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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?
...Fool me twice, shame on me.
This is wise advice when discussing the Wall Street crowd.
it's not different at all is it steve?
Snowden and Manning are heroes.
This is the same main stream media that has been talking about the recovery of the American economy and glossing over the divide between Main Street and Wall Street. Whenever the market does crash, it seems like select players are always the winners, while the average Joe's retirement just got hosed.
ALL bubbles end badly as they are doomed to burst from day one.
Booms work on psychology of crowds until some unseen actor "flips the switch."
Stocks go up, stocks go down. If the market doesn't crash I'll make money. If the market crashes I'll make even more money.
Seven puppies were harmed during the making of this post.
I mean basically we have $1 trillion worth of funny money from QE1-42 that has to be burned sooner or later anyway. If no actual real money is spent, is it really a valuation? Is it really a bubble?
"Malo periculosam, libertatem quam quietam servitutem." -- Jefferson
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!
Political debates have me rolling my eyes so much I think I got optical whiplash. I should sue. - Foamy The Squirrel
perhaps there will be an uber crash
My God can beat up your God. Just kidding...don't take offense. I know there's no God.
I remember in 1998 hearing the experts all say "This time it's different we won't crash."
The reason I would avoid Uber stock is their business model falls foul of the law in most of the countries where they operate, only a matter of time until they are shut down. A comparison to Kazza's business model would be more apt than snapchat but I agree the eyeball market is saturated these days.
And did you exchange a walk on part in the war for a lead role in a cage? - Pink Floyd.
If you think Uber is worth $40B, or Instagram worth $33B, I've got some tulip bulbs to sell you.
"National Security is the chief cause of national insecurity." - Celine's First Law
In that the companies make money this time?
Google seem to be traded at P/E 26 (Google finance, assume that's on actual profits and not ideas for the future) which is pretty reasonable. The interest environment is shit and Google at least have an urge to do new products. Whatever they will always be the search and information gathering giant I guess one could question.
Facebook mean-while is valued at P/E 75 which is way higher.
Do I trust or care Facebook even remotely as much as Google?
No I don't.
I don't care for Facebook at all. So do their social platform deserve that? Then again at least they have made more money than before.
Something like Microsoft is 17.7 so whetever. H&M is 30 as comparison. Sure there's a bigger market to sell clothes to but there's a bigger one for Microsoft products too :).
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...
007: "Who are you?"
Pussy: "My name is Pussy Galore."
007: "I must be dreaming..."
The Vogons disagreed.
http://michaelsmith.id.au
Facebook, WhatIsNameApp, the list goes on and on.
This is pretty much spot-on.
I remember the last bubble well. Anything with a dot-com name meant it was on the front lines of technology, and the impending everything-online economy would wipe away the old brick-and-mortar businesses who couldn't move as fast as the upcoming technology. It turns out that economics didn't move as quickly as they thought. Companies still needed a business model, and the established companies were often able to move into online business just as quickly as consumers demanded.
Today's high-value tech companies are trying new business models, either hoping to capitalize on access to a global market or trying to sidestep inefficiencies in the traditional business. Some companies might still be little more than investors' dreams, but it's not a widespread trend.
You do not have a moral or legal right to do absolutely anything you want.
Don't buy their stock, and don't get in a car with one of their drivers.
Come on man. UBER isn't even a stock. The so-called 'valuation' is somebody's pipe dream that hasn't been exposed to the marketplace.
ALSO there will ALWAYS be stocks that are over hyped and overvalued. Cherry picking individual issues and using them to characterize the market is a fools game.
March 10 2000 the NASDAQ hit 5132.
Now the NASDAQ is still well below the 2000 high on an inflation corrected basis. Even more so considering the burgeoning size of the tech economy over 15 years.
Maybe there is an argument that things are overwrought, especially in Vulture Capitalist Fantasy Land. But bubble? Nah.
one rule of thumb we were told in both my finance and economics units:
as soon as "experts", particularly media experts, start saying "no bubble" you can be pretty damn sure there is a bubble
It's not a bubble if the money is real. Here is the graph you need to look at. Notice that the p/e ratio of the NASDAQ was around 200 before the crash. When you have a p/e ratio like that, your income needs to jump 2000% to justify the stock price.
It might be argued that it is a little high now, but it's not anything near to what it was before (and if it is high, it's probably due to monetary inflation rather than irrational exuberance in stock prices).
"First they came for the slanderers and i said nothing."
