Slashdot Mirror
Silicon Valley Could Be Heading For a New Stock Collapse.
First time accepted submitter billcarson writes "Even though for most of us the recession is far from over, analysts are worried the technology sector might be near the end of a bubble. Technology stocks are at records highs at the moment. Companies that have no sound business plan have no difficulty in raising capital to fund their crazy dreams. Even Yahoo is again buying companies without real profit (Tumblr). Andreessen Horowitz, a major venture capitalist in Silicon Valley is already pulling up the ladder. Might this be an indicator for more woe to come?"
Less bubble driven pie in the sky greed and more mature market consolidation. The weakest in the herd are failing behind and will be preyed upon by vulture capitalists like Mittens and that's the ones you really have to watch out for, after the vultures have chewed out the juicy bit's and left it a debt ridden hulk with really 'imaginative' book work, pension funds usually buy them (after those pension fund managers make a visit to an offshore tax haven, to 'er' review their balance sheet with the vulture capitalists, purchasing bonuses).
Chaos - everything, everywhere, everywhen
Not that I would want to wish bad things like lost of income or livelihood on anyone, but as someone who moved here long before this bubble started, I wouldn't mind what the the tech bubble popping might do to San Francisco rental prices.
-Ryan
AUWYHSTOT (Acronyms are Useless When You Have to Spell Them Out Too)
The days of "a fool and his money are soon venture capital" are taking a siesta. Come back next decade.
Time Bomber the Book coming soon.
After the Bitcoin protocol and Silicon Valley, what's next? "The Word 'Collapse' Could Head for a Collapse?" The period would lead you to so.
Captcha: theirs
Remember that bears have predicted 60 of the last 3 stock market crashes.
Yahoo's recent desperate moves (e.e. buying Tumblr) are hardly indicative of the industry, but rather one company that really shouldn't be as big as it is. Silicon Valley as a whole is a lot more healthy than Yahoo.
The problem is a *debt* bubble. Either the debt is extinguished in a bubble collapse - housing, stock market, student loans, tech stock, etc., or it becomes inflationary. As long as debt is above a sustainable level there *has* to be one bubble or another.
The statist media is jealous of silicon valley and our ability to create amazing wealth without involving the goverment or unions. The very idea that there is a "bubble" is entirely constructed in an attempt to drive uncertainty thus make it a self fulfilling prophecy. Fuck the statists, now is the time to BUY more stock because 2014 is going to make 2013 look like 1998.
Could tech be at the end of another bubble? Sure, I suppose. But it seems to me the college tuition situation is more clearly ripe to burst? And how about govt. treasury bonds?
At least with tech, I think quite a few of the highly valued companies are truly successful. (Apple, as a prime example.) For every one of these questionable Tumblr type purchases of some web-based service, therre are dozens of others who nobody seems to be interested in buying at all. I'd say most investors are being fairly selective, even if they do gamble a bit on the occasional "high profile" site that's not yet making a profit.
I mean, websites that let you post inane comments on anything, or let you upload your tedious photos of your cat or drunken friends are easily worth billions of dollars, as nobody else could create something so technologically advanced without hundreds of millions of dollars right ?
Alternatively, you could investigate the concept of a price / earnings ratio (with an eye on possible future earnings based on real innovation and market share, which discounts most of these "will never make a profit because once the advertising becomes too intrusive, the users will go elsewhere" companies), and make an actual return on your investment. It won't be trendy and you won't feel the buzz of being part of the latest web craze, but you won't get suckered in the bubble either.
Overpriced assets need to come down sometime.
FB will be dead soon. Twitter IPO overpriced (but still not that bad). Most Silly Valley stocks are based on insane projections for the most part.
I used to do tech IPOs. My money's in broad S&P 500 low cost index funds now.
(yes, I made lots of money from the tech IPOs, and the other IPOs)
-- Tigger warning: This post may contain tiggers! --
In action.
We are in for a huge depression. Lets look at where you can currently make a decent living in the USA. Lawyers (for the small percentage that have jobs), Executives (who depend on businesses), Investments, and Technology.
