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Another Internet Stock Price Bubble Building?
Anonymous Coward writes "The Economist has a column looking at the valuations of some of the Internet's darlings, with a particular emphasis on Google. From the column: 'Valuations are, in fact, better founded than many of them used to be. But around 50 times next year's expected profits is still quite a leap of faith. At the levels seen in recent days, the price of Google's traded shares implies that it is the world's most valuable media company, with a market cap comfortably in excess of Time Warner's $76 billion, even though the latter had $42 billion in sales last year to Google's $3.2 billion. True, Time Warner's business is increasing at a snail's pace compared with Google's. But putting so high a price on future growth only makes sense if all's for the best in this best of all possible worlds. And it isn't.'"
I don't know about most people, but if Time Warner went bankrupt tomorrow, I would not notice (beyond having to delete channels 33&44 (CNN) from my grandmother's TV). Whereas if Google went bankrupt tomorrow, I would honestly be devastated. Heck, even my grandmother would be upset, she'd wonder where "the Internet" went. Granted, the vacuum would be filled very quickly by one or more entities.
Google also have an unusual combination of being both a) at the forefront of its market and b) good and ethical. Contrast with companies like Microsoft (forefront and evil), companies like Apple (distant second and good), and companies like SCO ('nuff said). Name another company that's both #1 in market share and #1 in user respect...
Google's worth every penny of its valuation.
Slashdot monitor for your Mozilla sidebar or Active Desktop.
"The Economist has a column looking at the valuations of some of the Internet's darlings, with a particular emphasis on Google."
This is not another bubble but the companies that were not dumb enough to die during the last one. Did Google founders buy yachts with investors money, hire idiots for $350/hr and then wonder why on Earth did they fail? NO. So please don't tell me about another bubble.
Karma: Positive (probably because of superiour intellect)
Google stock will split in the middle of September.
You can't handle the truth.
Wow another scolding article about stock ... I don't know...
speculation. It's almost as if the stock
market were some sort of
speculation market where people not only
invest based on the valuation of a company,
but also based on the derivative of the
company's price (i.e., a guess that
prices will fall or rise).
I'm shocked, shocked that people chose
to invest based on derivation instead
of valuation. It's almost as if they
think the stock market is some sort of
free market for stocks or something.
*shudder*. It's a complete scandal, I
tell you.
It seems like we're seeing the same problems with companies like Google that we were seeing a few years ago. Companies had lots of great ideas, but the problem came about when trying to actually make money on those ideas. This is what caused the demise of so many different startups.
Google is a wonderful company, but problems seem like they're going to arise as they get bigger and bigger and create more and more products, but don't charge for anything. As great as free stuff is, it doesn't pay the bills.
I guess the question is how long they can survive on their advertising alone.
What means: 1 trekking bird does not make it summer
The difference with the Internet bubble is that the companies talked about are growing, have a real income base and most of them profit. So even if there is a bubble building, when it bursts, it will not be of the same magnitude, there is a clear bottom (like 15 to 20 time the expected or real profit).
BTW: With googles market cap, can't they buy Warner and get the basics that way better?
My wife's sketchblog Blob[p]: Gastrono-me
I don't know about you, but I like a company who's motto is "make money without doing evil".
Maybe other companies can learn something from Google.
Google included, a number of these stock prices are based on future earnings, not current earnings. The prices may seem rediculous (when looking at their P/E), but hopefully they should fix themselves as their earnings increase. The problem is that people think 300 bucks a share is what they are worth now, and may continue driving the price up, until to bursts.
Voice your opinion!
I'm shocked, shocked that people chose to invest based on derivation instead of valuation.
OK, so here's a $150,0000 question for you, smartarse:
What is a value of stock if not future dividends?
I wouldn't put too much stock into Google. Not after watching how MSN Search is growing off on the horizon...
operating system for the Internet
Those are some of what keeps their valuations up there. People keep superimposing their stock curve with Microsoft's starting in 1988.
And if they buy OSTG, they'll be able to take down almost any web server through a DDOS.
I disagree with any premise that a huge market prices stocks using one valuation criterion. Are internet leaders priced high because they aren't affected by economic cycles? That's not why I invested in some of them in the past (and one of them now). How many employees does Time-Warner have? How many does Google to return those kinds of profits? As computers get faster and cheaper and seep into every nook and cranny of our society, who is in better position to explore new markets in profitable ways?
