No Tech Bubble Here, Says CNN: "This Time It's Different."

ErichTheRed writes I saw this on the Money page of CNN today. Apparently, various stock analysts have declared that this run-up in stock prices is different than the 1999 version. OK, we don't have the pets.com sock puppet, Webvan or theglobe.com anymore, but when Uber is given a valuation of $40 billion, can a crash be far behind?

Comments

what, Uber?

[ihtoit]

That ridesharing thing that's getting sued ten ways from Sunday for butthurting established taxi firms?

Something's definitely up if they're getting valued at $40 billion! That's 4 times the UK's annual agricultural output!

No bubble?

[msauve]

If you think Uber is worth $40B, or Instagram worth $33B, I've got some tulip bulbs to sell you.

2006: "There's no real estate bubble..."

[kimanaw]

I recall watching CNBC (yes I know, bad choice) circa early 2006 and watching some real estate manipulator say (paraphrased), "Of course there's no real estate bubble, there's an infinite demand for housing!".

I also figured out when the 2000 tech bubble was about to burst: I was at the local grocery store and overheard the following conversation between the clerk and bag boy as I was checking out:

<clerk>: "The manager said you don't need to come in to work tomorrow."

<bagboy>: "*chuckle* Hehe thats ok, I'll just stay home and day trade..."

I literally went home and cashed out 90% of my mutual funds after that. Unfortunately, my judgement failed me a couple months later, when I bought back in...and lost most of it...

Re:2006: "There's no real estate bubble..."

[jafac]

Oh I remember this, too; in 2007; and I kept imagining that housing demand will always go up, because we're always adding more people, right?

I was naive enough that I could never conceive that we'd get to a point in this nation where vacant, foreclosed houses outnumbered homeless people 4:1. I never dreamed that our trusted financial institutions and ratings agencies would sell their credibility and AAA ratings like a crackwhore sells her virtue. Yet, post 2008 - the banks were willing to sit on empty, depreciating inventory, rather than let their fellow americans sleep indoors under a roof. Disgusting. I learned a lot since 2007.

But I'm pretty sure that when the next crash comes, everybody's going to act all surprised like they didn't see it coming, and though it could never happen like that again.

Nope

[rsilvergun]

The difference here is that Uber has a product. A vile, rent-seeking product built on the corpse of the American Middle Class, but a product nontheless. What companies like Uber and Amazon are doing is bringing the Wal-Mart model to the rest of the workforce. Driving down wages and benefits and skimming off the top of just about every transaction. The money there is huge, especially once you're entrenched. That's why they're valued so high. Real money is in ownership, not petty things like making products and providing services. That stuff's for the plebs.

Re:Nope

[rsilvergun]

The drivers are happy because they're healthy. They're making about $12 bucks an hour after the cost of driving is factored in. That's not enough to buy health care but it is enough to disqualify most from the subsidies. At those wages their paycheck to paycheck, and a car wreck with an uninsured driver away from disaster. Speaking of insurance those drivers aren't anywhere near as well insured as a traditional taxicab driver, which is another reason they can out compete taxis.

But there's another nasty side of Uber we haven't seen yet, which is that as work becomes more and more scarce you're going to see more and more people turning to it to pay rent. It's not so much the sharing economy as the desperation economy. That's the rub. Right now there are some drivers doing OK because $12/hour seems like a lot as long as nothing goes wrong, and there's plenty to replace them when it does. But it's a larger part of the race to the bottom that the modern world's caught up in...

The "Boeing"-rule of thumb

[bkmoore]

When thinking about tech stocks, I like to use a "Boeing" rule as a measuring stick. The globe.com is valuing Uber at 40 Bn (1/3 of Boeing). Boeing had 90.8 Bn in revenue for 2014. Uber claims to be able to generate 10 Bn "soon" Business Insider, but conservative estimates are closer to 2 Bn. So revenue is somewhere between 1/45 and 1/9 of Boeing. I know the comparison is a bit apples (not the computer) to oranges, but Uber's overvalued IMHO. Especially considering that Uber has almost no physical assets and Uber is a privately held company with no public numbers.

Re:Reality Flip Switch

[Rob Y.]

The Fed has no choice, since it has only one mechanism for stimulating the economy. The Fed can't build roads and bridges, so it's only way to pump money into the system is through the financial markets. Assuming we do need those roads an bridges built and maintained, any sane system would run surpluses during boom times and spend those surpluses to mitigate the effects of slumps. But US politics today uses boom times as an excuse to cut taxes and uses slumps as excuses to shrink government. Exactly the opposite of what the economy needs.

Now government may need to shrink - but even government workers' wages pump money into the economy more efficiently and effectively than the Fed can. Mostly, though, shrinking the government is a euphemism for eliminating environmental, safety and business practice regulations that powerful political contributors want eliminated. That's not to say there isn't waste - just that waste is the excuse for implementing a political agenda that has nothing to do with addressing the waste. If they wanted to address the waste, they'd address it by addressing it - not by building the Keystone XL pipeline.