After a trading higher in the morning, the markets got spooked in the afternoon by the political and social turmoil in Ukraine. B-Teamers, who are only trained to believe that the next bubble is around the corner and only have permission to sell, followed their Pavlovian instincts and sold stocks all afternoon and right into the close. Recall that my #7 expectation in My Gut Feeling For 2014, was that “The Sochi Winter Olympics will be a public relations nightmare for Russia. The event will be plagued by old style Russian cheating and new style Chechen political unrest. A terrorist attack during the Olympics, either at Sochi or elsewhere in Russia will precipitate a global market pullback of 5 – 7%.” As it turns out I had my geography wrong as the Russian problem is coming from a different direction, Ukraine.
Facebook Acquisition Likely to Be a Blunder
Facebook (FB) made a large acquisition yesterday. The company paid $19 billion for WhatsApp, a text messaging service. This makes the $1 billion acquisition of Instagram seem immaterial. However, what is Facebook getting for $19 billion? Lots of users and no revenue stream, that’s what. However, in the social networking / application bubble world, that is what is important. I predict this will go down as one of history’s biggest acquisitions blunders, on the magnitude of Hewlett-Packard (HPQ) purchase of Autonomy for $11 billion or Bank of America’s (BAC) purchase of Countrywide, the cost of which is still mounting. Of course, the Time Warner (TWX) – AOL (AOL) deal of 2000 is still the poster child for bad mergers and acquisitions.
I went 4 for 4 in yesterday’s Olympic Men’s hockey quarterfinals, including the Finland upset over Russia. Today the American women play Canada for the gold in hockey. This will be a tightly contested game and could even go to overtime. However, I predict that the nation from north of the border will successfully defend its Olympic title. As for tomorrow, the men’s hockey semifinal round will pit the USA versus Canada as well. In this one the Yanks will be victorious. The USA goalie is just too hot and you always want to go with a hot goalie. Some of the goals Quick has allowed were meaningless late game goals. The other game has Sweden versus Finland. The Finns are coming off their Russian coup. Yet, I will once again go with the Swede’s (and NY Rangers) goalie, Hendrik Lundqvist to beat the Finns. In the end, the USA men will take home the gold.
Let the Situation in Ukraine Play Out
Don’t be a B-Teamer and let the situation in the Ukraine play itself out just as did the Arab Spring. As for the markets, expect a lower open and then some firming up as world leaders try to calm down the situation in Ukraine. By Monday the A-Teamers will be back and it will be business as usual. See you then.
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Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long BAC — although positions can change at any time.
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