Bubbles come and go on Wall Street all the time, and it really doesn't matter to them as long as Joe Blow Public takes the blowout so they can rake in the fees. I would think that the real estate bubble (if it is a bubble) might be more serious since a blowout would hurt Wall Street first (many brokerage firms are also involve in real estate finances). You can't rake in the fees if your house is on fire.
...the stock market will climb higher, and higher, and will never crash. You'd be crazy not to dump your entire life savings into the stock market in general and google in particular. We're all going to be rich!
Stock bubbles you!
Didn't Google go absolutely out of its way to prevent their stock from being overvalued, what with the whole reverse auction thing or whatever?
What happened?
What's Time Warners operating cost? $43 billion?
The Internet is full. Go Away!!!
They simply want to buy Google because it's Google, it's cool, and its the "Next Big Thing!"
I'm reminded of Krispy Kreme, Yahoo, Cisco Systems, and the optical equipment companies such as Bookham and Corning, all of which still trade well below their peak.
Google can survive on advertising alone as long as they attract lots of eyeballs, and can thus charge lots of money.
Aside from that - Google has other revenue streams. They sell search appliances and services, they license products to other companies (see CNN's use of Keyhole aka. Google Earth).
But if you compare it to the immediately preceeding calendar quarter, it was down. When you're big enough that seasonal trends are a bigger part of profit variability than growth, you're not a wild growth stock anymore.
Everybody's a libertarian 'till their neighbour's becomes a crack house.
Benjamin Graham w/commentary from Jason Zweig -
The Intelligent Investor
http://www.jasonzweig.com/
Warren Buffett's teacher and the father of value investing would probably not recommend this stock to buy. If you had bought it when it first listed that would be a different story but it's really dangerous to buy now.
Another recommended read:
Common stocks & uncommon profit - philip fisher
This is the father of growth investing
Wow!!! Third story on google in 12 hours. Google can surely stand slashdotting!!!
Latest news on Google scholar also counted...
counter-prediction: GOOG's split adjust value will be 1/2 what it is now.
Who soars too near the sun, with google wings, melts them.
There's no such thing as a bubble, just a time to invest and a time to get out. If you follow the fads you'll sooner or later miss the train and end up with nothing, in the current culture people always rush to get money, so everyone rushs and the prices go sky high. 6 months later everyone goes "oh time to take the money and put it in the next one". It goes on and on untill some huge event which kills all the sheeps money in 1 big go.
Stay away from fads and trends and a "bubble" will never effect you, follow them and you risk losing it all for short term gains if you're lucky.
I like muppets.
This time around, the large P/E ratios for Google and kin are based on actual earnings. In 1999, most of the Internet stocks weren't even making profits yet, and the huge P/Es were based entirely on ephemeral earnings estimates. But now, Google made $1.29 per share this past quarter (ignoring stock option expenses, which, by the way, will be of lesser impact in subsequent quarters), and is projected to make as much as $8 per share in 2006.
Once the growth projections taper off, the stock price will decrease off its highs, but for now, Google is slightly conservatively priced.
The article was bang on when it asked how a company with annual revenues of 3.4 billion can have a fundamentally higher market capitalization than companies which revenues in the $74 billion plus range? Where is the money? Are the Google shareholders receiving a dividend? How much is the IP really worth in licensing, advertising, and other revenue streams? The technical side of Google appears to be quite sound, but from business perspective their nose bleed share prices are not backed up by the realities of the corporate balance sheet. The current price of the shares, ~50 times annual earnings, has already PRICED IN an expected growth rate of 25-30% which means that unless Google can better that expected performance the share price is not justified. I work in the IT industry and I appreciate the services that Google provides, but the current share price looks like a come-on to a sucker bet. There will be a painful adjustment in the future and it will be interesting to see which big investors are left without a chair when the music stops.
It's not about revenue, it's about earnings. If it takes Time Warner $42 billion in sales to earn the same ammount as it takes Google with $3 billion in sales then I'd much rather own Google because of the higher profit margin = more room for earnings growth in the future.
It's not at all unreasonable to expect a 50x increase in profits in the next year for Google, now that Google Scholar is in beta.
The Dot Com bubble exhibited the same feeding frenzy behaviour. No one really knew the potential of the web, but every wanted in, and, the more the better. The collapse of the Dot Com bubble reflected, not only unwarranted investment behaviour, but the fact that the web couldn't deliver in a timely fashion, not too mention the bloated, vapour ware companies backed by wildly speculative VCs.
