The rules that apply in the stock market have changed, apparently. People placed orders to buy Facebook stock a week ago, swallowing the hype that promised a 10- or 20-point jump in the IPO, offering the first buyers a handsome profit, guaranteed. But it closed 20-plus percent down, meaning a hefty loss for many. Horrors! You mean stocks can go down as well as up? That's unfair, if not illegal. Better call my lawyer. Better yet, convene a Congressional committee. The Massachusetts Attorney General, never one to resist a headline, has subpoenaed the underwriter. It's a voter's constitutional right to scalp a profit on a hot IPO.
There were glitches in the system, certainly. But buying stock in an IPO expecting to flip it for a quick gain (as most were) is a gamble. I was not a player in this game, but I do trade stocks, and decades of experience have taught me that profits are never guaranteed, no matter how euphoric the CNBC talking heads are. In fact, the more giddy those folks are, the more you'd better watch your wallet.
The rules have changed. The old paradigm, in which new ventures siphon talent from established companies by offering stock options and grow, creating jobs and wealth aplenty, is under attack. The new President of France wants to outlaw stock options. In the U.S., the whole economic system is being challenged by the "Occupy" movement, backed by large segments of the press. Never mind that this is the same system that lifted millions of immigrants into a prosperous middle class and saved the world from communism and fascism. The new war cry is "What have you done for me lately?"
Blame the banks for the economic meltdown. Blame investment bankers. Blame private equity. Blame anyone but the people who borrowed recklessly, because those people vote. We are going to hear more of this nonsense in the next six months, because the blame game plays well in a sound-bite world. Candidates Obama and Romney are equally culpable because both are telling voters what they want to hear. Telling them what they need to hear is politically lethal.
I have no sympathy for those who lost money on Facebook. Maybe if they hold their stock, they'll recover; maybe not. The losers will complain that the system was rigged against them. If they really believe that, they shouldn't have put their money at risk. They should have stowed their dollars under their mattress.
