What's Important in the Financial World (8/13/2012)

The “lockup” of shares held by investors who took part in rounds of Facebook Inc.’s (NASDAQ: FB) funding that happened before the firm’s initial public offering will end on August 16. Many current investors are worried that, with as many as 1.6 billion shares about to become tradeable, some of these will be thrown onto the market. Facebook’s daily share volume is just short of 50 million. The period after the lockup will be a litmus test for how much faith these early shareholders have in the company’s future prospects. Some may believe that a precipitous drop could mean that the market in general sees too many drawbacks to Facebook’s future. If so, they will join the sell-off that has gone on since the first day of the initial public offering.

Why Oil Has Spiked

Oil prices has reached a three-month high of about $114 for a barrel of Brent crude. The spike in prices has at least three causes. The first is the explosion of a refinery owned by Chevron Corp. (NYSE: CVX) and located in California. The second is a belief that some of the world’s largest nations will begin stimulus packages that will lift gross domestic product and therefore demand for commodities. The third is lingering worry about trouble in the Middle East, particularly with Iran. The nation continues to threaten to shut the Strait of Hormuz, an important passage for crude-laden tankers, if sanctions against it because of its weapons programs continue.

Motorola Layoffs

Google Inc. (NASDAQ: GOOG) will cut 4,000 Motorola workers now that the buyout of the handset maker is complete. Media outlets claim the cuts will come because Google only wants to build smartphones and that other handset development at Motorola will end. Google needs to bring down costs at Motorola if it expects the hardware operation to make money. Research shows that the only two corporations making money in the smartphone industry are Samsung and Apple Inc. (NASDAQ: AAPL). The market share of former stars such as HTC have begun to erode. Google will need to move up a steep incline to avoid what many analysts call a two-horse race.

Douglas A. McIntyre