way to go but down.

I have a friend who counsels adolescents. He tells me the big social media trend among the nation’s youth is getting the hell off Facebook. Presuming the universal adolescent appeal of “coolness,” Facebook is about the least cool thing in the universe. Their grandmothers are on it, for Christ’s sake. And their teachers. And if they can ever find jobs- their damn bosses will be on Facebook asking to friend them so they can check and see if there are any pictures of them projectile vomiting in an alley after an all-night kegger.

But there’s more. Much, much more. Here are some headlines from Marketwatch.com today so we can all revel in the base greediness and irrational exuberance of the great Facebook IPO.

Facebook Stock Dubbed “Falling Knife”

Why IPO Fizzled

How Facebook Threatens the U.S. Economy

Embarrassment Over Facebook

Here’s an absolute brilliant analysis of all of this by Martketwatch.com’s David Wiedner:

It’s as if Mark Zuckerberg is having the ultimate nerd’s revenge: He’s humiliating all of us and taking our money in the process…

There were few regular people who made fortunes on Facebook. Its private placement and exclusive club made certain that Zuckerberg and his backers decided who would get rich and when….

At the end of a Facebook session, we feel an anticlimax. We hope for contact and more often than not get silence. We exploit our own privacy to our friends, advertisers, strangers. We rarely, if ever, make that connection that’s worth the investment of putting so much of ourselves out there…

In the end, it’s clear Facebook’s was the rare initial public offering in the markets that catered to that same kind of person, an exclusive sort of investor: the sucker.

In 2010, the movie “The Social Network,” told the story of the Harvard nerd who hit it big with his Facebook concept. There’s a sequel ahead that’s sure to be a hit with all those people Mark Zuckerberg has taken for a ride for all these years.   And it will be called “The Fall of Mark Zuckerberg: Avenging the Revenge of the Nerds.”

Forget the threat of the end of the Mayan calendar later this year- American political and governmental dysfunction is a more realistic doomsday scenario.

This article in the Washington Post lays it all out. As soon as the withering, vicious, nasty and exhausting national campaigns end this November- our government will have to figure out how to deal with the expiration of the Bush tax cuts on all Americans-middle class and rich alike. That’s also the time the temporary payroll tax cut expires.

Meantime, because of their inability to compromise on a deficit reduction package that was supposedly the solution to the debt ceiling fiasco of last year- a bunch of automatic budget cuts are scheduled to hit the Pentagon and the poor.

In a normal world where politicians put country ahead of party and ideology- the solutions would be easy. There would be compromise on the Bush tax cuts, extending them for middle class folks so as not to burden their finances in a still stubbornly recession-like economy. There would be consideration of allowing them to expire for the top earners. The increased revenue could then be used, in part, to help pay for the continuation of payroll tax relief that mostly middle income Americans have now come to depend on over the past couple of years and that add to the average consumer’s spending ability.

Normal politicians would then split the difference on cuts in Pentagon spending and entitlement programs. All in all, you would have actually engaged in a little budget discipline while still managing to keep some of the tax cut incentives necessary to incent spending and grow the economy.

But, of course, we do not have normal politicians in Washington right now. We have a system that is broken with massive ideological rifts preventing any semblance of compromise or rational governance.

And it’s too bad because there are positive signs out there for the American economy. Home builder sentiment is at its most positive point since the start of the recession. A new USA Today/Gallup poll finds 58% now optimistic about an economy recovery.

But the people who invest and spend on America look at governmental gridlock and see nothing but uncertainty ahead. Small businesses are going into their shells and slowing their pace of hiring. Defense contractors are freaking out and they’re slowing their hiring too. And God help you if you’re not one of the well-off in this society- because the concept of a safety net will be tattered beyond recognition as the government cuts Medicaid, food stamps, college loans- you name it.

If the President would like to get himself re-elected, you’d think he would address this tax and cut Armageddon that’s looming in November, because the very prospect of it could strangle our current anemic recovery and fatally injure his electoral chances. And if Republicans want to be taken seriously and not viewed as a party taken over by uncompromising ideological rigidity, you’d think they’d take seriously that their electoral success looks just as threatened as the President’s.

