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The Silicon Valley Top

Tim Knight from Slope of Hope's picture




 

From Slope of Hope:

Late last year, I paid a visit to Josh Brown ("The Reformed Broker") and had a pleasant chat. I went to his blog a week later and put up a comment, shown below, stating my belief that Facebook's IPO day would mark an important turning point in the market.

I forgot all about this, but totally by chance, a few days ago, I re-visited that comment and I saw that someone had put in a snide reply.

0409-valleybubble

Errr, actually, Facebook only goes public one time, so I'm not sure how I could make such a declaration "a lot". It's a specific day, and I do believe that Facebook's IPO will be a seminal event. There's only one Facebook, and it has only one IPO. It's not like there are twenty other Facebook-equivalents waiting behind it, and because of the public's fascination with this offering, I do believe it'll mark a tipping point.

 


 

It got me to thinking, though, about how many data points there are pointing to a general top in everything related to the Silicon Valley. I know this Valley and its culture intimately, and I live right in the heart of it. I could throw a rock and hit Zuckerberg's house from my back yard, and I drive past the homes of tech billionaires on almost a daily basis. This isn't 1999 all over again - - - a lot of things have changed since then, so the texture of this bubble is different - - but it's a bubble (both cultural and financial) nonetheless.

I offer the following anecdotal tidbits:

First, Bravo (home of the "Housewives" franchise, about which I wrote this oh-so-cool post) is going to launch a reality show about the Silicon Valley. This reminds of of how Richistan was published at almost precisely the top of the financial bubble (practically to the minute). 

0409-reality

Next up is the billion (yes, billion, with a B) dollar acquisition of startup Instagram by Facebook earlier this week. Remember how people used to joke at the huge valuations companies were getting in 1999, even though the target companies had no profits? Well, Instagram is different. It doesn't even have revenue. That's right - - the P/E and P/S ratios both yield errors on any calculator you dare try. (I guess this is the kind of insane exit Color.com's investors were hoping for.....the amazing thing is that just a few days before this billion-dollar acquisition, Instagram got a fresh round of VC funding at what was considered the lunatic valuation of half that amount).

 

0409-instagram

And, of course, there's Apple. The media is saturated with breathless reports about how Apple may be the world's first-ever trillion-dollar market cap company.

Of course, this isn't the first time we've heard this about any particular firm (cough, Petrochina, cough, Cisco, cough), and these musings typically happen, oh, just about the time that the firm in question starts to head south.

I have no idea what on Earth could slow down the Apple juggernaut, but for AAPL to simply stomp ahead and tag a trillion dollars in value now that these predictions have been wholly embraced would be, shall we say, atypical.

0411-forbes

Whether or not the NASDAQ has new highs ahead of it remains to be seen. All I can say is that, considering the extraordinarily deep and pervasive saturation of all-things-Silicon-Valley in the world at large, it just seems to me that a major contrarian event is at hand.

Dennis Kneale top, anybody?

 

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Thu, 04/12/2012 - 07:13 | 2337109 QuietCorday
QuietCorday's picture

I have a deep cognition schism with a lot of tech and digital. I have been working in and around digital media for over a decade, and I have to say there is something really bizarre about the whole industry.

So much of the thinking and action seems to be devoted to utter froth and whimsy: facebook, twitter, games apps etc. Aside from that, so much time and money pours into gubbins that seems a bit shallow or, at least, ludicrously consumer-focused tat.

Yet, if you want someone to create an IT system for a government department, write software to handle medical records, create a CMS that can handle huge numbers of pages, or you want to use invoice and purchasing software, you will pay millions/billions and the result will be utter pants, like almost Heath-Robinson style 1994 but in a modern colour way and might not even work. You can't really buy the kind of powerful home finance software you should be able to; there is only one software product I know that can handle the composition of documents of over 100,000 words and it is a bit glitchy.

You wouldn't believe the state of some of the systems I have come across in the last five years in really quite vital areas of industry, government and healthcare in Britain -- in  some cases, you would be better with recording information with a pen and notebook. Yet I can download a cat piano onto my phone.

I reckon the problem with so much of the tech industry is the brains and ideas come from people, usually young, who have no real experience of the outside world and the needs of businesses and people in a wider sense. So we get facebook, but have to deal with "mobile desktop solutions" at work that crash every five minutes.     

Thu, 04/12/2012 - 03:25 | 2337013 Clowns on Acid
Clowns on Acid's picture

Interesting that MSFT top was when they were sued by DOJ for browser based monopoly.

AAPL has just been sued for monopoly pricing by DOJ...just sayin'

Thu, 04/12/2012 - 02:38 | 2336965 SAT 800
SAT 800's picture

I agree with the poster. Since I already took my profits from the Stock Market, I find this easy to do. Should be fun laughing while the muppets implode.

Thu, 04/12/2012 - 00:30 | 2336875 El Oregonian
El Oregonian's picture

There are some things not worth the time to spend trying to figure them out. Let the insane, the idiots, and the value chasers seek out each other. I'll stick with my PM's

Thu, 04/12/2012 - 00:24 | 2336866 adr
adr's picture

So how much are you worth?

$2.4 billion.

How much does your company make?

