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.