Guest Post: Bubble Yum (Or Will Facebook Be The First Company To Hit A $1 Trillion Market Cap?)

Tyler Durden's picture

Submitted by Jared Dillian of The Daily Dirtnap

Bubble Yum

So a couple of months ago I went and got myself a subscription to The Economist, but I did it with airline miles, because I’m not going to pay hard dollars for that thing (I suppose some people say that about this publication, too). Well, maybe I should pay hard dollars for that thing, because I forgot how good of a contra-indicator they are. Most publications are good for only two contra-indicators a year, these guys give me a good one almost every week.

So two weeks ago they had on the cover (you have to watch for the covers, it’s hilarious) that there was some kind of tech bubble, and they were serious about it, really really serious about it, as if we don’t have enough problems with debt monetization already, now we have to throw an equity bubble on there, too? We are all just totally doomed.

Well, not so fast. I don’t share the opinion that we are in a tech bubble, not even close, I think that this is a legitimate investment boom, and I think it is going to be one of the biggest legitimate investment booms of all time. I’ve written bullishly on tech in the past, and it has taken me a while to hone my thesis, but it is getting sharper and sharper, and I think I have this thing sort of figured out.
So everyone had a grand old time punting around Linked In, and I don’t know Jeff Weiner from a hole in the ground, but that was very, very shrewd to go public in front of Facebook, because people want to get long social networking in a big, big way, big enough that they are willing to dork around with Linked In when Linked In really has nothing going for them in the long run. It is a poor man’s way to get long Facebook, especially since poor men cannot get long Facebook.

I’m going to pause for a public service announcement to all the class warriors out there--look, Facebook is going to go public at least $100 billion market cap, and that’s $98 billion that could have been made by all the punters running their hot dog stands, but instead, $98 billion was made by Richie Rich and his Richie Rich friends, and HOLY COW, $98 billion is a huge amount of money, it’s more than just about any tax code rejiggering you can do, you could have made a lot of middle class people very, very happy, and instead, the rich got richer. Sarbanes-Oxley has done more to perpetuate income inequality than any other law ever passed in the history of the United States.

Back to the story. We are trying to figure out if there is a tech bubble or not. There is not, and here’s why: people have no idea how big this social networking thing is. Linked In? LNKD is a sideshow. Even if Facebook goes public at $200 billion (which, at this rate, it might), it is still a buy.

I think it will be the first company to (legitimately) hit $1 trillion market cap.

You know what your problem is? You think too small. Go back in time to every technological advance. The phone. The TV. The internet. You could hold out for a long time, like lots of people are holding out on Facebook, but there comes a time where you just have to have it. And Facebook, at some point, is going to be more than just a social network, it is going to be some kind of online ID card that you have to have to shop or do anything on the web. It is going to put Paypal out of business, it is going to (I think) start handling money, just like they do, taking a vig.

You guys think way too small.

Remember The Social Network? Like, the movie? So Eduardo Saverin and Mark Zuckerberg are having lunch with Sean Parker, and this is a source of tension already because Eduardo wants to start charging for stuff, and Zuckerberg doesn’t, and--people don’t realize it, but that one creative difference was the most important decision that had to be made in Facebook’s early days--Eduardo was totally wrong and a threat to the company--if they charged for it, they would have killed it. Sean Parker nailed it. “We don’t even know what it is yet,” he said, “but what we do know is that it’s cool. And once you start charging for it, it’s not cool anymore.”
That’s the beauty of Facebook. They still don’t what it is. It’s just cool. And they’re going to put a twelve figure price tag on something that is nothing more than cool. But it’s not a bubble!

A company that is this important cannot be a bubble. Put on your tinfoil hat and think about why the government will never, ever let Facebook go out of business. There is an embedded put, and it has a very high strike. I hate talking about stuff like that, but a company that has intimate information (that people willingly put on there!) on every man, woman and child in the country is worth more (to somebody) than $100 billion.

You guys think way too small.

