Today is the much anticipated IPO of Facebook Inc. – Class A (NASDAQ:FB) which is set to open at $38 a share. Facebook very could well be the largest IPO ever for Wall Street which could be why the media has been talking about that literally all week and all year. Unfortunately, people do not like bad news which is why the new updates out of Europe will only be mentioned today. However, Facebook is not going to save your portfolio from a Greek default.
The European crisis continues to deteriorate further as further speculation into Greece’s potential euro exit. The good news is that the European Commission and the European Central Bank are working on a response plan in the event that Greece does get out of the currency. Policymakers urge that even if Greece does leave, the euro is still intact. Furthermore, Greek voters are now having second thoughts on voting in radicals as they have failed to agree and form a coalition government.
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As if that wasn’t enough, 16 Spanish banks were downgraded by Moody’s Corporation (NYSE:MCO). Bad loans were on the rise in March for Spanish banks as the figure rose to the highest level in 18 years.
As you can see, European leaders are preparing for the worst as the crisis continues to escalate. The ECB has already announced that it will stop lending to Greek banks to avoid the possibility of losing all their money. This is seen as a very strong response to Greek banks which says they need to get it together.
While Wall Street and the media are partying for Facebook, realize that underlying issues are getting worse and the probability of a summer correction appears to be closer and closer every day. Investors should be moving into conservative assets rather than high flying internet companies such as Facebook.
A lot of questions will be answered in the short term I believe. Greece will end up leaving the euro I believe because there is not much more they can do now. Hopefully, they do not leave but it seems more and more likely every day. Situations in Spain and Italy continue to deteriorate as well, luckily not on the scale of Greece but definitely something to be worried about also.
The bottom line is that the media is focusing on Facebook while all attention should be on Europe before we all get blindsided by the impending collapse.