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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.""
There's no end in sight!
Not to mention Google's IPO today, which has been valued quite highly.
Google is a great company with some really good services, but where does their core revenue come from, other than ads and maybe sales of their few SE boxes?
Makes you wonder, once again. Remember - it does not matter if you have the greatest idea on Earth, if your revenue is not from tangible assets (for relative measures of tangible ofcourse), the market will put you down eventually.
This is what I'm scared of - if things like that do happen, we'll once again go into an IT industry crash.
It's this kind of speculation which drove the first dot-com boom... and eventually burst the bubble.
OLPC Australia
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 :)
Finance tutorials and more! Understandfinance
...whether it's mini or not in my mind. Hype is what helped cause the legendary dot-bomb, and I'd rather keep my job.
All credit given to successful internet companies, I don't see it as a boom of any sort, I think of it more like big forecasts for what has actually worked this time around. Google may not continue to rise endlessly in the stock market, but internet companies are doing better in part because the internet is becoming so ubiquitous that you really can't avoid having some tie-in to your website in many industries. I'm glad to see companies coming back from the dot-bomb, but I can't call it a boom or a mini-boom.
How about a more stable term like 'successful market'? That sounds a little bit safer than over-hyping things again.
Perfecting Discordia
www.stevenvansickle.com
The gangsters in the movie are nervously sitting around in the hotel bar waiting for the hurricane to hit. Rocco, who's a tough guy but can't stand the tension, orders one of his underlings to talk. The most cheerful thing the thug can come up with on the spur of the moment: "I think in a coupla years, maybe, they're gonna bring back Prohibition."
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Look at that PE. Do the fools never learn?
Blasphemy! How dare you suggest that Google might not be worth nearly EIGHTY BILLION DOLLARS. That's its current market capitalization.
How does that compare to other companies?
Oracle: 64.78 billion
3M: 58.56 billion
American Express: 68.43 billion
Disney: 57.82 billion
General Motors: 19.48 billion
Red Hat: 2.2 billion
Anyone that suggests that a brand new company like Google shouldn't be worth 4x more than General Motors just isn't thinking correctly.
I'm a big tall mofo.
Too true.
Generally, it's one boom per industry, then people settle down and start working at it. Just because stocks are finally rebounding doesn't mean the gold rush is back.
ad logicam Claiming a proposition is false because it was presented as the conclusion of a fallacious argument.
Google should remember to grab as much copper wiring from the walls as possible!
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.
They just want more people to watch their boring Money TV programs.
So true. Apart from the few lucky guys that bailed out at the right time and got rich, the biggest beneficiaries of the boom were the stock porn purveyors pimping round-the-clock information whores.
GM has a major outbound flows. I was reading how of every car they ship $1600 goes to just Pensions. Their stability is declining. Income from tangibles is all well and dandy, but Google's has next to no materials overhead which tips the scale. Still it's not the income, it's the long term stability. Keeping Google afloat is cheap. If a goose eats $100 bill then it better lay golden eggs and this goose is laying some nice golden eggs. Once last word to the to wise, playing the stocks is like surfing. You ride the wave till it falls. Long term anything in the stock market is a fools game.
Sorry about the writing. Robot fingers, you know? Cliff Steele in DOOM PATROL #23
Booms are good. Insane run-ups like the dot-com boom in 1998-2000 are not. I graduated right into it, and ended up working in IT for decidedly non-dotcom companies the entire time. My reasoning: I was learning, so I might as well start with an established company. Turns out that was the right decision, even though it really bothered me watching people I knew changing jobs every 6 months for 30-40% pay increases!
If you want another example of a bad boom, just look at the housing market lately. I read a statistic the other day that said interest-only mortgages have reached 40% of all loans made in some housing markets. Just wait until interest rates go back up and the interest-only period ends. People will be paying way too much on houses that aren't worth nearly what they bought them for. I see this going on in my area, and I just wonder when the market is going to tank.
