This page has been archived and commenting is disabled.
The Second Dot-Com Bubble Is Raging, But "This Time Is Different"
"It's gotten pretty frothy," is how one portfolio manager describes the behavior in internet-based companies currently as signs of pre-2000 exuberance can be seen in Silicon Valley and the nearby area. As WSJ reports, home prices in San Francisco and surrounding counties rose more than 15% in the past year. Office rents in San Francisco are 23% above their 2008 peak. As SnapChat, Pinterest, and Twitter are set to join such illustrious names as RocketFuel; asset managers are careful to remind suckers investors that it's not at all like 1999 - companies going public are more mature, the leadership teams more seasoned, the business models more proven - but the "reach for growth" at all costs echoes Kyle Bass' remarks that "financial memory is no longer than two years," with even younger and more revenue-deprived companies come to market at massively elevated multiples.
Via WSJ,
"It's gotten pretty frothy," says Daniel Cole, a senior portfolio manager at Manulife Asset Management who has invested in highflying IPOs, including for Rocket Fuel Inc. The Redwood City, Calif., online-advertising company sold shares to the public last month at $29 each. They traded at $61.72 a share Friday, giving Rocket Fuel a market valuation of $2 billion, without having recorded a profit.
...
Technology and finance veterans say this time is different—and it is. Companies going public are more mature, the leadership teams more seasoned, the business models more proven. Social networks such as Twitter and Pinterest are drafting off the success of Facebook Inc., which sports a market value of $126.5 billion, or about 70 times next year's expected earnings.
But the current surge is accelerating, aided by some little-appreciated factors. Big companies are scarcely growing, and interest rates remain near zero, boosting zeal for investment opportunities in companies with high-growth potential. Moreover, a federal law enacted last year will allow startups to raise money from smaller investors, opening a vast new pool of potential funding.
"People are reaching for growth,"
...
"The big difference now, is companies like LinkedIn, Twitter, Facebook have demonstrated an ability to generate sales, and with the exception of Twitter, profits," Mr. Ritter says. In the dot-com days, "there were all sorts of companies going public that were essentially startups."
But investor enthusiasm is filtering down to younger, less-proven companies today, too. Pinterest, an electronic-scrapbook service that began testing ads this month, said Wednesday that it had raised $225 million from venture-capital firms. Pinterest didn't need the money; the company said it hadn't spent any of the $200 million it raised in February when it was valued at $2.5 billion.
The new investment values the three-year-old company at $3.8 billion, a 52% jump in eight months.
Snapchat, a two-year-old mobile-messaging service popular with teens, is considering raising up to $200 million at a valuation exceeding $3 billion, people briefed on the matter said Friday. That would be more than triple the valuation that venture firms placed on Snapchat in June, when it raised $60 million.
...
Another factor: Last year's Jumpstart Our Business Startups Act soon will make it easier for less-wealthy individual investors to back startups. Already, the law has made it easier for financiers to pool money from individuals.
Some people worry that the looser rules may end up hurting small investors.
...
As less-sophisticated investors jump into backing embryonic companies, "the odds aren't in those people's favor," he says. A lot of those companies will fail, "then all of a sudden all you have is a piece of paper to stick on the wall."
»
- 22158 reads
- Printer-friendly version
- Send to friend
- advertisements -
#strongbuy
Moral hazard m@therf@ckers. It's called moral hazard.
Russell Brand lays into bankers over moral hazard:
http://www.planbeconomics.com/2013/10/russell-brand-lays-into-bankers.html
Says the moron with a hammer & sickle as an avatar.
Mine has a touch of social commentary and irony. What's yours about?
Mine displays a cartoon character with more brains than all the believers of an idiotic system that doesn't work combined. Unless you define "work" as sticking a gun in peoples' faces and then killing them to steal their property and subsequently squander the stolen resources until this is repeated over and over until they all end up starving to death. I guess it does have a touch of social commentary after all.
Boris is like Mr. Motive avatar symbol... is, how do you say, nostalgia:)
"Predatory Capitalism ALWAYS Devours Itself"
How could it not ! ? ! ?
http://cosmicconvergence.org/?p=2973
Boris' hui was much firmer in those days, ei?