Shadow bubble? Of course, that doesn't mean a bubble won't eventually form in tech stocks, or that one isn't already being inflated elsewhere in world of technology.
This comes at the end of TFA.
It little behooves the best of us to comment on the rest of us.
...because trillion bazillion for a craptagram sharing app makes sense.
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.
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Uber has something the others don't... customers. It could be argued that the government created the market for them.
I remember the bubble. I remember the headhunter saying, a murder conviction maybe I still can't find you a tech job, but if it is only manslaughter, lets talk.
Hiring is recovering. The economy is doing well. Stocks are doing well. Nothing is overheated though, wages are fairly stagnant, and few companies are getting large investments without traditional business analysis.
I wish there would be a new bubble, I dream of a new bubble, but sadly, there is no bubble. You want money, you have to earn or scam it under normal market conditions, there is no funding for pipe-dreams, there is no overheated labor market pushing my rates up.
There isn't even a Y2K scam to dip in on. The next best bet is 2038 and the End of the Epoch. But so far a lot of jerks have already prepared the OSes for it, so the only profit center there might be the same COBOL systems that were last upgraded in `99. I'll make sure to keep my COBOL skills polished, but it seems like a longshot.
Uber has already won
I love the smell of smoldering luddites in the dawn of a new age.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
You climaxed early with "Student Loan Bubble." You could keep the gag going longer without that. It is just too laughable to keep reading after that. I did laugh, but it just felt too early.
When investors can't earn almost anything on fixed income, they pile on stocks.
In essence, if interest rates=2%, stocks=x, if interest rates=1%, stocks=2x (apreciate so they give back the same rate of return), but then there's the other way around, when interest rates starts to rise, the stock market could crash predicting the revaluing of assets.
The math isn't exactly 2%, x, 1%, 2x, there are other factors, but the basic idea is still true.
A bubble is what happened before 2008, the market was overvalued by a lot, even with fed funds @ 8%. Completely different situation.
Bubbles by definition expand very quickly then pop. Today’s NASDAQ has been a steady move higher over the last few years built on solid company earnings. Just look at the heavyweights in the index, Google, Apple, Microsoft, Cisco, Amazon, Sun Micro to name a few. Most of the names have a historical decade plus track record to look back upon and judge them by. There will always be high-flyers but these hardly are representative of the index. In 2000 everyone knew that the internet and tech was the next new thing and this understanding caused people to believe that any company in this new sector was bound to succeed. We are, and by we, I mean tech investors are far more discerning now days then before primarily because we know what it was like to get burned in the past. We might make the same mistake we did in 2000 in the future but today aint it. Anyone claiming it is does not understand fundamentals or is just trying to grab headlines like CNN.
no one ever lost money faithfully following that advice
If your children ever found out how lame you are, they'd murder you in your sleep
That's also part of the battered wife syndrome.
lucm, indeed.
I don't believe you. Short positions are a bitch to get, on most self-directed accounts it's not even possible. You need a serious account with a fat margin and a good track record with a broker to get in that business. I don't even know you and I can tell that doing that on a lot of stocks is out of your reach.
lucm, indeed.
I predict that the future is not predictable.
Table-ized A.I.
I would compare Uber to Napster, really. In terms of their predicted longevity. In terms of who they are up against. And in terms of who their customer base is. Literally on that last one.
If Uber "pops", it won't take even mildly savvy investors with it. Not sure how much of a hit that would be overall.
I've fallen off your lawn, and I can't get up.
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.
Wrong... any numbnut with as little as $10k can margin $30k to $40k worth of equity long or short. The minute the security (or what you're borrowed to sell short) falls out of cash value you have, the broker either sells it or covers the short.
These days, selling short is even easier as you don't have to wait for a down tic to fill the order. Additionally, most brokers have sufficient inventory to loan for short sellers. The game's the same, the rules have changed to make it even less fair.
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And that is what exactly? I do not need Uber. I could use MyTaxi or even talk to someone over the phone and call for a Taxi. However, in a decent city there is something called public transport. And when I can wait 10 minutes for a cab, I can also wait for a bus or local train to bring me home for a fraction of the price. Owning a zone card. That trip would not cost me any extra. Actually every time I use public transport it is beocming cheaper.
People fail to understand is that bubbles are not bad for the people who are lucky enough to get out in time. (And, yes, it's usually simply a matter of luck.) They are only bad for everyone else.
Financial analysts are the last people with an incentive to tell people about a bubble if they suspect one.