Market bubbles seem to occure every 3 generations. The big ones that come to mind are Dot-com, 1929, the railroads, the colonies, ... Dutch tulips... seems every 3 generation(s) that has their savings wiped out and dreams dashed wise up to the chants of "this changes everything", "this market is different", "these properties will only gain value", "these prices will last forever". I think it will be another 50 to 75 years before there is a new buzzword technology and enough new suckers who can't remember the previous crash.
Long term anything in the stock market is a fools game.
Let me make a modification for you:
Long term any single thing in the stock market is a fool's game.
A balanced portfolio of domestic small-cap, mid-cap and large-cap stocks along with a smattering of international funds and bond funds is the only sure bet long-term. Anything else and you might as well put it all on black at the casino.
Never mind. I forgot - you're better at picking stocks than everyone else in the world, and your winning streak will never end. Good luck with that.
I'm a big tall mofo.
Recovery? More like a dead-cat bounce.
How in the world this was moderated insightful is a mystery.
Never have more people used the internet in their daily lives - from buying odds and ends on ebay, to doing their banking, to reading the news, to fulfilling their consumerism pangs through ecommerce sites. The internet as a whole is much larger, and more robust, than it was in 2000, and it is a far more pervasive part of even more people's daily lives.
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
So? We're talking about 20K plus durable goods here. That also means that at least $1600 of rubber, steel and plastic are also in the finished product. That finished product also reflects the effort required to transform all the raw materials.
The end result (if it weren't GM) could be useful to you for 10 years or more.
GM's problem is that they make crap and are more interested in being "better salesmen".
Bringing up pension costs is just another indication of why the management of GM shouldn't be allowed anywhere near a company with as much national and global economic impact as GM.
A Pirate and a Puritan look the same on a balance sheet.
You better believe Buddha knew how to calculate a P/E ratio. Zen investment is what it's all about.
William of Ockham had no beard. The most likely explanation is that it was chewed off by squirrels every morning.
This is a bad time to be looking at a financial crash, because there is an energy crash looming too, and surviving an energy crash (in anything like the form we want our civilization to have) looks like it will require a large amount of capital to build non-petroleum-dependent infrastructure. But where's that capital going to come from if there's a financial crash going on at the same time??
I work in the hosting business and I can tell you, there's definitely something happening. Back in 2001 when the bubble burst, we lost 40% of our customers in a six month period, and then business was downright anemic for a long time. Gradually we've been building up new business by signing more customers whose revenue didn't depend on "dot com" type business. This year, though, it seems that there's another ramp-up happening. Our cabinets are filling up again -- not at the irrationally exhuberant rate that they did in 1999-2000, but at a more careful pace. And customers are being careful with their spending this time; they're only buying the services they need. Lots of colocation this time around instead of more expensive managed hosting, for example. But it's definitely happening.
Let's hope that this time around, the "Internet economy" can get firmly on its feet.
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Actually, for every seller there is a buyer. Thus when Lou Dobbs says "the market was down on heavy selling", he could just as easily say "the market was down on heavy buying". Shows you the quality of thinking in the financial industry.
Downward movement is, by the nature of how stocks are priced, caused by decisions made by the sellers in the transactions, not the buyers. The buyers were already waiting, ready to buy if the stock price declined to whatever level they found acceptable. It was the sellers who changed their mind about the value of the stock. It's that decision that Dobbs is characterizing, not the transactions themselves which, by definition, require two parties.
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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 average compound return from 1965 to 2005 on the Dow Jones is a little under 7%.
Dow Jones in 1965 = 800 (approx)
Dow Jones in 2005 = 11000 (approx)
factor = 11000 / 800 = 13.8
now we have
(1 + x) ^ 40 = 13.8
1 + x = 13.8^(1/40) = 1.067817
x = 0.068 = 6.8 %
I agree with you that it looks very good, however you have to substract inflation from that good return, and in the 70s inflation was well over 15%.
clicky
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"