So yeah, this is part of the whole larger tech trade, you’re going to need better semis and better networking so people can plonk around on Facebook, and I have written before that we are in the middle of a legitimate tech investment boom, and you see what’s happening? You have all these people running around, telling you it’s a bubble, and what they don’t know is that you don’t get bubbles in the same thing ten years apart. People are not that stupid. You get them seventy years apart, because everyone dies and nobody reads history. So a lot of people are going to get talked out of some really fantastic trades because of Larry Summers and The Economist and everyone else who is hating tech. And I suppose that is too bad, but that is what you get for listening to Larry Summers and the Economist.

As for me, I’m pissed. I wanted to buy Facebook a long, long time ago. I would be rolling in dough right now. It would be the best trade of all time. Instead, I’m watching Richie Rich get rich (no, I am not Richie Rich), which really makes me angry. Did you know that there are 40% fewer publicly traded companies in the U.S. than when Sarbanes-Oxley was enacted? And we wonder why it is so hard to make money nowadays--everything is completely picked over.

Final point. There is no tech bubble. There is a tech boom. And it is going to be a really, really big tech boom, in certain sectors of the market. There are some value destroyers in the space (MSFT and CSCO), so it’s not helpful to just buy ETFs; you have to get smart about the individual names. But as for the individual names, the best is yet to come. This LNKD IPO is ruining things for everyone, and it is going to make thefacebook all that more expensive, but it doesn’t matter. It will be a buy at just about any price. I’m bullish.
If I had only been born ten years earlier.

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mynhair's picture

Cap, or crap?  I get so confused.

Rich_Lather's picture

Subconsciously, he meant crap because he's actually used it and realized it is an overhyped, bug-ridden piece of shit...that steals your personal information and connections.

No intellegent person would post actionable information on there under their real bona fides....sober. It is, nonetheless, a gold mine for advertizers who target the 18-35 impulsive crowd, at least until something better comes along.

Did I mention the impulsive crowd?

Bananamerican's picture

early adopter here...but i draw the Luddite line at F'book.

"I am NOT a data mine! I AM A HUMAN BEING!!"-Charleton Heston

...and Zuckerborg creeps me out.

Kids seem to eat this shit up with a spoon but in my American dad's day they said, "it's none of your godDamn business"

how was the nation born without it?

Oracle of Kypseli's picture

My Daughter of 15 said: I and many of my classmates use nicknames and separate email accounts just for facebook as it is very intrusive.

While on the subject, we experimented on clicking on friends' friends on and on and went around the world a few times. I actually found an Australian with whom I had worked 15 years ago.

But the message is now resonating about personal information and some kids are dropping out of facebook

Bananamerican's picture

you mean there are still some PARENTS left?

My kid's on there too with bogus info...

I told her young, "We don't do "marketing"

oh_bama's picture

He is somewhat right

You guys think WAY TOO SMALL!

If you trusted the FED and BTFD you would HAVE MADE decent amount of money by now!!

BTFD! Just CLOSE YOUR EYES AND HIT THE BUY BUTTON!!

 

mynhair's picture

Canceled my cheapo Economist subscription the month after I gradeated the 3rd time.

1980.

I gots me edicated..

kengland's picture

Did you guys load the boat? No "inflation" with this product. The price has been the same now for almost two years. Consider yourself lucky if this product is still in stock. Usually disappears within days

 

http://www.costco.com/Browse/Product.aspx?Prodid=11539429&whse=BC&Ne=4000000&eCat=BC|3605|75277|90741&N=4047923&Mo=39&pos=0&No=7&Nr=P_CatalogName:BC&cat=90741&Ns=P_Price|1||P_SignDesc1&lang=en-US&Sp=C&ec=BC-EC39718-Cat75277&topnav=

Isotope's picture

Thanks for the heads up.

I've been waiting for some of the Mountain House/Oregon Freeze Dry stuff to get back in stock.

mynhair's picture

Funny how Israel gets less warning on a rocket attack than the Midwest gets for a tornado.

NotApplicable's picture

Well, May is the prime season.

BigJim's picture

It's not too surprising.

Qassams, or whatever the jihadis call their bottle rockets, have a short range and fly pretty fast. Whereas the conditions from which tornadoes arise are a little easier to spot from a distance.

Rynak's picture

I had to temporarily disable my webfilter to post this, because i've set it to block everything that has facebook in it's URL.