As I remember, during the 1999 bubble, three digit, and even four digit P/Es were not that unusual.
Then I'll be able to pick up major universities for about $1K each.
"This time it's different."
However, in a decent city there is something called public transport.
Well, we don't have those in the USA, except maybe NYNY. San Francisco, for example, has a pretty crap public transportation system. Unless you're actually going across town, it's faster to walk.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
I don't believe you. Short positions are a bitch to get
Thanks for immediately letting us know that you have nothing of value to add.
"His name was James Damore."
Well, the age based rebalancing 529 plan survived the crisis best, never went below the cost basis, and produced very reliable and steady gains. Averaged over 9% for 2005 to 2014.. The bond 401K net value dipped below the invested money for a brief period, 3 months in 2009 Feb-Apr 6% annualized return over 2005-14. The stock mutual fund went below cost basis most of 2009, but it too came roaring back, 7% annualized same period.
What about the super brain actively managed portfolio? It is the dog. 4% for that period. If you remove the 2% inflation component out, 529 did three times better than active management, even the bond fund was twice as good, the stock fund is 2.5 times better than active investment.
So, folks, the moral of the story is, go for dollar cost averaging, and do regular rebalancing. I was very fortunate I did not have to liquidate any of my portfolio in the middle of the crisis, that is what saved my tail. Not my active investment. Simple brain-dead $CA and the luck of not having to sell anything during the crisis.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
If the bulk of technology dollars were focused on social media, I'd say yes this is a bubble. Social media stocks are wildly overvalued. But that's only a small segment of the tech market these days. Tech is permeating everywhere. What's going to happen is a collateral damage effect from the upcoming FCC Title II ruling, assuming that it stands. Further, there is a steady rise in sub-prime lending for things other than houses e.g. cars and college education. Bubbles form when a market rise is based on bullsh*t and/or "social engineering."
No, no, it takes just one guy and a dedusted 386SX from the attic, running NetBSD. Should cope with tens of millions of requests per day just fine.
CLI paste? paste.pr0.tips!
I don't trust what they are telling us personally. I really would like to take some of my money and invest, but everything is so seemingly inflated that I am afraid it'll all crash soon. If we do have a crash that would be a good time to invest possibly. Anyone who bothered to invest back in 2008 after the stock market took that massive dive would have a ton of money by now. So I might try something like that who knows.
The reason I would avoid Uber stock is their business model falls foul of the law in most of the countries where they operate, only a matter of time until they are shut down.
Ha! Don't you get it?? Laws are meant for you and I, not for huge companies (or the .0001% who control them)... though I imagine that you may've been told differently).
With billions in venture capital funding to play with, it's only a matter of time until Uber gets most of those laws rendered moot - at least the ones that matter, anyway; Uber will obviously have to continue to strategize and pick their battles (Deutschland, for example, probably won't be selling out their taxi industry to Corporate America any time soon). :)
Who is "us"? You and your imaginary broker that allows you to do short selling without a fat margin and that won't knock at your door the minute the stock price goes the other way?
lucm, indeed.
You and your imaginary broker that allows you to do short selling without a fat margin
Are you imagining that we are claiming to sell short with an empty wallet?
When you wallet is empty, you cannot buy either.
perhaps the reason you cannot imagine regular folks selling short is that you are an idiot that doesnt know how to sell short? yeah... all your posts indicate this. All your posts indicate that you know extremely little about anything market related, least of all how people short stocks.
"His name was James Damore."
Yeah, one stock being fantastically over-valued doesn't mean the whole market is. Look at price to sales, price to earnings and book value. When those are out of whack, it's overvalued (or undervalued).
But once uber gets the laws sorted out by spending money, there are other big companies to move in to the same market. Uber doesn't have much uniqueness to last and hence no pricing advantage in the long run.
Bingo Dictionary - Pragmatist, n. A myopic idealist.
Uber doesn't have much uniqueness to last and hence no pricing advantage in the long run.
The same can be said for eBay.
Then it's good for eBay that it's business model doesn't depend on buying laws. Even when it was new, it was far less illegal than uber is now in most places.
Bingo Dictionary - Pragmatist, n. A myopic idealist.
https://www.change.org/p/obama-administration-put-a-cap-on-market-capitalization-of-listed-companies
Casteism
Really? I've been pretty fond of SF's public transportation. NYC's is up there, but I like SF's more. LA's, on the other hand, is pretty close to worthless. Not *quite* worthless, but close.