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Silicon Valley Could Be Heading For a New Stock Collapse. 200

Posted by Unknown Lamer
from the where's-my-model-s dept.
First time accepted submitter billcarson writes "Even though for most of us the recession is far from over, analysts are worried the technology sector might be near the end of a bubble. Technology stocks are at records highs at the moment. Companies that have no sound business plan have no difficulty in raising capital to fund their crazy dreams. Even Yahoo is again buying companies without real profit (Tumblr). Andreessen Horowitz, a major venture capitalist in Silicon Valley is already pulling up the ladder. Might this be an indicator for more woe to come?"
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Silicon Valley Could Be Heading For a New Stock Collapse.

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  • Market Consolisation (Score:2, Interesting)

    by rtb61 (674572)

    Less bubble driven pie in the sky greed and more mature market consolidation. The weakest in the herd are failing behind and will be preyed upon by vulture capitalists like Mittens and that's the ones you really have to watch out for, after the vultures have chewed out the juicy bit's and left it a debt ridden hulk with really 'imaginative' book work, pension funds usually buy them (after those pension fund managers make a visit to an offshore tax haven, to 'er' review their balance sheet with the vulture

    • by Gordo_1 (256312) on Monday November 04, 2013 @09:40PM (#45332297)

      Um, I think you've reached your metaphor quota for today. Thanks for coming out. Anything of substance to share?

      • by rtb61 (674572)

        Hows, this then. As always insider's are using their marketing channels to right targeted stories to threaten current stock prices. These insider's are major brokerage firms who use statistics of their own customers to measure overall market debt exposure on puts and shorts to measure whether the market can be pushed into a run. So normal market adjustments for particular over hyped companies (done by the same companies that are trying to market a run on stocks) can be pushed into the broader market via th

    • Who are these people who "have no sound business plan have no difficulty in raising capital to fund their crazy dreams"?
      I have awesome dreams, business plans, technical and business abilities, certainly I don't see any rivers of free flowing investment money....

  • by rritterson (588983) on Monday November 04, 2013 @08:34PM (#45331847)
    Not that I would want to wish bad things like lost of income or livelihood on anyone, but as someone who moved here long before this bubble started, I wouldn't mind what the the tech bubble popping might do to San Francisco rental prices. [sfgate.com]
    • by doom (14564)

      I wouldn't mind what the the tech bubble popping might do to San Francisco rental prices.

      Funny, I had a similar thought. In fact lately, I've been wondering what we might be able to do to pop the bubble on purpose. But that it'd be something like: identify the chumps, try to smarten them up... and that's as far as I get. Good luck on that project, eh?

      • by dbIII (701233)
        The damage also hits those that are on track with their plans but still need a bit of investor support. That's what killed Loki Games in the 2000 bubble.
        • by drinkypoo (153816)

          What killed Loki games was incompetence. Or maybe what they were trying to do was impossible, I dunno. But the games were mostly flaky and don't run on newer versions of Linux, either, just like they wouldn't work properly on many flavors of Linux initially. Loki_Compat is an unreliable solution.

          • by dbIII (701233)
            No. Good or bad didn't get a chance - they were hitting their milestones but the investors pulled out. That's how simple it was. Whatever personal baggage you want to air didn't get a chance to become relevant, and compatibility with versions that came out after the company folded is something well beyond their control.
            • by drinkypoo (153816)

              Hitting their milestones? Too bad having the games work properly at the time (let alone later) wasn't one of them.

    • by ShanghaiBill (739463) on Monday November 04, 2013 @09:03PM (#45332057)

      I wouldn't mind what the the tech bubble popping might do to San Francisco rental prices. [sfgate.com]

      It would also reduce commute times on Hwy 101. When the dotcom bubble popped back in 2001, it took 20 minutes off my morning commute.

      • by farble1670 (803356) on Monday November 04, 2013 @09:25PM (#45332203)

        the economy isn't interconnected at all right? it might even reduce your commute to staying your house.

        wait for it ... "but i work in the ___ field, so i'm not affected ..." in 3 ... 2 ... 1.

        • by doom (14564)

          the economy isn't interconnected at all right? ... wait for it ... "but i work in the ___ field, so i'm not affected ..."

          I tend to work places that have actual income, so no, I don't worry so much about stock scams evaporating.

          You want a real economic indicator? Try checking the snark frequency. This is all pretty obvious to people on the ground here: SF Techie Explains Why the World Should Revolve Around Bay Area Techies [sfweekly.com] (via jwz).

