BloombergView posted:

Tech Bubble Won't Burst In 2015. 2016?

It’s hard not to think about it as we ease into 2015, given that signs of froth have been building in tech since ever since the end of 2010, when acquisition prices and private company valuations started to soar. After four years of steep gains - of companies such as Salesforce.com hovering near all-time highs without ever turning a profit, of the Nasdaq creeping up on 5000 and at least one private company nearing a $25 billion (or more) valuation - shouldn’t something give?

All cycles being equal, of course we’ll see prices come down, eventually. But I don’t think it will happen for a few more quarters yet.

I’ve watched two crashes now - the end of the dotcom boom in 2000 and the credit collapse of 2008 - and one thing that was true of both is that a chorus of observers and analysts and Smart Money spent years saying that the tech sector was overinflated before anything actually burst.

In fact, the knowledge that valuations were hitting unsustainable highs seemed only to fuel the frenzy for venture firms, shareholders and banks to do deals at ever higher prices. That, in turn, kept those bubbles inflating well beyond the boundaries of rational pricing and investing.

As ex-Citigroup chief executive officer Chuck Prince said during the last go-round, offering all of us a permanent memento of a certain type of CEO, someone trapped by the forces of irrational exuberance, someone less a corporate steward and more a suitor at a cotillion: “When the music stops… things will be complicated. But as long as the music is playing, you’ve got to get up and dance.” Or as Daniel Cohen, a venture investor recently told me, “We know that the question is, 'When does the cycle turn?' But until then there’s lots of money to be made.”

It’s clear that there’s money to be made in Silicon Valley right now, and no one wants the boom to end.

The effervescence that dominated the final few years of both of the previous market booms was largely due to low interest rates, which, perversely, pushed piles of cash from around the globe into asset classes yielding the best return. The lower the rates, the loftier the inflation. That’s also where we find ourselves today.

Tanya Beder, a former hedge fund manager and founder of the asset advisory firm SBCC, describes her outlook for 2015: “Right now the global economy is driven by policy, not fundamentals. And that has made the U.S. the least worst place to invest.” The U.S. recently posted higher-than-expected GDP growth at a time when China’s growth is slowing, the Euro zone is struggling and Japan has dipped into a recession. Thanks to low interest rates, investments with some of the highest returns include private companies and tech, along with risky fare like junk bonds.

Take a short drive up and down the venture enclave of Sand Hill Road in Menlo Park and you’ll experience the global chase for higher returns first hand. VC firms are flush with cash, thanks in part to the equities bull market. Real estate prices are soaring. (Beder says she pays twice as much for her Sand Hill digs as she did for prime Manhattan real estate.) Guys from private equity firms and sovereign wealth funds are getting more active in the venture world. Lawyers are working to help startup employees cash out and sell their equity to private buyers. It's all a lovely, lucrative, frothy stir of money, ideas, and ambition.

The economists at Goldman Sachs seem to believe that Beder’s “best of the worst” scenario for the U.S. will last at least another year. They predicted in a recent note that the Federal Reserve won’t raise interest rates until next September, and until then the U.S. recovery will far outpace Europe's efforts to bounce back. According to economic forecasts housed on the Bloomberg terminal, the U.S. will have 3 percent GDP growth in 2015 and a 5 percent unemployment rate, compared with GDP growth of 1.2 percent and an unemployment rate of 11.4 percent for the Euro zone.

Goldman also predicts that oil prices will stay low and act as a stimulus for consumer spending. The oil trend should also bring down core inflation numbers, give central banks around the world room to keep rates low and force investors to continue picking off higher-risk assets in search of rich returns.

I think we have another several quarters of dramatic growth left for Silicon Valley and the broader world of tech stocks. Still, the next bubbly stretch will be dangerous for acquirers and investors, and not just because they'll be buying at lofty prices. It’s because if it winds up being the tail end of the cycle, those who arrived late to the dance may find themselves in trouble when the music stops and they discover everyone else has left the ball already.

