The Great Facebook IPO

Today is the big day. This morning Facebook, the great behemoth led by Mark Zuckerberg, the greatest industrialist of our time, went public.  At a market capitalization of $104 billion (based on the original offering price, which was exceeded immediately and will never be seen again) Facebook is the 23rd largest US company, just edging out

NYSE-Mod-Small Is anybody buying this hype? Apparently so, as quite a few people seem to be buying the stock.

McDonalds has a market capitalization of $92B as I write this. It has a brand name that is at least as well known and globally ubiquitous as Facebook’s. It has 420,000 employees to Facebook’s 3500. And in the 12 months ending 3/31/12, McDonalds made a profit of $5.56B on revenues of $27.4B. Facebook made $0.65B on $4.04B in revenue.

As any stock market novice knows, the value of a company relative to its profits is a function of the expected future growth of those profits. A fast growing company gets a higher multiple.

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How Much Do I Need to Retire?

Park Bench Crop Much of personal finance revolves around the effort to amass sufficient financial resources to retire. And at the center of all that is a simple and powerful question: just how much will I need to pull it all off, to stop working once and for all?

I have never worked with a financial planner, and I have certainly never worked as one, but I will speculate that this is a question that often pops up very early in the conversation. I can imagine an earnest middle-aged couple outlining what they want to do in 25 years and then asking “So, how much will we need to have?”

If the planner is being honest, he will answer “Nobody knows.” I am betting few of them say this. At least not in so many words. Bad for business.

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Do the Rich Work Harder?

There are two types of people who like discussing the habits and characteristics of “the rich.” Those that want to point out how evil these oppressors of the masses are, and those that want to learn how to be rich themselves.

I do not have much patience with the oppressors shtick. Thankfully, the great majority of Americans agree with me. Outraged complaints about how the rich Mansion - William Helsen are not paying their fair share of taxes is something leaders of the Blue Team voice to raise money from their navy blue supporters early in an election cycle, only to be conveniently forgotten as the day of actually voting approaches.

Support for raising taxes on high income households dissipates quickly once how much they are already paying is understood. An easy majority of Americans will say yes when asked if those making more than $250K should pay more taxes to reduce the deficit. But if the pollster gets specific and asks just how much those lucky few should cough up, a big majority choose rates lower than the current ones. Raising the marginal rate on households with incomes over $250K to 40%, which the administration claims to want, was found by a February poll to be supported by all of 4% of voters.

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Is the USPS Going Out of Business?

Imagine a business losing $1B a month. Its brand name is well known by consumers, but associated with bureaucratic inertia and occasional acts of workplace homicide. Management has a scheme to massively cut costs andUSPS Stamp modestly raise prices that, with luck, may return the company to break even five years from now.

Would you like to own a share of this outfit? Too late. You already do.

The inevitable, if not imminent, demise of the US Postal Service is one of the recurring themes here at BMA. Aside from affording me the opportunity to poke fun at Washington, and make predictions that are safely in far off in the future, I keep returning to the topic because it is an example of one of the core ideas of this blog, that vague and wishful thinking is no match for the reality of dollars and cents.

The Post Office is in serious trouble. If it were a normal corporation with private creditors it would almost certainly be in Chapter 11 by now. Deficits are large and getting larger. The top line is shrinking quickly.

Mail volumes are down 23% since 2007. And that decline is part of a long term trend, not some short-term effect of the Great Recession. Overall volumes peaked in 2006, but first class mail, which is is the real money maker for the USPS, peaked in 1999.

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When to Refinance Made Stupid

Imagine that you did not know all you should about the ins and outs of mortgages. It is not that hard to do. Try. Now suppose you searched the web for a good place to learn about mortgages. A place where you could trust the NYTimesBldgByLuigiNovi-Nightscream source. Not some dumb blog. Someplace prestigious and maybe even a specialist on the topic.

How about the New York Times’ weekly Mortgages column? The Times is as august and authoritative as you can get in the old media world. And real estate has been an obsession for New Yorkers for as long as anybody can remember. (Rome has a foundation myth involving twin orphans and a wolf. New York’s centers on buying Manhattan really cheap. Tells you something.)

Vickie Elmer writes the column for the Times on mortgages every Sunday. It appears to be all she does there, and it is reasonable to suppose that it is her full time job. So she must be an expert. This must be the place for the confused to learn about mortgages.

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