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Dot-Com Bubble v2.0?
eldavojohn wonders: "With the recent acquisition of YouTube by Google, there has been a lot of speculation (on both Slashdot & The Toronto Star) that we are nearing the second economic bubble created largely in part by growth in the digital sector. While one may be able to debate that the revenue from advertising and sales can indeed back this growth, are we headed towards the second bubble and, if so, how hard is it going to pop? Keep in mind that popular voodoo economic theory has attributed the first bubble phenomenon to 'a combination of rapidly increasing stock prices, individual speculation in stocks, and widely available venture capital.' I think we're experiencing all those, although it is not as flagrant as it was during the first bubble. What do you think?"
It's "Dot Com v2.0" and no one took out a patent?! Where's my attorney!
Methink's Taco's VA Linux stock hasn't quite rebounded yet.
Does anyone know if any of the slashdot ownership was realized as cold, hard cash or did it all go down the pipes and stay there?
I'm waiting for the third bubble, myself.
More
Seems to me the Internet is starting to mimic other economic systems, such that it is now subject to the whole boom and bust cycle. Just that they call it a bubble. There will be many of them in the years to come.
If by bubble you mean a time of ecenomic growth, then yes we are headed there.
The economy is on the upswing, and people (perhaps minus slashdotters) are generally optimistic.
It is very possible to have ecenomic growth without a hyperinflated economy resulting in the proverbial bubble. After the economic growth will be a time of economic slowing and finally a recession of the economy.
You can count on it, although unfortunately you can't set your watch by it. Timing of the whole thing is still not very precise.
nah. Google is making it. The others may not be able to compete in the future, but they will still be hanging in there. This current prosperity is the result of the ad based money making scheme and it will work for quite a while, if not until google has penetrated other non-traditional digital markets. TV will be huge, and google will defiantly get into it. The only bubble will be Microsoft's power, as it keeps slipping away for producing nothing. Vista will be far less important than it is being made out to be, and for that the old tech ways will waste away given the time.
Rises and falls in every sector happen all the time. We don't need to over analyze every rise in the market like it's the second coming. Things will inflate and deflate over time in all areas. The fact is the first dot com bubble burst wasn't that big of a deal. It's not like we had soup lines. Some *speculators* lost money. Enterpreneurs in *speculative* businesses lost their jobs. Really, it had not delitirious effect other than to correct the market and kick out some losers that needed to be kicked out anyway.
Apple just sold more Macintosh computers than ever in their history in one quarter. I would say there is real solid foundation to some of the stock prices going up in the tech sector. (I am glad I got in early. Just wish I'd bought some YouTube.)
During the first bubble, we had wild stock prices. Seeing that most of the new back of dot com's are not public, are we making this claim simply based on the purchase prices of a handful of private companies? Seriously, its nothing like the dot com boom of 2000, where hundreds of shell companies went for their golden IPO.
...that there *was* something behind the Internet boom, otherwise it never would have happened. If investors (Venture and otherwise) make more informed decisions this time, there's a far better chance at a sustainable market.
In other words, you need a product (*bang* no more Pets.com), you need a business plan (*bang* no more SimDesk), and you need an idea that isn't terrible from the outset (*bang* there goes "MyLackey.com").
Javascript + Nintendo DSi = DSiCade
Anyone know?
Seems there are/were tons of video sharing sites out there...I can't seem to figure out what made Youtube different.
Why did Youtube take off and blowup and the other video sites just sort of sat there?
During the first bubble the hubris was so thick in the Silicon Valley air you could feel it. People around you virtually hummed with it. And like The Emperor's New Clothes, if you actually looked at some of the shiny bits you'd notice some what people where trying to sell was utter shite, a scam, not worth a penny, yet people bought their stock on IPO and it all went nuts. There was 'the big strategy', to develope something Microsoft, Oracle or Cisco didn't have and would want and to trumpet it all over the place and hope one of these big companies would make you an instant millionaire by buying you out. Didn't always work.
Now I think most of what is going on in this bubble actually cuts the mustard in the ledgers. It pretty much has to. Too many (ad)venture capitalists got burned and they're a bit more careful now.
A feeling of having made the same mistake before: Deja Foobar
Anybody have a changelog for the version 2.0? I wasn't very happy with the features of version 1.0.
Last time, it was mostly companies going public. This time, it's companies heavily funded with venture capital, and the companies are then bought by other companies.
But it's definitely a bubble. Way too many companies are chasing the same pool of advertising money.
And, unlike Bubble 1.0, most of these new companies don't really do very much. Or even stuff that hasn't been done before.
As I wrote in another article, "social networking" sites have a life cycle. EZboard peaked mid 2003. Nerve peaked early 2002. Bondage.com peaked mid-2003. Tribe peaked early 2006. Xianz (the "Christian Myspace") peaked in spring 2006. Friendster peaked twice, once in late 2005 and again in mid-2006, but that's an unusual pattern. Usually, once they peak, it's downhill after that. Myspace has flattened and looks like it's about to peak. This works just like nightclubs; they become hot, they grow, they get too popular, they get overrun, they decline, they hang on, but nobody cares.
YouTube is terribly vunerable to the RIAA. Once somebody builds a tool to check audio on YouTube against RIAA licensed material, they're going to get notice-and-takedown orders by the ton.