          • did you know, there's a point in the lifecycle of all tech companies where they didn't make a profit? no tech company comes into existence with a ready to sell product making a profit.

            and yeah, the general level of the economy effects everyone, and that's a reflection of the stock market. why? because when people have money, or think they have money, they spend it. they buy houses. that affects the real estate market. they buy cars. they buy tech. they invest, allowing other companies to hire workers puttin

          • After reading the article at the link you posted, I finally understand the true urge behind the self-driving car - so that when you park at night to sleep the car can just move itself if it detects cops show up to check it out!

      • by Shavano (2541114)

        I wouldn't mind what the the tech bubble popping might do to San Francisco rental prices. [sfgate.com]

        It would also reduce commute times on Hwy 101. When the dotcom bubble popped back in 2001, it took 20 minutes off my morning commute.

        Because you could collect your unemployment check from home?

  • The days of "a fool and his money are soon venture capital" are taking a siesta. Come back next decade.
  • by Anonymous Coward on Monday November 04, 2013 @08:38PM (#45331877)

    Remember that bears have predicted 60 of the last 3 stock market crashes.

  • Yahooblr (Score:5, Insightful)

    by simonbp (412489) on Monday November 04, 2013 @08:51PM (#45331969) Homepage

    Yahoo's recent desperate moves (e.e. buying Tumblr) are hardly indicative of the industry, but rather one company that really shouldn't be as big as it is. Silicon Valley as a whole is a lot more healthy than Yahoo.

    • Re:Yahooblr (Score:5, Insightful)

      by fuzzyfuzzyfungus (1223518) on Monday November 04, 2013 @09:04PM (#45332063) Journal
      The point isn't that all of Silicon Valley is as incompetent as Yahoo; but that the cash is flowing freely enough that even a company whose business model appears to be "Try to be Google, as imagined by an AOL user" can throw a billion dollars at some goofy blogging platform.

      Now, I would not be at all sad to see fewer smart people wasting their lives trying to find new ways to get me to click on ads or analyze my behavior to sell me shit, (and there's a disturbing amount of brainpower going down the toilet on just that problem at the moment); but the trouble with a big wave of easy, dumb, money is that, while the crest is a blast, it can easily take down even solid people and ideas when the VCs eventually get spooked.

      Just remember how much fun the economy of more or less the entire developed world managed to have, just because some banks were gambling on US real estate. Barely any connection to whether the economy of people who actually do and make things was stupid or brilliant, doing well, or doing ill; but down it came...
      • by Aighearach (97333)

        yahoo is still big, of course they can throw some money at a (presumably strategic) acquisition. It tells us nothing about their overall competence, and even if they suck that doesn't mean it is a bad purchase; and if they're normally great, it doesn't mean it is a great purchase.

        Also whatever they do and however they do or don't suck, it is not at all instructive about startups and VC. And an anecdotal reference to 1 VC isn't much better. Maybe he's "pulling up the ladder" because he made a bad call recen

      • by jbolden (176878)

        Tumblr has 30-50m highly active users. It has 110m registered accounts who sometimes use the network. Tumblr has another 200m people who browse the service but haven't bothered to create accounts. To put that in perspective 108m people watched the Superbowl the most watched show.
        NCIS is the number one show with about 20m regular viewers, trailing slightly behind is Sunday Night Football and the BigBang theory. By way of analogy Yahoo is a network buying all rights to a show (Tumblr) that huge number o

    • Facebook IPO, Twitter IPO. Need I say more?

      • by jbolden (176878)

        Facebook is currently at $47.66 the IPO price was $38 2 years ago. That's a very good return even for an IPO that was considered to be priced too high.

        Yes you need to say more.

    • Re:Yahooblr (Score:5, Informative)

      by dubbayu_d_40 (622643) on Monday November 04, 2013 @10:37PM (#45332635)

      You know Yahoo has positive earnings, right? It's net was more than a billion (EBITDA) last quarter.

      In July it overtook Google as the most visited US web property and remains #1 to date (comScore)?

      Desperate moves?

      • by Rich0 (548339)

        In July it overtook Google as the most visited US web property and remains #1 to date (comScore)?

        Really? Who visits Yahoo? Maybe I'm just out of touch, but I don't know anybody who regularly visits Yahoo, and didn't know anybody back when I still used it for everything years ago (back when Google was the newcomer).