SnapChat has the worlds largest collection of amateur dick pics from husbands cheating on their unsatisfied wives. And it has no ads. Easy to see why it's worth over $3,000,000,000
I'm all in on pets.com LOLcats.com
Attention ZH admins: strikethru doesn't work :(
this time...is different.
http://www.japantimes.co.jp/news/2013/10/30/national/abe-pledges-nuclear...
areyoufuckingkidding.com
shittingabrick.org
ohforfuckssake.net
turkeyapparentlyhasnointernet.us
fuckinyouovergood.biz
areyoufuckingkidding.com is taken, but the other domains are available
Boris is hope registration for "fecalexcrementiscontacthighvelocityrotationalimplement.com" Is short and sweet, no? Please, teach how to registration of web site?
check availability here:
http://who.is/whois/fecalexcrementiscontacthighvelocityrotationalimpleme...
"Hockey-sticks"....
Watch for it.
Listen for it.
It is the key sign to get out....
I would like to start this thread by observing that Wall Street's darling, Amazon, for over a decade+ has never realized a profit.
Last week was no exception.
Shhhhh!!!! One slip like that could cause the Great Pumpkin to pass you by.
They survive by taking a loss on every transaction. Plus free shipping.
Who buys Amazon's data? that's a goldmine -
Doggone it, they know I bought a coffee maker last year!
"They survive by taking a loss on every transaction"
But they make it up on volume.......
Amazon is probably the largest NSA reporter out there now that you mention this. Real people ordering real stuff to their real addresses. data capture gold.
southerncomfort - exactly, Gold. it makes you wonder where their support comes from to enable them to live with miniscule profits and massive costs.
They lost $40 million on sales of $60+ billion. It's a rounding error.
They are operating more or less breakeven, as a strategic decision.
Compared to other companies that accumulate a cash hoard they don't know how to invest, Amazon continues to see opportunities to invest.
There are lots of crap, hype, fraudulent companies out there. Amazon isn't one of them.
You may not like them, or what they do, but they do what they do for a reason, and those reasons appear sound from a business perspective.
Losing money is a 'sound business perspective'? And obviously Amazon doesn't know "how to invest" if they can't turn any profit from their investment. Even someone who buys a bank CD or buys US T-bonds generates more profit from their investment than AMZN.
Can't? Or won't?
Is it really your position that Amazon is without a choice in the matter?
That they absolutely could not possibly choose to forgo some expansion / strategic investment one of these quarters and turn a profit?
What makes you think that?
You know I'm not a huge fan of these guys but it strikes me that corporate strategy gets it coming and going from the cynical crowd:
- plow back every dime from of operating cash (plus more cash from your equity raises) into expansion (and creating jobs) and you're "unprofitable - a bad investor".
- hoard cash in a pile and you're unimaginative and screwing shareholders
- pay it all back in dividends and you're a rent-seeker, a shorter term thinker, not building something for the long haul.
So who's your goldi-locks CEO, pitz?
Has anyone done an analysis to see if they are cash flow positive? One of their other problems that may have been in a story on ZH is that they are no longer cheaper than a lot of local retailers. Sometimes local is cheaper and I think that trend is increasing.
Its not enough to just be cash flow positive. Amazon must also generate an economic return (ie: earnings) when all of their expenses are included including longer-term expenses such as amortization of stock options, amortization of investment in physical plant/equipment, etc. is taken into account.
If they can't over the long term, then its pretty simple, Amazon is destroying shareholder value. And, over the longer term, amounts to little more than a Ponzi scheme.
"That they absolutely could not possibly choose to forgo some expansion / strategic investment one of these quarters and turn a profit?"
Another person who doesn't understand basic accounting I see, and has fallen for the nonsense of the Amazon pumpers that Amazon is somehow profit-less because they're 'investing'. Profit is independant of re-investment or investment in the business. A firm can be an aggressive investor and still have earnings. If such investment is accretive to the business, then earnings will grow. If such investment is dis-accretive to the firm, then earnings will fall. Amazon can't even generate earnings on its previous investment, so why should anyone trust that they'll be able to generate earnings on their future investment?
Another person who doesn't understand basic accounting...
Profit is independant of re-investment or investment in the business.
Words mean whatever you want them to, I guess. Whatever.
williambanzai - like I said to southerncomfort, you have to ask where is their support coming from. They have the core people who took them public and then you have Bloomberg. Talk about pump and dump for the tech industry. Bloomberg is very careful who they give publicity to and when they give publicity they are all in.