Out of those things, the only one that is productive is technology. We have lost most of our other productivity work to sweat shops overseas and in Mexico. Technology is holding up a whole lot in the economy currently, and no I'm not talking about the NSA. Looking at 1 income households for the most part, but this is true with many 2 income households. People working in technology can afford to purchase houses, a factory worker can no longer do that. A person in technology can afford a new car, a factory worker probably can't. If technology drops, well, nobody will be working in numerous markets. Real estate sales will drop to nothing, which kills all the construction jobs. Auto sales will drop which kills the few remaining automotive jobs in the US (mainly sales and marketing). Investments will collapse as the few that can afford investments already have them and their own people, all of the small investment firms and people will be out of work as well.
-The wise argue that there are few absolutes, the fool argues that there are no probabilities.
I figure it's some guy hoping to trigger a sell-off to help his position in the markets. In fact I know a "bill carson" who would do exactly that!
Its something along the lines of "social media, blah blah, make lots of noise about it, mobile app, get bought by Facebook, Google, Microsoft or Yahoo"
is $1000/share for Goog? Ridiculously overpriced. The Chinese have not even begun to ramp up their own Goog alternative, neither has anyone else. Goog seems like the only game in town - for a game very early in it's life-cycle.
The Dotcom crash happened mostly because there was a massive gold rush to throw money at any startup that said they were going to do cool things on the web. But there was way too much money being spent on Aeron chairs and expensive digs and nothing being spent on figuring out if the idea was good. This comes from having been to a lot of bankruptcy auctions. Hell, the CEO of one company spent investor dollars on a powered paraglider. Da fuq? I also wonder if Y2K was something of a catalyst. In the 90s, companies were spending gobs of money to prepare for Y2K. When that came and went without a hitch, all that money evaporating and may have caused investors to question their other high risk ventures.
The housing bubble was could be seen a mile away by anyone who wasn't living in a utopian stupor. You can't force banks to issue sub-prime mortgages knowing full well that most of those buyers couldn't keep up with the payments without the lenders passing the hot potato to the next sucker. BTW, CDOs and mortgage-backed securities had been around for 20+ years without a problem. Again, the gold rush of house flipping was eventually going to crash when the music stopped in the form of enough people saying "You want HOW MUCH for this P.O.S house?! Nope."
Honestly, I don't really see the same scope of bullsh*t in Silicon Valley. Social networking companies are at risk because they don't have a tangible product just as dotcom companies didn't in 2000. But the hardware companies aren't going away. Will other companies get injured as a few collapse? Sure, but that would be panic selling and hence a good buying opportunity.
While unemployment generally may be high, in the tech sector it is very low.
How about some actual, you know, statistics.
Tech companies, led by Mark Zuckerberg at Facebook, are lobbying Congress to relax immigration rules so they can hire more foreign talent because they believe domestic talent has gotten too scarce and too expensive.
And that's evidence of a shortage? They've been pushing for more of this crap for 20 years, rain or shine.
I also notice that almost the entire article is about Silicon Valley, which despite its pretenses of being cosmopolitan, or even "globalized" (whatever the hell that means), is one of the most provincial places there is. Here's a clue: there are parts of the US outside of the Bay Area. Amazing but true! Some of those places are tech hubs with lower salaries. Having trouble finding people at a reasonable price? Branch out. It's hardly a new business strategy. The geniuses who claim to have destroyed the barriers to long distance communication don't want to take advantage of it (except to India of course). I know that denizens of the valley are afraid to get on a plane to someplace like, say Pittsburgh, where they have a dreaded thing called "snow", but you can tough it out. Look on the bright side - the plane trip is much shorter than across the Pacific. You can even use Google maps to find this place called "Pittsburgh" .
Google, Apple, and a few others are overvalued right now as well.
But the stock market is all about gambling, not real value. Most of the big players treat it like monopoly money, because it's not coming out of their own pockets. :(
That's a problem with the stock market overall, though, not just tech stocks.
