Fields: Facing Problems With Facebook


The hottest story on Wall Street is that Facebook will sell its stock publically for the first time.

Based on the projected price of $45-a-share, this five-year old company will have a total market value (capitalization) of $100 billion.

Every time I read about another one of these “too-good-to-be-true “investments, I am reminded of a book that I read decades ago about the history of speculation.  The title escapes me, but the lessons do not.

In 1637, it was tulip bulbs in Holland, and then it was the South Seas Bubble, followed by futures contracts on slaves and stocks in the 1920’s. I can add to that The Dotcom Bubble in the 1990’s and real estate bubble of this past decade and a hundred other get rich quick schemes.

It always the same psychology underpinned by two beliefs: 1. I am going to kick myself if I don’t get in on this, 2. “The Other Idiot Theory” which holds that no matter what I pay for this there is some other idiot that will pay me more.

There is nothing more than mob psychology that drives this.  And one day the mob wakes up and all is lost.

The investor lemmings will do the same with Facebook and they are far more likely to get wiped out than rich.


Facing Off

Compare Facebook to General Electric and you realize the absurdity of the unbridled faith in Mark Zuckerberg and Facebook.

GE is 125-years old that has a capitalization (number of stock shares times price) of $124 billion.  It is the only surviving company from the original Dow Jones Industrials.  Last year it had over $10 billion in profits on $150 billion in sales. It makes its money in everything from NBC to jet engines to banking and a lot more.

Facebook is a one-trick-pony.  It had total revenue of $3.7 billion and estimated earnings of $1 billion. It has 3000 employees compared to GE’s 287,000

While Facebook worldwide list is growing, it is at the mercy of foreign countries that could restrict access to it with the flick of a switch. Facebook in a business where cutting edge leadership is about 24 months.

Facebook just as likely to be a fad that could go the way of its former competitor Myspace.  One thing is certain, unlike GE, it will not be around for 125 years.

Nevertheless, like the guy in Amsterdam who woke up realizing he had blown $20,000 on a tulip bulb, one-morning Wall Street investors could wake up with a financial hangover from this latest speculative collapse.

When all is said and done Zuckerberg and the guys at the top will cash out and walk away with billions.

The schnook on the street…not so much.

Note: With the assistance of my broker have successfully managed my own investments for the last forty years. I don’t own stock in any of the companies mentioned. And I certainly won’t be buying Facebook.

8 Responses to “Fields: Facing Problems With Facebook”

  1. Misunderstood says:

    Sam, you don’t understand the market. It is always “mob psychology” that moves it. A large number of people, i.e., the mob, believes a stock is going up and they buy it. That in turn drives the stock up.
    $1 billion earnings on $3.7 billion in revenue is nothing to scoff at and GE probably never made those kind of profits. Having millions logon to Facebook nightly builds its own fan club for the stock. I bet you don’t go on Facebook so you don’t know the appeal for some.
    If it has a two-year window like you wrote, a buyer can still make money. He or She should get in it, watch it carefully and get out when it starts to go down. That’s called making money in the market. With the exception of very few stocks, buy and hold is dead.

  2. SAM FIELDS says:

    Dear Misunderstood,
    For forty years I have been an investor and not as you a speculator.
    I don’t “day trade” which is just another way of playing roulette.
    I don’t sit in front of screen watching the minute changes.
    I don’t call my broker every hour
    What I do is read about a company and discuss it with my broker and then invest for the long haul.
    I don’t panic with every blip in the market
    I try to rely on common sense which tells me that FACEBOOK (which I am reluctantly on and offer little truthful personal information to their profiles) can’t possibly be worth as much as McDonalds also a $100 billion company.

  3. Seth Platt says:

    Facebook users will eventually migrate away from the platform when the profitability pressures from investors strips further away at the user experience and expectation of privacy. That being said it is a great platform for advertisers and as soon as it is more attractive to pay for advertising on the platform rather than do free new media marketing, the user will end up the looser.
    How will Zuckerberg manage the expectations of investors vs the user? Should be an interesting case study.

  4. Ed Foley says:

    Listen to Sam – he cornered the buggy whip market 40 years ago and is holding on. When the Chevy Volt finally catches on you’re gonna need those whips for the horses pulling it. At least that’s what his broker promised him by carrier pigeon.

  5. Twenty First Century Fox says:

    We have a safe new investment, Fields. It’s called the telephone. We don’t know if it will take off. We think it will.

    No one can predict the economy and no one can predict the stock market. There are only educated guesses. Even the stocks of very successful companies with long lives like Chevron and AT&T can go down dramatically and have in the past. If you want a sure thing, Fields, stay out of the market. Put money in a savings account.

    Your diatribe is ridiculous on so many points, but one sticks out to show your ignorance of the market. “All is lost” never happens. Even those who stuck with the market through the last downturn didn’t lose everything. No company as big as Facebook collapses overnight unless it is a massive fraud like Enron which there is no evidence of. With $1 billion in sales, it will never go to zero overnight. If the stock starts going down, sell it.

    You don’t want to buy Facebook. Fine. Don’t be so damn sanctimonious about how successful you have been playing it safe.

  6. managed 700 million says:

    SAM FIELD IS A TWIT!!! 125 yrs old you say. so you probably own the remnants of bankrupt polaroid, kodak, eastern , twa, panam airlines. sam if you got marked to the market every second as an atty the momentum to short you would be indicate an impending precipitous decline. but at least you can lie as most attys, judges do as well as wall street. but it seems the public markets are a better pricing mechanism than our legal system. sam, zip it when you have no idea what you are talking about.

  7. SAM FIELDS says:

    After reading the brilliant and insightful comments of my critics I have concluded that I must be all wrong.
    Accordingly I urge all of you to go long on FACEBOOK with every dime you have.
    But just in case be sure to keep the attached Web address:

  8. managed 700 million says:

    sammie continues to be a bellacose twit. sammie, no one certainly not I said all in. but in a well constructed portfolio there is room for a well thought out spec. not 50% in telecom, internet, high tech as so many did leading to a nasdaq high in march of 2000 ensuing bust. sam, pls leave inv advice to pros and continue being a dishonest conniving hack atty.