Ha, my company doesn't make money.

Well you bring in revenue right?

Nope, give everything away for free.

And you are a billionaire?

Yep, gonna get aother billion by next year.

How?

Stock, duh. Some guy got me this angel investor group. Gave me like $250 million when I just had a business card. They get stock and I get to sell shares. Some dude invested like $20 million for 1% of my company. Next thing I know that bald dude on CNBC said my company was valued at $15 billion. Then Google offers me like $2 billion for 10%. Of course I took it, got me a fuckin Lambo dude, 20k sq ft house. Not bad for a business card and no business plan. Whatcha lookin for man?

My fucking gun.

Thu, 04/12/2012 - 00:17 | 2336858 Cursive
Cursive's picture

Do you remember liesure suits?  Macrame?  Pet rocks?  Harvest Gold?  Adults on roller skates?  For that matter, do you remember the 21st night of September?  In a decade, Facebook will be forgotten as the weird fad that it is.

Thu, 04/12/2012 - 02:54 | 2336971 Ratscam
Ratscam's picture

Feels like back in 2000 when www.quepasa.com just had a business plan without a functioning website and IPOed for 60 million .
They never went live with their website. Que Pasa?

Thu, 04/12/2012 - 00:11 | 2336853 palmereldritch
palmereldritch's picture

So the rumours that there is a Zuckerberg cloning program are in fact true!

Wed, 04/11/2012 - 23:33 | 2336796 rosiescenario
rosiescenario's picture

Been around SV for many years....it used to be that the very best tell for a company's top was when they put up some sort of huge edifice....Borland had to be the classic when their building was going up in Scotts Valley...as each floor was added their stock took another exponential move south. Nortel also cratered after they put up their building in Mtn. View. If AAPL's new CEO announces some sort of building project, then that will be it for them and this entire market.

Thu, 04/12/2012 - 06:27 | 2337076 QuietCorday
QuietCorday's picture

Skyscraper effect + dying empire edifices. As soon as the tallest building goes up in a city, the country begins to crash + imperial powers start building huge buildings just before they leave a country.

I reckon this is the SV version.

Thu, 04/12/2012 - 00:10 | 2336852 algol_dog
algol_dog's picture

Boreland, HA! I used to do service calls for printers there in 1990. I'll never forget the first time I went in that building. There was a huge waterfall right in the main lobby. I got a tour by my escort, pointing out the living quarters (for overnight stays), laundry facilities, sport recreations, etc., etc. It was truely unbelievable the amount of money that was thrown in to that place. Wasn't much later that they stopped paying there service contract bills and I never heard from them again.

Wed, 04/11/2012 - 23:13 | 2336764 williambanzai7
williambanzai7's picture

PETS.COM DOG SAYS...

Wed, 04/11/2012 - 23:06 | 2336756 chrispycrunch
chrispycrunch's picture

Puts old meaning to the phrase 'but it's different this time '.

Wed, 04/11/2012 - 21:05 | 2336564 hack3434
hack3434's picture

So sick of this "tech" (read ever useless iJunk/Narcism feeders) bubble. 

Wed, 04/11/2012 - 21:17 | 2336584 Freddie
Freddie's picture

Facebook is for old people and retards who think they have a life.   Wow - look at me on Facebook. 

Wed, 04/11/2012 - 21:51 | 2336636 derek_vineyard
derek_vineyard's picture

facebook is for poor asian , african and south american countries

Wed, 04/11/2012 - 21:57 | 2336659 tamboo
tamboo's picture

facebook=cia/mossad/rothschild uberjoo money launderers.

caution!: your 401k/tax $ @ work!!!

Wed, 04/11/2012 - 20:30 | 2336504 Eric L. Prentis
Eric L. Prentis's picture

Tim, like the way you think. This presentation is well thought out and presented well. The financial elite’s misdirection at market tops is well documented, this time is no different.

The worst lie that is ever meant

Is the truth told with bad intent.

Wed, 04/11/2012 - 20:53 | 2336544 SilverTree
SilverTree's picture

HEY, do you all remember what it was like to be young and free?

http://youtu.be/-_CSo1gOd48

Wed, 04/11/2012 - 20:26 | 2336496 tom a taxpayer
tom a taxpayer's picture

Silicone Valley Top, yes. But will the Top be Facebook's IPO or Apple's new marvel:

New Apple iBoob Breast Implant Set To Explode!

http://christophreilly.hubpages.com/hub/New-Top-Secret-Apple-Product-Cou...

 

Wed, 04/11/2012 - 20:13 | 2336471 LowProfile
LowProfile's picture

Shark jumping to commence in 3...  2...  1...

Wed, 04/11/2012 - 19:36 | 2336363 DeadFred
DeadFred's picture

What's a trillion dollars nowdays anyway?

Wed, 04/11/2012 - 20:34 | 2336511 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Tell silicon valley to keep chunging for a little longer so I can get a job elsewhere. Then let it crash and I can laugh at the overpaid, coddled programmers who will be unemployed.

Thu, 04/12/2012 - 00:57 | 2336903 GFKjunior
Thu, 04/12/2012 - 03:29 | 2337014 Clowns on Acid
Clowns on Acid's picture

GFK - really good!

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