Main Paineframe posted:

yeah, but even the 50% he got wrong is kind of understandable considering wi-fi hadn't even been invented yet. even aside from the whole "march of technology" thing, it took some fairly non-obvious paradigm shifts to get the things we have today. a full ten years after he'd written that, blackberry dominated the smartphone market and laptops were still clunky, heavy jokes (netbooks weren't even around yet at that point)

then two years after that, steve invented the iphone, and then the next year he went and invented the macbook air, and all of a sudden the entire electronics industry was making "useful consumer portable computing" their number one priority. technology isn't really what kicked off the current portables boom so much as it was someone deciding to revolutionize the industry

Main Paineframe posted:

"portable" laptops in 1995, lol. guess wikipedia doesnt have any pictures of what passed for portable electronics back then, because he was one hundred percent right about no one wanting to read books on them

Wild EEPROM posted:

remember umpcs? yup

Main Paineframe posted:

yeah, but even the 50% he got wrong is kind of understandable considering wi-fi hadn't even been invented yet. even aside from the whole "march of technology" thing, it took some fairly non-obvious paradigm shifts to get the things we have today. a full ten years after he'd written that, blackberry dominated the smartphone market and laptops were still clunky, heavy jokes (netbooks weren't even around yet at that point)

then two years after that, steve invented the iphone, and then the next year he went and invented the macbook air, and all of a sudden the entire electronics industry was making "useful consumer portable computing" their number one priority. technology isn't really what kicked off the current portables boom so much as it was someone deciding to revolutionize the industry

Condiv posted:

the only good techie is a dead techie


tl;dr, bubble's bursting in 2015, gtfo asap

Main Paineframe posted:

"portable" laptops in 1995, lol. guess wikipedia doesnt have any pictures of what passed for portable electronics back then, because he was one hundred percent right about no one wanting to read books on them

computer parts posted:

my dad had powerbooks since like 2002 and they were fine, though they cost a shitton iirc

Sham bam bamina! posted:

what's a bubel? is it like a bagel or somtehing?

Condiv posted:

bubel is polish for dud or trash goods

Condiv posted:

bubel is polish for dud or trash goods

Condiv posted:

tl;dr, bubble's bursting in 2015, gtfo asap

Notorious b.s.d. posted:

the lords of capital

Soricidus posted:

i had a z88 in the early 90s and that was fine too, it even took regular AA batteries unlike crapple muckbooks that you can'#t even change the battery on

Notorious b.s.d. posted:

this article suggests the bubble will pop when interest rates go up and non-joke investments become available to the lords of capital. interest rates can only be raised and investment opportunities can only occur if we see strong economic growth.

tl;dr: a functioning, growing economy in the u.s. will be what pops the idiot tech bubble

Wild EEPROM posted:

remember umpcs? yup

Progressive JPEG posted:

Cliff Stoll is super cool, if you buy one if his Klein bottles he stores them in a crawlspace in his place. He used to just crawl in there to get em out to be mailed but it's rough on his back so he built a radio controlled forklift robot with a camera on it to get them out

H.P. Hovercraft posted:

Beast of Bourbon posted:

i had to roll over my mom's checking accounts and combined all of them and got wells fargo to give me the super premiere checking account and it has an awesome .11% interest rate!!

Notorious b.s.d. posted:

for perspective, a hedge fund typically charges 2% for the active management of the sharpest financial minds on earth.

Notorious b.s.d. posted:

the government's inflation estimate is at 1.7%.

it works out that you are paying wells fargo 1.56% of your assets every year just to not lose your money. for perspective, a hedge fund typically charges 2% for the active management of the sharpest financial minds on earth.

retail banks now charge 3/4ths as much as hedge funds

Pinterest Mom posted:

i guess if you define "sharp minds" as "managed to convince people they should be charged 2% to get returns that are worse than the index", that's a defensible statement to make

duTrieux. posted:

so, under the mattress then?

Elder Postsman posted:

lmao if u didn't join when it was still free

FrozenVent posted:

lol if you're keeping your emergency fund in a 5 year cd you're doing it wrong

Pinterest Mom posted:

i guess if you define "sharp minds" as "managed to convince people they should be charged 2% to get returns that are worse than the index", that's a defensible statement to make

Mido posted:

*shakes duTrieux's av*

my nigga

have u tried Bitcoins

Notorious b.s.d. posted:

the government's inflation estimate is at 1.7%.

it works out that you are paying wells fargo 1.56% of your assets every year just to not lose your money. for perspective, a hedge fund typically charges 2% for the active management of the sharpest financial minds on earth.

retail banks now charge 3/4ths as much as hedge funds

FrozenVent posted:

uh the money in a hedge fund is also subject to inflation also the bank isn't charging you inflation

are you a bitcoiner by any chance?