        I'd also be interested in how things are measured. I rarely type "google.com" in my browser, but I use Google all the time.

  • Systemic debt (Score:5, Insightful)

    by Livius (318358) on Monday November 04, 2013 @08:54PM (#45331995)

    The problem is a *debt* bubble. Either the debt is extinguished in a bubble collapse - housing, stock market, student loans, tech stock, etc., or it becomes inflationary. As long as debt is above a sustainable level there *has* to be one bubble or another.

    • I wonder if Snowden might not be a bubble popper? I sure would hate to have a ton of debt in cloud infrastructure here in the US right at the moment.

      • I wonder if Snowden might not be a bubble popper?

        The economy will continue running. Governments will continue spying. The most Snowden can hope for is to stay alive, out of prison and snag a few bucks from a remote interview in a decade or two by an infotainment company doing a "where are they now" piece.

        • by Shavano (2541114)

          I think he's in for a rather unfortunate future. The Russians will have had all the PR and spy info out of him that can be got in a year or so and when he's of no further use to them, what then? He could be stuck in Russia for years, decades even, under a state even more corrupt and considerably less free than the one he left.

          • Re:Systemic debt (Score:4, Insightful)

            by dbIII (701233) on Monday November 04, 2013 @11:18PM (#45332913)
            Pretty sad really. Utter traitors like North and Poindexter who sold weapons, via Iran no less, to a terrorist group that killed over a hundred US Marines less than a year before still have cushy government jobs while a mere whistleblower is likely to have to look over his shoulder for the rest of his life as if he was Nazi war criminal.

            even more corrupt and considerably less free than the one he left

            For the moment, but the race to the bottom is on and the US is catching up quickly.

          • As always, choosing martyrdom is a career-limiting move.

    • Money is the power mechanism of the poor. Debt is the power mechanism of the rich.
    • Re:Systemic debt (Score:4, Insightful)

      by ebno-10db (1459097) on Monday November 04, 2013 @09:58PM (#45332395)

      The problem is a *debt* bubble.

      A stock bubble is not a debt bubble, since cash is usually paid for stock (and even when not margin is limited to 50%). Neither the bursting of a stock bubble or a debt bubble is much fun, but the debt bubble is much worse. If stocks crash people say "dagnabbit, lost a bunch of money", but they're not left in debt. When a debt bubble like real estate crashes, you're not just poor, you're also in debt. That makes it extremely difficult to get the economy running gain, as so much of people's money is being sucked up by loan payments.

      • by Shavano (2541114)

        The problem is a *debt* bubble.

        A stock bubble is not a debt bubble,

        Tell that to 1929.

        • 1929 wasn't that bad - try the banking crisis starting in 1931.

          http://www.epips.com/djia/1930s-great-depression.html [epips.com]

          There was a major rebound in 1930, and people thought the stock market had settled on more realistic prices. If the banks had been solid, the Great Depression wouldn't have been so great. Note that the stock market didn't really go to hell until 1931.

      • by ultranova (717540)

        If stocks crash people say "dagnabbit, lost a bunch of money", but they're not left in debt. When a debt bubble like real estate crashes, you're not just poor, you're also in debt. That makes it extremely difficult to get the economy running gain, as so much of people's money is being sucked up by loan payments.

        You know, this could easily be remedied by distributing responsibility for debt more evenly between the debtor and the debtee. Right now it all rests on the debtee, who's options are to pay it all o

        • by jbolden (176878)

          There is a system in the USA which allows debtors who are unable to pay their debts to meet with their financiers and discuss a modified repayment program. That's called Bankruptcy Chapter 13. What you are asking for already exists. There is no need to threaten anyone with jail. Contracts, including debt contracts, are enforced by courts. Making them unenforceable or changes the enforcement system works fine.

          Obviously people didn't understand the agreements they entered into on homes. Informed custome

          • by ultranova (717540)

            There is a system in the USA which allows debtors who are unable to pay their debts to meet with their financiers and discuss a modified repayment program. That's called Bankruptcy Chapter 13. What you are asking for already exists.

            No, it doesn't. Bankruptcy sides with the debtor by default while I'm talking about siding with the debtee by default. Basically, I'm suggesting that in order for the debtor to get a single penny they'd need to prove that the debtee's circumstances have changed and this was the

  • by King_TJ (85913) on Monday November 04, 2013 @08:59PM (#45332023) Journal

    Could tech be at the end of another bubble? Sure, I suppose. But it seems to me the college tuition situation is more clearly ripe to burst? And how about govt. treasury bonds?