Recent Bloomberg darlings. Facebook, Twitter (never mentions Posterous, Tumblr), Kickstarter (never mention indiegogo), AMC/Breaking Bad (completely over the top), Amazon (never mentions Barnes & Noble), Linked In (never mentions Xing)
And then you have companies Bloomberg has been appointed as hit-man. The most obvious example being Blackberry. Bloomberg have been describing Blackberry/RIM as being on "deathwatch" for over 2 years and it all started when Blackberry refused to open up its encrypted messaging service to the governments in countries where its products were sold.
LOL at people who will invest in twitter
the technology behind the core of twitter is bigger than the company
You've got that right.
And the thing is - they open source a ton of their infrastructure.
Twitter's internal federation-of-micro-services architecture is widely discussed and widely copied.
I don't see the investment case for owning twitter shares; I think whatever makes money for twitter will essentially kill it. Death by suckage.
But as a corporate player in the software world they seem to have an excellent reputation.
Okay so that's maybe worth $1bn, but certainly not $10.
So, given the current valley "acqui-hire" metric of around a million per employee, then given ~1000 employes, $1B is about right.
Of course this assumes "no users" - now twitter may appear not to fall in that category, but if they started showing the slightest hint of MySpace trajectory... I think everyone in the US who will ever be on twitter is already on twitter. And they may well start to use it less...
...so yeah. MySpace.
Extremely overvalued given most firms receive thousands of resumes for each position they advertise. There's no shortage of tech talent to build as many new firms as necessary. There's just a shortage of profits to support it all.
Um... no, that's not quite right.
The short answer is that acqui-hire valuation is in some way due to with the value of the self organized teams, as opposed to just a mass of programmers.
Another aspect is that talent and skills are very, very unequally distributed. The median developer, inserted into a cutting edge team, will create more damage than progress.
There is plenty to be cynical about - it's just different than what conventional wisdom would have it.
For informed cynicism: read Venkatesh Rao.
I work in Tech Startups in London. The skills of the average developer here in startups, are not so great.
[Software engineering is my area of expertise, with about 16 years experience in 3 countries and about 6 different industries having worked in all positions all the way up to the highest level in the career - Technical Architect].
In fact the single hardest type of personnel for startups to find around here are developers, especially the generic hacker-type who knows a bit of everything and can learn all the rest which is the ideal CTO of a startup.
Maybe it has something to do with the fact that if they so wish good developers can just work as freelancers (making about $600/day or, if freelancing in investment banks, about $800) rather than go into startups for higher risk and to get paid peanuts in comparisson (not to mention that half the business models I hear about are a bit of a joke).
I've met and talked with Google and ex-Google and "cutting edge" they are not (brainwashed into being pretentious, yes, expert, not really).
So your "cutting edge team" theory does not match my experience in real life of being inserted in exactly such an environment and having the necessary expertise in the field to actually evaluate how good a software development team is.
Acet, I don't want to get into my credentials except to say that while I don't sport a beard, if I did, it would be a grey one. And I don't really want to get into what I do. Or brag about my locale, much as that's tempting. Locale could have something to do with our different experiences. (I don't know any "technical architects"; I think we call them "director of product"...) I love where I live and work, but we don't have a big financial industry to skim the cream of talent for consulting gigs.
My work allows me to talk to, and understand the skills, development environment, etc, of a great many teams every year. Yes, there are a bunch of crap startups. I've met them. I don't work with them. ;) I gravitate to those that are tackling interesting, hard problems, and there are definitely quite a few of those.
Can't honestly say I know a bunch of ex Googlers. One I do know, and whose books I read, seems pretty damn sharp to me. I do interact with programmers at the local startups who attend the local users groups. I interact with them in other settings as well. I deal with very top notch people. My experience e.g. with twitter and ex-Twitter people - including a very key developer there who was responsible for significant aspects of the new back end - is excellent. (Read his book, too.)
Risk tolerance and programming ability tend to have low correlation from what I can see. Tough to recruit some people from the big corporate campuses. Others are eager to take below market salary for the promise of a big reward. One guy I talk to regularly went from hot early stage startup, to more established startup, to corporate job, and back to startup, as personal circumstances dictated or allowed. Another guy, brilliant, who worked for me at a large company, would love to get in to the scene. Pity about his child support. He'll be sticking with the steady job, thanks.
