A month ago [6] 24-year-old Snapchat CEO Evan Spiegel gave global sheeple investors a glimpse at the reality in Silicon Valley's and how the second tech bubble will burst (via his comments from 2013). Overnight he stepped up the rhetoric, as ReCode reports [7] - itself in the midst of a stock-only buyout by Vox - Spiegel warns we are currently living through a tech bubble and that it’s a matter of when, not if, the tech bubble will burst. "People are making riskier investments and... there will be a correction," he warned, placing tha blame squarely on The Fed's shoulders, explaining that the bubble is being fueled by an "easy money policy" and low interest rates - that may not last much longer.
What Spiegel said in December 2013: [6]
Fed has created abnormal market conditions by printing money and keeping interest rates low. Investors are looking for growth anywhere they can find it and tech companies are good targets - at these values, however, all tech stocks are expensive - even looking at 5+ years of revenue growth down the road. This means that most value-driven investors have left the market and the remaining 5-10%+ increase in market value will be driven by momentum investors.
At some point there won't be any momentum investors left buying at higher prices, and the market begins to tumble. May be 10-20% correction or something more significant, especially in tech stocks.
More importantly, Spiegel brings up an absolutely critical point for the second tech bubble fueled by social-media stocks: there simply is not enough ad spending dollars in existence to support the gargantuan market caps.
Total internet advertising spend cannot justify outsized valuations of social media products that derive revenue from advertising. Feed-based advertising units will plummet in value (in the case of Twitter, advertising spend may not move beyond experimental dollars) similar to earlier devaluing of Internet display advertising.
And now, [7]
Evan Spiegel isn’t afraid to say that we are currently living through a tech bubble, even if he and his Los Angeles-based company are taking advantage of it. The CEO of the popular messaging service said on Tuesday that it’s a matter of when, not if, the tech bubble will burst.
“I think that people are making riskier investments and … there will be a correction,” he said on the first night of the Code Conference in an interview with Kara Swisher and Walt Mossberg.
“[I]t’s definitely something we factor into our plans,” he added.
The full interview is enlightening - it appears 'they' know it's just a matter of time...
