The Facebook Effect by Shawn Beecher at the Market Traders Institute
The largest tech IPO in history takes place in the next few days as Facebook attempts to live up to a 100 billion dollar valuation. With share prices expected to be between $34 and $38, investors are trying to be a part of the next Google.
Some of you may be wondering what this has to do with the Forex market. Remember, no matter how large the “pie” is, there are only so many pieces. If that “pie” is all of the money invested in every investment vehicle, that means that there is also a limited amount of money to go around. Every investor is trying to get the highest potential ROI (return on investment) and in the next few days, the Facebook option will be one that everyone will be considering.Because this will be such a popular offering, there are a few side effects that I anticipate seeing. These may have a lasting effects not only on the equity market, but also on the currency market:
Some of you may be wondering what this has to do with the Forex market. Remember, no matter how large the “pie” is, there are only so many pieces. If that “pie” is all of the money invested in every investment vehicle, that means that there is also a limited amount of money to go around. Every investor is trying to get the highest potential ROI (return on investment) and in the next few days, the Facebook option will be one that everyone will be considering.Because this will be such a popular offering, there are a few side effects that I anticipate seeing. These may have a lasting effects not only on the equity market, but also on the currency market:
- The lack of liquidity in the stock market means that the ability to purchase shares on the day of the offering is already in question. Hedge funds and institutional investors will be given preference, which could leave many other investors left on the sidelines until the first move is made.
- The lack of liquidity may also force investors into other subsidiary investments, and this is where the impact of Facebook will be felt the most.
- When investors get involved with revenue streams of Facebook as alternatives to the actual Facebook trade, the market will pick up and the technology sector may put the rest of the market on its back and carry it into positive territory for a few days.
The reason why this is so relevant to currency traders is because of the “pie” we were discussing. At this time, the interest in the USD may subside and money may go from currencies to the equity market.After the push that the USD has made against most of the other currencies over the last few weeks, this series of events may be a strong signal of a short term trend reversal in the currency market. All this will be doing is setting up another entry opportunity to again look long in the USD.If you have any questions or would like to comment on this article, feel free to contact me at: http://www.markettraders.com/fx-blog/press-releases/8188-shawn-beecher-to-join-the-george-jarkesy-radio-show-as-weekly-contributor/
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