Catullus's picture

Love the thinking.

I got rid of Facebook.  I was tired of providing free awesome to all my friends.  Plus my mom joined.  And I'd pay not to have her on.

mynhair's picture

Excellent.

Is this like My-Butt?

disabledvet's picture

I fear facebook.  I do not fear Zero Hedge.  Would someone please tell me why i don't fear both? Anywho "money and bad people do mix."  I think a trillion is "just a little on the high side"--then again...who knows?  I know this:  too much truth, justice and "the legal way" on this site to garner more than a few bucks in an IPO.  We need to excel and being a better criminal here.  "The rat's are winning again."

mynhair's picture

You should be afraid, very afraid.  This Fascist Goobermint will grab any posts it needs to put you on the cross.

I've had 3 days of a black helicopter going overhead since I mentioned '.416 Barrett'.

(It's a .50)

disabledvet's picture

I am afraid! I am!  Even that doesn't work. 

jeff montanye's picture

supersonic to 2500 yards.

mynhair's picture

I'll take 'other rivers' for $300, Alex!

Bananamerican's picture

you sniffing hairballs this evening Myn?

cxl9's picture

Facebook will be gone in five years. Or, irrelevant as a business anyway. There is no real business there to begin with. A bunch of narcissistic nitwits all screaming for attention, spewing meaningless chatter at each other all day long. The whole premise is absurd. Who values this "service" enough to actually pay for it? No one. Corporate networks have already started aggressively blocking Facebook to prevent people from wasting their work time on it. That's the beginning of the end.

Facebook will peak, wither, die, and finally be scooped up by Google and rolled into their stable of trivial, unprofitable side businesses.

Robslob's picture

It will be difficult to be on facebook when everyone is working 12 hours a day for $10 an hour and Amerika will be "king of manufacturing"...again!

Guy Fawkes Mulder's picture

No it won't.

  • Facebook is a powerful tool for social control. Its value to the ruling class is nearly infinite.
  • They can spy on people from nearly the cradle to the grave.
  • They can censor the broad, open internet as we know it, but if they let the people into a Facebook walled garden, then the people will feel like they have "the good old internet", even though everything in Facebook will be monitored by social control and censorship algorithms.
  • Gigabytes+ of consumer-related preferences and marketable information on every individual.
  • In a world where you can't actually drop money on the consumers via helicopter, Facebook gives you a Skinnerian box to reward people in virtual currency (or in future "electronic dollars") with a method of distribution far preferable to that of the helicopter.

In short, Facebook is going to be a linchpin technology for the Alpha controlling class in the coming Brave New World Order.

BigJim's picture

Post a pro-government announcement on Facebook and you'll get a credit on your Starbucks card.

The Axe's picture

Please,,,I need to up my meds..and restart my "myspace" account.

DoctoRx's picture

Disagree.  Most of said info is obtainable elsewhere for free or for minimal cost.  And if it's really so valuable, Google/Android, AAPL, and even Mr. Softee will compete by paying users (one way or another) to use their networks.

BurningFuld's picture

How about this: Instead of facebook where you post a picture of your face. Assbook where you post a picture of your ass? Some people have nicer looking asses. Just sayin'

teaddy bearish's picture

the worst thing about your idea is that it might work ...

john39's picture

i agree that there seems to be something sinister about facebook.   and I don't believe for one second the fairy tale of how it came together.   zuckerberg is just the public whiz kid face they put on it.  smells a lot more like an intell agency, just like wikileaks.

JW n FL's picture

FaceBook will NEVER DIE!!! and Twiter is on its death bed every moment of every day.. no way to control the flow of instant information..

 

just kidding Twitter will NEVER die either!

 

they have your info, you pics, your family, your friends, your likes and dislikes.. everything a key stroke away!

 

Thats why the U.S. Millitarty Promotes FaceBook! LOL

 

Before you call me a liar, please use google its you friend! LOL

ILikeBoats's picture

FB was funded in part by the CIA's venture capital arm.  I bet they love it.

FB never deletes anything, ever.  Even if you leave the service and delete your account, they still keep the info.

The most important part of any spy agency is the social graph, that is, who knows who and the relative importance of any 1 person to any other person they choose to know about. FB provides that almost automatically.