What we may now have is a Google Bubble. While investors may not be ready to reinflate the Dot Com Bubble and speculate wildly on the web as a whole, they might be ready to invest wildly in a darling of the web like the, do no evil, just too cool, Google company.
Me I'm gonna stick with Double Bubble and good 'ol Pud.
"Academicians are more likely to share each other's toothbrush than each other's nomenclature."
Cohen
Because the Republicans in control are happy to let the rich get even richer (ratios not seen since the 1920's), there is a lot of spare money floating around seeking investments. However, there is not a lot that looks promising to the investors. Thus, they chase after the few stocks that look semi-promising, and this is where the Yahoo's and Google's fit.
Also, every 15 years or so a new "Next Big Thing" usually pops up and attracks a hell of a lot of investors. But the NBT hasn't appeared yet so the cash is piling up. Past NBT's include automobiles, telephones, railroads, satellites, TV, computers (mainframes), PC's, the internet, etc.
In short, the rich have too much spare money.
Table-ized A.I.
"Google has bet the farm on the idea that putting some of the nation's smartest people in a productive work environment will make the company money."
Nah, put an even number of PhD's in a room and they cancel out. You either have to put an odd number of PhD's in the room, or lots of PhD's and a common sense manager to throw half of them out and to know which half to throw out!
The good thing about Google isn't the PhD's, its that it lets its people do stuff. Large companies generate an inertia because the people in them are never allowed to change things and so they end up like Oracle or MS, minor upgrades, nothing too shocking, all very predictable....
Google's not the kind of company where investors read financial statements or annual reports or do a valuation. Otherwise, they'd ask themselves why Google trades for 45x forward earnings, when you can pick up just about any oil company, and get a dividend too, for 10x.
Tristan Yates
In The General Theory of Employment, Interest, and Money, John Maynard Keynes laid out the big picture of 'value': When you look at an economy as a whole, you see that money flows from one place to another, then back again, making cycles. The question of value isn't whether one thing is intrinsically more worthwhile than another, but whether it has the power to pull a higher concentration of money into a given part of the system.
Along with that goes the idea that the overall value of money is based on people's willingness to use it. There are simple abberations.. put too much currency into an economy and you get inflation, restrict the flow of currency too much and you get a recession.. but even in a more or less balanced economy, people have to decide whether to spend their money on X today or Y tomorrow. Those decisions determine both where the cash goes, and how much buying power a unit of currency has.
Boil it all down, and you get the idea that 'wealth' is strongly tied to people's willingness to invest in the future.
Time Warner may be big, but is business model is old, well, understood, and frankly, not so healthy. Information on the internet competes with information managed by traditional media companies, and the differences in distribution models, usage models, and cost of entry are playing hell with prices in the traditional sector.
Google may be an unknown, but it's demonstrated its ability to make actual profits while distributing information on the internet. People are willing to invest in that model of the future, and that makes Google valuable.
Are people overestimating the potential value of the internet-information market? Possibly. But this time they're investing in a company that makes actual profits, as oppsed to the last dotcom boom, where people invested in the idea that 'branding' was synonymous with future profits.
If it turns out that Time Warner's $42B/year market dissolves into an internet information market worth, say, $8B/year, the investors who've bet that Google's cap will reflect current market conditions will lose money, and Google's stock price will go down. But it will happen slowly, as investors gradually work out the real value of the new information market. It won't be a cascade-failure like last time. At very least, there's no reason for Google's shares to drop below the reasonable value for a company that earns $3.2B/year.
...Internet stock prices fell by 20% Monday morning.
...Or would, if the average person read The Economist. I've only met one or two people that actually read the magazine, and one of those people was the person that introduced me to it. We're still stuck in the mentality of "It'll happen to you, not ME!" that people will continue to purchase until Vista launches. It'll be interesting to see how many people "upgrade" to Vista. Apparently, it'll only run on high-end machines. If people have to purchase a new computer, I think they'll seriously consider buying an Apple, assuming using Intel chips will really lower prices.
Are we looking at the DOTCOM bubble with respect to the entire industry OR a single company?
/.'ers, sigs are for kids.
What you are saying is comparatively similar if one is to say what Apple/Microsoft was in the era of golden goose called DOTCOM, therefore any successful (no matter how bloated or overvalue it may be) venture cap or IPO is sign of dooms day to come.