    At least with tech, I think quite a few of the highly valued companies are truly successful. (Apple, as a prime example.) For every one of these questionable Tumblr type purchases of some web-based service, therre are dozens of others who nobody seems to be interested in buying at all. I'd say most investors are being fairly selective, even if they do gamble a bit on the occasional "high profile" site that's not yet making a profit.

  • Define woe (Score:3, Insightful)

    by WillAffleckUW (858324) on Monday November 04, 2013 @09:06PM (#45332077) Homepage Journal

    Overpriced assets need to come down sometime.

    FB will be dead soon. Twitter IPO overpriced (but still not that bad). Most Silly Valley stocks are based on insane projections for the most part.

    I used to do tech IPOs. My money's in broad S&P 500 low cost index funds now.

    (yes, I made lots of money from the tech IPOs, and the other IPOs)

    • Why S&P 500 instead of total market?

      • Why S&P 500 instead of total market?

        Educated guess. It's actually a mix of 90 pct S&P 500 index (0.04 pct cost), 5 pct total bonds (0.12 pct cost), 5 pct total stock market (0.07 pct cost), without rebalancing but with reinvestment.

        Total market exposes you to risk stocks during excessive churn. Climate change means excessive churn.

    • Re:Define woe (Score:4, Insightful)

      by asmkm22 (1902712) on Monday November 04, 2013 @10:18PM (#45332499)

      I'm not convinced that Facebook is going away anytime soon. Like it or not, they've entrenched themselves pretty deeply in the internet. One of the best moves they did was push for their service to be used as a general login platform for other sites. Hell, you can even use your facebook account to log into MySpace. Even Twitter seems to have a ton of staying power, simply because it's so widely used by certain types of people to disseminate opinions. Fortunately for Twitter, those types of people have a hell of a lot of influence, like politicians, game designers, actors, and media personalities. They'll figure out a way to bring ads to the service, just like Facebook has, which is about the only thing that matters anymore when it comes to running a tech company these days.

      • by dywolf (2673597)

        Besides which, while everyone in the news talks about "the disaterous FB IPO" while speculating about Twitter's upcoming IPO...they all conveniently ignore that FB is currently trading around $50. so sure, the day traders who wanted to make a quick buck lost out, and thats what the news media focuses on....

        But when people started dumping shares as the price plummetted, others like me, who were willing to wait a little while, started picking up a few, cautiously at first, and then a couple more, particularly

    • Re:Define woe (Score:5, Insightful)

      by HockeyPuck (141947) on Monday November 04, 2013 @10:29PM (#45332583)

      Let me translate this for you:

      I used to do tech IPOs. My money's in broad S&P 500 low cost index funds now.

      (yes, I made lots of money from the tech IPOs, and the other IPOs)

      Translation from Douche to English:

      I made piles and piles of cash during the dot-com bubble. Enough to afford a Tesla and a $1.5m 1500sqft home in Cupertino. However, now that I have all this money, I can afford to diversify. If I didn't have all this IPO cash, then I'd never have the money necessary to send my kids to $20k/yr kindergarten, Challenger Elementary School and then either St. Francis or Bellermine High Schools.

      I'm really just writing this to flaunt about how lucky I was to have invested during the dot-com bubble and now I'm telling you to follow my lead, however, you can't since the dot-com bubble is over, so you'll have to get used to taking low digit yr/yr gains of the broader stock market.

      • No, I wouldn't say that. S&P 500 has been double digit yr/yr gains actually.

        I've been investing since I was 16. You can do what you want, but my gut feel is usually right.

        The best investment is an education, actually.

        • by Rich0 (548339)

          Return on the S&P 500 has been about 6% over the last 10 years, and about 7% over the last 20 years. The whole double-digit growth thing made a whole lot more sense in the prospectuses they sent out in the late 90s...

  • Its something along the lines of "social media, blah blah, make lots of noise about it, mobile app, get bought by Facebook, Google, Microsoft or Yahoo"

  • by RogueWarrior65 (678876) on Monday November 04, 2013 @09:45PM (#45332331)

    The Dotcom crash happened mostly because there was a massive gold rush to throw money at any startup that said they were going to do cool things on the web. But there was way too much money being spent on Aeron chairs and expensive digs and nothing being spent on figuring out if the idea was good. This comes from having been to a lot of bankruptcy auctions. Hell, the CEO of one company spent investor dollars on a powered paraglider. Da fuq? I also wonder if Y2K was something of a catalyst. In the 90s, companies were spending gobs of money to prepare for Y2K. When that came and went without a hitch, all that money evaporating and may have caused investors to question their other high risk ventures.

