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Another Dot-com Boom?
Ryan Hemelaar writes "CNN Money is reporting that the internet might be at a stage of another dot-com boom, with the top tech stocks now gaining ground again after the dot-com crash. From the article: "Now, 10 years after two key events in the history of the Internet -- the successful IPO of Netscape, which many cite as the beginning of Wall Street's love affair with 'Net stocks, and the founding of Yahoo! -- we're in the midst of a new, let's say mini dot-com boom.""
They just want more people to watch their boring Money TV programs. Nice try!
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It will be interesting to see how Wall Street reacts the second time around with these tech stocks. I would hope people can look back now and wonder what they were doing, consistently buying these stocks with P/E ratios of 300 and higher. With the tech bubble of the 90's still fresh in investors' minds, I would speculate that this time it won't get quite so out of hand. The name of the game on Wall Street is earnings, and in my opinion, one of the biggest problems we had with the last tech bubble is that so many of these companies had no earnings to speak of. To make matters worse, I don't know that a lot of these companies (pets.com) had a good idea of how they would ever have earnings. Hopefully the big investors such as pension funds, insurance companies, and mutual fund managers will think twice about backing some of the more obscure companies. Perhaps I should do an understandfinance.com IPO :)
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The internet is a new playing field. It is going to go through a few cycles like this before everything evens out and we get to a stable place. Also, since the bust, there's been a lot of increases in not only technology, but also availability of the internet. There's lots of new stuff to try out. There's going to be a lot of companies that want to try out new things, take a risk, because it could end up meaning big income. Going global on the internet is more possible than with other types of business. I think there's a lot of money to be made, just like the first time around. The good ones will survive, just like the first time around.
Anthropic principle: We see the universe the way it is because if it were different we would not be here to see it.
I don't think you can.
The financial world is a bit like slashdot moderation.
You see something you like, so you moderate it up, but everyone in the market does the same, so instead of a marginally funny joke going to mod=3, it gets blasted over to 5 instantly, and then modded back down because its not that funny.
(speaking of which, mod targets (ie this comment is +3interesting) would be a cleaner way than the current +1,-1 style)
liqbase
You're missing a very vital point - television industry charges money for cable subscription.
If you want Foo Bar channel, you subscribe to that channel. On top of that, they advertise and make additional revenue.
On the Internet, you are not paying for the service by the website. The only thing that you ever pay for is your connection, which is quite different from a TV subscription.
If Google were to be a paid subscription plus had ads, it would be different. It only has ads, and there is only so much revenue that you can make out of it.
In any new industry, there is always an early adapter phase (the 90's), then a disallusionment period with downward growth, followed by a more stable period with solid growth.
I expect to see the Linux world doing the same (Redhat, Novell, Mandriva, etc.).
I prefer the "u" in honour as it seems to be missing these days.
...overall, I'm glad the dotcom boom happened. There was such a massive spending on IT and Internet that really drove online connectivity forward. Sure, it was not financially sound, but I doubt the online world would be where it was today without it (and a round number).
Now? Good broadband (5-50Mbit) is showing up, everyone and their mother is on the 'net and overall I see competition from OSS which forces Microsoft to innovate. Just recently I read about a county here which that tightly integrated OpenOffice with their archival system, thus saving license fees. One down, 434 to go (which can now use that as a basis) not counting those that already use it for other purposes.
Now is the time to be investing in making such one-off transitions, not cutting back. Companies have disposible cash now, with XP released in 2001 and being between upgrade cycles. It is either laptops (movable) or thin clients (non-movable). I must admit Microsoft is scoring big on the former, but Linux is coming in hot on the latter. A flop now would only give Microsoft the time to milk the market until Longhorn is ready, because people will run on old systems, not taking either upgrade nor switching costs.
Kjella
Live today, because you never know what tomorrow brings
1) has lots of un-invested cash since this strategy doesn't present itself w/ lots of opportunities.
2) admits he never got the "hi-tech" thing.
3) most of his earnings are from the insurance companies he owns.
4) currently doesn't practice what he preaches by hedging against the dollar ( he lost $310m so far)
However I saw a quote from him a while back and investors would be wise to keep it mind
"Buffett says investors would be better off if they could invest only a limited number of times, as if you had only 10 tickets that permitted investments in your whole life. Buffett gives the example of a baseball batter just patiently waiting as the pitches sail by him. You wait for the perfect pitch--and then you hit it out of the park."
Sanity is the trademark of a weak mind. -- Mark Harrold
The fact that GM has made a ton of profit since the year 1897 is not relevant right now. Those profits have all been paid out to past shareholders through dividends. Looking at GM's balance sheet today, they are have a lot of debt compared to their cash reserves, unlike Google. In addition, GM has billions upon billions of dollars in future pension liabilities. GM does have about 100x more revenue than Google, however they aren't turning a profit right now. Even if they can turn things around, auto manufacturing is a very low-margin business compared to Google's profit margins.
I'm not arguing that Google isn't overvalued, it may be. But you cannot judge the worth of a company based on public knowledge and perception of their brand. Go out on the street and ask people if they have ever heard of Berkshire Hathaway. Most will be clueless, yet Berkshire's market cap is about 6x GM's. And for good reason.
I think that in a normal situation (whatever that is), when a currency inflates, real-estate would be a great investment to have for precicely the reasons you said. But we are not in a normal situation.
Nobody holds onto a loosing investment, the only reason why people put up with the dollar before was because of productivity increases and it's relative stability with other currencies. Now, unlike previous times, people will not hesitate to dump US currency (fast) when it inflates because this "boom" didn't come with the normal increases in productivity and infrascructure. At that point, only an idiot will hold on to bonds or dollars.
Most real-estate now is leveraged under huge amounts of debt, and that will likely become unsustainable long before inflation catches up with peoples paychecks. Yes there will be inflation, but it will likely exceed increases in pay for the very same productivity and infrastructure reasons, not to mention all the variable interest rate lones. All it takes is a small number of people to dump their properties to drive down the market, and once it does the people who are solely speculating on real-estate and not buying will exit out like mad.
When the real-estate collapses, unlike with the stock market, it has an immediate economic impact across the board and will just exascerbate the problem. Property will likely crash, pay will not go up, and inflation will go thru the roof.
It will really be a bad situation, probably worse than the great depression, but it won't last because the USA is still entering the information age and over the long term that will be a huge life saver.
Hopefully after this, people will have learned their lesson, and they will use money with real value and not money backed by the "good faith of the federal government"