As far as I can tell, DOTCOM burst was a chain of events caused by multiple catastrophic failure. Google is a leader in search/adclick provider industry, a very specific portion of industry which has matured and difficult to gain grounds. I should know... i work for one... arrgg
---
silly
"Don't let fools fool you. They are the clever ones."
You seem to have forgotten that when google was still in it's infancy, that Altavista ruled the search market. No one thought it would be toppled so easily. There are many search engines out there, and they all are similar in many ways. Google has a brand name, but it's not leaps and bounds better than the competition. They just use various methods to rank results, so while the results vary slightly, you still find what you want.
SearchIRC - Now with live chat directory!
Isn't Microsoft planning on putting a search bar for thier MSN search engine right on the desktop? What would happen then?
NOTE: I could be wrong.
One product of a massive income gap is that the winners, flush with cash, have less and less stuff to buy with their cash as investment assets become scarce. Everyone (in this market) has cash, but there are few easy ways to leverage it. As you move up the pricing tier, there are fewer and fewer buyers who can afford that investment, so market pressure seems to let up making investments seem more attractive. Diamonds from Tiffany's? Turning the table, the simpler explanation is that the more money a person has, the less each dollar means to them. The more cash you have, the less risk-averse you need to be.
Take into account that Google stock is kind-of like Google's currency: Googlebucks if you will and the Dollar is kind-of weak. This is like people saying that "we want to trade all of our US dollars for something backed by more than just US labor."
--- Nothing clever here: move along now...
This has been the case for every update for IE since 5.5. IE ships with the OS. It defaults to MS Search. They have always done this. This simple problem is that MSN search sucks. Until MS fixes that huge glaring problem, no one will use MS search. Every time Google comes up at slashdot, someone always posts,"In longhorn search will default to MS, killing google." Well default or not, it's easy enough to change. Until MS search actually is a good as Google will competition be a problem for Google. Despite the 150 million dollar ad campaign for MS search they were only able to steal roughly .03 % of the market from Google in June.
They need a better search product. Search isn't about search web pages. It's about finding the information you need.
Thalasar
people will type google.com on that search bar
People seem to have this idea that the stock price is reflective of the "coolness" of the company and how "rad" it is. I base this on some of the above posts. In all seriousness, Google is a rad and cool company with a decent business model. I think the problem, is that people are so defensive about their beloved Google (understandably), that they ignore what the fine folks at The Economist are trying to say. This article is simply saying that buying Google is a big gamble. It has been pointed out above that the share price reflects the present value of all future dividends. I humbly throw my opinion in with Graham and Buffett that stocks should not be purchased for speculation, since speculation is a zero-sum game. Instead, dividends should be taken into account. With that in mind, let's honestly consider when Google can be expected to pay dividends in the future. Look at Microsoft: how many decades did they go for without paying a red cent in dividends? However, it has now paid off for many people. The Economist is simply making the argument that betting on returns from Google is a long, long bet given the competition and the inherent instability of the market they are in. A lot can happen between now, and when Google has a market share mature enough and safe enough to allow them to start paying back those who bet on them.
Not many of you are stock junkies I would venture to guess, and it is very important to empahsize the market capitalization point.
When it gets as high as it has for Google, no new investors enter. Which means PPS drops. It doesn't mean the company is any worse off financially, but it means that fewer people are willing to invest in something that doesn't return dividends like it should.
We've certainly got interesting times ahead. I would venture to guess Google's market capitalization will eventually reach that of ERICY, or Ericsson, which is also overvalued, about $52 billion.
At that point, the PPS will be about $194.34 and may actually fall further assuming there's some massive shorting and scare sells. You should be able to buy in sometime this year around 170 bucks. That is, given they don't do a stock split.
http://www.fuckedgoogle.com/ nuff said
If you pay them too much, they will retire early.
But if you pay them too little, they'll go work for someone else.
If you want someone to design a piece of genius software, Ph.D.s are great. But for run-of-the-mill projects, you just can't beat an army of wage slaves.
It's not entirely a gamble. Sure, you can play it that way if you want, but in gambling you KNOW you will lose: $X goes in, the house takes 10%, and .9$X comes out. You might win, you might lose, but it's a zero-sum game and in the long run it's always a net win for the house and a net loss for you.
Investing wisely in the market isn't gambling. $X goes in, a bunch of new products are invented worth $Y, and $X+$Y comes out. It's a net win.