There was no dotcom bubble and there won't be a new one. We had a good economy with over-the-top entrepreneurs. It topped, scaled down and weeding selected the sensible business. It happens all the time, in all industries and sectors. New shops open town in good times and silly ideas go bankrupt in bad times. It may look overwhelming because we're so close to the source, but I'm sure the average resident in my neighbourhood isn't even aware of the dotcom tale. It was that insignificant in the grand scheme of economical cycles.
The more people talk about "the stock market bubble" and upcoming crash, the more people start expecting it and theb selling their stocks, which makes it more likely to happen.
Scroogle
We're really straight in the middle of the second bubble. Its different than the first in a way, mind you, but a lot of companies have while projects and dreams thanks to the "newfound" power of information technologies (like all the web 2.0 crap). Some work, many don't, and honestly, I don't see how long they'll be able to stay afloat pumping all that money in these projects. Just as an anecdotal reference: I put my resume on Monster 2 weeks ago. I only have an associate degree, and a few years experience in .NET and Ajax. I did not apply -anywhere-. Yet, since I put my resume up, I have gotten at least 2 interview offers per -day- (not counting weekends) for so called "Web 2.0" projects of all kinds, all wilders one than the next.
WARNING: This post sounds remarkably like something written in about 1998. It's still true.
The "digital marketplace" is fundamentally different than the standard "meatspace" environment. In cyberspace, product carries no mass. In many cases, intellectual property is "production grade" the moment it's written. EG: PHP code. There's no duplication cost, virtually non-existent distribution cost, and the result can be seen/used by millions overnight, if you have some servers to handle it.
Note: the servers to handle "millions" can be surprisingly cheap, and getting cheaper every day
So, while it takes an auto company years, and eleventy billion dollars to come out with a new line of cars, it takes maybe 2-5 guys consisting of a decent programmer, a few salespeople, and a book-keeper armed with a few thousand bux to develop a product usable by millions, even if they are working day jobs to pay rent.
So this means that the boom/bust cycle can happen in 2-3 years rather than 2-3 decades.
Get used to it - it's only going to accelerate from here. Ever heard of the technology singularity?
It's coming.
I have no problem with your religion until you decide it's reason to deprive others of the truth.
I happen to work at a "value investment" company. Our general philosophy is that the value of a stock is intrinsically tied to the company it represents.
The funny thing is, lots of people don't agree. They think that the VALUE of a stock and the PRICE of a stock are the same thing.
Beware of buying a stock just because everyone tells you it's popular and the price is rising. Chances are good you're already too late. You'll buy, the price will peak, then fall, you'll dump it to cut your losses, and start looking for that next rising stock, and repeat the process.
The real trick is to find fundamentally solid companies that are currently out of favor, and buy and hold them long enough for the company to rebound...
Every time there is an earth shattering technology whether it's been the Internet or the introduction of the auto (or whatever) it's the same: Tons of money get poured into the market, valuations become absurd, implosion, new golden age begins. We're more in the golden age at this point. The internet is not new or novel technology anymore. Your 800 pound gorillas who are going to be around are established i.e. Yahoo!, Amazon, Google, etc. There might be the occasional bright idea but probably no hysteria like we saw in the late 90s.
Speaking of "lost money" on the dot com boom, if you go to Vegas with 200.00, turn that 200.00 into 20,000 and then lose it all, you still only lost 200.00
It's never been lost, but it has been redistributed from the hands of the many to the hands of the compartively few (hedge funds mainly).
Interesting trivia regarding the Dow:
Reaches 995 on February 9, 1966. Doesn't bust it. It closes above 1000 finally on November 14, 1972 and doesn't reach 1100 until February 24 , 1983. (Wikipedia)
As far as a NASDAQ 5,000? We'll see it again the next time there is a revolutionary earth shattering technology.
pump and dump is comming? free as in beer didn't work, right
I completely agree. Technology sector is completely different from other areas of society.
Warning: Corny karma killing post above.
Low savings rate, high deficit (as % of GDP the US deficit may be ok but it's a lot none the less), declining dollar, slowing real estate market. Of course these are indicators of an economy slowing down, not a 'dot com bubble'.
Baby Boomers all the way. The boomer demographic is the real bubble underlying stock prices, housing prices, etc. Those folks are in their peak earning years, and there are a lot of them. They are pumping HUGE amounts of money into 401Ks, pension funds, you name it. When they start dying, getting sick, retiring, the flow of money will reverse. They will be selling houses and moving into assisted living and nursing homes. They will be taking money out of their 401k instead of putting it in.
Just because the dot-com bubble popped didn't cause these people to stop trying to squirrel money away for retirement. And since they never really saved the way they should, they're trying to make up for lost time by speculating in stocks. So the irrational exhuberance continues. Eventually, though, it will stop. And when it stops, the bubble will collapse in a very very big way.
The fallout will involve all these folks whining about how the next generation should pump more money into SS so they can afford the affluent lifestyle to which they've grown accustomed. Screw 'em. The most irresponsible generation decided to give their life savings to the pinstriped crooks on Wall Street. That's their problem, not mine.
Baby boomers are the big white elephant in the room that everyone pretends they can't see. Instead we have to endure all manner of ridiculous handwaving BS about new economies yada yada yada. Phghght. What a bunch of crap.
The fact is the first dot com bubble burst wasn't that big of a deal. It's not like we had soup lines.