Tunga's picture

FB never deletes anything, ever - ILikeBoats

 

Not so ILikeBoats. Tunga posted extensively on facebook about the father of the supercomputer; Dr. John Von Neuman and his "anti-machine". Poof!

 

Tunga also posted the links exposing the Christmas Day Underwear Bomber from Kurt Haskell. Poof again. 

The place is well populated with NWO propaganda shills and Homeland Security Drones. Good information does leak through just by virtue of the fact that so many real people with real experiences recognize the control grid for what it is and play off it to our advantage. Let's face it; most of the stooges working for Homeland Security are pretty fucking stupid. They work there because they can't get a job being a low down no good dirty rat fink any place else. Just Tunga's unsolicited opinion of course. Nothing the Tunga says is true. At least that's what it says in the disclaimer. 

 


Cthonic's picture

Nothing like having people happily constructing their own dossiers.  Wanna to stand out like a sore thumb? Don't have a facecrook page.

Missiondweller's picture

Was this tongue in cheek or is this guy smokin dope?

Scisco's picture

Ya facebook very well might reach 1 trillion market cap, milk then might go for a $100. Just saying not willing to rule out the possibility.

I wonder what would happen to facebook once it seriously starts to be mined by the government, insurance companies, ect. People post their lives up there with no means to take it back.

Cthonic's picture

Would happen?  Wrong tense my friend.

knowless's picture

facebook is not social networking. it is the current iteration, in 10 years facebook will be the stronghold of the middle aged house wife, yes, but it will not be the only way people connect online. the fatal flaw in facebook is it's ownership over social construction which does not delineate social factions, everyone is treated to be equal as "friends" facebook is not about friends, a true universal social network would list the different social relationships between people in a cascading structure which makes it plain for all to see the different associations between people.

facebook will die, i'm sure you can make money in the process though.

wake me up when a social networking site allows me to: coworker, acquaintance, friend, associate, et all someone, all in a linked cloud where i can add multiple relationships at will.

illyia's picture

 ... a company that has intimate information (that people willingly put on there!) on every man, woman and child in the country is worth more (to somebody) than $100 billion.

'nuff said.

mynhair's picture

From DJ news, 20 minutes into the future:

* 20:43  SEN BOXER DEMANDS ZH POSTERS LIST

* 20:44  BWANY FWANKS DEMANDS SOURCE OF PHOTOS FROM ZH

* 20:48  SEN bOXER DEMANDS ZH UNPHOTOSHOP PICS OF HER BEING SHORTER THAN JOPLIN,MI         YELLOWPAGES

* 20:49 SEN CHUCKY SCHMUCKY SCHUMER DEMANDS HIS LIKENESS REMOVED FROM CHUCKY CHEESE

* 20:54 OBAMA OBJECTS TO BEING CALLED BLACK IRISH

* 20:55 SOS CLINTON OBJECTS TO BEING CALLED A MORON

* 20:55 VAN JONES OBJECTS TO BEING CALLED VAN JONES

* 20:56 MOOCHELLE NEEDS $500 MIL FOR A NEW WARDROBE

* 20:56 MOOCHELLE: MY ASS GREW WHEN I WASN'T LOOKING

* 20:56 MOOCHELLE: WOULD NOT HAVE NOTICED IF BARRY DIDN'T USE IT FOR A SHELF FOR HIS       QUINNESS

TrustWho's picture

...absolutely, the dark path. George Orwell knew. Power corrupts, absolute power corrupts ABSOLUTELY!

Robslob's picture

Time to join "assbook" and "qwitter"

TrustWho's picture

When young people learn what their parents know, (Nazis used public medical records to find Jews to slaughter) Facebook will die. When Facebook users understand "1984" and "Brave New World" and how their transparency is harming them, social networks will die.

The other side is people are sheep and love to be manipulated and humanity will go down a darker path.

Caviar Emptor's picture

I knew this would be big, really big. 

Just wait till the smaller, me-too copycats pile in for IPOs: always the least profitable, most improbable startups rack up 600%-day 1 gains (and become penny stocks within 10-18 months)

Sack will only have to pump single stocks not the whole market anymore.