I don't watch the ticker ever few minutes, because innovation doesn't happen in minutes. Buy a company who isn't overvalued (which is a matter of research, unlike the fall of the cards, which is guessing) and wait a few months or years.
Sure, there's silly money to be made in the nearly-random movement that day traders take advantage of, but if they win at all it's only because the stock market tends to rise over time. So they lose money on 99 transactions and win on 100 of them, even picking at random.
Fine, whatever. From the market's standpoint they're still providing liquidity, which is what's really going on. You don't ordinarily get to invest at the beginning and sell out at the end. You buy in at some point in the ride, and sell out when you want your money for some other purpose. The companies don't see that money, but the initial people invest because they know that they can get their money out at some point before the very end.
It looks like a gamble if you don't know what you're doing, but unlike a casino you can be smart. Figure out how much money they have, how much money they're likely to make, and you can make yourself a profit for free. Do it wrong or get unlucky (competitors, lawsuits, ideas that turn out badly, shifts in people's tastes) and you can still lose, but unlike the casino there's money coming out at the end of the day because the money is going into something real: companies that provide real services and products.
Yeah, there are gamblers there, too. I'm happy to take their money.
New vista users Love the new M$ search -- altavista.com.
One or a handful of stocks does not make a bubble. Google's inflated price is partly a measure of the pent up desire for Internet stocks in general, which is being expressed only in the magic, untainted "Google" brand, which only became well known after the crash was safely defined in memory as "past".
The actual Internet Bubble was the opposite: any Internet stock was inflated, because buyers knew there'd be a shakeout, couldn't tell which ones would survive to win, so they hedged their bets by buying all of them. That hastened the collapse of the entire equity market, because the equity markets propped up losers, never letting either the equity market or the product market decide winners and losers.
When the Internet stocks look like the real estate market, with low interest rates, supported by Chinese purchases of our debt, propping up vast billions in inflated speculative real estate value, then we're back in a bubble. When a few Internet stocks are inflated, we're still looking at a market that can't do anything but boom or bust. We've learned very little from the Bubble and its Bust. Until we do, we'll never have the sustainable growth in the equity markets that reflect a healthy economy.
--
make install -not war
This is not your father's stock market. Didn't anyone else realize that this technological growth spurt would also carry with it a new reality of the stock market? Once technology allowed John Smith to trade stocks in his living room, the stock market changed forever. The stock market is no longer rational people evaluating business; instead it is now the public wagering on the future. And the stakes (and the stocks) are high.
This is not your father's stock market. This revolution is not about market cap, future potential or any other factor that is measurable. It is about knowledge and progress, rather than nuts and bolts. It is about people supporting what they like on the assumption that the price of the stock will continue to raise while good things are still happening at that business. It is not about ROI, dividends and PE ratios; rather, it is about visibility, selling price and simple popularity.
This is not your father's stock market. This is the American thermometer that reflects our collective knowledge. Several weeks ago, Wired published an article that cited a report stating that the people in the World Trade Center on 9/11 were much better informed than the emergency workers on site. To quote classis sci-fi, "A person is smart. People are stupid, panicky, dangerous animals, and you know it." But there is a third category: an informed group can be much more than the sum of its parts. If you need proof, go look up collaborative intelligence in the wikipedia.
To your father who is now complaining about the unnatural state of the market, I have just one piece of advice: welcome to the next generation. We may not be the greatest generation, but we certainly know what we like and we are showing you. If all this seems a bit too unpredictable, then get out of the way because there are no leaders here and the followers will certainly lose money.
Welcome to the new world order -- Welcome to MY World.
let's put things in perspective with some market caps:
MSFT: 277.46B
WMT (walmart): 207.18B
GOOG:84.00B
YHOO: 46.82B
APPL: 36.25B
Seems to me, the market is saying Google is worth ~1/3 of Microsoft, 2-3 times of Yahoo and Apple, and 1/2.5 of walmart.
He doesn't split, but he did make BRK.B so the stock would be more accessible.
I think splits are a good idea when a stock gets expensive, consistently above $100/share is quite high. $7k is quite difficult for smaller investors to participate. Not that I care, but more investors makes it more liquid which is actually good for everyone.
The society undervalues mathematicians and physicsts too...
... and overvalues doctors.
Agreed... very much agreed...