Wow, talk about revisionism. The first bubble burst was HUGE deal; dozens of major banks grossly violated their 'chinese wall' policies while underwriting the IPOs of clients and looked the other way when internet companies were engaging the shadiest accounting practices known to man. Companies swapped "shares" and both counted it as revenue based on projected stock prices, for example. Tens if not hundreds of thousands of people lost their jobs in "layoffs", and it had a massive ripple effect in places like SF. The crash and delisting of hundreds of "internet" companies destroyed "investor confidence" on the stock market, and affected all manner of investors, from individuals to massive retirement accounts.
Christ, man! It was enough to destroy Arthur Anderson Consulting. Why do you think they're known as Accenture now? Having your top officers lambasted by Congressional investigators for conspiracy, fraud, etc on national TV doesn't exactly bolster confidence in a business where clients are trusting you...
Please help metamoderate.
is that companies are actually making money.
for better or for worse, business has finally wised up and worked out how to make money from the internet.
there are also a lot more people online now than there were 4 or 5 years ago. they are regular consumers, whereas before there was a lot of people who had a technical focus in their life. more people = bigger market = better economics and the chance to profit.
Where I live, a couple people have hung onto to very successful nightclubs with years and years of "staying power" by re-inventing them every so often. One of them had a rather unique strategy of closing down at the end of the summer, transforming into a different type of club, and opening back up again until the next spring/summer, when it again closed and transformed back into its "beach club" motif.
Another one has changed names and themes every couple years, when the old one got too "dull" and "passe".
I think it's just as possible for these social networking sites to do. They just need to realize that it's not enough to build the thing once and consider it "finished". They need to plan on constantly monitoring the types of users they're getting and what the competitors do that draws them away again, and keep re-designing the site to accomodate the changes.
I think that it is quite possible the YouTube purchase was over-valuated.
However, the problem is that the market has no useful mechanisms to properly evaluate the true worth of future technologies.
They could be insanely great - legendary.
Or they could be really lame.
So, trying to predict future cash flow and growth at the beginning of a company with a new technology is mostly a crap shoot.
One good rule is - don't buy into a rise. It's better to put most of your money in an index fund (Euro stocks mix with say Total US market at a 50/50 split) and only use speculative funds to invest in such speculative ventures. So, let's say you save $20,000 a year - put at most $2000 in YouTube and other such speculations, where the downside is as likely as the upside.
Also, realize that the one thing most new investors are very bad at is knowing when to sell. When I bought into Red Hat at the IPO, I planned to sell half of the stock at a specific dollar amount, right before the lockup expired and the price dropped for a bit. Then I sold most of the rest when the largest lockup expired. Then I bought back into the same number of shares using 1/20th the money I had "earned". Net result - I had the same number of shares - and a lot of cash.
If you buy into such a thing, be willing to sell part of it when it rises to a certain point. If it falls, know at what price you'll give up. You can also sell at a price when you think it will be quiet for a month or so, lock in the capital loss to wipe out the capital gains for tax reasons - and buy back in one month plus one day later.
Main thing is trust your gut.
-- Tigger warning: This post may contain tiggers! --
Google is one of the most speculated companies out there -- enough so that, on paper, it's worth 127.62 gigadollars, which is more than 2/3 the value of Wal-Mart and 1/3 the value of Exxon. Even though it does make money, its price/earnings ratio is an astronomical 61, whereas Wal-Mart is around 14 and Exxon is 10, which is a definite sign of tulip fever not unlike what we saw in the late 90s.
But even for the future, as a long-term investment, it's the nature of the business which matters. Most of what google sells is merely advertising -- however, a brick-and-mortar advertising company with total saturation, such as Lamar, has a high P/E ratio as well, but only has $5.6 gigadollars in market cap. Even the ubiquitous Clear Channel only has a $7 gigadollar market cap, and that's with a high P/E ratio, as well.
When google is inevitably reduced to what it's worth (probably a single percentage point of what it is currently) by whatever means -- legal action, bad earnings reports, a downturn in the PC industry, accounting scandals, a recession, its spending away billions of dollars with no results, and what not -- other people will realize that google and every other modern web company is exactly the same way.
Then whammo, Webcrash 2.0.
I feel sorry for anyone who let history repeat itself and may have actually believed these companies would rival major brick-and-mortars in revenue and profitability. The only right thing to do in such situations is to short the stocks.
The new bubble is alive and very well. It's not in the software development industry, per se.
It's the medical industry right now. It's the thing to do if you're going to college. Become a pharmacist, x-ray or ultra sound tech or some other skilled position in a hospital and earn a very healthy living.
Of course, medical software is a huge industry right now as well.
But basically with the supply of old people getting larger and larger it makes sense that the medical industry is really in a boom right now.
How long will it last? I'm not sure. But changed to our health care system will probably bring about change eventually.
"If you are a dreamer, a wisher, a liar, A hope-er, a pray-er, a magic bean buyer
The system needs a good flushing. The web (and tech in general) is a mess of useless, pointless crap. Thousands if not millions of websites offering pretty much the same thing. Good examples would be the youtube clones, youtube itself being one of course. One good blog to every 1,000,000 poorly slapped together ones. Useless Bookmark/social sites like bluedot. Webmasterworld, where 500 good question/answers have been repeated 5 million times. Digg, a place to visit adsense filled blogs with one or two lines of information and a link to the actual source of information, and never worry about missing one of these adsense filled blog posts, it will be repeated on the front page at least 10 times a day. Not even going to talk about MySpace and the clone army the venture capitalists will be sold into creating.