Some worry about Europe and whether countries like Greece and Italy will default. Some fear that date in December when the Mayan calendar supposedly ends. I laugh at those measly threats. Our biggest fear should be the American politician. If only they could offer leadership as well as they play politics.

There are free speech proponents who, regardless of the foulness of the speech involved, feel very, very queasy about economic boycotts intended to silence people.

But regardless of how one feels in the specific case of Rush Limbaugh’s remarks about Georgetown University student, Sarah Fluke last week, central to the issue of the efficacy of economic boycotts is the concept of money and the free market.

The Supreme Court has made it pretty clear that money is a vehicle for the expression of protected 1st amendment rights. In the matter of Citizens United, the high court upheld the rights of corporations and labor unions to spend unlimited amounts of money on political campaigns.

The underlying philosophical foundation would also support the concept of economic boycotts because they too involve the use of money as a means of political expression. Not the spending of it, but the strategic denial of it.

And it is, perhaps, ironic in the case of the Rush controversy, that presuming that many on the political right are extreme free market proponents, the use of the economic leverage of the boycott, really is use of the free market; manipulating it as an expression of free speech.

So whether you’re boycotting Bill Maher’s advertisers for an ill-advised and, some would argue, grotesque tweet about Tim Tebow a couple of months ago, or angry with Rush Limbaugh for his vitriolic rhetorical attack on a young female college student, looks to me like the law is- more than ever- firmly behind you if you decide to stop buying products from companies whose perceived values are incompatible with your own.

To the anti-boycott/free speech advocates- if there really is a marketplace for ideas in this country- a place where people pay through their purchases and their listening or viewing habits, to make it possible for some to shout their views from an electronic pulpit- no one is ever losing their right of expression.

The only thing affected by the power of money- is the size of the pulpit. How people choose to spend their time and money and show their attraction or revulsion to the product, determines whether that pulpit is amplified through a 50,000-watt radio or television tower, or relegated to 45 people reading the daily rants of a lonely website.

Either way, though, it’s still free expression. Nobody said you have the absolute right to get rich off of it.

Gas Prices

Yeah, they’re high and going higher.  It’s been an inescapable trend over the last several years.  Gas prices are low when the economy is reeling.  They are high when economic conditions improve.  Both sides always try to bash the party holding the White House about costly gas prices and both come up with solutions or blame that are just plain silly. 

Really want to have an effect on gas prices?  Convince one billion Chinese to stop buying cars and filling them with gas. 

Collegiate Snobbery

Rick Santorum has been getting a lot of flack from Democrats and Republicans alike for saying this:

President Obama once said he wants everybody in America to go to college.  What a snob. There are good, decent men and women who go out and work hard every day and put their skills to test that aren’t taught by some liberal college professor trying to indoctrinate them. I understand why he wants you to go to college. He wants to remake you in his image.

Foolish or crazy as a fox?   It may yet resonate with conservative blue-collar voters in Michigan.  And I’ll bet a lot of anti-Obama voters didn’t even hear the college part as much as they heard the “Obama is a snob” part, which some suggest is the GOP version of class warfare.  It may well work- in a primary.  The overall problem with this strategy, of course, is that there’s polling that finds 93% of Americans think it’s a pretty good idea to send your kids to college.

Looking Forward to that Cruise Ship Vacation

First there was the Costa Concordia incident, in which an Italian sea captain trying to show off, came too close to shore, grounded his ship and killed more than 30 passengers and then literally tried to catch a cab and run off into the good night. 

Now you have its sister ship, the Costa Allegra, adrift in the Indian Ocean.  And as if it’s not bad enough that a generator fire knocked out the engines, the radio communications and then the air conditioning, it was adrift in “Pirate Infested Waters.”   I’m not afraid to admit I hate infestations of any kind, but particularly pirate infestations.

In between the two incidents, there were several outbreaks on a number of cruise ships of the Norwalk Virus.

So….if you don’t get killed by a show-off captain, manage to avoid spending three days with a raging fever and massive intestinal distress, and escape marauding pirates in the Indian Ocean- it should be a wonderful vacation experience for all!

