The 2.0 Social Network bubble

"The man is the only animal capable to stumble twice over the same stone".

In 2000 many companies went bankrupcy because the speculation in the "dotcom" industries caused a bubble which obliged companies to merge and fire workers.

Ten years later it seems that we are suffering from the same illness, and that no one is going to do anything to regulate this situation. Capitalism in all the senses.

Linkedin got into the stock market today refusing NASDAQ and choosing NYSE. The result was a an increase in 260 % of its value of the IPO (Initial Public Offering).  Linkedin made an IPO of 45 dollars per share and boosted up to 90 before started being traded in Wall Street secondary market.

During the day Linkedin price of shares picked in 121 dollars per share and dropped down to 101 dollars per share in just 10 minutes after reaching the maximum price. It then dropped down slowly until it reached the closing price at 93,86.

Should be still wait until Facebook gets into the stock-market and regulate its entrance in order to prevent another dotcom bubble? Facebook is now valued higher than Boeing. The easily in which revolutions in arabic countries had been organized thanks to this social network is such that the price of this company is in exponential growth. What is it going to happen once they get into the market?

I want to give you some additional information. Since 2001 there has been a lot of financial engineering innovation which has turned into many risky instruments traded in the secondary markets. This instruments are called derivatives and allow investors to take very risky operations.

CFDs are a good example. This instruments are called Contracts For Difference and enable an investor to leverage their positions mostly to 10:100. This means that an speculator could have bought 1M Linkedin shares for 450000 dollars when they were valued for 45M dollars. This are very risky instruments which can able the investor to have very high returns but also substantial losses. The bad point of this instruments is that if a company goes bankrupcy, this 90% left will have to be repaid by the investors. Could you imagine then a 90% of losses in the system which can't be recovered?

Another point is that Facebook is planning to create a coin which enables you to buy things sold in Facebook. Is Facebook trying to create an economy to get into when the Capitalist economy fails? It's clearly shown that capitalism abuses. Capitalism is about surviving with the higher amount of money possible in oneself pocket. It leaves freedom in the hands of humans, which are not able at all to think rationally and to stop another dotcom bubble in 2.0 version.

It seems that we will have to take another path into the developing of the world. Probably China's path which seems to be the best one in these days by covering themselves from a dotcom bubble. They will be the only ones surviving from this one.

Marc Ramon Hernández