As for tech, quit cock-teasing us and put together a phone with wireless internet, camera, mp3 player, video player, video recorder, gps, and 3d gaming. Get rid of the psp, gameboy, DS, ipod, palm, blackberry, blueberry, boysenberry, and so on.
A bubble burst only effects the crappy businesses who use copycat ideas and whose only purpose was to make a quick buck. Good-bye and good riddence.
On the "first" DotCom bubble, I don't like the *speculative* label. By the end of the 90s, the productivity of capital goods had been amazingly enhanced by IT, and no single person on the planet could forecast to which extent that could happen, and probably still can't. The people involved are not always the world-infamous technical traders pressing F5 and F8 to buy and sell, we're talking also about insightful analysts, respectful economists and thinkers that devoted some serious time to that matter, without reaching a consensus. Some of those could be long some stock at the time. So what?
Technology jumps that cause even slight increases in margins might significantly alter decade-long investment policies by those who fight fiercely for a place in their markets. We're not talking about Google, Microsoft, Cisco, but about all corporations that need IT (all of them, from Exxon to Albertsons).
As a professional of the financial markets, and in the M&A business, more specifically, my opinion is that if your cost of equity (future earnings) beats the market, you pay for acquisitions in cash, as interest expense will be lower than future earnings, there'll be no need to dilute shareholders profits. I always tremble when I see incredibly skyrocketing overperformers making decisions that market prices reveal to be irrational. Bingo. Maybe market is mispricing.
Bubbles can burst?
1. Where are the "rapidly increasing stock prices"? Look at practically any
2. "Individual speculation in stocks"? Sorry, again, I'm not seeing this. Other technology companies and stocks that rely on the Internet to provide a barometer for future growth have been stagnant and significantly underperforming the broader S&P.
3. "Widely available venture capital"? It might be out there somewhere, but after just going through a round of pitches for a friend's profitable
We're not in a bubble, and if it's the beginning of a bubble, it's at the very beginning of a much more cautious investment pattern that has little resemblence to the last one.
re-inventing them every so often.
Area, the hottest nightclub in NYC for part of the 1980s, did a complete redecoration and theme change every six weeks. That kept it a hot club for years.
But redesigning a web site doesn't have the same effect. Tribe just did that. (New! Web 2.0! Now you can rearrange your home page!) One of most active tribes is now "Tribe.net bug reports". Oops.
Rapid ad quantity explosion - Slowly growing target audience (Internet users) + More & More internet uses blocking/ignoring ads = Recipy for an over-bust.
There was no dotcom bubble and there won't be a new one.
There was a tremendous bubble. I was there. I did work for companies that were almost entirely virtual. There was no "there" there. It was all hot air. I know plenty of people who suddenly had fantastic jobs and were living a lavish lifestyle, only to be out on the street looking for a job when the boom dropped on the bubble. Bay Area traffic noticeably thinned for at least two or three years. It definitely was a bubble, and when it popped, the effect was very painful to a lot of people.
My guess is that while the average person on the street doesn't know the entire dotcom tale, they do know that there was a tremendous upsurge in the NASDAQ for a period of time, and that it was fueled by rampant speculation. This isn't the same thing as Starbucks overextending itself by opening 54 shops in Dubuque, rather than the 52 it can actually support. There was a huge outlay of capital, there were companies going public every day, and the stock market had lost all rationality. Even non-techies could see this. All they had to do was watch the news.
This time it is different, in the sense that all of the Web 2.0 companies aren't going public. As another poster has already mentioned, this time it's private capital chasing after some good and many bad investments. When the majority of these companies die, John Q Investor won't take it in the shorts this time. In that sense, the Web 2.0 investment phenomenon is a lot closer to the normal course of business events you describe.
Read the EFF's Fair Use FAQ
Angry Chair
Sitting On An Angry Chair
Angry Walls That Steal The Air
Stomach Hurts And I Don't Care
What Do I See Across The Way
See Myself Molded In Clay
Stares At Me, Yeah I'm Afraid
Changing The Shape Of His Face
Candles Red I Have A Pair
Shadows Dancing Everywhere
Burning On The Angry Chair
Little Boy Made A Mistake
Pink Cloud Has Now Turned To Grey
All That I Want Is To Play
Get On Your Knees, Time To Pray Boy
I Don't Mind, Yeah
I Dont Mind, I-I-I
Lost My Mind, Yeah
But I Don't Mind, I-I-I
Can't Find It Anywhere
I Don't Mind
Corporate Prison We Stay
I'm A Dull Boy, Work All Day
So I'm Strung Out Anyway
Lonliness Is Not A Phase
Field Of Pain Is Where I Graze
Serenity Is Far Away
Saw My Reflection And Cried
So Little Hope That I Died
Feed Me Your Lies, Open Wide
Weight Of My Heart, Not The Size
Pink Cloud Has Now Turned To Grey
All That I Want Is To Play
Get On Your Knees Time To Pray
Get thee glass eyes, and, like a scurvy politician, seem to see things thou dost not.--King Lear
Last bubble, I invented a new index tied to Herman Miller chairs. It basicaly goes like this;
:)
1) If chairs are flying at Microsoft, things are good in many ways!
2) If there are lots of Herman Miller chairs on eBay (and servers et al.), then things are bad!
3) If Herman Miller knock-off chairs (from China) are on sale at Staples, good for the global economy, bad for Herman Miller!
4) If you're working, and they come and take your Herman Miller away, this is potentially very bad!
