Tag: economy

Facebook money is not real money. Yet.

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First off –  a little introduction on money. When you think of money, what do you see? I bet you picture some coins, maybe banknotes, possibly your credit card. Think about this: in 2011 cash (the things we physically picture as money) in the US accounted for under 16% of money currently available (broad money).

As debit card and credit card adoption increases, as eCommerce grows more and more, the need for “narrow money” (coins, banknotes etc.) decreases. Most of our money exists just as bits of information in the financial system. I presume that in the future most of the currencies will disappear as we’ll move toward a more globalized approach to money, a world with one single currency. We do have a world bank, we have an international monetary fund – we will have an international currency.

We will strip money out of all their symbolic value and give them just one purpose: to enhance human collaboration and trade.

We accept and trust the financial system, not money per se

What we need is a world-wide acceptance of a certain currency, the universal ability to use that currency and a integration with the legacy financial system.

Call me crazy but I believe Facebook credits, the monetary system Facebook imposed on game developers could one day do that. If you think about it it’s not the currency we have to accept. It’s the system that’s issuing it. We trust Facebook with our personal data, our likes and dislikes, to some extent our social life. We could one day trust it with our money.

One might be skeptic about the idea of a Facebook – ran monetary system. However, Facebook is dominating the internet in terms of share of time and number of users.  The Internet is dominating human communication and in the future – trade. It is a matter of time until the electronic currency will shift toward a more Internet – oriented form.

If so, maybe George Soros was not wrong to buy Facebook stocks.

Why did George Soros buy Facebook stocks?

George Soros buys 341.000 Facebook Shares

As you might have heard George Soros, the Hungarian – American investor known for his 1 billion $ profit in the 1992 “Black Wednesday UK Crisis”, is reported to have sold his stakes in financial companies such as Citigroup, JP Morgan, Goldman Sachs and Wells Fargo, and bought 341 000 Facebook Shares.

Why would Soros buy Facebook stocks?

The decision to buy Facebook stocks that have been steadily falling since the IPO  is at least intriguing as the share price dropped 45% since the 18th of May 2012, the day when Facebook went public. Even more intriguing is Soros’ decision to sell his financial companies shares over Facebook.

Let’s look at the chart and then a quick set of facts:

Is this the end of Facebook stocks nightmare?

As you can see the drop in shares price seems to have leveled out. I suppose that might be the lowest point Facebook will see in a long time. After all the company is doing great in terms of users and revenue (next to 1 billion users, Q1 2012 revenue up 45% from Q1 2011).

LATER UPDATE: Facebook unlocked its inside investors shares and the share price dropped 6% and than bounced back to ~$20 per share.

What does George Soros know that we don’t?

George Soros is known as a very informed investor. He knows when to sell and when to buy. He also sold his minor stakes in Intel and Dell.

I can only assume that George Soros bets on one of the following:

  1. A large partnership Facebook is about to join. Last week I’ve noticed some Apple-Facebook motion and discussed the possible implications. Such a move will have positive implications on Facebook’s stocks.
  2. Facebook stocks will begin to rise as the company will provide the market with evidence of its increase in revenues, in the future.
  3. George Soros’ is attempting to trick the market into increasing demand for Facebook stocks. His actions can be enough to increase the Facebook stock price.

I believe that by the end of the year Facebook stocks will see a positive trend and pass a 25$ /share price. After all Facebook is a very valuable company and will continue to be so in the future.