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Facebook IPO Seen Deepening Investor Distrust Of Stocks


Liberty
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http://www.bloomberg.com/news/2012-05-25/facebook-ipo-fallout-deepens-investor-distrust-of-stocks.html

 

Facebook Inc. (FB)’s initial public offering, plagued by trading errors and a 16 percent drop in the share price, will push more individual investors out of a stock market they already distrust after the financial crisis.

“This is clearly the latest in a long string of events that is eviscerating the confidence investors have in the market,” said Andrew Stoltmann, a Chicago attorney who represents retail investors. “The perception is Wall Street jiggered this IPO so the underwriters made money, Facebook executives made money and the small investor got left holding the bag.”

 

Pendulum is swinging pretty far away from "greed" and towards "fear" lately. The FB IPO certainly isn't helping, as it had great media visibility and probably affected sentiment disproportionally with its actual economic weight.

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That perception is pretty accurate, I would guess, as a first approximation -- if one were to approach the scene as a forensic investigator.  You spoke of fear vs greed among the retail investors, but there is also greed vs fear among promoters, and a great imbalance between the two.  Stability / sustainability requires those to balance, ie to oscillate, not to swing the needle to one limit and hold it there.

 

As a personal strategy, if planning to watch the general trend and then commit for long terms, instead of looking for particular situations,  perhaps it is better to wait for a long trough.  I expect 2-3 years of trough width at least.  Not until the mutual funds and other trust structures have been further strip-mined, will the future pessimism bottom.

 

Read Richard Koo!  Think about Japan.

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