The "acqui-hire" phenomenon is actually improving circumstances for would be risk takers; it sweetens the downside scenario. (For good teams, anyway.) I know a team who took that bus recently - business plan didn't work out, but they got a really nice payday and a gig they're enthusiastic about, and they get to keep working with each other (at BigWebCo.)
So while I don't doubt your observations and representations, mine are somewhat different, and that itself doesn't strike me as terribly surprising. As to the difficulty hiring truly good developers, I think we're in violent agreement on that score.
I only pointed my credentials to show that I've been around long enough and far enough in IT to be a good judge of techical skill (just don't ask me about sales and marketting).
My point being that while there are some exceptional people out there in my field, they are exceedingly rare and and no more likelly to be in startups than any others (as you said, risk-taking has low correlation with skill in this field). On the other hand, there are far more people whose sense of self worth far exceeds their true skills, and I wouldn't be at all surprised if they're attracted to the perceived glamour of Startup world.
In general, techies tend to be a closed, unexibitionist (or maybe just exhibitionist in things that are obscure to most people) bunch and the very best are often towards the autistic end of the autism spectrum, so in my opinion the amount of hype and bullshit in the Startup world nowadays (the ridiculous term "Rockstart Coder" being a fine example of that) would attract not the best people but the most pretentious or naive (read: inexperienced) ones. [Certainly I remember how innocent and naive I was when I was first drawn in to Startups during the first Net boom]
Hence from the point of view of a technical person looking at the level of technical skills, a valuation of $1 million per team-member seems exceedingly high too me.
I believe it's more likelly that what's really going on is that thanks to the [economic concept of] expert advantage, those with expertise in the field are creating wildly unrealistic evaluations of skill and ability in the mind's on non-experts. As I said, Techies are not an exhibitionist bunch, and in our field our technical accomplishments (which are often obscure for non-techies) are proof enough of our skill (think Linus Torvalds), so the self-promoting Techie is much more likelly to be making up with bluster for lack of technical skill.
True, my experience comes from London's Startup world (which suffers from the British problem of overemphasising a book's cover rather than its contents), so take it with a pinch of salt.
Acet, thanks for the response; I'd love to continue the conversation some time.
BTW, being in the London finance scene, do you follow Martin Thompson?
Love the whole "disruptor" thing. Cheers...
Why are most firms that advertise software positions still getting thousands of resumes and only bothering to interview but mere handfulls? Doesn't sound like there's any shortage of people with the skills on the market if firms can be that selective in who they bother to interview, nevermind hire.
Good developers making $600 a day as freelancers? Are you silly?
Actually it's about £500+ for a senior dev outside finance and £600+ in finance (more in investment banks and specialized areas like high-performance computing).
These are London rates and yes, I was earning more than than freelancing in Investment Banking before I left to start my own company.
"And the thing is - they open source a ton of their infrastructure."
Which just makes it easier for the universe of competitors to set up shop. Dumb business move.
"Setting up shop" is the least of potential worries for any potential twitter competitors.
Network effects. Metcalfs law. Reed's "sneaky exponential". Etc.
Twitter has no competitors to speak of.
And they don't have to worry about dumb business moves, because, really, they have no business. I'm not going to defend them on that point because they have no defense that I can articulate. I've tried, but I can't keep a straight face.
That said, there are benefits to open sourcing some of your infrastructure; other companies as well as volunteers are now essentially contributing features and bug fixes to twitter for free.
Also, the good and valuable consideration which comes from being seen as an open source contributor. Pays off when hiring rock star talent.
A technical overview of the twitter stack.
Wonder what Tyler Durden's ZH is valued at... Maybe a month's worth of Fed treasury buys?
My bet is that ZH is profitable and is being operated in run-off mode, essentially.
I'm disappointed that there weren't more investments made to evolve the property.
oops, I wrote pretty much the same thing as mayhem.
so, let's examine this. where is the real value in Zero Hedge? is it the cavalier, devil-may-care attitude of its commentors? probably not. these bums can just take their cursing and anger to Silver Doctors, though the slumming might be a bit distasteful.
how about the Tyler team? this masterful and monumental work could not possibly be created by just one financially insightful guy with his nose to the grindstone all day long. I guess the big question is just how much $ would it take to make the Tylers play ball.
