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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."
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.
It might not be a bubble or a boom... it could be a rush. I have noticed a lot of grizzled men wandering around the bay area lately. Sure, they might be homeless people, or box car hobos, but they could very well be old prospectors. An abundance of old prospectors is a sure sign of a pending rush.
"Things are more moderner than before- bigger, and yet smaller- it's computers-- San Dimas High School football RULES!"
Regardless of how much firmer the the base is this time, the earnings and earnings prospects are both so very low compared to stock value. So at some point in future there WILL be a correction.
They suggest that this latest boom, fueled by Google's ascent, is under steadier footing than last time
Oh man, they're actually stating that this bubble/boom/bulge/b???? is on steadier footing but is being fueled by Googles ascent? My, what short memories we have. If anything, the latest b???? appears to be more of an aftershock, related to it's predecessor, just to a lessor degree, but the same root causes and issues.
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..."
.. you have to admit that Adsense is a firmer business model than Pets.com -- or heck, graphical nonrelated banner ads -- and RSS, open web services APIs and stuff like del.icio.us or Flickr are more valuable content than the websites of 1997.
Maybe some lessons _have_ been learned. That doesn't mean necessarily that current pricing isn't off, or that the dynamics of self-fulfilled prophecies have changed, but there's definitely more value on the internet now than around 1997-1999, with less flowers.com fluff.
Maybe a part of the 1990s tech bubble wasn't unwarranted overvaluation, and that adds to the hypothesis of a firmer expansion now.
It's naïve to just go "ah, history repeating itself". History never repeats itself, except as a farce.
What they say: "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."
How it sounds: "Listen baby, it's going to be different this time, I swear. I know I was a little rough with you before, and I'm sorry about that, I really am. I've changed, baby. You've gotta believe me, I'm a different man."
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.
Pining for the fjords
For better or for worse, the stock market used to be something that only those that knew how to invest really did anything with. 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. Then millions of average families got involved, went crazy thinking it was the lottery and lost obscene sums of money.
.com era. Sorry, but at barely $6.00B in projected revenues for this year, they aren't worth $500/share. If they were consistently making $25B in profit on expenses of $2B, yes, I could see that. God help us, though, when Google utilizes all of its information its indexed to maximize its profits. Privacy won't be just dead, but it'll be publically humiliated, tortured, executed, its body cremated and its ashes unceremoniously pissed on for good measure.
I am a pretty good investor, but then my mom taught me the basics of investing. My father and I are two archetypes of investors. He's the type that goes with the flow, whereas I'm conservative with the amount of money I'll invest, but willing to take risks with small companies that I rationally believe have a good shot of growing big. If I had control over my assets in the dotcom era (I was still in high school), I'd have made almost $1,000,000 before taxes and would have ended up keeping the bulk of it after the bubble burst. My father would have lost everything because he never researched what he was investing in, he'd just buy what the latest rag said was a cool company... like most of the Linux "companies" back then.
The biggest problem we have is that most people don't want to realize that investing is serious work and that it requires that you **learn** what you're doing. It's not the "insert money into slot to double each year for five years" game that they want it to be. Losing everything you invest is a realistic possibility which is why it should come after savings and bills... not before. And if you do nothing but short term investments, you'll only make your broker rich and yourself poor unless you're GOOD at it and have a lot of money to buy in bulk.
My point is that maybe enough of the casual investors have left that we can move forward now. Google's stock, though, is still a holdover from the
It seems that the difference that TFA sees betweeen "Boom" and "Bubble" is that the latter is marked with unwise spending, from the VCs to the board room. TFA could be simply put in a readers' digest form as:
There is economic growth in Silicon Valley that we predict will be more stable and longer-lasting than the "Dot Com Bubble" era, because VCs aren't handing out money as freely, and companies aren't being [as] stupid with their money as they used to be. *GASP!* Real, honest, tried-and-true business practices apply to the internet as well!
Call it a "boom" if you want. It's a new, lucrative market that's gaining financial stability because there are plenty of examples from the "bubble" of what not to do.
I pity the foo that isn't metasyntactic
Something that costs free? That's unpossible!
Boys from the City. Not yet caught by the Whirlwind of Progress. Feed soda pop to the thirsty pigs.
...until they burst. Look at almost all of the press before Greenspan's "irrational exuberance" claim - it was all boom, no bubble, "new economic paradigm" talk. Hindsight is 20/20, if people had largely identified the bubbles we've had a significant time BEFORE they burst - they probably would have not been bubbles.
e.g:
Stan: "Hey, Bob wanna through your nest-egg in to the stock market? I heard it's a big bubble just waitng to burst!"
Bob:Um...no.
This is the best Democracy money can buy?!?!?