My memories of a cruise ship vacation were primarily the tiny, little cabins and the huge bill at the end.  In between, you eat like a depraved Roman Emperor, consuming indescribably large amounts of food in a celebration of decadent gluttony accented with pretty little ice sculptures gently melting on a buffet table of death.

History has shown us that it is not a wise thing to bet against America. It’s a pretty resilient country. And though millions are still without work, the housing crisis continues and Europe may yet be unable to contain its debt crisis, Friday’s unemployment report has significantly surpassed most economist’s expectations and offers more than a glimmer of hope that a recovery is actually taking hold.

The job gains were impressive and across all sectors of the American economy. There have now been five consecutive monthly drops in the national jobless rate and the 8.3% figure represents a three-year low in the unemployment number. Wall Street seems impressed and the Dow Jones is now flirting with the 13,000 mark.

The political implications are huge. It’s estimated that if the current monthly gains of over 200,000 new jobs continues until election day, the jobless rate in November may well come in at just under 8%. It’s a significant number. No incumbent President has ever been re-elected with a jobless rate over 8%.

For Republicans seeking the presidential nomination and centering their campaigns on a cratering American economy, there are still enough weak points and looming threats to the nation’s finances to make a case but there’s also a political danger. It is not an advantageous position to appear to be rooting for the continuing demise of the American economy. It is not a “morning in America” message and it threatens to make President Obama the optimist and Republicans the party of gloom-and-doom.

There is an obvious pivot that can be made to other issues and they are also important ones to be settled in a campaign. The debate over the size of government. The arguments of over-regulation versus government protection of consumers and the environment, for example. There’s the continuing danger of massive budget deficits.

But there’s a ritual that occurs on the morning of the first Friday of every month. The current leader of the Republican party, House Speaker John Boehner, releases a public statement on the latest jobless report. For five straight months now, he’s had to say, in essence, we’re glad things are looking up but the situation is still dire. How long that message continues to resonate if the string of positive economic news continues, could well end up determining who gets to live in the White House for the next four years.

Even the lawmakers who say they “get it” don’t really “get it.” For them it’s an abstraction. They think they know what those poor middle-class people care about.

They are advised by their aides and consultants that the failure to extend something like the payroll tax cut would hurt the finances of the regular people. But they don’t really know because, by any standard- our lawmakers are very wealthy people who live in a world far different than most of their constituents.

Here are the figures. There are 535 members of Congress; 100 Senators and 435 members of the House. Between them, there are 261 millionaires. Last year, the Center for Responsive Politics found that the median wealth of a House member was $765,000. The median wealth of a U.S. Senator was $2.38 million. And during the worst of the Great Recession, lawmaker’s median wealth increased 16% between 2008 and 2009.

For a $50,000 a year income, repealing the payroll tax cut costs that worker $160 monthly or $40 a week.

So what‘s $40 to somebody worth a million or ten million or a hundred million? Not even couch change. It’s nothing.

- Half a tank of gas for an SUV? They wouldn’t know. They don’t drive cars, they have drivers.

- A little extra money to buy prescription drugs? They wouldn’t know. Congress has the best health care coverage in America. They’ve never had to use an HMO and they certainly don’t have to worry about paying out of pocket for medications.

-Eight roasted chickens at Costco? They wouldn’t know. Forty bucks barely covers the tip for a couple of steak dinners and several cocktails at Morton’s.

-Nine gallons of milk/ Ten 20-ounce loaves of bread? Actually, they do know these figures because they get briefed on them by aides so they won’t get embarrassed if some wise-ass reporter asks them.

- Half the price of a one-way ticket on Amtrak’s Northeast Regional for the holiday visit to grandma’s in New Jersey? They wouldn’t know. They take the Acela. 1st Class.

- A really cheap pair of shoes? They wouldn’t know. A pair of Ferragamo men’s shoes goes for about $600. The low end of Manolo Blahnik’s for women go for about $700.