Well, some kinds of doctors (like dermatologists and radiologists), yes, but _all_ of them? This is not a straightforward issue, but I'd argue that it's in society's best interest to have at least some of its best and brightest going into medicine (instead of law school or business school). In places like England, where they're paid like barbers, the quality of specialized care (which does matter, even if preventive medicine stamps out 99% of the problems) is not as good as it is here.
Most of these people can be become doctors if they want to.
That depends. Medicine is all about informania. Millions of little unrelated details, often drug doses that are empirically derived, must be memorized. A mechanical engineer might feel like a sports car on an off-road track in that environment.
I know that of which I speak, 'cause I'm an engineer-physician.
The position with Goggle is identical to what can be seen in the market as a whole. Essentially rampant stock inflation. It is basic economics, shares are scarce resource and the 'market' has an essentially unlimited money supply through paper debt and near limitless leverage through options. The value of the market is one giant bubble.
Check out the recent transactions from some of the biggest insiders at Google.
e r/trans.asp?Symbol=GOOG
http://finance.yahoo.com/q/it?s=GOOG
http://moneycentral.msn.com/investor/invsub/insid
I dont see any buying, just alot of selling from a few select folks.
Reference analysis of Google multiple before the earnings release here
the total income of the top 1% earners divided the average income
Correction: should be divided by.
(For some reason my eyes don't pick up missing "short" words such as "is", "by", "it" etc. when I proofreed. Is there a name for such an affliction?)
Table-ized A.I.
You appear to have a misunderstanding of what a CS PhD is trained to do.
Like all other PhDs, they're trained to do research---creating and exploring new ideas. This---sometimes!---involves programming, but for most of 'em, that's nothing more than a means to an end. PhDs are hired to generate ideas, not code.
So, yes, there are no doubt teenagers who could program circles around the grandparent poster. There are also teenagers who could make free throws and hit layups much better than him, too. Neither comparison is useful.
Google's not the kind of company where investors read financial statements or annual reports or do a valuation.
Let's see. I'm a Google investor, and I do both constantly.
Otherwise, they'd ask themselves why Google trades for 45x forward earnings, when you can pick up just about any oil company, and get a dividend too, for 10x.
It's a very simple answer: growth. You can't just look at P/E ratios without looking at growth. If you do you'll be stuck with mediocre returns.
I've got some dividend stocks too. Buying a stock like Google isn't without risk. If the ad market tanks, Google is going to get hit bad. But if the ad market doesn't tank, Google is going to grow tremendously.
The parent is spot on: you can gamble on the stock market with risky investments, or you can invest more soundly and be reasonably sure of a positive but potentially smaller return.
I used to work with a guy who played the stock markets for fun, but consistently made a very good return on his investments as well. If there's one thing I picked up from the various instructive discussions we had on the subject, it's that all his investments were based on sound underlying principles. I doubt he'd ever consider buying Google, for example, with a P/E of something like 50(?) at the moment. He was out of tech stocks a bit early, but having made a good profit and comfortably before the bubble burst. The last investment he told me about was a company whose assets if they folded tomorrow were worth more than the current asking price in terms of shares, due to a superficially bad annual report that was completely explainable if you bothered to read more than page 1.
Sure, my colleague didn't make theoretically optimal results, but he was pretty much always the right side of 0, usually well ahead of the market, and certainly well ahead of most managed funds. Curiously enough, even the Warren Buffetts of this world seem to go for this sort of long-term investments rather than quick day-trading gambles -- IIRC he stayed well clear of Internet stocks during the boom and doom -- but what would he know about making money on the stock market anyway?
Having made sound investments, you also have to have the guts to stick with them, rather than running away at the first sign of a big drop. Some funds are naturally volatile, and of course you prefer to invest low and withdraw high, but the long run is what really counts. I invested in a fund this year that has seen very good returns lately, and according to my research is probably a good bet for another 2-3 years at least. It seemed to be on a bit of an unusual peak before my investment, and I'd have preferred to wait a while but had to go in then to gain certain tax advantages. Sure enough, it dropped some 15% in the month after I bought it, which looked like pretty bad news. Then again, it rose over 20% in the two months after that, so it's already ahead of the market as a whole. If I'd chickened out during the drop, I'd have lost out, but having stuck with it as a sound investment, I'm back up again now.
Of course, a smart day-trader could have beaten my returns here very effectively, but I don't have time to do the research and make the changes required on those timescales. So, I'm investing in sound funds for the long run with a level of risk I can stand, and (fingers crossed) common sense and smart-alec derivatives traders haven't beaten me yet.