I do not fail; I succeed at finding out what does not work.
Oh dear..... This is not going to end well is it.
Whole lotta collapsn' goin' on out there
"Silicon Valley Could Be Heading For a New Stock Collapse."
"Bitcoin Protocol Vulnerability Could Lead To a Collapse."
The question is: how will a tech bubble burst impact economy outside of silicon valley?
I'm not connected to high tech like I was during the dotcom days, but it strikes me that this bubble is still a bit immature. What I see as somewhat more concerning is the wide variety of things that are getting overvalued, such as high tech stocks, renewable energy, bonds (due to central bank quantitative easing), and a couple of US-centric things (higher education loans and the coming health insurance market).
I think any bubbles and their bursts will be moderate in size and effect until a lot of people find ways to leverage the hell out of one or more of these things. Then it'll be full blown tulipmania. But I think that'll take some time to set up politically and financially.
In the meantime, I wouldn't go dumping your nest egg into Yahoo. It's also possible in several different ways to lose your shirt on the stock market and still end up paying capital gains tax. I point this particular thing out because it's clear from the talk that a lot of people think of bubble collapses in a particular way (asset goes up to a high unsustainable price and then falls). Unfortunately, such bubbles can fail in a number of exciting ways.
On the plus side, if there is a high tech collapse, there probably won't be any "too big to fail" firms in there.
Once people start talking about a stock bubble, then the those stocks will continue soaring - the Nasdaq probably doubles or triples from here. Then when all the people talking bubble have finally lost every penny trying to short those stocks, then the crash will finally come.
After reading the article at the link you posted, I finally understand the true urge behind the self-driving car - so that when you park at night to sleep the car can just move itself if it detects cops show up to check it out!
"There is more worth loving than we have strength to love." - Brian Jay Stanley
*cough*Twitter*cough*
Not the one San Francisco is famous for, although it's an interesting coincidence.
It's the new buzzword developing momentum in Silicon Valley and it would be a red flag in any bubble book--except for the fact the word is for the upcoming industry for the Internet of Things (IoT). The timing for it to mature into the mainstream is almost perfect and it'll probably save the valley from imploding, im(not-so)ho.
Slashdot, you read it hear first.
As long as they don't tank the entire economy, a burst would be a Tax on Stupidity, since they didn't learn from prior dot-com bubble.
Table-ized A.I.
It's a cliche that you can't time the market.
There's a reason for that.
It's true.
Now that's all well and good Mr. Market
But tell me
What should I do?
Very good question, now listen with care
Bend over, and lend me your ear
When talk is of bubbles
The alarms's set for troubles
Next month
Or maybe next year
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
I suspect that with the types of devices using computer chips and software and the proliferation of OSs it is a risky bet to put money into the computer or electronic device industry. We can see this in the smart phone segment where companies jockey for position without knowing if a brand or new enterprise might suddenly sweep up the market. Although risk might yield a lot of earnings second guessing the computer industry is just far too difficult.
While unemployment generally may be high, in the tech sector it is very low.
Tech companies, led by Mark Zuckerberg at Facebook, are lobbying Congress to relax immigration rules so they can hire more foreign talent because they believe domestic talent has gotten too scarce and too expensive. It's driving up wages bills like crazy. Matt Allen, a tech recruiter at Vertical Move, told me recently:
of course he told you that, he's a recruiter! the truth is that the tech sector jobs are either offering insultingly low wages or out-sourcing to save a buck, the bigger the pool, the more control they can screw people over, especially if you are under the threat of being deported if they fire you. The whole rent-a-coder thing went awry because people offer to work for wages below minimum wage because in their country, $3/hr is a good wage and tax free by keeping it in paypal.
You don't see every tech person driving around in beamers.
Anons need not reply. Questions end with a question mark.
