Paul Kedrosky's Infectious Greed

The Google IPO march continues apace. I see that as of today the company is looking for a Sarbanes-Oxley compliance officer. Not much point in having one of those folks skulking about unless you’re serious about going public sometime (relatively) soon.

The puffy profile piece on Google’s upcoming IPO that is the cover of the current Wired has an entirely appropriate URL. It is http://www.wired.com/wired/archive/12.03/google_pr.html. Notice, of course, the trailing “pr”, as in “printable version”, but also as in “public relations”.

To be fair, the piece does have some good tidbits about life in a soon-to-be-public company. Here, for example, is a quote from Jeff Skoll, eBay’s first employee and former president:

“Before we went public, I used to send out a company-wide joke each day, just as a way of loosening things up. The day after the IPO, I sat down at my computer to write that day’s joke and in walked the general counsel. He says to me, ‘You know that joke of the day thing? I think it’s very funny.’ Gosh, thank you, I replied. ‘Well, stop it,’ he said. ‘We are a public company now, and we don’t want to offend anyone. If you want to keep sending out jokes, they can only be about lawyers.’ So I tried sending out lawyer jokes for two weeks – and then I gave up.”

So what’s next for Nasdaq? The history of the index is that long-ish declines create considerable pent-up pressure for reversion. In other words, technology traders are impatient folks and they can’t seemingly resist “buying the dip”.

Let’s leave aside whether that makes any sense (it doesn’t), it is interesting looking back at the last time the Nasdaq Composite declined for more than five consecutive weeks. It was October 2002, and here is what happened:

A fair rejoinder, of course, is that the 20% snap-back rally in October of 2002 was very different from today. Back then stocks had been weak for more than a year, and there was a great deal of fear and consternation in the market. The power of the snap-back was partly a function of the length of the decline, but it also arguably had at least as much to do with the severity of the decline.

Put another way, you’re more likely to see a snap-back rally after three weeks of 5% declines than are are after three weeks of 0.05% declines.

Well, six weeks of advances on the Nasdaq are now followed by five-and-a-half weeks of declines. The result: The Nasdaq Composite index is almost exactly back to where it was at the start of the year.

Good “Where are they now?” story in today’s Wall Street Journal about the stockmarket bubble of the late 1990s. Here is an interesting chart from it comparing the Dow crash of 1928, the Nikkei correction beginning in 1987, and the ongoing Nasdaq’s travels:

Fascinating and somewhat bizarre interview with Disney Chairman Michael Eisner on Larry King last night. The consummate corporate politician, Eisner consistently rapped Larry King’s (and callers’) softball questions out into left field for easy base hits.

For example, he got away with saying that the reason the Disney board rejected the Comcast deal was because the bid was too low:

“They were … over $3 less than the current market price of the company, which means, as opposed to being a premium, it was the opposite.”

As Eisner well knows, Comcast’s bid was under the Disney share price only because Disney’s shares stormed upward after Comcast made its offer. When the bid was announced it was at a (small) premium to Disney’s price, not a discount. The only reason Disney’s price went higher than Comcast’s original offer was because people speculated that Comcast would likely bid again, or a new bidder would appear.