5) If you're working, and they come and replace your lawn chair with a Herman Miller, this is potentially very good!
6) If you don't know what a Herman Miller chair represented in the last bubble, then you won't know what to look for in the next bubble.
I was in the thick of the first dotcom bubble. And the #1 warning sign that it was, indeed, a bubble was that people talked about bubbles all the time. Everywhere! I have also lived through recessions and slower expansions that didn't pop. Nobody talked about bubbles much then.
So I can tell you confidently, based on this article and many others I've read: yes, we're in a bubble now.
I predicted this more than 2 weeks ago, BEFORE the Google/YouTube acquisition, and with almost exactly the same thesis.
http://www.thrica.com/blog/archives/21
Now where's my Nobel Prize?
The venture firm that invested in Google itself also invested in youtube, and I think the VC (which is on Googles board) really wanted their Youtube investment to be a success, and cashed in some brownie points.
They probably also got enough PR and excitement around hight tech investments that they might pull inn a few billlions more from other VC investors.
Google probably dont mind spending an extra billion making their old VC friends happy.
don't cut it off www.mgmbill.org
I don't get the sense there is a huge buble yet. A lot of the companies being started are trying to be smarter. Cost to create web company is way down. Seems like most of the wasted money back in 1999 was for advertising... giving stuff away for free and blowing millions on superbowl ads, and thinking you should expand fast and hire hundreds of people before your competitor. Second, the IPO market is pretty much non-existent so most companies are being bought by bigger ones, so the average Joe that lost money the first time around is buffered. Still I think the YouTube deal is pretty bubblicious. We'll know in the months to come. If your 18 year old cousin says he's moving to San Francisco to start Mowgo.com and your grandmother starts asking "What's this Web 2.0 thing? Can I make money starting my own web site?" I'd get out the umbrella...
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Webomatica
I don't think that this new "bubble" is as unstable as the last one. Because of the much (much) lower cost of online publishing compared to that of 6-7 years ago, net-repreneurs (=P) don't have as much to lose as they did in those days. Not to mention the fact that VCs are now more cautious in what they invest in and how much. While you might have gotten millions of dollars in capital for your online business then, you are likely to only get tens of thousands or even a couple hundred thousand now.
The dot-com collapse didn't destroy Anderson. Their consulting arm was spun off before the Enron fiasco in their accounting arm, just as a branding device I might add. This saved all of their jobs when a few bad apples from the auditing division decided to collaborate with Enron regarding hiding their numerous scams, which caused a total collapse of everybody still wearing the Arthur Andersen (note spelling, incidentally) label. This was despite them having over 10,000 partners (that is, partners as "we split the lion's share of the profits" partners, not partners like Starbucks or whoever has employees who they call partner as a PR gimmick) who had no connection to Enron whatsoever.
Nobody lost their retirement due to the tech bubble popping, unless they had manually speculated in the tech sector (and, within that, in the riskiest field of "Burn $2 million for Superbowl commercials" Internet stocks). So the retirement funds went down for a 2 year period. Oh no. It happens. As sure as the sun rises they'll go up again (and they did, and they are -- S&P 500 up about 28% versus five years ago and double what it was 10 years ago). You might remember a particular software company whose software isn't small, its Micro? Yep, they got battered in the bubble, too. They've more than tripled in value over the last 10 years, even accounting for the beating they took when the bubble popped.
Help poke pirates in the eyepatch, arr.
I think it's time to sell my domain name. Bidding starts at $100,000.
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a lot of tech companies now are buying others. i guess the main goal here is to eliminate competition rather than create new sources of income.
let's take google and youtube for example. if google didn't buy youtube, some other company will have the access to the users. it's a loss for google. by gobbling them up, they reduce the chance other companies from competing with them.
well look at amd and ati. for me financially, i don't see the advantage to amd. but it shakes the arena.
Live your life each day as if it was your last.
A fool and his money are soon parted.
I am officially gone from
Some have already started listing the waste
>> Techflock-flock onto the best bits of technology
This completely ignores why the dot com bubble even happened. You are comparing a time in which revenues with no profits led to amazingly high P/E ratios to a time when Google is profitable (and is even in the S&P 500) and only trades at 61 times earnings (despite it's massive growth rate). When the bubble popped, there were companies with no profits with little revenue with 80 times earnings or more. It amazes me how many people speak of the market when they don't even know of it, or its occurrences. Along with the high P/E ratios we were headed for a recession in 2000, the current U.S. economy is merely slowing according to recent economic data; a recession is currently out of sight. Aside from the economics of the situation, Google is to me more of a business model than a search engine or advertising company. A small business could build their entire business around Google, much like many do with e-bay.
Sorry folks, but Google isn't an economic bubble. It's an economic pimple.
Granted it might be what anaysts call a "bellweather" stock for the industry, but that's not the same as actually being an industry, much less an entire economic bubble.
Google just has a lot of cash and feels like shopping. The number's involved are nothing on an economic scale, though I'd be happy to have my 1% cut of a deal that big!
We geeks tend to think we are the center of business, but there's a lot more money outside of the IT industry than there ever will be inside of it.
Google's market cap is over 127 Billion, based largly on click ad revenue. Unlike bubble v1.0, Google is making money and a lot of it, but its based on something quite fragile. Some day a better idea may come along or advertisers may get tired of all the click-fraud. Compare Google with other good old american companies.
