This is the equivalent of credit risk in investing in bonds. US Government bonds return less because there is essentially zero risk of default. Greater safety involves a trade-off for lower returns. The risk spread quite substantial. Even though there have been some lay-offs in the public sector over the past couple of years, their magnitude is trivial in comparison with the carnage in the private sector. Plus in the public sector, stringent seniority rules put most of the risk on new relatively low-paid hires like untenured teachers, further insulating most employees from risk.

When investing one’s human capital in a career path, the security of employment is the equivalent of credit risk. Accordingly, the relevant comparison in the public vs. private sector analysis is not just the total compensation package but the risk-adjusted total compensation package.

I certainly do not think that new teachers are overpaid — they are the sacrificial goats for poor past employment practices. Still, public sector employees have to realize that voters will be increasingly unwilling to fund compensation and employment stability that is clearly better than they can usually achieve themselves.

http://www.thefinancialist.com/central-banks-to-continue-fighting-global-slowdown-ecb-credit-suisse-oliver-adler/

These “indications of interest” are recorded – the idea behind the name bookbuilding is that they’re building or filling the order book. For Facebook, the book was ‘filled’ (one time) by about Thursday or maybe even Wednesday of the first week, according to press rumors. But the New York and Boston investors that attended the road show in the first two days would keep getting calls to update them, and all investors could change their orders based on how things were going. There are some investors that won’t place orders until the offer is at least two times subscribed – those are free riders, obviously, but they may still get a few shares if they’re good overall customers. And then there are well respected investors that have their own strong idea on the price, and the issuer may have to price lower to get those investors into the offering. Last week I had dinner with someone closely involved with the Google IPO who said that Google, in the end, had 5 top investors that Google especially wanted to have in the offering, and so they chose the price in part to make sure they got those five (it was “dirty Dutch”, so they had the option of pricing below clearing).

We should remember that Facebook is only one offering. It was a mess, but it’s even trickier to price these very hot, high demand offerings. Just a few days before trading, GE announced that it was no longer going to advertise on Facebook because the adds didn’t work, and this news made no difference in the demand for the shares.

By the way, your colleague Ravi Jagannathan is an expert on IPO auctions.