If you disagree, post your argument. (-1, Overrated) isn't your personal censorship tool for views you don't like.
Me and and a bunch of friends started an ISP, one of the first in our town. The technical side of it went great and the customer base grew and grew, almost out of control... BUT, none of us knew how to run a business properly and the whole thing was pretty much screwed up so much so that we couldn't handle it and ended up selling it to a larger ISP and getting hardly any decent cash for it. So I can say that I rode the wave early on, but ended up not becoming a millionaire or even a little rich from the experience. Kind of makes me jealous of all the others that did it properly. I'll probably never get that kind of chance in my life again.
Meh.
Absolutely they can survive and indeed make a healthy profit on advertising alone. However, when they have about half the market already in web search, they can't possibly continue the astronomical growth they've enjoyed to date in that field, and that's what the speculative investors are (probably naively) expecting.
They will inevitably have to find other markets that can grow to the same sort of level to maintain the growth of their stock, and I doubt they're going to beat the number one web-based activity any time soon. I certainly can't see them finding such a golden egg about once every 2-3 years indefinitely!
If you disagree, post your argument. (-1, Overrated) isn't your personal censorship tool for views you don't like.
I don't know if the housing bubble is bigger, but housing bubbles are much much worse.
... oops I mean stop these kind of problems, the fed would just print up ^h^h^h^h ... oops I mean loan more money by lowering interest rates. But they will not do that this time, because if they do, foriegners will get pissed off at the inflation and dump the dollar as the world reserve currency making things 10 times worse. So they will most likely raise rates till housing crashes, which they won't be able to stop from becomming a great depression, which will quickly become a global great depression, at which time the governments of the world will panic as all their govt bonds become unpayable so they will print up money like it's doomsday causing hyperinflation.
1) with a stock you can normally sell it immediately at a market value, real-estate seems liquid, but it is not, and people will very rudely find that out at crash time.
2) selling a home costs money! There are a zillion inspections, and regulations people need to meet just to sell one. Especially in CA. Selling stocks costs little in compare.
3) When a stock market crashes, it usually takes a year or so to filter thru the rest of the economy. In a real-estate crash, the effect is almost imediate as people cut back spending almost immediately. Which causes more economic slowdows, which causes real-estate to fall even faster. (which is why, after it starts to crash, then it's game over, no monitary adjustment in the world will fix it)
4)A stock crash (at least in the USA) will not bring down all the banks with it. Yeah, FDIC is usefull when a small group of banks fail, but when they all catch hell at the same time, forget it. All bets are off.
5)Even when stock crashes, you still own a piece of a company. In real-estate, there is no true ownership untill it is completely paid off, you will likely own nothing but debt.
6)With the asian real-estate crash, the US banking system and economic growth bailed them out to a certain extent. There is no one to back up the US system. If things go to hell here, then that's it.
7)Stocks do not cost monthly payments that are obligated over 30 years.
8)Currently, 30 to 45% of real-estate is speculative. Once it stops growing, just watch what happens as zillions start to sell their second homes, and their vacation homes, and their "investment homes". Nobody is going to cling to a loosing investment. When it goes, it will all go to hell quickly at information age speeds.
Normally to create ^h^h^h^h
At this time, I would recommend getting out of ALL debt no matter what, and before all this happens you would be wise to put your money in something other than stocks, bonds, real-estate, banks, or cash ( try gold, silver, or comodities?) I would also strongly recommend food storage.
As a US citizen, I can't even believe I'm saying this. But too many people are falling for the "it's too big to fail", or the "they won't let it crash" mentality which will make the inevitable consequences worse. Hopefully, this time we will learn our lesson and demand money be backed with something other than "good faith of the US federal government".
The oils, like the homebuilders, have a long history of boom-and-bust. Knowledge of that history is restraining the prices of these high growth remarkably low PEG companies. For the oils, there is some reason to believe that "this time it will be different", as inexpensive resources become scarce. Time will tell.
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...as any CEO knows when the *bubble* gets too big,
1. start acquisitions/ mergers.
2. borrow.
3. sell stock (for CEO and insiders).
4. fire thousands of lower tier employees.
5. consolidate operations.
Repeat.
as the scales tip for companies like google, it is not necessarily doomsday.
For some reason, this all reminds me of the Satirewire classic article on Cisco.
Well, then you must have forgotten the stagflation of 1979 where we had both inflation in prices and a recession in employment and industry. Something that they Keynes model of money says is impossible.