Based on market cap
1 Google = 8 Ford Motors .93 IBMs
1 Google = 222 Intels
1 Google = 2.5 McDonalds
1 Google =
1 Google = 1.6 Time Warners
Here in so california prices went up 400% in only 5 or 6 years! Its insane as mexicans are now cramped in 8 or 9 per home and sleeping in RV's in driveways and garages. These houses that are setup like this are not in the hood at all. Its a bubble for sure. The population has not increased that much and now only 10% can afford the average home. Mathmatically something is wrong with this supply and demand situation at the moment in the housing market.
I mean 1 million dollars for an average 2 bedroom house when average salaries have gone down since 2000?
http://saveie6.com/
Why do so many web2.0 companies need millions of dollars in funding to start a website? http://bla.st/ started on ~$300 and three months (part time) work. What other big costs are there other than Staff and Marketing?
It's likely there will not be a Bubble 2.0, at least for awhile.
From what I've read the consensus I believe is Bubble 1.0 was caused due to the sheer ignorance of misplaced VC money literally thrown at startups. Most had poor to non-existent business plans, with forecasted profits set to come later rather than sooner, depending on third party ad banners to drive the business along to profitability. Additionally, many of the conversion-to-internet business ideas were ill-thought out to begin with, such as ordering pet food online or scanning magazine ads with an optical cat reader. The ad market imploded, as did the VC money and startups along with it. Fun times.
Today even though a lot of money is pouring into VC investment, many of the major players now have a viable product or industry. Apple has its iPod and Mac business picking up once again, and even Google is not merely sitting on its cash hoard or laurels, its actively moving beyond basic search to integrate itself into every corner of everything internet (case in point recent Youtube acquisition). Capital investment no longer blindly throws cash at every idea pitched by a college kid, so there are definitely some viable, and rock solid, businesses out there right now as opposed to just five years ago.
If there is a Bubble 2.0, we probably won't even feel it that much, more like a small ripple if anything.
People who are saying it's a bubble are simply the ones who don't have the guts or the ideas to start a new company and make millions (or even billions) themselves. Stop with the sour grapes!
With a proven psychopath in the White House, most people have their economic nuts pulled into a lower body cavity and the more optomistic readers of Federal Reserve tea leaves are pitching the prospect of a softer landing depending on the results of 7 November. Your lemonade stand aside, on what basis do you foster the notion that this economy is on the upswing?
Or did you mean we will revisit economic growth eventually?
In that case "ya, sure", we will probably see another one of those someday. Relatively speaking.
Unless you consider inflation to be economic growth.
"According to the Elliot Wave Principle, the first echo of a major top coincides with higher sentiment among market participants than at the initial peak." I would say this isnt 2.0 but merely an echo of the initial mania. Oddly enough, investors are usually more sure of themselves in the echo. They are also usually wrong on future prospects. http://www.safehaven.com/article-6113.htm
Ok, if there's a new dot-com bubble coming up... I have a few domain names that are quintessential brands... like NERD.COM and FOLK.COM - hey... I have been trying to do something with these domains for a decade and after the hurricane hit my city, it's been a mess just trying to stay afloat.... if there is a new bubble, let's get something going. I'm putting these and some other primo domains up for auction at the Traffic East convention this month via Moniker and Sedo....
Sorry about the gratuitious post, but hey... this is what "dot com" is all about.. a good domain name. Aren't you tired of the stupid eBLAHITZ.com or myCRAP.com domain names? You'd think these cheapasses had no alternative but to DIGG up some stupid, misspelled domain name, but they don't... I am not alone.. there are good domain names available for groups that will front the money - the kind of money they'd put into even a modest ad campaign.. so where is this dot-com bubble? The first sign of it should be an interest in premium domain names that are up for sale... *knock* *knock*
...until some geeks make a few billion dollars. Then the "real money" gets their tools to start talking about bubbles in order to put the nerds back into their places.
He who questions training, only trains himself at asking questions. -- The Sphinx, Mystery Men
It's the Star. Hardly a real newspaper. I rank it far below the Boston Herald and the NY Post. Slightly above the National Enquirer.
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BMO
Why dont you ask the Secretary of Labor who might have a conflict of interest regarding the ill-made attempt at corrective measures? That might be able to explain those wage discrepancies, and why she should have all her degrees revoked.
Twitter supports and protects racists - by smearing their critics with the "Hate Speech" label.
Oh, no. Not again.
What, they didn't mention banks signing an insane amount of IPOs for upstarts with hilarious business plans which next to no venture capitalist in his right mind would back up (but of course the banks raked in money on the signings alone)? They didn't attribute it at least in part to a change of mentality (or loss of sanity) where suddenly 99% of the stock market companies would now be assessed based on their revenue instead of their (mostly non-existing) profits? Ookaay....
And of course there was a dot.com bubble. Saying "it's always been like this" is human, but daft nonetheless.
So this time it is different. This time it's not about taking that IPO money and running the company into the ground as soon there is no easy money to be made anymore. This time venture capital seems to be involved. And this time it will hardly become a mass phenomenon, because you actually need a noteworthy (perhaps not useful, innovative or sensible, but at least noteworthy) product and a decent sized user base. Before you can be bought by Google.
And that 1.5 billion that eBay paid for PayPal in 2002 was also a huge tech-bubble.
Wait a minute....wasn't the meltdown still in full swing back then?
Accenture was an individual company totally distinct from Attur Anderson for yeatrs and years before Enron even existed and in fact it was re-named to Accenture long before the whole Enron scandal even erupted.
