Dotcom Bubble 2.0

paddyrg

Many of us remember the first dotcom boom and bust, which took some serious scalps from institutional investors as well as many private ones (my friends included). Anyone remember Marconi?

Anyone with eyes can see it's happening again - IPOs of companies that have no business model despite being popular for 5 years, where every customer is a cost not a revenue stream, yet these customers are being valued at hundreds or thousands of dollars each. Instagram was bought for $1Bn and loses money. The guy who owns snapchat just turned down a $3Bn cash offer saying he thought his app (which losses money, remember, and is copyable) was worth more than that (I suspect he'll regret that in a couple of years). Valuations are insane and overheated.

A billion is a big number, people bandy it about interchangeably with million, but remember this - a million seconds is 11 days, a billion seconds is 31 years. It is a huuuge number. Someone offers you a dollar a second for 93 years for something you knocked up and is very simple to reproduce, you bite their hands off, but greed is ruling and running rampant. And nobody in speculator world is calling people out on it as long as they can make a quick buck on the launch before it's sold on to idiots and fund managers with a nice bonus and week at some special conference.

Problem is our pensions etc are invested in funds made up from a lot of tech-exposed stocks. Twitter going beak up will damage your grans pension and yours. Be extremely careful around social media exposure in your portfolios, the stocks and markets are playing fast and lose with share prices completely unrelated to underlying value. Crash is inevitable, it's when not if.

grey_gym_sock

there are always some individual stocks which are crazily overvalued, and will come crashing down to earth in due course.

the dotcom bubble was about the market as a whole, especially tech stocks, being on a crazily high valuation. the US is perhaps a bit expensive right now, but nowhere near the excesses of the dotcom era.

e.g. the schiller PE ratio (like the PE ratio, but based on the average of the last 10 years' earnings) is perhaps as good a simple measure of value as you'll get, and that is currently at 25, compared to an average of 16, and a dotcom peak of 44. click for graph.

there are even some big tech stocks paying decent dividends now!

Freecall

I agree.

Participants in all bubbles expect to get out before they burst and some will do so, having made a good profit.

The problem is that even those who do not participate can end up suffering in the resulting decline when they ultimately burst, as they must.

IronWolf

paddyrg wrote: »

A billion is a big number, people bandy it about interchangeably with million, but remember this - a million seconds is 11 days, a billion seconds is 31 years.

Thats a cool little fact

I agree, some companies just have ludicrous valuations, but the advantage of investors irrationality is that they often sell things off too cheap as well.

ColdIron

paddyrg wrote: »

A billion is a big number, people bandy it about interchangeably with million, but remember this - a million seconds is 11 days, a billion seconds is 31 years.

Indeed, and just to round this off a trillion seconds is over 31,000 years

Another way of looking at it is a million seconds is a nice holiday, a billion is half your working life and a trillion is about 2 ice ages

Our national debt is now measured in units of a trillion

paddyrg

Update - through a quirk of timing, in Canada 10 kids are in big trouble for saving and swapping snapchat pictures (the platform was set up to be a 'safe' way for teenagers to send nice photos to partners). Naked teenagers having photos exchanged without consent - that's child pr0n territory. Hitting the main news outlets today, I suspect he'll wish he'd accepted the $3Bn as this could really knock ones value perception.