FACE BOOK IPO

I thought that IPOs were supposed to raise money for a company going public. If this is so, then the IPO was a great success because it ended up making the most money for Face Book. Unfortunately for gamblers who are used to making a killing on IPOs, it didn't happen this time. Some of them are taking out law suits. I think judges should throw such suits out. I don't care if institutions knew something more about Face Book than the rest of us. I knew enough to stay out of the IPO. First the IPO price for the stock had a P/E of 100 which is huge. a P/E of 40 would have been generous. Second it was known that Face Book is having a hard time getting advertisements onto cell phones and more and more people are looking at Face Book on their phones. This has been said to be a big challenge for Face Book in the future. It seems to me that when you gamble, you have to accept the results.

There may be big investors in the underwriters that say they will switch accounts unless the underwriter makes them whole. Well, this is something between the underwriter and the gambler, but it is not something for the courts.

LOWERING TAX MYTH

There are those who think the myth that lowering taxes, especially on the wealthy, improves the economy. I have been fond of pointing out that lowering taxes is an inefficient way of improving the economy (http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html).

A more recent analysis that comes to the same conclusion is by Fareed Zakaria

(http://www.washingtonpost.com/opinions/fareed-zakaria-romney-is-wrong-on-tax-cuts/2012/06/07/gJQAy1pHLV_story.html?wpisrc=nl_opinions_Fri).

OK, the drill is that when the wealthy get more money, they buy more non-productive things like Treasury bills, notes and bonds, and buying existing stock does nothing for the company the stock represents, only the IPO and bonds benefit the company. Also when the wealthy get more money they do things that might benefit the global economy (like buying chalets in Switzerland, Bombardier personal jets from Canada, and islands in the Bahamas). When the middle class gets more money they pay down debt.

It is quite clear that Bush-41 and Clinton raised taxes, and we had the best economy of my lifetime and the Federal government had four years of positive cash flow. Bush-43 got the biggest tax cut in history and the economy tanked, from which we still haven't fully recovered. Even job growth from 2002 - 2007 was the poorest since the Great Depression. And all the tax cuts that Obama has given (e.g. extension of the Bush-43 tax cuts, a third of the stimulus package, the payroll tax cut and its extension, the small business tax cut, etc.) may have kept us out of a deep depression but haven't pulled us out of the poor economy, though we may be slowly coming out of it.

Though all the evidence is to the contrary, the myth of the benefits of tax cuts continues.