    The housing bubble was could be seen a mile away by anyone who wasn't living in a utopian stupor. You can't force banks to issue sub-prime mortgages knowing full well that most of those buyers couldn't keep up with the payments without the lenders passing the hot potato to the next sucker. BTW, CDOs and mortgage-backed securities had been around for 20+ years without a problem. Again, the gold rush of house flipping was eventually going to crash when the music stopped in the form of enough people saying "You want HOW MUCH for this P.O.S house?! Nope."

    Honestly, I don't really see the same scope of bullsh*t in Silicon Valley. Social networking companies are at risk because they don't have a tangible product just as dotcom companies didn't in 2000. But the hardware companies aren't going away. Will other companies get injured as a few collapse? Sure, but that would be panic selling and hence a good buying opportunity.

    • by Shavano (2541114)

      Social networking companies are at risk because they don't have a tangible product just as dotcom companies didn't in 2000.

      Social networking companies do have a product: advertising.

      • by znrt (2424692)

        Social networking companies do have a product: advertising.

        he said "tangible". that all the buzz about targeted advertising is actually worth the money is still speculation.

        • by Shavano (2541114)

          What do you mean, then? Are you going by the strict "it can be touched" meaning of tangible? I was going by the looser "it can be perceived" meaning. Either way, advertisements are more tangible than software but less tangible than houses.

  • by ebno-10db (1459097) on Monday November 04, 2013 @09:50PM (#45332357)

    While unemployment generally may be high, in the tech sector it is very low.

    How about some actual, you know, statistics.

    Tech companies, led by Mark Zuckerberg at Facebook, are lobbying Congress to relax immigration rules so they can hire more foreign talent because they believe domestic talent has gotten too scarce and too expensive.

    And that's evidence of a shortage? They've been pushing for more of this crap for 20 years, rain or shine.

    I also notice that almost the entire article is about Silicon Valley, which despite its pretenses of being cosmopolitan, or even "globalized" (whatever the hell that means), is one of the most provincial places there is. Here's a clue: there are parts of the US outside of the Bay Area. Amazing but true! Some of those places are tech hubs with lower salaries. Having trouble finding people at a reasonable price? Branch out. It's hardly a new business strategy. The geniuses who claim to have destroyed the barriers to long distance communication don't want to take advantage of it (except to India of course). I know that denizens of the valley are afraid to get on a plane to someplace like, say Pittsburgh, where they have a dreaded thing called "snow", but you can tough it out. Look on the bright side - the plane trip is much shorter than across the Pacific. You can even use Google maps to find this place called "Pittsburgh" [google.com].

  • by msobkow (48369) on Monday November 04, 2013 @09:52PM (#45332365) Homepage Journal

    Google, Apple, and a few others are overvalued right now as well.

    But the stock market is all about gambling, not real value. Most of the big players treat it like monopoly money, because it's not coming out of their own pockets. :(

    That's a problem with the stock market overall, though, not just tech stocks.

    • Re: (Score:3, Informative)

      by Anonymous Coward

      Google, Apple, and a few others are overvalued right now as well.

      How is Apple overvalued? Their p/e ratio is 13.25.

      • by msobkow (48369)

        Their market share is sliding, not growing. Profitability will therefore come down.

        • You clearly have no understanding of the stock market and I recommend you don't invest money in it because you will your clock cleaned. Market share has little to do with their stock price. Apple sells more iPhones and iPads now than they ever have in the past. The reason is that the market is growing so there's LOTS of room for more than one winner. It's not a zero sum game. What does matter is margins and they have been shrinking for Apple but are starting to stabilize. That said, nothing really big

          • by msobkow (48369)

            Apple is overrated. They're a fad. In all respects.

            Sooner or later a new shiny will take over people's fanatacism in the North American market. It's already happened overseas.

            • First off, you seem to be under the impression I'm some kind of Apple fanboy. I'm not. I use a Samsung phone (two, in fact). Your hatred for the company makes you incapable of making good investment decisions so I would suggest you not come on here and spout crap that you know nothing about. Just a thought. Anyone who has loyalty to a company or technology is an idiot. This is even more true in the world of stocks.

