Sox First

© pingdom

Facebook's stock market debut has been nothing short of underwhelming with the stock fizzling after Friday's debut. On Monday, it finished 11 per cent down. Of course, it was only the investors that lost out. The banks that did the underwriting cleaned up, as they always do. According to the San Francisco Chronicle, Goldman Sachs pocketed $235 million selling its stake in Facebook's IPO, doubling its money on a bet it made on the social-network giant in 2010.

And now the fingers are starting to point. Reuters reports that Morgan Stanley, the lead banker in the IPO, reduced its revenue forecasts for the company. That was after talking up the initial price to $38, ignoring the advice of others who said Facebook's fundamentals weren't right. "They overplayed the enthusiasm and probably just misread the atmosphere of the marketplace," said Keith Wirtz, who oversees $15 billion as chief investment officer at Fifth Third Asset Management told Bloomberg.

In the end, what brought it undone was greed.

Facebook actually increased the number of shares being sold in the IPO by 25 per cent last week to 421.2 million. It also raised its asking price to a range of $34 to $38 from $28 to $35. This is the perverse part. Had Facebook kept the original terms, investors might have actually made some money.

Instead, the stock only got to $38 because Morgan Stanley intervened to prevent it from falling below the IPO price. After that, the price collapsed. And the banks were the only ones who made a profit.

© fdecomite

And so the Greek tragedy continues. It's not just a financial issue, it's a humanitarian crisis. According to the latest reports, the country will stay in recession until next year. The forecasts by the Paris-based Organisation for Economic Co-operation and Development actually assume that Athens fully implements a European Union/International Monetary Fund plan of reforms under a 130 billion euro rescue package to make its economy more competitive and repair public finances. And no one knows for sure whetehr that will happen with the place headed for an election on June 17.

Greece is a humanitarian crisis. As reported here, unemployment in Greece is now running at 22 per cent, Over the past three years, unemployment there has roughly doubled, and Greece has lost more than 10 per cent of its output. Homelessness is up by 25 per cent, 80,000 businesses have closed down and there's been a 57 per cent increase in HIV infections from the previous year, most of that coming from drug abuse.

In an interview with The Guardian, leftist leader Alexis Tsipras says Greece has descended into hell. "We have never been in such a bad place. After two and a half years of catastrophe, the Greek people are on their knees; the social state has crumbled; one in two youngsters is out of work; there are people leaving en masse; the climate psychologically is one of pessimism, depression, mass suicides. We cannot accept that this is the future of a European country. And precisely because we recognise the problem is European, and it will spread to the rest of Europe, we are sounding the alarm bell and are appealing to the people of Europe to support us in an effort to stop this descent into what can only be called social hell."

© Gwydion M. Williams

The implosion of Greece is now being compared to Lehman Brothers. Whether it is or nor remains to be seen. Still, it's likely to have the same devastating impact on the global economy.

Dr. Robert Shapiro, chairman of Sonceon, an economic advisory firm in Washington who served as Under Secretary of Commerce for Economic Affairs in President Bill Clinton's administration, says that the real problem is that no one knows how much exposure the banks have. Which is similar to what happened in 2008 with Lehman Brothers. Once Lehman collapsed, it set off a chain of events that few saw coming because the credit default swap market is so murky, opaque and no one can read it. "There are lot of people who could be caught by surprise and faced with large losses. We still don't know how many credit default swaps there are against European sovereign debt and the banks that hold them," he says. In other words, a Greek exit from the Eurozone, a Grexit, will have a Lehman like domino effect on Europe.

Still, Michael Cohrs, an advisor to the Bank of England has told The Guardian it 's unlikely to be another Lehman for one reason. "This is not as complex as Lehman Brothers in the sense that Lehman happened quite quickly. Greece has been unfolding before us for a long time and all of the bright minds have been thinking about this."

That said, the worry is no one knows the exposure and that is like what happened in 2008 to Lehman. And there is no way anyone knows what will happen next month because the polls change every few days. The Greek economy might be in much worse shape by June 17 when they hold an election. The government is running out of money to pay its day-to-day bills. And the big worry is those banks which are three times the size of the American banks and which fund most of the world's trade. As with Lehman Brothers, no one knows what their exposure is.

History, as Mark Twain said, doesn't repeat itself but it sure rhymes.