How do you figure that a college education is a good bargain? Tuition prices have vastly outpaced inflation, mainly due to permissive government loan programs (throw money into a system, watch prices rise, economics at work). Meanwhile, because a college degree is the new high school diploma, the college offerings in - let's be blunt - useless fields have expanded. Here is some data from DOE:
Degrees with, um, limited employment prospects, change since 1985
- Visual and performing arts: up 150%
- Interdisciplinary studies: up 175%
- Recreation, leisure, fitness: up 620%
- Liberal arts, general studies: up 120%
- Family science (wtf?): up 50%
- Social science & history: up 80%
Meanwhile, technical degrees with good employment prospects, again since 1985
- Mathematics: no change
- Engineering: down 5%
- Computer science: down 5%
The only real exception seems to be in medicine and healthcare, which is eminently employable and is also up quite a lot. Otherwise, our colleges seem to be producing more and more well-qualified hamburger flippers.
p.s. I didn't mention business, although that is the most popular degree by far. Up 50%, whichever category you care to place it in.
Enjoy life! This is not a dress rehearsal.
Social networks like Tumblr don't have to be profitable. Google. Facebook, Yahoo are themselves profitable. What they are buying are user bases not the business. As far as record highs:
Cisco P/E 12
Apple P/E 13 (and that's x-cash, including cash it is much lower)
Microsoft P/E 13.5 (also x-cash)
Google P/E 28 (high but still rapidly growing)
HP is losing money but the stock is cut in half
I don't see a bubble.
The article actually focuses primarily on pre-revenue and/or pre-profitability consumer-oriented startups. While these companies do make a fair share of headlines and noise in both the tech and the mainstream media, I would hardly say that it makes up a large percentage of the *actual* jobs and capitalization of either the tech sector as a whole, or even the tech sector in silicon valley.
While the author does make some good points with regards to over-valuation of these companies (and some of the crazy things that some companies may be doing to attract top-level talent), his comparisons to the late-90s dotcom bubble is weak at best. (I know from personal experience, as I entered into the workforce during the boom and got to experience first hand the woes of the bust).
The original dotcom bust had such an impact on the overall economy because a majority of the investment and valuation was on these non-profitability consumer-oriented businesses (pets.com, etoys, govworks, etc.). The current tech sector economy is *significantly* more diverse, with strong B2B startups, hardware and consumer electronics, platforms and services, etc.
However, note that the focus of the article is *only* on consumer-oriented startups. His graph on Andreessen Horowitz (ironically, founded by former Netscape founder Marc Andreessen, who was one of the poster boys of the first docom bust) I think nails is perfectly: "Andreessen Horowitz ... is saying it will no longer invest in early stage consumer-oriented startups ... Andreessen is interested more in later stage and business-to-business-oriented companies. Companies with actual prospects of real revenue, in other words."
So in the article itself, the author specifies that there is still a very strong market for B2B companies. Who are these companies? Most of us probably have never heard of them, and likely never will. Because most of them are boring, unsexy companies that help provide business improvement, revenue generation and/or process efficiency in industries that will never make it on to VentureBeat or Tech Crunch. However, they are also boring, unsexy companies that add *actual* value to businesses, which in turn provides revenue and profitability to the company, which I would argue is a significantly stronger driver to the tech economy than the B2C startups.
To say "tech sector" and "silicon valley" and to only attribute it to the flashier B2C, consumer-oriented startups is simply perpetuating the disservice that the tech media gives to the women and men who are and will continue to be the true drivers of this economy.
Seven Sisters mainframes were the go-go stocks of the 1960s. Then transistors, PCs, A.I. computing, pen-computing, dot-boom 1.0, etc.
Every speculator thinks they sell before the crash. And technology will rise again from the ashes.
I guess we could call it this. Anytime Yahoo starts buying companies, you know the tech sector is fucked up.
who prays for Satan? Who in 18 centuries has had the humanity to pray for the 1 sinner that needed it most? ~Mark Twain
Things have improved over the past few years, but investors are still cautious when spending their money on startups. It's nothing like the golden years (late-90's), and I doubt we'll ever reach that again. It still takes a lot of work to get even a small investment -- the ones you read about that get massive amounts of funding for seemingly easy/obvious ideas are really lucky.