The New Boom

DarkClown writes "Wired is running a piece discussing the recovery from the burst Bubble in Silicon Valley. This time, though, it's no Bubble: it's a Boom. They suggest that this latest boom, fueled by Google's ascent, is under steadier footing than last time. Technology and the market seems to be catching up to the hype." From the article: "A boom perhaps, but not (phew!) a bubble. There's a difference. Bubbles are inflated with hot air and speculation. They end with a wet pop, leaving behind messy splatters. Booms, on the other hand, tend to have strong foundations and gentle conclusions. Bubbles can be good: They spark a huge amount of investment that can make things easier for the next generation, even as they bankrupt the current one. But booms - with their more rational allocation of capital - are better. The problem is that exuberance can make it hard to tell one from the other."

Comments

Oh, no hot air, I see...

[dachshund]

So when Amazon.com was selling for hundreds of dollars a share, that was ridiculous. But when Google is selling for $434 per share, everything's just fine. Because, um, they sell advertising, or something.

Re:Oh, no hot air, I see...

[Anonymous Coward]

Exactly- and also they have few hard assets. The google price, in my opinion, is of people being scared sh*tless of missing the next microsoft.
The issue with google, to paraphrase Matt Drudge from hi radio show, is that right now some 15 year old kid in Idaho or Ohio or Beiijing or Bangalore (insert any place name) is right now working on something that will blow google out of the water, and take the market by storm.
PS- has anyone ever clicked on a google ad? I haven't.
BTW-Did anyone notice that Chipolte's stock doubled on the day of their IPO?

Some people just don't learn

[pubjames]

One thing I learnt from the last bubble (and having read up about other ones in history) people always say "It's different this time..."

Infrastructure not old business model

[Flying pig]

Amazon is (just) a department store that runs over the Web. All its tricks are just derivatives of the way that traditional department stores operated - hosting stores within stores, customer accounts, POS advertising. It arose at a time when the infrastructure did not really exist to support it. Google is an enabling technology. It is funded through advertising, but it is something fundamentally new. I'm in the process of completing a personal engineering project. When I look at the stuff I have had to learn and the technology I have had to acquire, it's probable that without Google and the Internet it would have taken several times longer and not worked so well. As for my day job, it would be nearly impossible.

Google shares are possibly over-hyped, but they reflect a very interesting perception: that the Internet is now good for something, but that we don't know where it is going. We had the mass transit revolution (railways), the personal transit revolution (bicycles, then cars), the communications revolution (telephony.) Now we have the information revolution, and anyone who looks like they are reading meaningful signposts is likely to be highly valued.

Definition of a Bubble

[LukePieStalker]

You know it's a bubble when people are calling it a "boom".

Google P/E

[Anonymous Coward]

As reported by Nasdaq, Google's current P/E is 95, predicted for next year is 36. That means you get 1% return this year. You are predicted to get 3% next year. ING pays 3.80% on a simple savings account today.

Solid foundation. Right.

historical blindness

[elmegil]

This time, though, it's no Bubble: it's a Boom.

Riiiight. Anyone remember the Wired with the smiley face, subtitled "The Long Boom" claiming that this time it wasn't a bubble?

Re:Why economic equality is sometimes bad

[Anonymous Coward]

For better or for worse, the stock market used to be something that only those that knew how to invest really did anything with.

1929 - Anecdotes of shoe shine boys offering stock tips. So what's your definition of "used to be", because it better not be since then?

Those with no clue on how to invest usually just avoided it, or invested in safe mutual funds or big companies like GE or IBM.

1987 - Program trading gets partial blame for the unchecked selloff. Such trading was typically used by mutual funds and directly affected the common stock trade. With that contribution in that situation, a stock trader would not be safe from the influence of "those with no clue".

Then millions of average families got involved, went crazy thinking it was the lottery and lost obscene sums of money.

The sad thing I've noticed is that people like to chase 'apparent' fast wealth. "Everyone's getting rich trading plush dolls - I gotta do that.", "Wait, everyone's getting rich trading stocks - I gotta do that.", "Shit, everyone's getting rich trading real estate now - I gotta do that.", etc.

I'm a value oriented investor so my observation has been that you can profit from the expected hysteria in two ways: beat the trend and occupy a footing before the madness or, wait for the crash and pick up the pieces. The first option requires a lot of effort along with an ability to anticipate the next rage while the second option usually requires A LOT of patience with an understanding of the longterm value. Most of the time I ignore all that, but since we're talking about boom/busts I thought I'd mention it.

My point is that maybe enough of the casual investors have left that we can move forward now.
It'll be at least another decade before they return and it won't be the same bunch, but the cycle is inevitable. Those that got burned will probably swear off the market completely (seeing as how most didn't really understand it anyway), but others that missed the boom may be lured by hype in due time.