Don’t get me wrong. I wouldn’t mind being rich myself. But when they fight for us regular people, it’s usually because doing so helps ensure they remain on the pathway to power and wealth. After all, it’s the little people who elect them. I’m not saying they don’t care. It’s just that when they consider the tough times most people are going through, they have to imagine that world. They certainly don’t inhabit it.

Some would accuse me of waging class warfare. I would respond that it’s not war when one side has all the weapons. But it is class cluelessness.

On one hand, I want people to shop. Consumer spending boosts the economy and helps create jobs. On the other hand, the materialism is just so disturbing on so many levels. On the third hand- who’s to begrudge folks down on their luck looking to find stuff they can actually afford? I am obviously conflicted.

I have a view of a Pentagon City Mall from my apartment balcony. On Thanksgiving morning I noticed tents had been pitched outside the closed doors to said mall. Could these be Black Friday maniacs? So I took a walk and confirmed my suspicions. Some folks had, indeed, chosen to spend their entire Thanksgiving Day waiting for Best Buy to open at midnight. The line kept growing throughout the day. People were festive. I realized this had become some sort of deranged sport.

Because my son visited me for Thanksgiving and as a starving college student, needed a couple pairs of shoes, we braved the throngs and actually went into the even larger Pentagon City Fashion Mall- a gigantic five-story complex about three city blocks wide. I hate shopping so much- on a normal day, much less BLACK FRIDAY. It was every bit the crowded, aggressive experience I imagined. Except I forgot about the tedium and boredom of the long lines, the unpleasantness of surly customers like me. My son, I must admit, is much more mature and patient than I. Then again, he was the one getting the free shoes.

————————————————————————————————————

So now it’s the Cyber Monday after Black Friday and I have just scoured the World Wide Web for interesting, violent shopping stories to validate my intense dislike of crass commercialism.

Found some!

From Yelp.com, two interesting accounts of a Black Friday shopping experience from, apparently, the same Best Buy mob scene at the same California mall. The first one from Chris “Chrispy” B:

About thirty minutes before opening time everyone became one huge mob around the front door. They tried to limit the number of people allowed in at once but the mob just pushed through. My chair got bent in half somehow, still not really sure how. Probably has something to do with my swollen knee.

Apparently, he’d run into Joe the Wizard “K” :

Someone hit me so hard with a chair that he nearly bent it in half. Enjoy your television.

Then there’s the story of 61 year-old, Walter Vance, a pharmacist with a heart condition who collapsed in a West Virginia Target store. Shoppers reportedly stepped over him to get to their sale items.

And my personal favorite: Turns out the woman who pepper-sprayed fellow shoppers at a California Wall Mart in order to clear a path to a crate of X-Box video game players- has turned herself in. But according to police, the moment she walked into the precinct she invoked her 5th amendment right against self-incrimination.

I’m not sure exactly how this conversation went but it could have been something like this:

Pepper-Spraying Shopper: I’m turning myself in.
Cops: What for, lady?
Pepper-Spraying Shopper: I can’t say.

?????????

Already less popular than Venezuelan dictator, Hugo Chavez, BP during the oil spill, Nixon during Watergate, lawyers, the IRS and Paris Hilton, Congress seems intent on finding a new bottom in the hearts of the public. The so-called congressional Super Committee’s failure to find even modest savings and revenues to address the federal deficit is just one more example why people seem to really despise Congress.

There is plenty of blame to go around on both sides and this is not an opinion forged out of a need to sound non-partisan. The combination of cowardice and partisanship is very, very powerful and both Democrats and Republicans are proving that, in this Congress, playing politics trumps national interest every time.

Democrats have not been serious about addressing the cause of much of our deficit-spending- entitlement programs like Social Security and Medicare. Why? Because the choices are painful and politically unpopular. Republicans, to their credit, finally gave in a tiny little bit and for the first time in recent memory, agreed to a modest rise in tax revenues but then sabotaged the whole thing by demanding that the Bush tax cuts not be allowed to expire at the end of the year- without identifying ways to pay for them.

With this failure, Congress has now opened the door to more failures over the next couple of months. Extended unemployment benefits may not happen. Keeping payroll tax cuts going into next year are, inexplicably, at risk.