              • by msobkow (48369)

                There are certain brands that maintain brand appeal and price by being exclusive. Apple is not exclusive; they're a mass marketer. Therefore their aura of exclusivity and "specialness" will disappear in due time. You can't have it both ways -- either you're an exclusive up-scale marketer, or you're a mass market commodity. You can't be both for long at all.

                • by msobkow (48369)

                  That's not to say I expect Apple to disappear as a company, but I think they're *way* overvalued because they won't be able to maintain their high margins as the "exclusivity" of the brand wears off.

            • by dywolf (2673597)

              that could be said of any company and becomes advice any investment of any kind, period.
              the GP is right: you know nothing Jon Snow.

              • by dywolf (2673597)

                *against any
                (seriosuly, if /. were a stock, it's stock would double just from adding a frigging EDIT BUTTON!!!)

        • Their market share is sliding, not growing. Profitability will therefore come down.

          Simply untrue, since market share is merely one of many factors that can affect profitability, and it doesn't actually matter very much for Apple, since they don't play in the low-margins-high-volume game at the low end of the market where having a bigger share is the most important thing.

          First off, I agree that their market share is decreasing, as is their profit share in both the smartphone and tablet markets. That said, their sales volume has continued to increase at a quick rate (though slower than that

    • Uh, what? Apple's P/E is famously low (around 13) compared to their competitors in the tech industry (which average around 20), indicating that they are undervalued by quite a bit. Google's is around 30 right now, so the claim that they're overvalued may have merit, however (which isn't to say that they're not a valuable company, mind you, merely that the stock price may be out of touch with just how valuable they actually are).

      As for companies treating it like monopoly money, companies that sacrifice their

      • Just because a companies P/E is low does not mean they are undervalued. It could mean the market expects that future earnings (you know, the ones that actually count if you are buying a stock) are going to be lower than they have been.

  • Oh dear..... This is not going to end well is it.

  • The question is: how will a tech bubble burst impact economy outside of silicon valley?
  • I'm not connected to high tech like I was during the dotcom days, but it strikes me that this bubble is still a bit immature. What I see as somewhat more concerning is the wide variety of things that are getting overvalued, such as high tech stocks, renewable energy, bonds (due to central bank quantitative easing), and a couple of US-centric things (higher education loans and the coming health insurance market).

    I think any bubbles and their bursts will be moderate in size and effect until a lot of people
  • It's a cliche that you can't time the market.
    There's a reason for that.
    It's true.
    Now that's all well and good Mr. Market
    But tell me
    What should I do?

    Very good question, now listen with care
    Bend over, and lend me your ear
    When talk is of bubbles
    The alarms's set for troubles
    Next month
    Or maybe next year

  • by b4upoo (166390) on Tuesday November 05, 2013 @03:09AM (#45333967)

    I suspect that with the types of devices using computer chips and software and the proliferation of OSs it is a risky bet to put money into the computer or electronic device industry. We can see this in the smart phone segment where companies jockey for position without knowing if a brand or new enterprise might suddenly sweep up the market. Although risk might yield a lot of earnings second guessing the computer industry is just far too difficult.

  • complete bullshit (Score:4, Informative)

    by Gravis Zero (934156) on Tuesday November 05, 2013 @04:47AM (#45334195)

    While unemployment generally may be high, in the tech sector it is very low.
    Tech companies, led by Mark Zuckerberg at Facebook, are lobbying Congress to relax immigration rules so they can hire more foreign talent because they believe domestic talent has gotten too scarce and too expensive. It's driving up wages bills like crazy. Matt Allen, a tech recruiter at Vertical Move, told me recently:

    of course he told you that, he's a recruiter! the truth is that the tech sector jobs are either offering insultingly low wages or out-sourcing to save a buck, the bigger the pool, the more control they can screw people over, especially if you are under the threat of being deported if they fire you. The whole rent-a-coder thing went awry because people offer to work for wages below minimum wage because in their country, $3/hr is a good wage and tax free by keeping it in paypal.

    You don't see every tech person driving around in beamers.

  • Social networks like Tumblr don't have to be profitable. Google. Facebook, Yahoo are themselves profitable. What they are buying are user bases not the business. As far as record highs:

    Cisco P/E 12
    Apple P/E 13 (and that's x-cash, including cash it is much lower)
    Microsoft P/E 13.5 (also x-cash)
    Google P/E 28 (high but still rapidly growing)
    HP is losing money but the stock is cut in half

    I don't see a bubble.

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