IPO Foolishness
Research for Online Investors

by John Dalt

5/19/11

We are late writing today, as we had errands to run this morning.  LinkedIn (LNKD) went public today at $45 per share.  It immediately shot to $122.69 per share before settling back to a 'value' price of $94.25 at closing.  Can you spell i-n-t-e-r-n-e-t b-u-b-b-l-e?

If you are an investor and want to make money in the stock market, hang up if someone suggests you get in on this great company.  LinkedIn made $3.4 million last year.  They plan on losing money this year and next.  It looks like some of the money they are going to lose belongs to IPO investors.  If GOOG traded at the multiple LNKD traded at today, their stock would be priced at $2,600 per share.  The bonus is GOOG makes money and is executing a growth policy worldwide.

The President held a news conference at the State Department this afternoon on the Middle East.  He promised billions of dollars in aid to Egypt and Tunisia.  The President called on Israel to pull back to pre 1967 borders in an effort to appease Hamas in the Palestinian Territory.  There is nothing like going in front of a hostile audience to propose such sweeping changes in U.S. policy.

According to Reuters, Israel’s Prime Minister Benjamin Netanyahu is scheduled to meet with the President in Washington on Friday.  We will report if he is too busy on a survey crew in the West Bank to attend a meeting.  By the way, State Department employees embraced the president’s foreign policy initiatives.  Are you surprised?

The U.S. is now in the position to offer aid to the Muslim Brotherhood in Egypt and has thrown Israel under the bus in the name of moving a peace process forward that does not promise peace.  This seems like another chapter that closes the circle (noose) tighter around Israel.  All on more borrowed money…that we don’t have and cannot borrow.

The Financial Times reported today that the International Energy Agency (IEA) ‘warned’ OPEC they must increase production or else…’face a threat of the release of strategic stockpiles of oil by western countries for the first time since 2005.’

The basis of this warning is the loss of Libyan oil.  Before the uprising in Libya, the country exported 1.58 million barrels of crude oil per day.  Libya’s crude is sweet and easy to refine.  Much of it goes to Italy, for use in Europe.  This has led to higher prices for crude on the Brent Crude market.  The IEA cited a drop of production from OPEC of 1.3 million barrels per day in April.

The IEA represents 28 western nations.  These countries hold 1.6 billion barrels in strategic reserves.  They are allowed to pull on the strategic reserves when authorized by the IEA board because of supply disruption.  The IEA has made this decision twice before.  Once in 1991 when Iraq invaded Kuwait and western allies attacked Iraq.  This removed 4.3. million barrels per day from the market.  Hurricane Katrina caused a release from U.S. stockpiles because of damage to U.S. import facilities that lowered U.S. imports 1.5 million barrels per day.

It strikes us as a bit of hubris.  We are warning OPEC to increase production or we will use up all of our existing supplies.  That makes sense…..and then we will throw a temper tantrum.

Why not drill our own natural resources?  Oh right, we would rather OPEC citizens look at drill rigs and derricks against the backdrop of their sand dunes than us look at them (in pictures) on a frozen tundra where only the elk and antelope play.

The Mailbag:
This is not the first time I have heard about the confiscation of retirement accounts.  We cut back our contributions some time ago.  Why the heck work?---subscriber T.M.

John’s reply:  It is scary.  I don’t trust any of them.  I inserted “heck” in your response for our gentle readers!

I’ve been concerned about this for awhile.  Geithner has suggested raiding government employee pension funds until they raise the debt ceiling.  The government continues to destroy savings for the baby boomers.  Now they want our retirement savings.  I wonder how much the American people will take.---paid up subscriber G.C.

John’s reply:  They are already raiding government employee pensions.  That is how the government is operating right now.  Why doesn’t the executive branch start laying off government employees?  Why doesn’t Boehner demand it?  The government is broke but continues operating like nothing is wrong.  The fix is in.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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