Worst of all, Congress is expected to debate over the weeks ahead, whether to water down, delay or eliminate the triggered cuts that were supposed to take place if the Super Committee failed to do its job. The idea was that these cuts, many of them amounting to deep slashes in Pentagon spending, would surely pressure lawmakers into making a deficit deal. After all, who wants to be blamed for weakening America’s military?

If they try to weasel out of those triggered cuts, you can kiss even our AA+ S&P rating goodbye.

Clearly, no one cares up there on Capitol Hill. They don’t care if America is downgraded by credit agencies. They don’t care about endangering national defense. They don’t care about the unemployed. They don’t really care about reducing deficits. They give all the above considerable lip service- but the results tell the real story about the priorities of our politicians. They care about only two things; immediate political survival and getting on the gravy train when they leave Congress so they can continue to enrich themselves.

Representatives from both sides took to the Sunday talking-head shows to blame each other and finger point. No last-minute emergency negotiations. No burning the midnight oil. No college try. Nothing.

They are, however, working on the statement expected today- describing their failure to reach a deal. Maybe they won’t find a way to agree on that either.

There is a card for every occasion and so it seems only appropriate Hallmark is tapping into the recession market to offer a little sympathy to those suddenly facing unemployment. I’ve been there.

Some of these cards are fairly amusing.

“Don’t think of it as losing your job….think of it as a time-out between stupid bosses.”

Or: “I just dare somebody to steal my identity now.”

There are somber ones too, though I think the humorous ones would have been nice to get while I was in my own state of panicked limbo just a couple of years ago. This does open a fairly large potential arena for other cards that address all the possible nuances of economic distress people are feeling these days.

There’s also rampant underemployment:

“So sorry about your new job as a Wal-Mart greeter!”

“Now you can have fries to go along with that new, tiny little paycheck!”

There’s the long-term unemployed:

“Don’t worry! Congress is working on the off-setting cuts to pay for your extended unemployment benefits…in between fundraisers and golf outings with lobbyists!”

There’s the couple hundred thousand folks who were ripped off by Bernie Madoff:

“Oooh. Heard about that whole Madoff thing…join the club! Price Club!”

There’s losing your job to outsourcing:

“Sorry your job went overseas! Have you considered moving to suburban Shanghai???”

And two all-purpose recession-oriented sympathy cards dripping with irony:

“Imagine someone trying to make a profit from your unemployment! If you’re reading this- we just did!”

“Look on the bright side, you could be writing Hallmark Greeting cards!”

I need to see a psychiatrist. BPSMW syndrome has gotten the best of me. Doctor, I keep glancing at MarketWatch and Bloomberg every three minutes. I can’t take it anymore.

When the Dow drops 600 points, I get all depressed and panicky and want to come home and kick the dog. When it rises 423 as it just did today, I get all giddy and happy and skippy (that’s a condition in which you start skipping suddenly, rapidly and uncontrollably).

I’ve tried to wean myself off the market cold-turkey. It’s not working. I pass a TV and shoot a quick, secretive glance to see if there’s a red arrow or a green arrow in the corner of the screen. I actually now hate anything that’s the color red.

I’ve started enjoying long meetings at work because I have, as of yet, not loaded any market-alert apps on my phone and suddenly three hours go by and I remember what life used to be like before my life savings and supposed retirement evaporated before my eyes every other hour.

When the market goes in the crapper, I slap myself for not having taken my money out and invested in gold bullion. When it rockets upward, I congratulate myself for being so calm and level-headed when the truth of the matter is I am actually suffering from Bi-Polar Investment Paralysis, a secondary condition characterized mostly by extreme fear and uncertainty of doing anything remotely financial.

A friend of mine recently recommended Chart Therapy. This is where you pull out a ten year chart of Wall Street’s gyrations and realize these current antics are but tiny little blips even though they look like gigantic Swiss mountains when you’re monitoring them by the minute.

This I know. I am exhausted and weary and I trust those poor men and women on the floor of the exchange must be as well. I think by now we are all longing for the magic words, “The Dow Jones Industrial Average today, was unchanged on low volume and no particularly newsworthy events.”