The problem with Keynes is that he made the solution to his "problem" to be the use of a central federal bank to lie to people about the value of their money. In theory, a central bank would inflate in bad times, and deflate in inflationary times. Unfortunately the fed established in 1911, has NOT stopped inflation or depression and the Keynes model especially did not predict the stagflation of the 1980's which the "austrian model" of economics predicted quite well.
1 share of Google and I'm going to ride this baby to $1000.
Yee-Haw.
Who's with me?
The dotcom boom had less to do with the value of tech stocks than it did with a sudden prolferation of day-traders in the market.. basically untrained idiots whose only concept of stock valuation was to look at the ticker and see whether the numbers were still going up.
Throw enough numbskulls with money into a market, and you get what's called 'arbitrage'.. a situation where you can sell dollar bills for $1.50. The bubble ends when the people who think a $1.50 dollar bill is a good investment run out of money.
A negative frenzy would also lead to arbitrage, except that you'd have people selling dollar bills for fifty cents. Again, the cycle ends when the stupid people run out of money.
Let's be clear - what we are seeing with Google is NOT the same as what happened during the bubble. In the bubble, companies were losing money hand-over-fist and were getting rewarded for it for various reasons - their burn rate was indicitive of "major" innovation that would pay off in the future, or they would tout trivial things like "monthly visitors" or transaction volume or such other useless data.
Google has REAL earnings. They are not touting visitors or click-throughs or that kind of thing, they are reporting PROFITS, and those profits are expected to grow big time.
For those that are saying that Google's market cap at ~$3B earnings does not jive with TW's ~$40B earings at roughly the same market cap. Stock price is only partually impacted by the ratio of market cap to revenues - it is also gamble on the ratio of stock price to earnings - for the coming periods, and future earnings growth affords a higher P/E ratio.
Two things have a real potential to knock them back to earth - if they don't start getting their costs under control and if they see even the slightest slowdown in earnings growth. The slight uncertainty the Google team gave in the report is what sent them way down the other day.
I really really think that investors are still very wary of fast growing tech companies. and for Google to grow that fast, there really is something behind it other than a bubble.
Jerry
http://www.cyvin.org/
Now, does that mean you should go out and buy google? Hell no. Look at the trends. Google debuted at about $95. In two months, it grew by 100%. It took about seven months to see that kind of growth in share price again. That tells you that this stock may be too hot to handle; it's rich. Speculators have driven the price up, and alot of those speculators are going to stop looking at stock trends and start looking at google's first quarter filing for 2005. They're going to pay attention to this snippet:
They'll see that, and they'll start selling off. The speculators will be joined by the pros, who will probably sell about half their portfolio to make money on the stock price, and then sit on the rest until google stabilizes (which will probably happen around $100/share (PE 40)). Then they'll take their money, and buy more google shares, because Google will be increasing revenue, just not an an increasing rate. Google will still make money.
Oil Crisis
This time it will be different? Same old same old.
Does it go on forever?
Oil Crisis
This time it will be different? Same old same old.
OK, so I messed up and didn't click preview...
perhaps I'll learn one day...
Does it go on forever?
the lenders are loaning the most (read easiest) money.
Right now its the white hot real estate market.
The same has happened in the past with farming, the internet, and many others.
When the Chinese manufacturing market starts to cool, they'll pull their money
out of US Treasuries, raising rates, and your seaside condo will take a year
(instead of a week) to sell.
If you are, we knew all about it already ^_^
And maybe some mezcaline?
Really, i don't know what are you talking about.
1 - Proprietary means the source for the software is not freely available, and that the use, distribution, study and modification of the software is restricted by it's author. Portability doesn't have a damn thing to do with it.
2 - Who says XMMS is not portable?, all the librarys that XMMS uses are FREE, and are portable, including it's widget, GTK. it's not tied down to the GNU/Linux sound system, since it supports arts, oss, alsa, etc. via different plugins. Both Input and output are plugins, shared librarys XMMS uses, so, you can just download the code of XMMS and port it, most of the librarys it uses are allready ported. Noone has ported XMMS to windows since windows is a proprietary plataform, and the puropose of xmms is to provide a free alternative to winamp, what good would it make to replace winamp if you are still using a proprietary plataform?.
Instead of complaining, port it, you are free to do so.
WTF am I doing replying to an AC at 5 A.M on a Friday night?