You know it's a bubble when people are calling it a "boom".
"Google shares are possibly over-hyped,"
Google shares are very overhyped.
Google has done nothing that is new. They have nothing backing them. If you liquidated Google you would make back a tiny fraction of their stock worth. It is fucking asinine is what it is.
When a company that makes the world go round (IBM) stock is not even close to half the worth of a company that has no product, you know the world is fucked up.
All idols fall, and goggle will fall as well. It is the way of things. Soon another young man will figure out how to do what google does, only better. When they do the only happy people will be the few who cashed out early. The rest will be left with nothing.
The future is in deliverables, not data.
IANALBIAAWST
(I am not a lawyer but I am a Wall Street Trader)
What makes this a bubble, just like the last one was is more the outlook. When people are starting companies plans for how they are going to have a cash liquidity event you have a bubble. But its just the beginning of it, and I think we can eak another 3-4 good years out of it easily. That puts the pop around 2009, which just about lines up with what Harry Dent thinks
One of the things that you need to be very afraid of, is when someone is claiming that there is not a bubble, when there is overvalued speculation and rampant turnover. Case in point is the current housing bubble, which I do believe is a bubble.
One thing that you'll get an idea of after a while, is that (especially now), investors are trying to keep the economy afloat by generating another bubble to replace the currently failing one (thank you Greenspan). It's really just musical chairs, and I would seriously look at someone who is saying it's different this time as someone who wants to take my money from me.
Don't be fooled, Wired is part of the media and will further its own agenda and those of its Editors and Shareholders before your interests.
Contrary to popular belief, life is not a bitch. It is far far worse.
I'd say it's more like one of those belches that brings up stuff from your stomach. When it bursts it doesn't disappear completely like the dot com bubble. It splatters stomach acid (offshoring) that stings your throat and the bile (downsizing) leaves a bitter taste in your mouth. There, can we all just agree on this metaphor?
If you can read this sig, you're too close.
I think this is clearly another bubble. The difference is that VCs are more cautious, it's Google and Yahoo! that are fueling this boom. Look at the ridiculous sums of money that have been paid for Flickr, del.icio.us and other "Web 2.0" sites. These sites don't have the revenue potential to be worth millions of dollars.
-Grant
|grant.henninger.name|
Hear me out on this. The new boom will be automation.
Cars that drive themselves, house hold robots, robotic lawnmowers, expert systems, and better search engines etc etc.
Put your stocks into these areas... Its the next big hype because VCs will see these things and be mystified and start hurling wads of cash at the next roomba.
"I am the king of the Romans, and am superior to rules of grammar!"
-Sigismund, Holy Roman Emperor (1368-1437)
Prime Minister: What use is it, Mr. Faraday?
Faraday: I know not, but I wager one day your government will tax it.
Story two:
Prime Minister: Waht use is it, Mr Faraday?
Faraday: What use is a new born baby?
Probably both urban legends (BTW I'm a former RI member, I'm allowed to say this) but they make a point.
Pining for the fjords
"There's a difference. Bubbles are inflated with hot air and speculation."
Bubbles are also inflated by insiders who exploit the speculation to fleece speculators. In order for this to work really well, however, you need oversight with its hands (intentionally or not) off the tiller. That's what we had in the Dotcom Bubble, methinks. It looked to be good for the economy, so the hand was off the tiller.
What those who want activist courts fear is rule by the people.
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.
Riiiight. Anyone remember the Wired with the smiley face, subtitled "The Long Boom" claiming that this time it wasn't a bubble?
7 November 2006: The day Americans realized corruption and incompetence weren't addressing 11 September 2001
I remember when Wired reported on this back in the late 90's. They referred to the past few years and next few years as "The Long Boom". I don't think it (the economy) was referred to a bubble until after it had burst. http://www.wired.com/wired/archive/5.07/longboom.h tml
If there's one thing many economists are starting to understand, it's that the rampant abuse of credit in America and the trade deficit are preparing us for a hard landing in the next year or two. The biggest debate is what kind of hard landing... Bond holders believe banks and consumers will hit a credit limit first at which they finally start conserving and some people think foreign investors will decide they're saturated with American credit and stop buying it. I agree with the bond holders, China will never pull out as long as they're profiting. The whole economy is riding a bubble created by home equity credit-driven consumer spending. It's not tech speculation anymore, but when this housing bubble bursts, all of the other countries (hint: Taiwan matters a lot to tech companies) heavily dependent upon our imports will also suffer.
-Those who would give up essential liberty to purchase temporary safety deserve neither. -Ben Franklin
how they used Skype as an example. I dont get how a company that practically gives away phone calls is worth billions. They make it sound like paying billions for it is a good sign.
Anyone explain this?