Hot potato hot potato. ...pie
DUCK......DUCK.......DUCK......GOLDEN GOOSE IS DEAD !
Yes, ZH Sheep, dont buy stocks, keep buying your gold and silver coins and burying it in your backyards waiting to someday trade it in for a loaf of bread when the world collapses. keep complaining about froth and bernank-bucks. continue getting your rocks off listening to toolbags like peter schiff while they scam you of all your money. to da moon bitchez!!!
I'll be buying TWTR and FB and raking in the dough while you guys continue your circle jerk of misery.
Of course its a bubble, but who gives a flok.
I watch Idiocracy couple of days ago.
Good stuff.
Not sure that buying metals constitutes a circle jerk of misery, but if that is your definition then so be it.
Just for the record I didn't down arrow you. I am of the mindset that there is "money" to be made elsewhere as well, however I won't touch the aforementioned with a ten foot pole
who gives a flok? the people who have no interest in living in a system run by criminally insane psychopaths.
but are scared of bitcoin and anything modern except comment blogs
LOL, right on cue here comes the dot.com II bubble spokesperson and prominent ZH gold and silver basher/troll.
Come back when they crash we'll talk then.
Since you have such an obsession with "getting rocks off" I'll tell you what I'm going to do.
I'm going to save your post and when the market inevitably crashes, as you concede it will,
I'm going to wank to it like a 15 year old on meth.
Hell, if my fellow ZH posters are amenable maybe we'll even circle jerk to it.
Ummm....you do know that's not the typical ZH rallying cry?
so.... I'm putting you down for a no on the cj?
mayhem_korner.... got it.
circle jerkin bitchez!
that red kittys gona get sooo spanked
Corruption always pays better than working for a living and besides, everyone is doing it! Don't you worry about it. Pretend you are making money and not ultimately working to liberate it from someone else's pocket.
Interesting that Spawn of MDB is red; must be a recessive gene in the mix.
I personally like AAPL, not at current levels, but would go long when it gets back up to $700 -- my price target is $7,000 by December 2014 -- rumors are out about a surprise release of the iPhone 6 with a stunning new range of case colors and a screen size almost as big as last year's Samsung models. Somalian micro-caps are looking good, too: double your dough overnight, they will leave TWTR in the dust. TWTRQ is a different story: 500% overnight. I heard that Spectrum Information Technologies and Mercury Finance might return from the dead. Go long zombie stocks. Will post if I hear anything new.
Keep your powder dry and keep your twitters and tweeters straight.
dot.com, dot.schlong
here's a career path that's literally ON FIRE!
http://ch.tbe.taleo.net/CH07/ats/careers/requisition.jsp?org=TESLA&cws=1...
Have a BS money loosing company?
Now is the time to IPO it,
So much money being thrown around. It bubbly, just like the DOT COM days.
...I think they are still using.. ahh nevermind
I'm launching tipstofixobamacare.com tomorrow and going public on Friday. Need some coin for the week-end.
Sounds like a winner.
$250B valuation, easy.
I'm in.
I'm sorry but I've been reading many economics Nobel prize awardees and what is a bubble?
Don't worry. The FED controls the software to the market indexes. Just buy the fucking all time high. Be happy.
BitCoin Last price:$213.1400
Who uses Mt. Gox prices nowadays?
move your IRA into SnapChat now!!
Twitter takes money for sponsored tweets, one guy I know deep into the social media utilization spent $800 over a weekend during a big convention and got his money's worth from it. whether that will translate into profitability ???
How do you price the payment transfer protocol for the internet? Only 2.5M!
Buy a bitcoin and do yourself a favor.
QQQ - Get your FREE money here !! According to the Fed (Bernanke and now inflationary Yellen) Banks get the QE... US citizens will get a guaranteed rising QQQ.
For a limited time only..../ unitl 2016...get your free money here !!
Yeah I have to agree with all of the statements about the financial memory. I can show you another example - bidding war that happened with one house in Toronto. People are not rational, and would spend their money in the most extraordinary ways.
Here's a link to a speach given by Kim Dotcom at a megabreakfast meeting here in NZ. He expounds on the real reason for the takedown of Megaupload and how the great spying mery-go-round keeps everything legal.
http://vimeo.com/69229022?autoplay=1