Protecting our capital in a ‘QE’ world

Rule number 1 of successful investing: never buy what the sellers are selling you on. Avoid IPO’s like the plague. IPO’s are made to create enormous wealth for those who are cashing out by selling their shares at peak valuations as well as the underwriting firms who put the deals together and market them. By definition, buyers are virtually always getting the over-priced end of the deal.

The ratio of earnings beats fell in the fourth quarter to the lowest level since the start of the 2008 and 2001 recessions. Ditto for revenue misses.  As the big bankers and their brokers salivate over the Facebook IPO which will be sold to the “dumb money” of their unsuspecting clients (known to the bankers as their “distribution channels”), the stock market is bidding prices further into nosebleed territory, on more low volume, liquidity speculation. This will end as badly as it always has before. Buyers beware. Here is a direct link to a video clip by Jim Bianco on the numbers.

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6 Responses to Protecting our capital in a ‘QE’ world

  1. JW says:

    An excellent clip with good advices. Thank you very much. BTW, Canadian NGX (natural gas exchange) traded $1.99 for March contracts!!! Wow, isn’t it? JW, Vancouver

  2. bullion.bunny says:

    Agree….but then again the “google” IPO went from $80 to $700……..almost a ten bagger!

  3. well actually it went from 80 to 700 to 320 to 600 to 420 and is now back at the price it was in 2007. Depending on when you bought you are happy or harmed. And Google has been one of the rare anomalies. Most often prices fall shortly after new issue and rot there…

  4. doug robertson says:

    The only was Bill Gates could have become as rich as he became was from Microsoft stock, not Microsoft salary. He got all that ‘nickel stock’ and he wisely kept a fair slug of it. Then are the venture capitalists who get their inflated portions, then come the angel investors who get their inflated portions until the founders get ‘nickel stock’. Its a general rule of thumb that the IPO price is generally all its worth until the company establishes not only a corporate track record, but also a stock track record. I bought an issue called Pyxis many moons ago which did ‘okay’ until it finally got bought out by Cardinal Health. I still see the Pyxis medicine dispensors when I go to the hospital every now and then to see friends and family. Pxyis was a new IPO, it made a valid base structure and was putting up the numbers and the funds came a buying.

    Facebook certainly seems overly-hyped. Everyone knows about the company from being on it all the time. But exactly how does it make its money, how many actual users etc. That is what we as investors need to know. And we need a good market. That is what Google had going for it. It was launched near the end of summer in 2004 and those were good investing years. Boomers were still earning, investing….certainly not what it is like currently. Like DP says, keep your powder dry and beware. I agree.

  5. dave says:

    but you can’t fight the fed

  6. dave says:

    “everybody wants or has a government job, everybody wants free health care’ Hey that sounds like Canada!

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