What's Important in the Financial World (5/2/1012) Dow at Four-Year High, Facebook IPO Roadshow

There are rumors that the Facebook “roadshow” to present the company’s prospects to investors will begin this week and that the initial public offering of the social network will come before month’s end. None of the potential investors may care about what is said in these presentations. The pertinent financial data was filed with the SEC months ago. Facebook may be as closely watched by investors and the public as Apple (NASDAQ: AAPL) is. The fact that founder Mark Zuckerberg, who is only 28, will become one of the world’s richest persons adds fascination, as does the idea that someone so young could build something so colossal. The estimates for what Facebook will be worth after the process still hover around $100 billion, which is where they have been for more than a year. That means none of the information released by the company or the press has mattered much.

Four-Year-High Dow

The Dow Jones Industrial Average reached a level where it last was at the end of 2007, the year when the index peaked. At the close, the Dow was 13,279.32. Its all-time high of 14,164.53 was set Oct. 9, 2007. There are a number of reasons the index will close in on the record before mid-year. The primary one is that many analysts believe the P/E ratios of a number of large companies are still well below what their prospects should dictate. Among these are the financial firms in the index that have been beaten down by concern about consumer spending and their balance sheets. These include American Express (NYSE: AXP) and JP Morgan (NYSE: JPM). Microsoft (NASDAQ: MSFT) is also mentioned as an undervalued stock in the index in light of its recent earnings and the upcoming launch of Windows 8, which should prompt upgrades of the operating systems on hundreds of millions of PCs. Cisco Systems (NASDAQ: CSCO) and Hewlett-Packard (NYSE: HPQ) also are mentioned occasionally because their prospects and assets are considered much better than their managements.

Toyota Sales Comeback

Toyota (NYSE: TM) finally has started its U.S. sales comeback, after more than a year of shocking volume drops due mostly to the Japanese earthquake and low supplies of parts. The sales levels of many other large manufacturers fell in April. But the largest Japanese car company posted an improvement of 11.6% and added market share. Demand has been pent-up for some of Toyota’s most sought-after products, particularly the Prius, which remains the world’s most popular hybrid. As a footnote, Chrysler continued its unexpected return from the dead. The company, which was in Chapter 11 and is now controlled by troubled Italian manufacturer Fiat, posted a 20% increase in sales for April.

Chesapeake Energy CEO

Aubrey K. McClendon, the CEO of Chesapeake Energy (NYSE: CHK), was punished for transactions that allowed him to invest in every well the company drilled. The firm’s board did not care about the arrangement until the press and some investors began to criticize it. McClendon will lose his job as chairman, and the board will look for a replacement. McClendon probably will be gone entirely before that person is picked. The pressure on the board to fire McClendon is relentless. The board was complicit in McClendon’s good fortune. But that will not stop its members from doing what is necessary to salvage their reputations. The easiest way to do so is to identify McClendon as a cancer that affects Wall St.’s opinion of Chesapeake as long as he is there.

Douglas A. McIntyre