If the valuation of companies like Google is so high, then a lot of people must have had surplus money to invest in them. Therefore, the bubble was in their pockets ...
"I love my job, but I hate talking to people like you" (Freddie Mercury)
It wasn't 'a combination of rapidly increasing stock prices, individual speculation in stocks, and widely available venture capital.' It was 'dumbass venture capitalists throwing money at any goober with an "... on the net!" business plan, under the impression that as long as it was on the net, it would make money.'
Editors, please stop with these simpleminded, Roland Piquipalle-style questions at the ends of submissions. It's posted to Slashdot, you're GOING to get comments on it, no need to say "gee guys, what do you think about $FOO? "
I want to delete my account but Slashdot doesn't allow it.
INAFA (I'm Not A Financial Analyst). However, after watching the economy for many years, and being burned in the last bubble. I have reverted to the old rules. For example, under the old rules: when stocks were up and bonds were down and Gold (bullion) was climbing (or skyrocketting) in price, then you were in a bubble. Gold bullion is a hedge. Gold goes up when the well heeled ("in the know") are seriously worried about a collapse. The "traditional" plan is that to pump stocks and buy gold, then sell the stocks to the dolts suckered in near the end of the bubble. Gold is the hedge in case you mis-time it.
...because everything in the Toronto Start has journalistic merit.
Push to test, release to detonate...
"I'm free of carpal tunnel syndrome despite being a constant keyboard user"
Believe me, I know the value in having proper furniture, posture and habits to avoid back, leg, neck and shoulder problems, but carpal tunnel syndrome's link to computer work is not strong.
From Wikipedia:
"However, recent studies and peer review articles have found no relationship between carpal tunnel syndrome and office-type work. Recently the Harvard Medical School published a report in which it addressed carpal tunnel syndrome. The Harvard report cited to the 2003 Journal of American Medical Association study[5] and the 2001 study in Neurology (the Mayo Clinic Study [6]) in reporting that computer use did not increase a person's risk of developing carpal tunnel syndrome."
"On the other hand, in 1997, studies done by the National Institute for Occupational Safety and Health (NIOSH), indicated that job tasks involving highly repetitive manual acts or necessitating wrist bending or other stressful wrist postures were connected with incidents of CTS or related problems. However, it appears that the 30+ studies reviewed were concerned with the occupations of assembly line workers, meat packers, food processors, and the like, not general office work."
RTFM; please, I beg you.
I think there is an upturn in IT right now, but nothing like the late 90s.
The first bubble crashed hard as all hell after 2000, now we are just picking up the pieces.
The overriding cause of the 1990's tech bubble was due to Wall Street's wooing the general public into moving their cash assets from savings accounts (and their mattresses) into publicly traded securities. This was an historic event, fueling huge tech growth and speculation. Most of that cash is still invested, but some (and I can't even begin to guess what the numbers are) landed into the bank accounts and other assets of the new-wealthy. Of course, much of this cash also fed GNP, which in the absence of during the tech sector crash in 200-2001, led to a mild recession.
I believe that we are very susceptible to another bubble. My reason is that the past bubble has given the public a tenancy toward self-serving attitudes (this is why we allow the current presidential administration to dismantle the clean air and clean water acts), combined with short memories of ridiculous speculation and corporate deceit (Enron).
-- Total Fed Credit was up only $1.5 billion last week. The big action was in the banks, which were busily creating enough credit for themselves to use to choke down a whopping $42 billion in government debt. In one week! Loans and leases fell, but idiot Americans, at the apparent top of the housing bubble, racked up another hefty $21 billion in real estate loans last week, and the people that already had houses gorged themselves on another $16 billion in home equity loans! All in one week!
I gulp in amazement. This was all helped no doubt by the foreign central banks adding to the madness by soaking up another $12 billion in government securities last week, too, after gobbling up $13 billion the week before that, and stashing them all at the Federal Reserve.
As if to compound their calumny, the damned Federal Reserve also printed up another $3.98 billion in actual cash, enough for every man, woman and child ("Now at exactly 300 million, and growing!") in the USA to have another $13.27 in cash.
Money is literally pouring out of government and Fed orifices, and my fingers were actually shaking in fear as I slammed shut the door of the famed Mogambo Bunker Of Ultimate Retreat (MBOUR). Locked and loaded, I relaxed just enough to notice that the Dow Jones Corporate Bond Index fell all week, and the St. Louis Monetary Base fell by $7 billion, almost 1%. The rest of the afternoon was a blank, as my Mighty Mogambo Mind (MMM) refused to believe what I was seeing, and it kind of seized up, although I seem to vaguely remember getting telepathic messages from the microwave oven to "Burn everything! Kill them all! Eat donuts! Chocolate ones!"
-- Now that we have dumbed-down the schools, the society, the government, the Supreme Court, the news media, the money and the economy, what is left to debase? Leave it to John Stepek of MoneyWeek.com to fill us in. He writes "The fall in the number of AAA-rated company debt issues has credit ratings agency Moody's wondering whether it needs to lower its standards. Daniel Curry, head of corporate finance in the Americas, tells the FT: 'We are wondering if it makes sense to keep the quantitative standards at the same level for triple As'".
