Goldman selling Facebook...
Goldman selling Facebook... Einhorn speaks, markets move... 'A French default is not out of the question'... 'Most important country' race heats up... Wal-Mart grows 8.6%...
Goldman Sachs – the company that mysteriously winds up on the right side of every trade – is selling its shares of the social media website Facebook.
In a filing made yesterday with the Securities and Exchange Commission, the Wall Street investment bank said it would sell 28.7 million of the 65.9 million Facebook shares it owns. Goldman is cashing out to the tune of about $1 billion on Facebook's upcoming initial public offering (IPO). Goldman bought in January 2011 when the company was valued at $50 billion. The IPO valuation range will peg the company at around $100 billion. So Goldman and its clients got a one-year double out of Facebook.
If Goldman is selling... do you really want to be buying?
Another highly successful investor, hedge-fund manager David Einhorn, said yesterday at the Ira Sohn Investment Conference in New York that Facebook's IPO road show presentation "felt like a rock concert." According to a number of reports from the conference – including from our friends at the financial blog Zero Hedge – Einhorn said he liked two Japanese social media companies (Dena Co and Gree Inc.), both of which were much cheaper than Facebook.
Einhorn also said Amazon might take some of Dick's Sporting Goods' business... which caused shares of Dick's to fall 4%. Einhorn called Amazon difficult to value and noted that it was stealing market share from other retailers. But he said it's having a horrible time increasing its profits by the same amount. The company's future is a riddle, Einhorn concluded.
Then, Einhorn called the chief executive officer of construction materials company Martin Marietta Materials a "megalomaniac" and said the company benefited from a one-time (soon to be withdrawn) stimulus... and that stock fell 8%.
In a rambling 15-minute talk, Einhorn also commented on a few different countries. He said, "A French default is not out of the question"... "Norway is the only country that can finance itself"... and that money is leaving China and its banks are becoming illiquid.
It looks like Greece is getting some fierce competition from Spain for "most important country in the world."
The Financial Times said this morning that the Spanish bank, Bankia, is denying reports of a run. Bankia was nationalized about a week ago. Spanish Secretary of State Fernando Jimenez Latorre denied the rumor that 1 billion euros have been withdrawn since the bank was taken over by the government. Bankia shares fell as much as 29% today.
Experience tells us... When government officials deny something like this, it usually means it's true. I can't see how the words "Spanish bank" wouldn't scare the bejesus out of any human being. The bank's president, José Ignacio Goirigolzarri, really sealed the deal when he said in a statement to the Madrid stock exchange, "Depositors at Bankia can be absolutely reassured that their savings are safe."
Oh no, look out below...
Of course, all the financial news sources agree: Stock prices are falling today because of bad headlines about Spanish banks.
Tuesday, we pointed out that Greece's $300 billion or so of gross domestic product (GDP) is less than World Dominator Wal-Mart's annual sales. Spain is actually larger than Wal-Mart, with $1.4 trillion in 2010 GDP, according to the World Bank.
Imagine that... a country larger than Wal-Mart. $1.4 trillion... well... that's more than half the size of JPMorgan Chase's balance sheet, with $2.65 trillion in assets. Geez... when you're more than half the size of a big U.S. bank... I mean... that's about as big and important as a country can get.
So, yes, let's make it official. Greece is out. Spain is now "the most important country in the world."
If you aren't holding shares of Wal-Mart today, don't blame me. Since 2006, I've constantly and consistently recommended shares of Wal-Mart every time they've been cheap enough. With the S&P 500 down about a half a percent today, Wal-Mart is soaring, up 5%.
I love how people say Wal-Mart is too big to grow... and it just keeps proving them wrong. Wal-Mart reported a little more than $112 billion in sales last quarter, for an overall net sales increase of 8.6%. That includes a 2.6% rise in U.S. same-store sales (a key retail metric). That's the biggest rise in U.S. same-store sales in three years.
Stock investors are letting the world know what they think of Wal-Mart's recent Mexican bribery scandal. Shares are priced just about where they were before the scandal broke. The scandal will prove to be a one-time – ultimately solvable – problem. That's the time to buy a great business.
In fact, investors overall have been a bit too fearful lately. Whatever Wal-Mart is doing in Mexico, it's working. Wal-Mart's Mexican same-store sales were up 5.6% last quarter, second only to Brazil. No wonder superinvestor Warren Buffett took advantage of the Mexican bribery scandal to add to his Wal-Mart position. The company is doing great. If you don't own this stock... well... like I said, you can't blame me!
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A short housekeeping note: Due to a local power outage and resulting technical difficulties, our customer service department has been without phone service for two days. If you've tried to reach us during that period, we apologize for any inconvenience. You can always send your customer service questions to info@stansberryresearch.com. And we've been told the phones should be restored by tomorrow.
New 52-week highs (as of 5/16/2012): none.
Unfortunately, the mail was dominated by responses to one reader's suggestion yesterday that Warren Buffett pay 90 million American families $1 million each. Several readers corrected his faulty math, including one who said, "No wonder we have so much trouble in this country." If you benefited from our never-ending recommendation to buy Wal-Mart, let us know about it. Write us at feedback@stansberryresearch.com.
"Perhaps Tom Lee should go back to math class. His proposal for Warren B. to give $1 million to each of 90 million families (by the way, how about single people) as he suggests would be easily affordable? That works out to $90 trillion Tom, not $90 million as he seems to assume. Not even Warren B. has that kind of jing." – Paid-up subscriber RS
"No wonder we have so much trouble in this country. Do the simple arithmetic. Ninety million families times $1,000,000 is $90 Trillion, just about 3000 times Warren's assumed net worth of $30 Billion, and substantially above the nation's GDP. You guys printed it. I hope with tongue in cheek." – Paid-up subscriber KY
Ferris comment: Yes... tongue firmly in cheek. It's bad math, bad thinking, bad economics, bad everything.
"I like the proposal about giving every working family a million dollars. I see a problem though. Even if only half of the 90 million families are working, that is still 45 trillion dollars. Is buffet that rich? Maybe we could raid Medicare and social security to get that amount. Thanks." – Anonymous
Ferris comment: Heck, let's just print it up and drop it from helicopters! Oh wait... we're doing that now.
"With all due respect to Tom Lee's idea about Warren Buffet offering to give every working American family $1 million, I would suspect that even if Warren Buffet would go along with this redistribution of his wealth, he does not possess assets of $90 trillion to distribute. Nice idea, though.
"I had written my senators and congressmen e-mails and letters back in 2008 about a way to devalue the currency in the best possible way, and thus fix many of the problems that we have going forward. If we were headed toward socializing all debts and losses, we may as well use a free market approach to implement that socialization. I suggested back then that we print up about $9 trillion (devalue the dollar) and give every legal man, woman and child in America $25,000. Only qualification of this is that if that person or family had a debt, the money must first go to reduce their debt burden. Otherwise there would be no restriction on what to do with it.
"Other than saddling the country with a lot more federal debt (which they've done anyway since then) and creating inflation (which they've also done anyway since then), it would have "solved" (albeit temporarily) every societal problem that they have to date only made worse." – Paid-up subscriber SB
Ferris comment: OK, now it sounds like you're serious. Distributing a large sum of money to "every working family" – an indefinable entity at best – is ludicrous. It would ruin countless lives... and create the greatest inflationary boom ever and the mother of all collapses.
Dropping large sums of money into people's hands is a horrible idea. Large sums of unearned money ruin lives. Lottery winners often wind up much worse off financially than before they won.
Regards,
Dan Ferris
Medford, Oregon
May 17, 2012