Mr. Stepek asks, rightly, "Why is this happening?" I can tell by quickly scanning the rest of his article that it is a lot of tightly-reasoned, probably correct-in-every-respect conclusions, all of which are sure to confuse and confound me because a) I am pretty stupid and b) I don't care, because all I know is the one basic fact that I need to know to hate it, hate it, hate it, and that is that this Moody's guy says that they are considering to magically increase the number of AAA-rated bonds, which pay (theoretically) lower yields as the offset to the higher "safety" in the "quality" of the bonds. Ergo, AAA bond issuers have to pay a lower coupon (interest) rate.
Therefore, with my usual Mogambo understatement, this is just a sorry, sick, slippery, sleazy, scandalous, slimy, sleaze ball, scumbag way of reducing the expense that financial entities have to pay on bonds that they issue, effectively lowering the interest rate, which, when plugged into any one of their idiotic equations and ridiculous econometric models used by the Federal Reserve, means Let The Good Times Roll! Which means that, regardless of the horrible consequences, they believe that asset prices will, in the short run, increase in response, and that is enough for them.
The sad, sorry fact is that only ethical way to increase the quantity of AAA-rated bonds is to either have more companies become more credit-worthy by cleaning up their act, or have credit-worthy companies issue more bonds. You don't dumb-down quality. But Moody's is, no doubt, going to take the latter course of action.
The effect is that garbage-quality DDD rated bonds, like, for example, those of Mogambo Overpriced Cheap Crap, Inc., are now -- voila! - AAA rated at a stroke!
Wow! If I knew that my DDD-rated Mogambo Overpriced Cheap Crap bonds (which have to pay a
Sheesh.
mirrorshades radio -- darkwave, industrial, futurepop, ebm.
Not really. Stocks grow in value over time as the economy grows - that's just what they do. The NASDAQ composite index, which is very tech-heavy, is still well below its dotcom-bubble high. Stocks ARE going up lately, but this time they're supported by earnings, which means it's not a bubble but rather true economic growth. The price/earnings ratio of the S&P 500 is just slightly higher than the historical average of 15, and WAY below where it was during the bubble.
Private equity and acquisitions may be seeing a bubble, that's true. But that's an entirely different ballgame. Public stocks still have tons of room to grow, and the growth we've seen so far is real, organic economic growth rather than a speculative bubble.
Compare the 1990 Nikkei crash in Japan to the Nasdaq dotcom crash in 2000. The Nikkei had an "echo boom" after the crash, just like the Nasdaq is experiencing now. After the nikkei echo boom, it ultimately plunged even lower than the bottom of the initial crash almost 10 years later. I'm not sure that the Nasdaq will fall below the low of its 2000 crash in the next 5 years (approximately 1,250), but you can see on those charts that there is historic precedent.
My only regret... is that I have... bonitis..
A while back wired.com had an interview with Harry Dent, who predicted a second bubble (he also predicted the first bubble way back in 1992). Ah, here is a link: http://www.wired.com/news/technology/0,70034-0.htm l
Basically, his prediction is that tech will boom (aka, bubble) again until about 2010 - 2012, at which point we will have an economic decline not seen since the great depression. I believe reality will be a little more tempered than his prediction, but will otherwise follow the course he describes.
I add to a list of quotes every so often, and I noticed this one a couple days back:
While the context is about health, the statement about "public incredulity" is equally applicable to the coming banking collapse. Most people seem to think that "the United States are too big to fail"... Aren't they going to be in for a surprise.
Newsflash: infinite budget deficits are unsustainable. The rest of the world has been financing the twin deficits (Feral Government budget deficit and the trade/current account deficit) for decades. Sooner or later China will pull the rug out from under the U.S. economy, perhaps when they figure they've taken all the industrial capacity they can get and we're no longer useful to them.
I'm using this opprotunity to load my credit card with useful things. Bought ten earthboxes a few weeks back, and dirt/fertilizer/plants/etc. When the system finally goes, I'll have some tasty vegetables, to go with a couple sacks of dry beans/rice/wheat.
pictures of my earthboxen (start with the last picture)... These were from 3 weeks ago, going to put some more recent pics up soon.
Learn the rules so you know how to break them properly.
www.teslabox.com
So what you are saying is that people who didn't do anything ended up with nothing?
Nope. I'm saying the good, the bad, and the ugly all got hit with it. People who were talented and people who weren't. People who worked their ass off and made fantastic things, and people who just pretended and got by for a while. It's not a shame that the fakers lost out, but a lot of really hardworking, bright people did too.
Read the EFF's Fair Use FAQ
I think that's true now as well, but this one may be more exciting. In previous tech bubbles, the burst was followed by a long, slow and more or less monotonic increase in activity. In this one, I think that this time the system is 'ringing' - a problem that anyone who is familiar with audio or electronics can relate to. This implies a couple of possibilities.
Ray Kurzweil argues in The Law of Accelerating Returns that not only is technology increasing faster every year, (first derivative is positive), but the rate of increase is also increasing (second derivative is positive). (See also "The Singularity is Near".) If he is correct then tech bubbles must become a regular component of the economy. This is a new economic model, but it can work, if they don't all come at once. If they are spread in time then like all the point functions in the light wave's phase front they will tend to cancel out to an extent, so the overall economy might even out although particular industries might come and go like fireflies.
Wikipedia has a raft of articles on related topics.
It's easier to be a result of the past, but more fun to be a cause of the future! http://www.spacefinancegroup.com/
Last time we had an engineer running the economy was Jimmy Carter.
Remember that before you listen to the "Slashonomics" advice rendered here.